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3 Simple-Yet-Effective Ways Product-Based Businesses Can Increase Monthly Profits

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Archives, Commentary, Global Trade Daily, Special Reports

3 Simple-Yet-Effective Ways Product-Based Businesses Can Increase Monthly Profits

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In order to thrive, businesses must have a healthy bottom line. Have you recently taken a long look at your product-based company’s financials and realized that its overall profit is much lower than you expected? Even though your business is making a ton of sales every month, the numbers don’t lie — profits may be much lower due to the money your company has to shell out each month for payroll, the costs incurred for manufacturing your products, and other overhead expenses. This can definitely be quite frustrating for any entrepreneur!

Now you may be thinking, how exactly can I increase profits without having to make massive changes in my enterprise’s operations? Is there a way to grow net profit without the need for more sales or marketing outreach? Well, wonder no more! In my experience as the CEO and founder of CMA Exam Academy (a Certified Management Accountant exam review program), I’ve discovered many simple-yet-effective ways a product-based business can increase its monthly profit. Here are three of them that I’ve encouraged other entrepreneurs to follow:

Prepare & Review Your Budget Now to Save Later

Your profit may be much lower than you thought it would be because you never set up a budget, or you set one up in the beginning of the year or quarter and then forgot about it. Don’t let this be the case any longer! Your monthly budget is your guidebook of exactly what your enterprise needs to function and deliver its offerings to customers. It is important to take the time to put together a spreadsheet that lists exactly which costs are needed for each month’s operations, including subscriptions for your CRM and sales management software, payroll, manufacturing essentials, etc. Include EVERY single cost, no matter how small it is! Better yet, use an accounting system to track all of it.

Once you prepare this budget, it’s time for the second step: comparing it to your business’s actuals. You may have written down the monthly overhead costs in your budget so they are set in stone, but your actual expenses could be much higher without you even knowing it! So take your last month’s financial statement and review the expense lines to identify the largest variances from your budget. For example, you may discover that the costs of office supplies or cloud-based file storage are higher than you budgeted for. Once you note these discrepancies, you can make changes to ensure the actual expenses match your budget.

Look for Waste in Production Processes

You may be completely unaware of waste that occurs throughout your production process. For example, a process that you use to manufacture your products may result in a lot of wasted materials, which can be really costly and lower your overall profit. So see how you can lower or eliminate the waste altogether. Assess all of your production processes to pinpoint any waste and consider changes that can be made to fix it. Even a small adjustment in the process could drastically reduce the waste, so this is a must-do step for every product-based company!

Waste can also refer to costly, unnecessary manpower in an inefficient process. For example, say you have several people working on one element of the production process, when in actuality only one person really needs to work on it. In this case, the extra manpower is a wasted cost — it can even be lowering the overall efficiency of the entire process!

Try to Negotiate with Vendors

Do you work with an array of vendors whose products are used to create your final offerings? For example, do you purchase bulk materials from several sellers to create your business’s products and then buy packaging supplies from another vendor? If so, see how you can negotiate with them to get the best prices for these items. Here are a few ways you can do this:

See if You Can Hammer Out Discounts for Early Payments

Every business owner wants their invoices paid on time so that they always have the funds available for operational expenses. Therefore, see if your vendors would be open to offering you a discount for paying your monthly invoice early. Even if it’s a small discount percentage, it can really add up to a ton of savings! For example, say you usually buy $4K worth of materials each month from one seller. If you can negotiate a 5% discount for paying your invoice early, you will save $200 a month! And if you secure 5%-off early payment discounts with every vendor you buy from, all of the savings would really add up and increase your monthly net profits!

If a seller isn’t open to an early payment discount, see if any of their competitors would be open to one. If one of the competitors is, mention this to your current vendor and it may persuade them to offer you one as well. They would likely much rather agree to a small early payment discount than lose your business altogether to one of their competitors.

Negotiate Pricing

Kind of going along with the last point, see if you can negotiate pricing with your vendors. Again, reach out to your vendors’ competitors to see what kinds of pricing options they offer and how they compare to those of your current vendors. If any of the competitors offer the same materials for better prices, see if your current vendors would be willing to offer the same prices. If they are not, then consider switching vendors — even if the pricing difference is just $50 a month, you will end up saving $600 a year! Always consider the long-term savings.

To Wrap It All Up

Are you looking for ways to increase your business’s net profit? You can do just that by preparing and reviewing your budget now to save in the next month(s). On top of this, assess your production processes to eliminate costly waste. Also see if you can negotiate with your vendors to secure discounts on early payments and lower the prices for your monthly purchases. Following these simple-yet-effective steps may help you save a lot of money and boost net profits, in turn improving your company’s overall bottom line.

