3 questions logistics leaders should ask to bring down costs

“They are going to want a profit margin,” he said. 

To avoid paying a margin on top of services you don’t need, Van Erlach suggested looking at what your customer needs from your fulfillment capabilities.

“You have to look at, does being closest to the customer matter to me based on my product type? In our case, not so much because we are a subscription box. … We don’t have to ship and deliver within two or three days like some companies do,” he said.

As vacancy rates fall and costs of warehousing have skyrocketed, companies like FabFitFun have begun to think twice about how they can utilize that space.

“What FabFitFun is doing is becoming a 3PL,” said Van Erlach. “In addition to managing our own volume, we are bringing in well-known clients that are actually joining us in our facility because we have tremendous capacity and excellent logistics rates across the country.”

For companies with much less volume than FabFitFun, which currently has more than 1 million subscribers, Van Erlach suggested leveraging a third-party network that allows for more flexibility as the company grows.

What should my relationship with carriers look like?

Common to many retail companies, the COVID-19 pandemic forced FabFitFun to think twice about carrier strategies.

“When we looked at our logistics network, we pretty much had one carrier company with a great rate,” said Van Erlach of its pre-COVID system.

“That is when we diversified our logistics. We went directly with every major last-mile carrier in the country. We balanced our national carriers so that we had multiple national carriers, every major last-mile carrier, and that was a good decision that we made because we could get all of our shipments out on time.”

The key was to optimize the various shipment dimensions for each carrier FabFitFun used. 

“We looked at the requirements, the sweet spots of the carriers that are out there, and actually designed packaging around [those requirements]. We eliminated air from anywhere in our shipments and saw strong rate competition from carriers,” he said.

How can I cut more costs from the packaging?

Van Erlach explained that not only can a company reduce shipping fees by meeting carrier packaging requirements, but critiquing product suppliers on shipping strategies can also lead to even greater cost savings.

“We start [conversations] all the way upstream with our product suppliers by looking for packaging design inefficiencies. I have seen products where there is a plastic straw that’s sticking out of a cup and they have built a package around the plastic straw,” he said.

This process makes it easier for carriers to maximize space on their trailers and bring shippers savings by pairing their volume with other merchants’ volume as well. 

“If you are a smaller shipper, then companies like LaserShip offer a great service where they will pick up your less-than-truckload shipments and combine it with other clients in the region that ship to a regional warehouse in other parts of the country. … It is a combination of those strategies that you want to be looking for. More strategically, it’s always going to be a question of how do I ship more gross profit dollars per package.”

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