4 Common Mistakes Small Businesses Make When Shipping Products To Customers
Posted On May 4, 2015 by
There are several steps between making a product and ensuring you have a satisfied customer when the product is delivered. While small business owners are juggling multiple tasks at once, such as research and development of their product line and marketing it, they sometimes are unaware of the number of factors involved in getting a product to their customers’ doorstep. Several variables can affect how quickly a product is received, the condition it is received in and how cost effectively these tasks can be executed. As a result, logistics and shipping mistakes are often made in the process. Here are some common mistakes to avoid:
1. Not Forecasting Increased Expenses
Many small businesses don’t think to accommodate for increased expenses on an annual basis. “From a planning perspective, one of the most common errors retailers make is assuming that next year’s costs will be the same as this year’s or last year’s costs,” wrote Chris Merritt for Logistics Viewpoints.” Fluctuating fuel costs, a driver shortage that has increased wages and regulatory mandates that require cleaner, more fuel efficient and more expensive engines are all likely to rise faster than distribution costs. This disparity inevitably will be felt in most small businesses’ bottom line profits each year. Planning for these increased expenses will enable a company to come up with internal solutions to make up for these expenditures in other areas of their business.
2. Not Automating
If your company is still processing waybills manually, your company could be losing thousands of dollars each year. Shippers can charge up to $5 to process paper waybills as opposed to nothing to process them electronically. A simple change like this can reduce your variable expenses significantly. Keeping up with constant technology changes is imperative to remain competitive in the current business environment. Using a fulfillment company is crucial for small businesses to be more efficient in their operations. This is a great way to automate your shipping process when orders come in.
3. Not Reviewing International Shipment Terms
Many small businesses don’t know there are a number of factors that come in to play with sea freight that don’t with land freight shipments. Dixon Golf’s Co-Founder and Chief Operation Officer, Dane Platt, learned that this could be a costly mistake when he arranged an order of golf balls to be shipped to China through a supplier. The terms he received for the shipment were categorized as CFR (cost and freight), meaning the shipper is responsible for all costs associated with bringing the goods into port. “This meant the goods would arrive in China without having any of the costs of duties and taxes included,” Platt says. “I was responsible for paying them. The duties and taxes ended up adding more than 30 percent to the cost of material.” Not double checking the terms of the International shipment made it unprofitable for Dixon Golf to sell the final product on the market, Platt says. As a result, Dixon decided to cut their losses and allow Chinese customs to seize the material. The mistake cost them about $20,000, Platt says. He learned that if he had requested DDP (delivered duty paid) terms, that would have made Dixon’s supplier responsible for paying duties and taxes.
4. Guestimating Inaccurately
In a time crunch, business owners often panic and end up guestimating the weight of their shipments. This can be disastrous if at the last minute an order balloons to a much higher number than anticipated and can cause a snowball effect of cost errors. For example, Younique Boutique, a production company, started with a client that ordered 12 of its custom wedding-cake toppers. When the order ballooned to 280 and the destination wasn’t determined until the 11th hour, founder and CEO Brina Bujkovsky, scrambled to ship the order from her manufacturer in China to the production set in Hawaii. “I just added $5 to our cost for each topper and crossed my fingers. We had no idea how heavy the boxes would be, or which method we would need to ship.” Sending the shipment last minute cost her company approximately $1900. The difference between her last minute estimate and the actual cost resulted in an $800 loss. She could have avoided this costly error if she had done more research on shipping options for larger orders ahead of time.
If you find these shipping issues are affecting your bottom line, consider consulting with a small business specialist or a fulfillment center that caters to small businesses. It can also be helpful to work with your suppliers to come up with the most cost effective shipping methods using if/then scenarios for your business so you’re prepared when these kinds of situations come up in the future.