tag:blogger.com,1999:blog-6675555466239004301Fri, 26 Dec 2008 20:53:47 +0000Best practices in Free Shipping, Shipping Cost reduction, Warehouse and Returns management, Dropship Fulfillment and Margin optimization for Online Retail. Leverage our experience and have us convert your Logistics into a Profit Center.http://www.optimalogica.com/max@optimalogica.com (Maxim Mironov)Blogger30125tag:blogger.com,1999:blog-6675555466239004301.post-5278556356578667808Mon, 22 Dec 2008 04:50:00 +00002008-12-21T21:01:14.469-08:00increase salesCOGSshipping costreturn policyprofit and lossLiberal customer return policies drive sales, no doubts. However, how nice is nice enough? Where is the line between generating extra sales and losing money? Here is a a simple framework to evaluate impact of your return policies on well-being of your business. Your return costs = product cost + shipping + marketing Product costs: half of your vendors don`t accept returns, others charge 15 % http://www.optimalogica.com/2008/12/customer-returns-1-returns-10-sales.htmlmax@optimalogica.com (Maxim Mironov)4tag:blogger.com,1999:blog-6675555466239004301.post-8738938048005295010Sun, 14 Dec 2008 18:10:00 +00002008-12-14T10:58:35.398-08:00residential surchargecost reductionfuel surchargeCarrier managementsupply chainshipping costltlaccessorial chargesIt`s a well known fact that UPS and FedEx increase their rates every year for 6-7 %. They are not alone in this "beat the inflation game", freight companies do the same plus they have a few more unobvious ways to balloon your shipping costs without you noticing it. Let`s take a look at a typical transportation contract and how LTL companies can charge you more: Base Rate - Freight companies morehttp://www.optimalogica.com/2008/12/widening-hole-in-your-pocket-shipping.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-3935829343497074120Mon, 01 Dec 2008 21:50:00 +00002008-12-05T14:45:41.298-08:00expedited shippinggross marginfreight quoteshipping costdim weightdropshipdim factorlogistics optimizationEconomy 101 and common sense suggest that there are people out there willing to pay extra for expedited delivery. But can you profitably sell to these people? Does extra revenue bring you more margin or expose to potential disasters? As Christmas approaches do you want to go extra mile and offer 2nd day, overnight or special services deliveries? In my experience, most of the companies are http://www.optimalogica.com/2008/12/expedited-shipping-extra-revenue-or.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-4130384077899171421Fri, 28 Nov 2008 17:17:00 +00002008-11-28T09:23:44.418-08:00cost reductioncost of revenuemarginMost of the people who started e-commerce businesses were expecting to earn at least 35% margin. The reality is disappointing. To grow you need to price competitively; your fulfillment costs accumulate quickly and actual gross margin drops to low-twenties. But, can you keep high margins and grow? Many product categories can deliver 35% plus margins. For furniture, for example, reasonable COGS ishttp://www.optimalogica.com/2008/11/35-margin-myth-or-reality.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-255245947113069950Sun, 23 Nov 2008 21:24:00 +00002008-11-23T13:39:56.223-08:00returns managementreturn policydamaged in transitStan`s article on Returns Policies has been featured in PracticalEcommerce (a leading online retail magazine). Here are some of the advices on elements of simpler and more effective return policies... If there is one thing that every online retailer hates and fears, it’s returns. Many great stores fight to keep return rates below 2 percent of total shipments. Those merchants work with the http://www.optimalogica.com/2008/11/effective-return-policies.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-240212230758303213Thu, 13 Nov 2008 19:50:00 +00002008-11-13T12:38:09.325-08:00cost reductioncost of revenuelayoffOOSWe are in the recession. Consumer spending is decreasing and many experts expect bad times to last for at least next 12 months. Naturally, companies are looking for the ways to reduce burn and many of them are cutting staff. I want to argue that there is a better way to survive the stormy times and letting people go undermines your perspectives. 1. Numbers Let`s say your G&A is 9 % of sales (http://www.optimalogica.com/2008/11/cutting-cost-is-better-than-cutting.