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Nathan Liao is the founder of CMA Exam Academy, a top Certified Management Accountant exam review program. As a CMA and CMA coach, Nathan mentors accounting and finance professionals in over 80 countries to earn their CMA certification in as little as 8 months. The unique review framework in CMA Exam Academy has proven to be the key to his students’ outstanding success in attaining their dream of earning the Certified Management Accountant certification. www.cmaexamacademy.com

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Air Cargo, Archives, Global Logistics, Global Trade Daily, Ocean Carriers

LCL: A Shipping Solution for Today’s Global Logistics Market

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Less-than-container load (LCL) shipping has become part of the solution design to many supply chain challenges. LCL shipping provides shippers with cost and time savings as they face longer wait times at ports along with more last-minute-change needs, based on disruption and delays.

In a recent global survey conducted by our team, shippers reported congestion and capacity as their main pain points in today’s ocean environment. While we have seen a continuous increase in shippers turning to LCL shipping to battle those challenges, almost a quarter of the participants in the survey noted they were not regularly shipping LCL today.

In the following, I’ll share where we’ve seen shippers find success through LCL and why you should consider it if it’s not already a part of your shipping strategy.

Combating today’s tight air and ocean market

Consumer demand continues to be at an all-time high, and we expect that demand to increase through the holiday season and into next year. Some of the larger air terminals in the United States are seeing delays of up to 5-7 days to claim cargo, and ocean vessels continue to be delayed at the ports of Los Angeles and Long Beach, waiting on average 10-15 days to berth.

While delays may seem inevitable, there are creative solutions for shippers to lessen the impact. One way is diversifying freight through different modes like LCL. In fact, we helped hundreds of customers shift some of their freight from full-container-load (FCL) to LCL to keep their products moving.

For instance, CoolDrive Auto Parts—Australia’s largest family-owned importer and wholesaler of aftermarket automotive parts—worked with our global team of experts to introduce more flexibility into their supply chain with LCL.

“LCL not only gives us incredible flexibility, but also provides that same flexibility to the businesses we supply…We can see how new products perform without overcommitting to them. It has helped us grow our catalog, create relationships with new suppliers, and allowed us to be even more flexible and responsive to specific customer needs.”

The reality is—space for LCL shipments is typically more readily available since you’re only looking for some container space versus an entire empty container, which can be scarce in today’s market with ongoing container shortages. Working with a provider, like C.H. Robinson, who has the global suite of service offerings and scale to run our own consolidation loads, helps you not only plan and load out cargo more frequently—but also better handle unplanned freight during peak times.

Expedited LCL options

While moving freight via traditional ocean shipments for the holidays has passed, retailers can turn to expedited LCL as an option to avoid solely depending on air. Of course, this would depend on the origin and destination of those goods. The quicker ocean service has also grown in popularity amongst e-commerce shippers, where air was once seen as the only viable option.

While expedited LCL shipping is not as fast as air, it is an alternative to consider for some of your freight. One of our customers went this route earlier this year when we helped convert some of their air freight to expedited LCL shipments. While the transit time was longer, with the right planning, they were able to build the appropriate amount of inventory before making the adjustments—and in return reaped some cost savings.

Cost savings

LCL shipping is the go-to product in terms of cost savings on conversions from air to ocean. In fact, expedited LCL services are still seeing upwards of 60-75% savings versus today’s airfreight environment. And because you only pay for the space you use, LCL service can even show reduction over under-utilized FCL shipments.

It can also aid in saving on storage fees. It’s no secret warehouse space in the United States and around the globe continues to be tight. By using shipments in transit as inventory in transit, LCL shipping can even help lower warehousing and inventory costs, which can help reduce your tariff spend per shipment.

Keep in mind, LCL is only one part of a supply chain, but it’s an opportunity many shippers aren’t taking advantage of. If you’re interested in learning more about LCL and how it could benefit you—talk to your dedicated C.H. Robinson representative or reach out to one of our logistics experts.

Greg Scott is the director of LCL ocean services at C.H. Robinson

retail
Archives, Global Trade Daily, Stories

The Impact of COVID-19 on Online Retail

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Online supply store DK Hardware examines how the pandemic is changing the habits and overall consumer behavior of online shoppers.

After more than a month of confinement, we all dream of the day when everything returns to how it was before, and we can resume our not so old habits. However, it is more realistic to think that COVID-19 has come to stay and that, after this first devastating wave, the entire population will have to remain extremely responsible and we will suffer the consequences of this pandemic for longer than we would like. We do not stop living one of those moments in history in which the foundations of our society are shaken and we experience profound changes that will prevent us from returning to the point where we were a few weeks ago.

This first month of confinement is forcing us to adopt new habits and customs that we will maintain once the state of alarm is lifted, customs that will leave consequences in multiple aspects of our lives. In this post we are going to focus on everything related to new buying habits, otherwise, it would be too long.

