It’s no secret that distribution is a pain point for a lot of food suppliers. Shipping is very expensive. To make it a little easier on you, here are some ways to save on shipping costs to get your products to your customers.
1. Pack small and light
The first step is to think about what you are shipping. Often, the actual packaging of the products can be bulky and heavy. This takes up more room in a vehicle and can lead to higher costs if shipping with a third party distributor. To avoid this, start by measuring your current products and then determining the average daily/weekly orders. This will help you determine the space currently used in a vehicle to get your products to your customers and if this needs to be reduced.
You should only be using space that needs to be used and buy packaging that fits your products.
2. Determine and use your MOV
This is a popular but essential topic. A minimum order value is the lowest dollar value that you will ship to your customers. Using our calculator, you can determine how to guarantee a minimum profit per order. This calculator breaks down the cost on the road, margins and break even point, target profit, and average deliveries per hour to determine your business’ unique MOV. After determining your MOV, implement it! Only offer delivery to customers who meet that bracket, otherwise you will be taking a loss.
3. Be strategic with your shipping area
You’ve thought about your packaging and the minimum order for delivery – however, you must also determining the limits to where you are delivering. A MOV ensures profit for delivery, but it does not consider the shipping area. Your shipping area must be feasible with your resources while also considering the needs of your customers. To determine the best shipping area for your business, compile a list of where your customers are located and choose the most frequent.
Tip: If you are just starting out with delivery, start small. Service in your own area first. Build up a customer base and, then consider expanding to different cities. You want to make sure you are running a profitable business before running the risk of shipping to a larger area.
4. Work with more than one carrier
If you don’t have the resources or time to deliver your own products, consider using a shipping partner. This blog post outlines all you need to know when determining whether to do this. If you do work with a carrier, do not only use one. Different carriers have different costs for residential vs. post office deliveries. Use a few different carriers for different orders and compare and contrast. This may seem more time consuming, however it increases the chance of getting the best deal. Also, don’t forget the power of negotiation! Use competitive pricing to get the price you want.
Co-loading is a great option for saving on shipping costs. Co-loading is the coordination of vehicle distribution routes from different suppliers to bring products to their buyers. Essentially, it is connecting two suppliers that need to distribute their products to the same location, however do not have the capacity to do it alone. It can save you money, increase your shipping area, fill capacity and even reduce emissions from your distribution route! To learn more on how it helped these three farmers save time and money on their distribution, click here.
Backhauling is the carrying of goods on return trips. An example of this is delivering a product from your farm to Toronto and then collecting products from suppliers located in Toronto and bringing them to the region where your farm is located in. This prevents empty vehicles from returning to their original location and aiding other suppliers that require transportation. Backhauling allows for profit from the return trip. This can be combined with co-loading to help you save money.
7. Pick up locations
If door-to-door delivery is not feasible for your business, or you’re looking to decrease current costs, consider pick up locations. Pick up locations allow you to bring your products a little closer to your customers and a lot closer to you. Instead of having to make 8 deliveries in one day, you could possibly cut it back to 1 or 2.
In addition to reducing costs, pick up locations can also help you promote your business by having locations in busy customer hotspots such as farmers’ markets, gyms, schools or community centres. To learn exactly how pick up locations can save your business money, check out this post.
We all want to save money in our businesses. Don’t lose money by trying to get your products to your customers.
The last tip to success is having a way to properly manage, track, and communicate your distribution. Put it all in one place.
Ensure profitability on all of your delivery orders
Download our Minimum Order Calculator to calculate hourly distribution costs, your break-even point and target profit:
Nina Galle is Local Line's Content Marketer, creating blog posts, templates, free tools, and other helpful resources for local food suppliers.