Green Your Storage and Shipping
January 18, 2008 Concerns about global warming and finite fuel sources have many consumers and business owners concerned about the impact of the products and services they consume. For retail merchants, the bottom line and the environmental impact are intertwined and directly correlate to product shipping costs. For purposes of this article we”ll ignore manufacturing, which should be evaluated on a case-by-case basis. Absent manufacture, a retail organizations” major environmental impact is the carbon footprint of their storage (warehouse) and shipping (order fulfillment and delivery). This article seeks to call out a few relatively simple changes that will be better for the environment, customer relations and your businesses” bottom line.
When it comes to the delivery of merchandise, the total carbon footprint is roughly equivalent to how much fuel it takes to get your products where they need to be. Luckily (for this analysis) parcel shipping costs are intimately tied to the total fuel cost. The more efficient the shipping is, the smaller the footprint, and the cheaper the shipping cost. Ground and sea cargo are cheaper than air; bulk or freight shipping is cheaper than individual parcel delivery.
Let’s look at a very simple example, a 10-lb. parcel shipment from a New York City warehouse to a residence in Los Angeles.
If your warehouse is in New York, your cost for a normal ground shipment to the residence in LA would be approximately $12.66 (ground, with residence fee and fuel surcharges). If you need to get it there via next-day air it would be approximately $81.00. If you put some of your inventory in a warehouse in Los Angeles your cost for that same package would be $8.39 (ground, with residence fee and fuel surcharges). If you had to get the product to the customer the next day, it would be the same $8.39 fee.
What is the lesson? Your carrier pricing is a factor of distance. If you strategically place inventory in multiple locations, you can increase your service delivery speed and reduce costs. Granted, in this example we saved a little over $4.00. However, if you”re doing 100 shipments a week you would be saving over $1,500 monthly just on shipping. You just saved roughly one-third of your shipping costs while increasing your service levels.
This simple example demonstrates how locating inventory as close to the end buyer is your ticket to shipping savings and reducing your products shipping carbon footprint. The promise of savings may seem counter-intuitive if you have to first get your inventory to LA. But it comes back to shipping costs. Moving a pallet from New York to Los Angeles, via ground freight, cost significantly less than individual parcel shipments.
The example also highlights how your businesses bottom line is intimately tied to the environmental impact of your product’s fulfillment. As shipping costs rise in line fuel prices, it becomes even more important to look simultaneously at minimizing shipping expenses while cutting the carbon footprint.
Here are five actions that can help achieve those goals.
1. Keep Inventory close to the end customer
Our hypothetical Los Angeles is a great example of how keeping inventory closer to the customer can reduce your carbon footprint while lowering last-mile parcel delivery costs. Overall, using volume freight shipments to get inventory to regional warehouses will cut the total number of miles traveled per package.
2. Move in bulk by “ground” whenever possible
The further you transport goods in volume—in a large container or by freight—the better optimized your long-distance inventory transport will be. If you’re importing from overseas, going by sea in a shipping container helps contain costs and uses less fuel than relying on air freight.
3. Maximize the number of products you pack into each shipping container
Consider eliminating the use of pallets. You”re not selling pallets; and for purposes of this article bonfires are not the objective. Critical to making this move is confirming that your warehouse will accept “un-palletized” cargo. If not, it may be time to consider a new warehouse.
Take for example, Keetsa, which designed the packaging for its eco-friendly mattresses to fit the dimensions of DHL, the United States Postal Service (USPS), and UPS. Moreover, it designed the packages such that they would not need to be freighted on pallets as the warehouse could receive un-palletized merchandise. As a result, Keetsa can pack its containers without pallets, cutting both its container freight shipping costs and its carbon footprint, by 30 percent.
4. Package for “maximum shipability”
Maximum shipability means achieving the minimum shipping volume necessary to move your product to the seller. If your product is too large for mainstream carriers, your shipping costs will greatly increase from a pure parcel point-of-view. Less space and the ability to use standard carrier services translate into significant cost savings. Consider again, the Keetsa example.
Keetsa, as part of its manufacturing process, has created a carrier-friendly shipping box for its mattresses, which means that parcel carriers like DHL, UPS and FedEx will pick up the mattresses in their normal course of business. Because the packaged mattresses can shipped with parcel carriers in their regular routs, orders get out to customers much faster increasing customer satisfaction. And because the mattresses are pre-boxed, when an order comes in, it requires minimal warehouse staff time, since someone just prints a shipping label to Lick and Stick™ it to the package. As a result of this easy-to-handle packaging, Keetsa has lowered its storage costs.
5) Match your warehousing to your inventory
Does your warehouse maximize efficiency and economies of scale? Odds are “no” if your inventory is housed in a 3,000-10,000 square foot warehouse. Even a majority of Fortune 500 companies find it’s more efficient to contract use of strategically located warehousing facilities rather than owning small, regional warehouses. It saves on heating and lighting—not to mention other expenses related to security, phones, software and employees.
Just as Fortune 500 companies no longer fulfill all their orders from one central warehouse, now small merchandisers can plug into national warehouse networks—cutting their costs and carbon footprint by increasing efficiency and bringing inventory closer to customers.
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Learning from Keetsa.com
Keetsa’s carrier friendly packaging and elimination of pallets are two ways that it has reduced its carbon footprint. But Keetsa also has avoided leasing a 10,000 warehouse by turning to Shipwire to manage its inventory storage and order fulfillment from warehouses in Los Angeles and Chicago, as well as automate fulfillment from Keetsa’s online and retail stores. That has allowed the company to bring shipments closer to customers further cutting its carbon footprint. Better yet, Keetsa has been able to take the cost savings it’s realized with greener storage and shipping practices, and pass them onto customers. So Keetsa’s eco-friendly mattresses allow the both retailer and its customers to realize more green in their pockets. To learn more about Shipwire and Keetsa, visit http://www.keetsa.com and http://www.shipwire.com.
Author Info: Damon Schechter, Shipwire.com founder and CEO, and author of, “Delivering the Goods: The Art of Managing Your Supply Chain,” shares strategies in helping growing Web retailers reduce their carbon footprint through strategic changes in inventory management and shipping.