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Five Steps to Reduce E-Commerce Costs

by Amy Silvers on March 29, 2019

To maximize efficiency in an e-commerce distribution center, it’s necessary to regularly evaluate the vital – and costly – components of your operation. This specifically includes e-commerce distribution supplies.

This starts with analyzing the e-commerce distribution supply chain and ends with revealing potential cost-cutting strategies for every shipment.

Expense and E-commerce Distribution Supplies

There are several sources of expenses in the e-commerce distribution supply chain. These include both hard costs and soft costs – a term we can borrow from construction that applies to e-commerce as well.

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Hard Costs and E-Commerce

Hard costs, defined as expenses for the tangible resources needed to run your business, are fairly straightforward, making them easy to calculate and monitor. These may include expenses like:

  • Paper
  • Inventory
  • Packaging material and labels
  • Labor

Soft Costs and E-Commerce

Soft costs, defined as indirect expenses associated with running a business, are not as easily quantifiable, making them more difficult to project, track and analyze. Some soft costs are required, like equipment rental and loan interest. Other soft costs are just expenses and can be managed. Such expenses could include:

  • Process inefficiency – How much effort and time does it take to complete each step in your process? Are there opportunities to alter or eliminate unnecessary steps?
  • Returns and wasted effort – How many steps need to be redone to complete the work correctly if a mistake is made? Could some of this wasted effort be reduced?
  • Managing inventory and ordering – How many different people are involved with every order? Could the process be reworked to make it more efficient and reduce required labor?
  • Material inefficiency – How much is the additional cost if a label is difficult to use? How can finding and testing the right label positively impact efficiency?

Clearly, hard costs can be difficult to reduce. Soft costs, on the other hand, can be seen as an opportunity. To reduce these costs, you need to look at them as problems waiting for a solution, rather than simply a cost of doing business. They could be the key to reducing e-commerce distribution costs.

Reducing E-commerce Distribution Expenses

Here are 5 steps you can take to start managing the costs associated with your e-commerce distribution supplies: 

  1. Label quality control: Every problem with labels and supplies that you keep off your floor and out of circulation is time and money saved. In an industry with tight margins, this can be critical to profit. Take a look at implementing a Six Sigma program or Quality Control process in your distribution center, or ask a trusted supplier to work with you to set one up. 
  1. Volume purchasing: As the cost of paper and materials increases, you need to look beyond small volume vendors to find those with a deeper purchasing network. This will help you to buy materials at a competitive rate, which will keep prices low and ensure you aren’t unnecessarily passing costs to your customers. Develop relationships with suppliers that purchase in volume and are willing to pass savings to you. 
  1. Customized solutions: It’s important to determine whether the tools you are using are simply added cost or truly adding value. Sometimes a custom solution is just what you need to unlock efficiencies in your process. Maybe a fold under, integrated, direct thermal, thermal transfer, cut sheet, auto-apply or barcode label could reduce your shipping time and labor expenses? 
  1. Review your supply chain: Are you ordering excess labels to reduce costs and then scrapping because you bought too many? How many people are involved in the ordering process? How much time and money is being wasted managing inventory? Many businesses are shocked to discover how much waste is generated in the ordering process. 
  1. Process inefficiency: Many distribution and fulfillment centers believe they are efficient, not realizing time and money is being wasted on every order. Utilizing an expert in workflow efficiency to review your operations can reveal problems you may not have known – problems that increase the costs of every order. Make sure you are using the right tools, tools that increase efficiency, for your processes 

Start Now - Reduce E-Commerce Expenses

By analyzing your e-commerce distribution supply chain, you’ll be able to discover possible changes that can lead to higher profit on every order. You’ll also identify inefficiencies and problems that might be holding you, your team and your operations back.

Reducing the expenses associated with your e-commerce distribution supplies isn’t about downgrading quality; it’s about improving efficiencies every step of the way. If you’re ready to see how much money you could be saving on your e-commerce distribution, then contact the experts today at GO2 Partners. Ask for a free expert consultation on your distribution supplies and shipping efficiency.

Topics: Ecommerce, Distribution Supplies, Shipping labels, Increase efficiency