Finding Cost Savings with Data Visibility
In our first article, "Surviving the 2022 Supply Chain Storm", we discussed the different components stacked against ecommerce and the supply-chain space right now. Each of these elements is causing increased costs to retail companies, whether that cost is from labor, supply, parcel, or one of the many other areas where ecommerce and the supply-chain industry are being hit hard. To balance the current increased costs, we need to make sure we are finding areas where we can save money. Areas where in the past we have not noticed overspending. So, how exactly do we find those needed saving areas? Data visibility is the answer.
Many times, ecommerce, retail, and the supply chain work in silos between their departments—from people to systems. They might have one department using a warehouse management system (WMS), while a different department uses a customer relationship management system (CRM). The other systems do not properly receive the company data to evaluate the whole sales cycle cost versus profitability. Having the CEO or COO the owner of the information to cut costs or save money is tedious, time-consuming, and nearly impossible.
So, how can EasyPost and Elevate help? By using Elevate, you can feed all internal management systems and data points, including all parcel and carrier information via EasyPost, into Elevate and sync everything into one system immediately. Then, in near-real-time, the information is aggregated and fed into simple dashboards that allow you to identify cost-saving solutions.
What kind of savings? Glad you asked. Here are three recent examples of savings that Elevate and EasyPost have delivered to clients over the past year.
1. Weight conversion savings. The visibility of actual package characteristics. Currently, companies fill out package characteristics on the carrier websites, the carrier picks up the package, and off it goes for delivery.
Summary of problem identified: Without visibility of per-package weight, it is nearly impossible to confirm that the item contents of a package are within a reasonable weight of what the carrier is billing. When items are shipped across international borders, particularly borders that may use different units of measure, the chance for accuracy to be lost in translation exists. In this instance, items were weighed in grams and billed in ounces. This meant overcharges of $40 to $70 per package. Not a small amount when hundreds to thousands of packages were being shipped per day.
Results: By providing package-level visibility to billed weight and quickly identifying where and when overcharges were occurring, the client was able to work with the carrier to correct the billing error and reclaim most of the excess amount charged. The team was also able to put proactive monitoring and alerting in place to reduce the likelihood of errors in the future, notifying key individuals should any package appear to be overcharged.
2. Profitability-per-item savings. Profitability per item is knowing whether you are losing money on specific items available on your website that should be available only as add-on items or removed from the website altogether.
Summary of problem identified: Many companies can assess their profitability at the company level or by the line of business. However, this high-level visibility often loses the detail of any individual items that may be sold at a loss from high shipping and handling costs. And, merchants may only be looking at the gross margin—that is, sales compared to the cost of goods sold—without thinking about the cost to fulfill and deliver. Without visibility of these specific cost elements compared to sales at the item level, the company can be losing money without knowing it.
Results: Understanding costs compared to sales at the item level opens up a conversation of the best fulfillment method for any particular item to ensure profitability. This may mean making items that are only eligible for in-store or online purchases or picking up at the store to offset shipping costs. It may mean adding additional shipping and handling surcharge fees or adjusting pricing to ensure items sold add to the company's bottom line. Also, having this visibility may lead to more strategic, long-term merchandising conversations for what types of products the company needs to curate to drive profitable sales and the company's long-term financial health.
3. Labor versus shipping clarity and analysis. While we often hear of clients considering cutting labor costs, it may not always be the key area for improvement. We have found that our clients' shipping and parcel costs outweigh labor expenses by seven times.
Summary of problem identified: When cost centers are siloed, holistic visibility of costs relative to one another doesn't exist—meaning teams can often lose sight of what may be their largest opportunities. Moreover, teams may not understand the tradeoffs and relationships between these costs that might need to be balanced to achieve the lowest total cost to fulfill and deliver. For example, teams only looking at labor costs may split orders into multiple packages to save on consolidation efforts. However, in cutting this corner to save on labor, incremental shipping costs may increase more than the related labor savings.
Results: By providing visibility to labor and shipping costs, teams can make informed decisions to invest from both capital and expense perspectives to reduce overall spending. By coordinating these efforts, teams can align on a strategic vision that prioritizes the most impactful efforts, ensuring customer expectations for service are met while driving overall profitability.
In each of these examples, Elevate and EasyPost helped the client identify an area in their spending they could reduce or recover in overhead. These savings were just the beginning. Other savings solutions have been placed within Elevate and EasyPost to become more efficient and profitable. This allows them to move out of crisis mode and into thrive mode. If you would like to schedule a demo to see more about how Elevate and EasyPost can help you, email us today at email@example.com.