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-7985538338780243455Sun, 02 Nov 2008 16:49:00 +00002008-11-07T22:51:20.798-08:00small packagere-boxingfreight damagedamage recoveryltlshipping damagedamaged in transitIt`s quite common to think of "damage in transit" is an inevitable part of the business and that little can be done about it. My experience is quite the opposite: 10 % of the vendors are responsible for 90 % of the damage and a couple of simple solutions can half your costs in just a few weeks. So, why damage is a big problem for some manufacturers and is not for others? First of all, much http://www.optimalogica.com/2008/11/half-your-damage-in-transit-in-just-few.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-1895020703265572942Sun, 26 Oct 2008 21:42:00 +00002008-10-26T15:43:47.933-07:00class 70shipping costdim weightclass 100class 125freight all kindFreight ClassNMFC Codesclass 150class 85fakltlclass 250dim factorIf you ever reconciled your shipping costs on a product level - you`ve ineviteably seen situations when Chair A costs you $50 to deliver and Chair B of the same weight shipped from the same manufacturer only $15. These single incidents start happening daily as you grow. Shortly you lose control over your shipping costs and can`t tell anymore if you should be selling this product line at all. http://www.optimalogica.com/2008/10/negotiate-fak-or-bleed-to-death.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-1626583618503741276Sat, 18 Oct 2008 16:54:00 +00002008-10-18T11:29:44.527-07:00Purchase Ordersupply chainInvoice verificationinvoice reconciliationpayment termscredit memoHow can we ensure we are being invoiced accurately at all times, are all the rules and discounts in place? These are some of the challenges every retailer faces, the solution really is to regularly verify your invoices and make sure we are not overpaying the supplier.When a supplier signs an agreement to fulfill your orders, it is important to ensure both parties agree to the set deliverables. http://www.optimalogica.com/2008/10/goldmines-of-invoice-verification.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-8945972803972872802Fri, 10 Oct 2008 01:56:00 +00002008-10-09T19:56:59.393-07:00Vendor Managementdrop shippingVendor set upsupply chainvendor conversionEvery retailers challenge is to always keep his suppliers happy; the success of your business revolves around the supplier's ability to source products in a timely manner. Signing deal with a new vendor and further steps ahead to set up a profitable relationship requires a well structured set up, there are many ways to make the vendors job easy at the same time obtain the relevant info that you http://www.optimalogica.com/2008/10/how-to-build-great-relationship-with.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-2784418978735249453Tue, 07 Oct 2008 23:37:00 +00002008-10-07T16:45:59.274-07:00cost reductionoperational efficiencylost salesreturn policyrefundcompetitive pricingLost Sales is a bit of an enigma for every company. How can you know for sure how much revenue did you lose due to uncompetitive pricing and operational inefficiency. I want to share our way of addressing both issues. Uncompetitive pricing. COGS and Shipping cost reconciliation will equip you with data necessary to optimize your pricing. In another article on my blog I spoke about some of the http://www.optimalogica.com/2008/10/two-ways-to-reduce-your-lost-sales.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-1246387351136745445Thu, 02 Oct 2008 15:56:00 +00002008-10-02T19:36:56.177-07:00returns managementcustomer remorsereturn policydamage recoverycustomer satisfactionIn any retail business having a concrete policy on returns is very important; this could ensure the loss is minimal due to returns.It is very difficult to consider all aspects of returns in your policies especially when one is selling multiple sku's that are different in nature from one another, there are however ways to derive policies based on the type of return.Returning a defective itemA http://www.optimalogica.com/2008/10/how-to-define-your-returns-policies.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-962452121679438053Thu, 25 Sep 2008 09:47:00 +00002008-09-25T04:21:46.711-07:00returns managementsupply chainclaims management.damage recoveryReturns management is a big challenge for any retailer; you always wonder how to ensure customers don't return the item. Well it's quite possible with a strong process - read on..In this part I want to share a little more specific steps to diminish returns. The aim should be to have a return rate of less than 2% for any type of sku in any given month. I want to discuss three different catogories http://www.optimalogica.com/2008/09/6-simple-steps-to-turn-around-your.