Change of Habits

One of the first pieces of news that hit us all hard was knowing that we could only step on the street to buy basic necessities. When we found out, we all ran to loot the supermarkets as if we had seen the four horsemen of the apocalypse arrive. Once the first moment of panic was over (fear is very powerful and completely irrational), we gradually adapted to the new situation and discovered that these small forays into the streets in search of food, medicine, within others, it was anything but pleasant: lines surrounding the supermarkets with people more than 1.5 meters dressed from top to bottom with gloves and masks, security measures to access the premises, lonely buyers fleeing from anyone who invades their personal space … measures completely justified and that we must respect, but that makes it almost traumatic to go shopping.

But this change does not stop here: during the last month, we did not know very well if the rest of online retailers dedicated to the sale of products that are not essential items would continue to operate normally. This uncertainty took its toll on this ecommerce, but once the doubt was cleared and, seeing that the orders were made and arrived relatively normally, we found the second great change in habits: buying everything that we need or want in online stores. Yes, even supplies for your home.

Has your bathroom shower window broken, and you cannot go to your usual store? You can buy it online. Have you been thinking about changing your kitchen’s plumbing system now that you’re spending more time at home? Well, you can buy it online. Companies like DK Hardware, one of the largest online home improvement retailers for a variety of hardware manufacturers all over the United States and Canada, have your back.

Think Global, Act Local

Online retail is there to satisfy your needs and now it has more prominence than ever. This situation is causing many SMEs and local businesses that saw that the online channel was only a complement or did not even consider working on that channel, have woken up from one day to the next and now consider it their priority (and if not I don’t know what they are waiting for). While many companies, both large and small, keep their productivity levels in check thanks to the option of telecommuting, many businesses are going digital so as not to be left behind and remain part of the game.

And After This, What?

The post-coronavirus world will be an even more digitized world in which the battle to get users to choose us will be even fiercer: let’s not forget that a large part of the population does not have the purchasing power it had before the pandemic and that the longer the confinement lengthens, the longer and more severe will be the economic crisis that the country is facing. In these circumstances, these factors will be key:

Price: The price war will continue to be something that online retail has to live with. The excessive stock in the warehouses together with a society that is going to look at the price with a magnifying glass, will force the stores to have competitive and attractive products.

Loyalty: With so many new players on the board, it will be more difficult to get your buyers to be loyal and make recurring purchases in the same store. Therefore, establishing a good loyalty strategy is going to be mandatory.

Omnichannel: It is more important than ever to attract and retain users, so we cannot forget the power of working multiple channels at the same time, building a powerful brand image and with the aim of being more in contact with our users: social networks, email marketing, SEO, SEM are some of the examples of channels that must be perfectly coordinated and that will work as one.

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Featured in the Best Online Shops 2020 – Newsweek, DK Hardware is one of the largest online home improvement retailers for a variety of hardware manufacturers all over the United States and Canada.

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Archives, Global Shippers 101, Global Trade Daily

The State of “Fast and Free” Delivery: What Retailers and Parcel Carriers Should Know

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Thanks primarily to Amazon (and the explosive growth of Amazon Prime), consumers in 2020 are conditioned to expect that virtually anything bought online can be shipped for free. That’s true for small orders like prescriptions and batteries, and for huge items like appliances and tires. If it means a shopper has to buy an annual subscription, or spend a little more to meet a free-shipping minimum, most people would consider that a low bar to meet.

But as every retailer and ecommerce seller knows, shipping is never free. Today’s multi-billion-dollar parcel carriers are getting paid. They moved nearly a billion parcels this past peak season. That shipping cost is being ultimately absorbed by sellers and is reflected in the price buyers are paying for products.

And parcel volume growth isn’t slowing down – it’s accelerating. According to the Pitney Bowes Parcel Shipping Index, global parcel shipping volume grew 70% from 2014 to 2017, to 74.4 billion parcels. The index projects global parcel volume to rise at a rate of 17% to 28% from 2018 to 2020, surpassing 100 billion parcels this year.

Handling increasing parcel volume isn’t just about figuring out how to do more of the same. The process of getting things where they need to go is under a transformation. In a recent report, Gartner found that transportation is the largest portion of delivery costs, due to a shift from carriers handling bulk freight to small parcels.

[Parcel and last-mile delivery will] continue to be the fastest-growing shipment segments due to increases in multichannel retail, eCommerce in B2B and same-day delivery offerings.

Gartner also observed what many companies are feeling. As volume continues to grow, companies only have time to react instead of plan. That means many are missing opportunities to revolutionize parcel logistics with innovation and alternative delivery models.

How fast does “fast” need to be?

According to research from Freightwaves, consumers unsurprisingly still have an appetite for fast delivery, with 60% of shoppers saying they’ve abandoned an online purchase because of slow delivery times. With record volumes to handle – and so much at stake with consumer expectations – efficiency, on-time consistency, and flexibility are key for parcel delivery services, whether it’s same-day, next-day or deferred.

