The current economic climate has affected everyone, and parcel shippers are no exception. While fuel prices have been a pleasant surprise in 2009 and provided some relief, we are all still feeling the effects and looking to offset risk. What I think is very interesting, though, is how some shippers are addressing their current situation. Shippers have been reacting to the crisis in typical ways: looking for savings opportunities, tightening expenditures and questioning current and future network strategies. But it is evident that some shippers are going about the process of finding savings in the wrong way. I recently encountered a shipper who, as a result of a corporate directive, was re-evaluating their parcel network and exploring the option of using postal consolidators to drive savings. While I don't disagree with this strategy, I am amazed that this particular shipper never even considered the option of partnering with their current carrier to drive the required savings.
Most companies feel like they are not "doing all they can•bCrLf in this environment if they aren't brow-beating their carriers and rebidding their business. Sometimes, however, the path to driving savings is much easier to execute than expected. There are three ways to engage your current carrier in a positive way that can yield savings. First, find an aspect of your business that could be transitioned to your parcel carrier that may not have a significant impact to you but could be attractive to the carrier. Whether this is a pocket of international parcel business, a few LTL lanes or larger freight shipments, you may be able to leverage existing business into savings reductions on your parcel network. Carriers are looking for ways to expand their business, drive revenue and solidify the business relationship they have with your company. Use these carrier goals to your advantage and as leverage to meet your internal savings goals.
Optimization Is the Key
The second path to realizing savings in your parcel network is optimization. Both FedEx and UPS have robust engineering staffs that can model your network and identify opportunities to reduce costs. Converting one- and two-day transit points from Express services to Ground can be a huge win for both the shipper and the carrier. The shipper achieves their objective by lowering their overall costs, while the carrier maintains or even increases profit margin. Other opportunities include eliminating the use of Next Day by 8:00am service, minimizing unnecessary ancillary charges such as re-bill fees and extending cutoff times to improve service and more efficiently manage the workflow of the shipper's facility. Engaging your carriers in the optimization process is the key to driving savings and identifying opportunities that will yield immediate and sustainable results.
You Get What You Ask For
Finally, the best and most obvious way to drive savings in your parcel network is to simply "ask.•bCrLf Shippers are constantly working behind the scenes on alternatives and backup strategies but seldom take the direct approach. You may be surprised at the results you can achieve by sitting down with your carrier and having an open and honest conversation about your company's objectives. Your carrier may be open to making a rate concession rather than be faced with the alternative of being thrust into a competitive bid situation. Let's face it. Changing carriers is not an easy task. It takes work and a lot of it. No one wants to go through a carrier change unless there is a compelling (usually financial) argument to do so. Likewise, your carrier does not want to go through a long, drawn-out bid process that could result in lost revenue. Take the time to sit down and share with your carrier your savings goals and where you need to be from a financial perspective. When you factor in the cost of change, you may be surprised at how close you can get to achieving your target.
In summary, the economy has had a huge impact on the parcel shipping community. As a result, shippers have reacted in a variety of ways. There is a reason why you selected your parcel carrier in the first place. Don't forget to leverage that relationship when you look to drive costs out of your parcel network.
Money-Saving Measures
1. Engage your current carrier in order to leverage existing business into savings reductions on your parcel network.
2. Optimize, optimize, optimize. Whether this means converting from Express services to Ground or minimizing unnecessary ancillary charges, there are changes that can be made.
3. Be open and honest with your carrier regarding your company's objectives. Your carrier may be open to a rate concession in order to avoid you thrusting them back into a competitive bid situation.
Mike Williams is the VP of Consulting Services at Green Mountain Consulting. Contact him at mike@gmcps.com.
Most companies feel like they are not "doing all they can•bCrLf in this environment if they aren't brow-beating their carriers and rebidding their business. Sometimes, however, the path to driving savings is much easier to execute than expected. There are three ways to engage your current carrier in a positive way that can yield savings. First, find an aspect of your business that could be transitioned to your parcel carrier that may not have a significant impact to you but could be attractive to the carrier. Whether this is a pocket of international parcel business, a few LTL lanes or larger freight shipments, you may be able to leverage existing business into savings reductions on your parcel network. Carriers are looking for ways to expand their business, drive revenue and solidify the business relationship they have with your company. Use these carrier goals to your advantage and as leverage to meet your internal savings goals.
Optimization Is the Key
The second path to realizing savings in your parcel network is optimization. Both FedEx and UPS have robust engineering staffs that can model your network and identify opportunities to reduce costs. Converting one- and two-day transit points from Express services to Ground can be a huge win for both the shipper and the carrier. The shipper achieves their objective by lowering their overall costs, while the carrier maintains or even increases profit margin. Other opportunities include eliminating the use of Next Day by 8:00am service, minimizing unnecessary ancillary charges such as re-bill fees and extending cutoff times to improve service and more efficiently manage the workflow of the shipper's facility. Engaging your carriers in the optimization process is the key to driving savings and identifying opportunities that will yield immediate and sustainable results.
You Get What You Ask For
Finally, the best and most obvious way to drive savings in your parcel network is to simply "ask.•bCrLf Shippers are constantly working behind the scenes on alternatives and backup strategies but seldom take the direct approach. You may be surprised at the results you can achieve by sitting down with your carrier and having an open and honest conversation about your company's objectives. Your carrier may be open to making a rate concession rather than be faced with the alternative of being thrust into a competitive bid situation. Let's face it. Changing carriers is not an easy task. It takes work and a lot of it. No one wants to go through a carrier change unless there is a compelling (usually financial) argument to do so. Likewise, your carrier does not want to go through a long, drawn-out bid process that could result in lost revenue. Take the time to sit down and share with your carrier your savings goals and where you need to be from a financial perspective. When you factor in the cost of change, you may be surprised at how close you can get to achieving your target.
In summary, the economy has had a huge impact on the parcel shipping community. As a result, shippers have reacted in a variety of ways. There is a reason why you selected your parcel carrier in the first place. Don't forget to leverage that relationship when you look to drive costs out of your parcel network.
Money-Saving Measures
1. Engage your current carrier in order to leverage existing business into savings reductions on your parcel network.
2. Optimize, optimize, optimize. Whether this means converting from Express services to Ground or minimizing unnecessary ancillary charges, there are changes that can be made.
3. Be open and honest with your carrier regarding your company's objectives. Your carrier may be open to a rate concession in order to avoid you thrusting them back into a competitive bid situation.
Mike Williams is the VP of Consulting Services at Green Mountain Consulting. Contact him at mike@gmcps.com.
