June 29 2009 10:26 AM

I recently sat through a fascinating presentation by a VP at FedEx on the topic of the operational impacts of bad addresses. One of the slides claimed that 25% of the domestic shipments and 35% of the international shipments that FedEx handles have bad addresses requiring Address Correction for delivery.

This is no trifling issue financially.

The prices for address corrections charged back to shippers had some steep increases this year. From the FedEx website we find:
If a recipient's address on an airbill, air waybill or shipping label is incomplete or incorrect, we may attempt to find the correct address and complete the delivery.

• For FedEx Express U.S. freight services, the fee increased from $40 per correction to $50 per correction. 
• For FedEx Ground service, the fee increased from $6 per correction to $8 per correction•bCrLf
The FedEx accessorial charge for address correction for U.S. Express package services, International Express package services, FedEx international priority Freight, and FedEx international Economy Freight remained at $10 per correction.

This is Big Bucks
Let's do the math:
FedEx handles about 3.5 million shipments a day via air. If 25% of those need address correction, then FedEx has the right to potentially charge $10 for each one of those. That's 3.5 million shipments x 25% of shipments with an address issue = 875,000 shipments a day. 875,000 shipments a day x 252 shipping days per year = 220,500,000 potentially distressed shipments. By its tariff, FedEx can charge $10 for each of these = $2,205,000,000.

You can do the same exercise for their ground shipments at $8 each (a 33% increase, by the way, from the $5 fee they charged last year for address correction) on a similar number of daily transactions.
Keep in mind FedEx claimed in this presentation that 35% of the international shipments had addresses in need of correction.

A Potential for Defects 
I want to share an observation on address corrections that I have garnered from poring over hundreds of shippers' invoices at the detail level. Not all these "address corrections•bCrLf are address corrections at all. My experience has been that one of the triggers for address correction is information entered into the delivering driver's scanner where he is manually correcting an address at the time of delivery. I have seen on invoices changes from "dock 1•bCrLf to "dock A.•bCrLf I have seen changes from "Suite A•bCrLf to "Suite B•bCrLf for doctors' offices where reception is at Suite A but the driver knows deliveries are made at "Suite B•bCrLf at the rear because the driver has been delivering there every day for years. I have seen address corrections on invoices where the address to which the shipment was tendered was "corrected•bCrLf to the exact same address where the driver entered into his scanner as the address he/she delivered to. My point is that the carriers (and I am not singling out FedEx as the only guilty party here) is relying on the data entry of an employee who is a driver, not hired as a data entry clerk. Some have postulated that the couriers are incented to enter as many address correction/changes as they can because it's such a large revenue generator for the firms as you saw in the math above. Most shippers rarely have the time to inspect and manage the address corrections on their invoices. 

Trust but Verify
My first suggestion is to do exactly that, at least for some period of time. First so that your firm can build up a file of valid delivery addresses for the points to which you ship. Second, for you to build a validation history of correct vs. incorrect address corrections on your invoice. With this information, you can usually get your carrier rep to admit that there may be some deficiencies in their process and in so doing then you are in a place to negotiate a reduced address correction fee. 

Everything Is Negotiable
At a recent presentation I gave to senior transportation executives, I posed this question to the audience: "How many of you have negotiated a reduction with your parcel carrier for a reduced address correction fee?•bCrLf I was amazed that about 25% of the attendees raised their hand. I saw the look of disappointment on the faces of about 70% of the attendees, who I guess had been told by their sales rap that "address correction fees are non-negotiable.•bCrLf And now they found out that Santa had not visited their house and perhaps their sales rep did not know that address correction fees were in fact negotiable. You may be wondering why the math does not add up here. I then asked, "How many of you have had the address correction fee waived completely?•bCrLf About five percent of the attendees raised their hands, which then caused consternation with 95% of the attendees who never thought that concession was possible.

I have to be honest. Having worked on the carrier side for almost 33 years, I do know that bad addresses are an operational issue—first getting the shipment properly handled and sorted to its correct delivery terminal, then getting it on the correct route vehicle by the delivering terminal and lastly by the delivering driver who looses precious time on his route if the transaction does not have a correct address or a partial address.

So what can and should shippers be doing as good partners with the carriers to ensure a defect-free tender in the first place? First, most of the carriers allow you to verify the delivery address against their database if you use their online shipping software to make sure that your address and their history coincide. By the way, this does not ensure that you will not be hit with an address correction fee after the delivery because if a "correction•bCrLf is entered by the delivering driver, even if it coincides with the carriers database, you may see the charge show up.

Second, these online shipping tools allow shippers to build address books. If you get a correction in then use that invoice as a learning tool and update the address. Most of the on line tools allow for a "corporate address book•bCrLf so an entry there that all the employees can pull from insures that everyone in your firm has access to a correct physical delivery address if you are using a commercial carrier. 

P.O. Box Shipments
Lastly, and this is a big one, the commercial carriers can not and do not deliver to P.O. Boxes. Only the USPS legally can put something in a P.O. Box. Ergo, build out a process to use the USPS Express Mail or Priority Mail for those transactions that are consigned to a P.O. Box. I have found it more effective than contacting the recipient and then trying to obtain a physical delivery address that the commercial carriers can deliver to. However if you do change the address to a physical delivery address make sure that you put that info in your address book so you can save time, energy and effort on the next shipment. I can share with you , that if you tender a shipment destined to a P.O. Box to one of the commercial carriers you may experience a delay and you in all likelihood pay the address correction fee. If you use the USPS as a policy, practice and procedure for these types of transactions there will be no fee and no delay. It is what they do.

Jerry Hempstead is President of Hempstead Consulting and can be reached at gmhempstead@aol.com or www.hempsteadconsulting.com

Jerry Hempstead is president of Hempstead Consulting. He is a frequent speaker and lecturer on transportation and logistics and has written scores of articles on the subject.