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-1785390183690549415Fri, 19 Sep 2008 03:56:00 +00002008-09-18T21:09:39.189-07:00shipping cost reductione-commercecost reductionCOGSvendor conversionshipping costshipping discountslogistics optimizationIn the second part I`ve argued that most of the retailers call COGS is a sum of actual Cost of Goods Sold and costs of fulfillment inefficiencies (for some of which vendors should issue credit memos). In this part I`ll share some of the benchmarks and cost reduction practices for shipping costs. Shipping costs are likely to be your second biggest cost on P&L statement. They range from 10 % to 25http://www.optimalogica.com/2008/09/dude-wheres-my-margin-part-3.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-305379286813920972Tue, 16 Sep 2008 18:54:00 +00002008-09-16T13:17:22.068-07:00EDI methodPurchase OrderInvoice verificationOrder ProcessingOrder ManagementPurchase order is a basic component of the retail order flow yet flawless communication between you and your manufacturers is essential to reduce errors and be able to properly reconcile costs with your sales data. The format used to raise PO’s should be carefully reviewed; you could save a lot of steps in re-confirming the details of your order each time to the supplier. Let us look at two http://www.optimalogica.com/2008/09/purchase-orders-small-details-are.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-2047452212642949870Tue, 09 Sep 2008 19:20:00 +00002008-09-10T11:24:12.113-07:00returns managementWarehousingmarginInventory ManagementWarehouse Managementmargin calculationdamages3PL set upProcurementOften you need to make a decision - buy products into inventory or dropship. In this article I review some basics of inventory management and share a couple of hints to help make this decision. Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and hide from the customer the fact that http://www.optimalogica.com/2008/09/abc-of-inventory-management-basic-terms.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-1998002805407161186Thu, 04 Sep 2008 23:32:00 +00002008-09-04T18:12:26.912-07:00shipping cost reductioncost reductionshipping costshipping discountslogistics optimizationshipping volumeThere are two most commonly used strategies to reduce shipping cost: negotiate volume discounts or shop around each time for the best price. While both strategies produce results consolidation is better one for rapidly growing online retailers. Strategy 1. Consolidation Do an assessment of your current shipping agreements. Are you shipping on your account? Using vendor`s accounts? Working with ahttp://www.optimalogica.com/2008/09/shipping-cost-reduction-strategies.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-740740752915405521Tue, 02 Sep 2008 17:29:00 +00002008-09-02T11:03:10.233-07:00cost reductionfreight damagemaximize recoverydamage recoveryshipping damagereverse logisticsClaims managementdamaged in transitClaims as a whole could get very complicated if it is not done correctly. When we set up the process for the first time our recoveries were below 20 % of the product value. By identifying specific issues and reworking the process we have increased recovery to 35 % of retail price. Our damage rate was about 4 % of sales, so process improvement resulted in savings of (4 % * (35 % - 20 %)) = 0.6 % http://www.optimalogica.com/2008/09/best-practices-to-maximize-damage.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-8085443169494979957Thu, 28 Aug 2008 22:36:00 +00002008-08-30T15:25:21.524-07:00online retaile-commerceCOGSInvoice verificationprofit and lossinvoice reconciliationcost of goods solddropshipcredit memoIn the first part we looked at a P&L statement and identified biggest cost saving opportunities. Now is the time to look into Cost of Goods Sold and share some of our best practices making it accurate. Cost of Goods Sold (COGS) - 59 % of sales When was the last time (if ever) you compared vendor invoices against the costs in your system? Were your expected costs close to the invoiced