Cutting Shipping Costs: Smart Strategies for 3PLs

Cutting Shipping Costs: Smart Strategies for Fulfillment Centers and Brands

For third-party logistics providers (3PLs), shipping is more than just an operational expense—it's a strategic opportunity to boost profitability. Traditionally, many 3PLs have operated on a cost-plus model, simply passing carrier costs onto their clients with minimal markup. However, in today’s competitive market, shifting from merely covering costs to actively maximizing margins is crucial. By leveraging innovative shipping solutions, 3PLs can unlock new revenue streams, optimize pricing strategies, and ultimately increase profitability while delivering value to their customers.

Case Study: Real-World Savings in Action

A techSHIP 3PL partner successfully generated USD 185,000 in additional revenue in December alone by leveraging the Dynamic Pricing Tool alongside shipping programs and advanced rate shopping capabilities.

The Cost of Shipping: By the Numbers

Shipping expenses represent one of the most significant operational costs for 3PLs, often consuming 20-30% of total eCommerce revenue, with annual surcharges increasing by an average of 5-7%. Without strategic cost management, these rising expenses can rapidly diminish profit margins and put 3PLs at a competitive disadvantage. More critically, failure to offer competitive shipping rates can result in lost contracts, reduced customer satisfaction, and increased churn—ultimately impacting long-term profitability and growth. The cost of acquiring and onboarding new brands is substantial, making it imperative for 3PLs to provide cost-effective shipping solutions that drive loyalty and operational efficiency. To stay ahead in the market, implementing strategic cost-saving initiatives is no longer optional but necessary.

Key Strategies to Reduce Shipping Costs

By leveraging advanced shipping technologies, fulfillment centers, and brands can take advantage of several cost-cutting strategies:

1. Advanced Rate Shopping

Shopping live (API) rates are no longer enough—advanced rate shopping tools take it to the next level by utilizing algorithms to select the most cost-effective carrier based on various factors. Advanced rate shopping factors include rules-based selection on:

• Transit Time – Ensuring timely deliveries without unnecessary delays.
• DIM Weight – Minimizing dimensional weight costs through optimized packaging strategies.
• SKU-Level Considerations – Customizing shipping methods based on product specifications.
• Destination – Selecting carriers based on regional strengths and cost advantages.
• Day of the Week – Leveraging dynamic adjustments for weekend or holiday shipments.
• Custom Rate Shopping Groups – Grouping shipments based on specific business rules or client preferences.
• Carrier Performance Data – Using historical data to make informed carrier selections.
• Real-Time Rate Adjustments – Automatically adjust selections based on carrier capacity and demand.

Shipping tools like techSHIP provide over 100 customizable conditions that can be applied in advanced rate shopping, allowing businesses to fine-tune their shipping strategies with greater precision.

Benefits:

• Reduce shipping costs by up to 20%
• Avoid unnecessary surcharges
• Ensure compliance with customer delivery expectations
• Upgrade to faster service levels at a lower cost
• Improve carrier diversification to reduce dependency and mitigate risks
• Automate decision-making for optimal shipping choices in real time
• Gain insights through reporting and analytics to continuously optimize costs

2. Cartonization for Optimal Packing

Cartonization technology automates the packaging process by determining the most efficient way to pack orders based on product dimensions, weight, and carrier guidelines. Businesses can achieve significant savings by reducing wasted space and minimizing dimensional weight charges.

Advanced cartonization solutions consider factors such as:

• Box Weight Capacity Limits – Ensuring compliance with carrier restrictions.
• Fragility Considerations – Selecting appropriate packaging for delicate items.
• Multi-Item Packing Optimization – Reducing the number of boxes per shipment.
• Sustainability Initiatives – Lowering material waste and environmental impact.

Benefits:

• Reduce packaging materials costs
• Lower dimensional weight fees
• Improve sustainability by minimizing void fill
• Enhance operational efficiency with optimized packing workflows

Pickers will go to the floor with the courier label and attached packing slip, instructing them which box is required to pick items, including SKUs and quantities. This streamlined process ensures accurate and efficient packing.

3. Dynamic Pricing Tool

Effective pricing strategies are critical for maintaining profitability, and a Dynamic Pricing Tool allows businesses to manage mark-downs from published rates and markups from negotiated rates. This ensures shippers can recover handling, packaging, and carrier fluctuations costs while maintaining transparency with their customers.

Benefits:

• Increased profitability by +10%
• Competitive pricing adjustments that are hidden from the customer
• Adaptability to fluctuating shipping costs

4. Leveraging Shipping Programs

Partnering with strategic shipping programs offered by major carriers and regional providers can unlock exclusive discounts and optimized delivery networks. Programs such as discounted bulk rates, regional shipping solutions, and cross-border shipping options can significantly lower costs while improving delivery speed.

Advanced shipping programs offer:

• Volume-Based Discounts – Lower per-shipment costs with bulk deals.
• Regional Carrier Networks – Optimized delivery routes for faster service.
• Cross-Border Expertise – Simplified international shipping with reduced customs hassles.

Benefits:

• Access to bulk shipping discounts
• Faster delivery times in key regions
• Reduced cross-border complexities
• Improved customer satisfaction with reliable deliveries

Summary of Cost-Saving Opportunities by Business Size

• Small Shippers (50,000 packages/month):
  • Potential savings of up to $35,000/month by eliminating surcharges.
  • Leverage rate shopping and cartonization to optimize operational efficiency.
• Medium Shippers (200,000 packages/month):
  • Potential savings of up to $140,000/month, with significant cost reductions through shipping programs.
  • Utilize dynamic pricing and cartonization for enhanced profit margins.
• Enterprise Shippers (750,000 packages/month):
  • Potential savings of up to $525,000/month by implementing comprehensive rate shopping and shipping programs.
  • Advanced automation and analytics drive further efficiencies and cost reductions.

Leveraging Technology for Long-Term Savings

Advanced shipping solutions, such as those offered by Techdinamics, empower businesses with the tools needed to make data-driven decisions and optimize their fulfillment strategies. Technology plays a pivotal role in achieving cost savings and operational efficiency, from automated order processing to carrier rate negotiations.

Final Thoughts

Reducing shipping costs requires a proactive approach that leverages the latest tools and strategies available in the market. By investing in advanced rate shopping, cartonization, strategic markups, and optimized shipping programs, fulfillment centers and brands can enhance their profitability and customer satisfaction.

In an era where every dollar counts, embracing smart shipping solutions is no longer optional—it's essential for long-term success.