Expanding your market through distribution channels is a great option for many hardware suppliers. A distributor can help to get your product in the hands of far more customers than you ever could on your own. However, if you are not careful, the additional cost of coordinating the logistics of working with distribution channels can eat into your profits.
Could high transportation costs be cutting into your profits as an industrial hardware supplier?
Most businesses spend about 6-8% of their earnings with distribution channels on transportation alone. However, industrial hardware suppliers with inefficient distribution networks can easily spend up to 25% of their revenue on transportation costs!
Cutting costs in any aspect is always a top goal for any industrial hardware supplier. Even reducing overhead costs by a few dollars and cents can make a big impact on the bottom line. But how can you cut costs on transporting your goods to a hardware distributor?
Here are some useful tips.
1. Weigh the Costs of 3PL Versus In-House Transport
There are many ways to get your industrial hardware from your warehouse to the distributors. If your company does not have the means to handle this internally, an option is to look into 3PL or third-party logistics providers.
This allows you to outsource the transportation process to another company that will load your hardware onto their own trucks and brings them to the distribution channel location.
There are lots of benefits to using a 3PL. First, these companies are responsible for any damages, as well as the maintenance and fuel of the vehicles and payment for the drivers. If you only need to deliver small shipments, you can work with a Shipment Consolidation (SCL) company, which will combine your order with others headed to the same area.
Now, working with a 3PL is not always the most cost-efficient option, depending on the size of your business and the frequency of shipments. Plus, there is the challenge of finding a 3PL that is reliable and can handle your distribution requirements
For some larger industrial hardware suppliers, it may be cheaper to finance transportation internally. This will certainly require a large investment upfront to purchase vehicles and hire personnel – but it could save you money in the long run and provide you with greater flexibility than working with a 3PL.
2. Partner with Distributors who have Multiple Locations
If your business is based out of California but the majority of your customers are located cross-country in North Carolina, you will be wasting a lot of money on transportation to fulfill their orders. Instead, look to see where your target markets are and connect with hardware distributors who have warehouses in those areas.
For instance, Elite Sales, Inc. is an industrial hardware supply company that has distribution centers located in three big hubs: Florida, Texas, and Indiana. This allows them to quickly transport hardware in the south, west, and Midwest areas of the country. This is great for industrial hardware companies that have significant sales in those states or areas.
Be sure to review your past sales data to identify any location patterns and see where your largest or greatest number of orders are coming from. Then see which hardware distributors are located near those areas.
3. Utilize Warehouse and Shipment Automation Technology
Time is money, and extra time spent conducting tasks that can be accommodated through automated technology is certainly a waste of resources. Some of the processes in the warehouse can be automated for a more efficient and cost-effective approach.
For instance, you can automate the supply chain management aspect by tracking your own inventory as it goes out to your distribution channels. This will alert you if any materials are low, so you can order from your own suppliers and be sure that you have enough to fulfill order shipments.
You should also incorporate systems that track efficiency so you can easily correct any variables that may increase costs. For example, say that fuel prices suddenly spike which means that transportation costs are going to increase. To maximize your output, you may want to temporarily set minimums on deliveries to distribution channels.
Another example would be to use transportation logistic software that tracks each shipment’s movements as soon as they leave your warehouse. This will alert you regarding any potential delays and provide alternate routes or solutions to resolve any unexpected problems.
Overall, the secret to saving money with distribution channel transport is increasing efficiency. For some industrial supplier businesses, this could mean considering new transportation options, strategic partnerships based on location, or investing in cutting-edge technology.
Reducing these overall costs by a few percentage points can make a huge difference in your business’s profitability – so you should do all that you can to save money on transportation.