How to Reduce Shipping Costs with Optimized Packaging

Every time you ship an order in a larger-than-needed box, you’re paying extra to ship empty space. For many companies, that extra shipping cost adds up to thousands of dollars a year.

Here’s how to correct that and reduce shipping costs.

Packaging material costs represent a frequently overlooked line item of overall shipping costs. With carrier delivery rates steadily increasing, it’s more important than ever to consider the impact of packaging decisions. Right-sizing your packaging practices can greatly reduce shipping costs.

However, in many shipping operations, box size options are rarely audited or analyzed in terms of space utilization. In fact, when our team performs an operational audit for clients as part of our ROI analysis, we find that many shippers are packing over one-third of their orders into larger-than-necessary boxes.

Costly Empty Space

The first rule is to always pack orders in the smallest box (or bag) and dunnage that is adequate to protect the contents. Yet too often, companies are paying extra to ship empty space.

Shipping orders in larger-than-necessary boxes was a non-issue in the past when the larger carriers calculated freight rates based on weight only. However, most carriers now consider both a shipment’s physical weight and dimensional weight and charge the higher of the two shipping rates, so using the wrong size box has become very expensive.

Suppose the order packer selects a larger shipping container than necessary to pack all the items for the order. That shipment will incur a higher delivery cost by the carrier due to the increased dimensions of the box.

How fast and high do excess shipping costs add up? Here’s a realistic example.

For example, consider a 12” x 12” x 12” box. A one-square-foot box is 1,728 cubic inches which dimensionally weighs out to a 13-pound package. Using a standard dim factor, if you fill a 13-pound DIM-rated box with only 7 pounds of product, you’re potentially paying approximately $5 more to ship that box than you need to.

Multiply that extra $5 charge by 100 orders a day over 255 shipping days per year, and you’re paying $127,500 per year in extra carrier charges.

In addition to higher freight charges, you will likely incur additional packaging costs for the extra dunnage needed to protect the box’s contents. If the items are loose in the box, they could shift and move while in transit, resulting in damaged deliveries and the cost of returns/reshipment.

Why It’s Important to Expand Packaging Sizes

You can optimize package size and reduce shipping costs by broadening your package types and sizes. Shippers may need to work with their box vendors to provide a more extensive selection of box sizes than was necessary with weight-based shipping alone. Look at your average order size and order a range of boxes to match.

• Include three to five box sizes larger and three to five packaging sizes smaller than your average order size to handle outlier packages.
• Also, paying a bit more for the packaging needed to fit your “outlier” items properly could equate to several times that amount in reduced shipping costs.
• Two under-used packaging types to help further reduce shipping costs are cardboard/padded envelopes and polybags.

A little-known fact is that the US Postal Service provides free boxes, envelopes, and polybags for orders shipped via many of its services, saving you an additional 25 to 75 cents per package.

Consider Cartonization Software

If your fulfillment operations is shipping orders in various package sizes, consider adding cartonization software to evaluate the order contents and select the optimal package size for each order.

Cartonization software eliminates the need for staff to guess which box is best each time, ensuring the smallest packaging and lowest carrier rate for every shipment. It can also help reduce packaging costs by eliminating the overuse of dunnage or void fill used when orders are packed in larger-than-necessary boxes.

Cartonization and dimensional weight calculators on many WMS systems can also provide insight into the best standards for your needs. Several software companies have also developed cartonization or cubing software applications that may work for your operations and reduce shipping costs.

No One-Size-Fits-All Approach

Best practices in cost-effective packaging vary by a company’s industry, products, shipping requirements, and more. CLS has helped many companies evaluate and optimize their packaging options and reduce shipping costs by automating order packing and shipping processes. Contact us if you’d like to learn more. We’re here to help.

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