This year’s U.S. peak shipping season saw about a billion package deliveries (up 4.5% from 2018). Retailers are offering more same-day options, which increases demand and the need for trucks, local delivery vehicles, drivers, warehouses and warehouse workers.

This year, the challenge was also complicated by a shorter selling season (the holiday season was six days shorter in 2019 than is typical), new restrictions on driver hours of service, and the December 16 implementation of new rules for Electronic Logging Devices in commercial trucks. All of these factors impact capacity and the ability of networks to deliver fast and on time.

Emerging shift in consumer behaviors

On the flip side of the “freer and faster” coin is Gartner research analyst Tom Enright. He’s counseled retailers on their supply chain and fulfillment strategies for more than a decade.

In a groundbreaking report published in November 2019, he detected an emerging shift in consumer behavior: “Consumers are starting to express increased concern about the environmental impact of retailer’s shipping practices, and are seeking slower, more sustainable options.”

Consumers are now defining convenience as order fulfillment on their terms, and they’re expressing more and more concerns about the environmental impact of fast, one-off deliveries.

It’s a conflict between three consumer choices:

-The desire for instant gratification

-The price reduction they can get for waiting longer for a delivery

-The impact fulfillment speed has on transportation, packaging and other environmental issues.

According to Enright, for retailers, these shifting demands are driving the emergence of two new requirements that are somewhat at odds with current models:

-Retailers must be more environmentally sustainable in order fulfillment operations.

-Retailers must offer a wide range of shipping speeds and prices, especially if incentives or other benefits are included in the offering.

Considerations for retailers and parcel carriers

That means retailers – and their parcel delivery partners – need to consider more flexible fulfillment options. These will need to be able to satisfy a consumer who wants a totally different delivery than currently exists. Companies will need to consolidate multiple online purchases from different retailers, have them combined using less packaging and have it delivered as one shipment a week from Tuesday. That’s instead of three separate shipments expedited for delivery tomorrow – or even same-day.

Major retailers like Amazon, Walmart, Target, and The Home Depot are doubling down on offering same-day delivery options. And for parcel delivery providers, it remains a highly fluid and exciting market. New network models are not only welcome, but will be required to meet the ever-evolving demands of shippers.

The explosive growth of package volumes, and consumers’ desire for next-day and, increasingly, same-day delivery, aren’t likely to wane anytime soon. And retailers and parcel carriers will need to pursue creative, innovative ways to keep up with those expectations and meet that demand.

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Valerie Metzker is the Head of Business Development at Roadie, a crowdsourced delivery service that works with consumers, small businesses and national companies across virtually every industry to provide a faster, cheaper, more scalable solution for scheduled, same-day and urgent delivery. With over 150,000 verified drivers, Roadie covers 89% of U.S. households — the largest local same-day delivery footprint in the nation.

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Archives, Global Trade Daily, News

UPS & CVS Pharmacy Collaborate for Customer Convenience

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CVS customers now have the added convenience of utilizing recently expanded in-store UPS package pick-up and delivery options. UPS confirmed earlier this week that more than 6,000 CVS Pharmacy stores around the country will offer the service which was confirmed to roll out immediately.

“This deal offers additional convenience to consumers in the e-commerce era,” said Kevin Warren, UPS’s chief marketing officer. “Working with CVS Pharmacy demonstrates our commitment to increased customer choice and control with our global UPS My Choice® network.”

The collaboration directly impacts both companies, as it not only brings added traffic to nationwide CVS Pharmacy locations, but also provide the added option of trip consolidation for UPS customers seeking an all-in-one shopping experience.

“We will continue to bring our customers new omni channel services and experiences that redefine convenience and make it easier to meet the demands of their increasingly busy lives,” said Kevin Hourican, Executive Vice President, CVS Health and President, CVS Pharmacy. “Adding UPS Access Point locations at CVS Pharmacy locations offers added convenience in local communities throughout the country for shipping and safely receiving packages.”

By adding more locations for customers seeking convenient shipping options, UPS also adds to the UPS Access Point locations, which currently boasts more than 40,000 and 38,000 drop-boxes globally. Additionally, the collaboration impacts over 60 million UPS My Choice Program members currently customizing shipping needs. These members have direct access to the extended UPS network to for estimated arrival and progress alerts, sign for a package in advance, set vacation holds, and more.

“Until now, the UPS Access Point locations have largely been local businesses and The UPS Store® locations. With this announcement, UPS broadens our services to offer an enviable network of secure choices to busy shoppers,” Warren said. “Consumers now have access to a vast and robust suite of options that include the CVS locations, neighborhood businesses, lockers and The UPS Store centers.”