Practical Ecommerce

How To Buy Shipping Supplies

Shipping supplies, such as corrugated cartons and bubble wrap, are the third highest overhead cost (after labor and facilities expense) in most order fulfillment operations. No matter if you outsource your order fulfillment or do it in-house, keeping shipping supplies affordable is a top priority for those who ship in volume.

Blanket Purchase Orders Are a First Step in Cutting Costs

Most shipping-supplies buyers start with local or online vendors and buy in small lots at published prices. As buying volume increases, the next step is to contact the vendor’s custom quote department to negotiate a blanket order subject to volume discounts. This will require buying in larger volume, but the cost savings can be substantial.

These are the stock packaging vendors that we work with at eFullfillment Service, the company I own:

In addition, purchased and free USPS shipping supplies are available from the USPS shipping supply store.

Simply Buying in Volume Isn’t Always Cost Effective

Screenshot of shipping-supplies-ROI spreadsheet.

Screenshot of shipping-supplies-ROI spreadsheet.

The unit cost of shipping supplies decreases as purchase quantity increases, but extra quantity requires additional investment in packaging stock on hand. The test is if the extra savings divided by the extra investment yields enough return compared to your other investment opportunities. You can use this downloadable spreadsheet to help calculate this.

In the above example, for an 11 x 11 x 11 carton purchased from Uline at published rates, the cost savings from buying 500 cartons instead of 250 is $45.00, but the added investment is $150.00.

The return on investment (ROI) is $45.00 divided by $150.00, or 30 percent, and, in my experience, any ROI over 15 percent is good enough.

But, in that same example, the savings to move from a 500-carton quantity to a 1,000 quantity is only $10.00. Yet the extra investment is $295.00, for a ROI of only 3 percent, which is much too low to be a good use of limited working capital.

Release Against a Blanket Order Can Improve ROI

There is a way around the low ROI problem, which is to place blanket orders with your suppliers subject to batch releases over time. The blanket order commits you to the volume required to achieve the lower unit price, but you then release in monthly or quarterly amounts until the blanket order volumes are filled. This gives you the cost savings you need, but lowers the added investment per release to a point that your ROI can then exceed your minimum.

Having Custom Cartons Made Locally Can Reduce Costs Even More

If you can place a blanket order for at least 1,000 cartons of the same size, you may be able to cut costs even more by having your cartons made to order by a carton manufacturer in your area. To find one or more vendors, consult your local yellow pages a heading like “Boxes-Corrugated & Fibre.”

The carton supplier will produce the cartons you need to your exact size requirement and can imprint your company logo and sales message as well. The carton manufacturer will deliver to your site and may be willing to warehouse your production run and release against a blanket quantity, which improves your ROI and conserves your floor space as well.

Dunnage Materials Can Cost More Than the Cartons

In our experience as a fulfillment house, the cost of packing materials, such as sealing tape, plastic envelopes, foam peanuts, bubble wrap, Kraft paper and inflatable packing pillows–known as “dunnage”—often adds up to more than the cost of the corrugated cartons.

A good way to manage this issue is to post the unit cost of each of the dunnage materials that you use at your packing stations so that everyone concerned can realize how much expense is involved.

For example, the published price of Uline’s standard 5/16” x 12” x 375’ bubble wrap is $36.00 in single rolls, or over $.10 per square foot delivered. That cost alone for a shipment that requires 4 running feet of bubble wrap is $.40 per package or $400.00 per 1,000 such packages.

When buying dunnage materials, you can use the same discount versus investment ROI calculation as used for cartons, although ease of use is sometimes just as important as unit costs. In our business, for example, we have found that high quality, 3-inch carton tape is faster to apply and thus has a net lower cost per package compared to “cheaper” tape because of the labor expense involved.

The Biggest Cost of Packaging Is Sometimes Hidden

When buying shipping supplies, there is a hidden cost, which is wasted shipping weight or DIM minimum weight resulting from use of cartons that are unnecessarily large because the right size carton is not provided.

The way around this issue is to stock your pick and pack work area with a full range of stock sizes, from small to large, so that wasted carton and dunnage weight can be avoided while still adequately protecting the contents.

Likewise, your shipping staff should be trained to avoid use of “free” priority mail or flat rate cartons when UPS or FedEx delivery is cheaper, taking into account the cost of the carton that you provide.

The best way to avoid hidden costs of packaging is to get all of the cost information in front of your pick and pack staff in the form of charts and posters so they can make the right decisions as they go along.

Summary

Shipping-supplies expense is a big part of order fulfillment costs. The best way to control that expense is to buy in volume, subject to ROI review. Sharing cost information with your staff, and staff training, can minimize wasted expense both in use of expensive packing materials and in the hidden cost of added shipping weights.

John Lindberg

John Lindberg

Bio   •   RSS Feed


email-news-env

Sign up for our email newsletter

Comments ( 8 )

  1. Thomas Mongan June 30, 2010 Reply

    We do work for a shipping supplies company that also offers large order discounts. Another thing to consider when buying from a local service is free shipping or discounted shipping rates inside a certain area.

  2. John Lindberg July 1, 2010 Reply

    Thanks Tom, that is good advice about paying attention to the freight-in costs when buying packaging and especially when you start buying in bulk quantities. By the way, I forget to include in the article a link to the Uline custom quote department and that link is [http://www.uline.com/CustomerService/ContactQuote.aspx](http://www.uline.com/CustomerService/ContactQuote.aspx).

    Johh Lindberg – President
    EFULFILLMENT SERVICE INC

  3. Susan Petracco July 6, 2010 Reply

    Uline is a great source for boxes (I haven’t used the others though). I found that if you purchase regularly for them, they’ll give you a discount – but you have to call them to get it. I was really happy that they rewarded our loyalty as customers.

  4. Jagath Narayan July 6, 2010 Reply

    Excellent article! Thanks for sharing the actual numbers too. Many ecommerce business owners often focus only on the unit economics of the products they are selling and miss out on the savings opportunities on the peripherals.

    How about also using recycled cartons for shipping (packing material from the inbound shipments into your warehouse) ? I have seen some businesses do this, and then stick an eco-conscious sticker on the box.

  5. John Lindberg July 6, 2010 Reply

    As a contract fulfillment company, we can’t use overstock or recycled cartons, but highly discounted surplus cartons are available in bulk quantities from several vendors. The one that I am acquainted with is located in Benton Harbor, Michigan and their URL is http://www.kirshcarton.com/.

    John Lindberg – President
    EFULFILLMENT SERVICE INC

  6. Steve @Erraticblog July 7, 2010 Reply

    Great article John.

    I would also suggest people search at eBay for supplies. There’s not always a good deal there, but I’ve found a few deals in the past that have saved me around 20% compared to the price I normally pay from a supplier.

  7. Elizabeth Ball July 12, 2010 Reply

    I’d also add that merchants select their dunnage packaging to cut labour costs and time but also to improve the perception of quality for the customer.
    I discovered the false economy of using bubble wrap that had to be taped shut snugly over the package. The white, smart-looking bubble-wrap self-seal envelopes cost twice per unit but enables the package to be sealed in a quarter of the time AND look much more professional.

  8. William Jeffrey November 14, 2016 Reply

    have you ever tried PackagingSpot?