amounts? Orhttp://www.optimalogica.com/2008/08/dude-wheres-my-margin-part-2.htmlmax@optimalogica.com (Maxim Mironov)1tag:blogger.com,1999:blog-6675555466239004301.post-1241381249947833425Tue, 26 Aug 2008 19:33:00 +00002008-08-26T12:55:34.878-07:00shipping cost reductionresidential surchargefuel surchargeCarrier managementlifrgateaccessorial chargesbase priceshipping discountsshipping volumeIt sounds counterintuitive, but reducing your shipping costs is in the shippers’ best interest. Lower shipping costs allow you reduce prices, your sales increase and so does your shipping volume. As a result, by giving you better discounts carriers increase their sales and total margins. Shipping contracts negotiation is never a zero sum game. It is a great opportunity to understand the other http://www.optimalogica.com/2008/08/retailers-and-shippers-friends-or-foes.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-5450740199000871537Thu, 21 Aug 2008 22:48:00 +00002008-08-28T18:46:03.598-07:00online retailgross revenuee-commercecost of revenuemargingross marginnet revenueCOGSshipping costprofit and lossYou started a business to make profit, right? Buy for $50, sell for $100 and net at least $20 after all the expenses. Well, what looked good on paper is more complex in the real world. Suddenly, you realize that competitors sell for $90 and your costs are out of control. Let`s look under the hood of your business and tune it up. 1. Start with the P&L Profit and Losses statement is the ultimate http://www.optimalogica.com/2008/08/dude-wheres-my-margin.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-3537601950201829513Tue, 19 Aug 2008 22:18:00 +00002008-08-19T15:55:47.811-07:00Brokerage Feecustomsshipping to CanadaDutiesCanadian Taxesexport from US to CanadaPSTCanadian CusotmersHSTcustomer conversionGSTlanded costeBay CanadaHave you realized that Canada is the 7th largest economy and close to California in terms of population? Weak dollar drives more and more Canadians to buy cross-border. So, unless your sales to Canada are about 10 % of your US sales – you are overlooking a significant opportunity. Here are three components of the Landed Cost (full price customer pays) that Canadian customers need to get from US http://www.optimalogica.com/2008/08/are-you-still-turning-away-your.htmlmax@optimalogica.com (Maxim Mironov)0tag:blogger.com,1999:blog-6675555466239004301.post-8937143859887202593Fri, 15 Aug 2008 20:06:00 +00002008-08-15T16:04:46.908-07:00returns managementcost reductionliquidationMost of the retail companies consider returns and damages to be unavoidable cost of doing business. Every return refused by the manufacturer is deadweight for a retailer. Good news is there are simple ways to reduce your return rate and recover some hard cash from the trash. 1. Prevent "negative value" liquidations Pre-calculate value of each return scenario; train your returns specialists on http://www.optimalogica.com/2008/08/liquidation-cash-from-trash.htmlmax@optimalogica.com (Maxim Mironov)1tag:blogger.com,1999:blog-6675555466239004301.post-7703805693437452914Mon, 11 Aug 2008 07:54:00 +00002008-08-13T12:30:51.238-07:00cost reductionfreight damagedamage recoveryshipping damagedamaged in transitProducts damaged in transit tarnish retailer`s reputation. To make the matter more complicated - customer`s cooperation and help are needed to recover the damages from the carrier. We created a very efficient damage management system to reduce customer dissatisfaction and recover 40% of the retail value from carriers. In just 8 months our recoveries surpassed $300K. Efficient claims management http://www.optimalogica.com/2008/08/claims-management-as-discipline-how-to_11.htmlstanley.arul@gmail.com (Stanley Arul)0tag:blogger.com,1999:blog-6675555466239004301.post-124864280070801256Wed, 06 Aug 2008 21:32:00 +00002008-08-25T11:50:42.849-07:00shipping cost reductionshipping cost recalculationonline retailInvoice verificationfree shippingdropshipEvery retailer knows that customer conversion is critical. It costs you money to attract customers to your store and you want to do whatever it takes to have them make a purchase. Free Shipping is one of the well-known ways to make one`s purchasing experience smoother but requires per product cost info when applied to your entire catalogue.While product wholesale costs are usually more or less http://www.optimalogica.com/2008/08/how-free-is-your-free-shipping.htmlmax@optimalogica.com (Maxim Mironov)2