When company officials think about growing top line revenue they usually think of ways of attracting more sales. However, many times company executives are not aware of the valuable profit centers that are hidden within their own operation.
There are actually practical ways companies can achieve revenue goals without the cost of securing new business. One area of a company that has several different ways of adding real dollars to the bottom line is the shipping and logistics department.
No part of a business interacts directly with customers and suppliers more than shipping does. The opportunity to add value is riper than ripe within this business segment. Check out these five ways you can use this to your advantage.
1. Change Shipping Terms to Prepay & Add on Outbound Collect Shipments
If you have customers who route their freight collect, convince them to allow you to ship it so you can prepay the freight and add some margin (profit) on top of it in the form of "shipping & handling". There is value in you handling the payment of the freight invoice, dealing with potential freight damages and carrier service issues. Sell that value to your customers in the form of you handling the risk and making their lives easier.
2. Change Prepay & Add Vendor Terms to Collect
Many suppliers use freight as a profit center (much like I just described in #1). However, everyone wants to make the customer happy so converting those usually inflated prepaid & add shipments to collect on your freight account is usally an easy process. By simply telling your vendor that you need to reduce the number of different carriers coming into your receiving dock and that if they don't comply you'll have to go elsewhere wtih your business, usually gets this accomplished. The cost savings in doing so is typically significant.
3. Offer Premium Service for Guaranteed Delivery
This is an easy one. Offer one price for regular deliver and a premium price to guarantee the regular delivery. The distance freight carriers can deliver next day is pretty far and carrier on-time performance has never been better. By charging more to guarantee the standard delivery is an easy way to boost profitability.
4. Offer Cheaper Freight Costs for Slower Delivery
If a customer doesn't neccessarily need your product right away, offer cheaper freight costs in exchange for the flexibility. If you have the ability to marry up loads to build a truckload with stopoffs or create a pool distribution channel, you could still make a big profit on freight if you were able to find much cheaper ways to ship.
5. Build a Premium Membership Program
Take a page from Amazon Prime where you offer customers exclusive priviledges such as free shipping, dedicated customer care, special reporting, etc. in exchange for an annual membership fee for being part of your "Platinum Customer Program".
These are some suggested ways your company can turn a cost center into a profit center fairly easily. There are other things you can do with logistics to help increase your company value and profitibility. Download our case study to see more examples of how KDL can turn your logistics department into a valuable asset in your company's profitibility.
Feel free to comment below if you have other ideas that would be helpful in increasing profitibility by leveraging a cost center or bringing extra value in exchange for better margins.