Feb. 9 2011 05:11 PM

Albert Einstein once said, "Know where to find the information and how to use it - that's the secret of success.” To be successful in managing parcel expense today, shippers need to change the process they use to manage their parcel carriers. In the past shippers would provide carriers their total spend with little supporting detail other than locations. Carriers would respond with their proposal laden with discounts assigned to various shipment types and zones. Then the arm twisting negotiations would begin. The shipper would complain that the carrier’s rates were too high. There would be a threat to change carriers. After much conversation the carrier would provide an additional reduction and the deal was closed. Typically, the advantage went to the carriers who knew more about their customers’ shipping characteristics than the customer did. 

Today the most successful negotiations are fact based. Shippers have balanced the information scales by outsourcing their freight audit and processing to third parties such as Data2logistics. Our clients benefit by being able to prepare better proposals by: knowing volumes by origin, destination, zone or geographic density, providing a distribution of shipments by weight breaks, package and service types. 

When a carrier submits their proposals, the information can be modeled against historical shipments to determine what the total cost of service will be. This includes gaining visibility to compare cost components like fuel, all accessorial fees and net minimum charges to which discounts will not be applied. This apples to apples comparison allows shippers to have a true benchmark of carrier proposals and also identifies opportunities for negotiation.

For example: Knowing what the carrier’s discount percentage is by service type in the abstract is a data point with limited value. Seeing costs by service type on your most heavily used zone and weight range is actionable information that can be used to further drive down costs. This information provides an opportunity to tell the carrier that based on the amount of business flowing to that zone, discounts need to be adjusted above the levels the carrier is providing for all other zones.

Actionable Information is the key and is required to move beyond carrier negotiations to advanced “carrier management”. The following are examples of some benefits to be realized through partnering with Data2Logistics and the access to actionable information: 

Monitoring carrier service selection is an action that should be taken throughout the year. Shippers receive reports based on mileage ranges and service types; i.e. overnight and second day air to identify where a ground service could have been used to meet service requirements at a significantly lower cost. You will be able to identify the cost center and the package sender in these situations to educate and remediate the unnecessary premium service costs. 

Alerts provide valuable information when trends for volumes or spend exceed a variance percentage set from a historical average. When these conditions exist you are able to identity the drivers behind the variance by department or cost center. Being able to track this information on a weekly basis allows you to be prepared to respond to your management before they have raised the question at the end of the month.

Monitoring carrier performance provides you with on time performance metrics. It also identifies when carriers are not billing in compliance with contracted rates or fail to provide you with required information. This allows you to provide carriers with feedback and have performance information to set and measure KPIs.

Having visibility to accessorial charges speaks volumes to shippers. If you see spikes in address corrections you can recognize there is a need for address hygiene and realize that no matter how small, defects in an address result in address correction charges. UPS just raised their address correction fee by $1.00 in 2011 or by 10% to $11.00. This is a cost that should be controllable.

Being able to recognize when you are being charged a DIM weight as opposed to actual weight provides two opportunities to take action when you have visibility to this information. You can attempt to negotiate a different DIM factor or you can reconsider changing your packaging. This is especially relevant in 2011 as parcel carriers have changed the dimensional weight factor this year as part of their general rate increase. The volumetric divisor was decreased from 194 to 166 on domestic shipments and from 166 to 139 for international export shipments. For many shippers this has been a real eye opener this year. 

By identifying shipments made from the same origin (perhaps by different individual) to the same destination brings about an opportunity. Armed with this information a shipper can negotiate bundled pricing. This allows these shipments to be combined for billing purposes and move as a higher weight shipment that will be charged at a lower rate. 

If your business makes residential shipments you are likely to see over an 11% increase in these charges this year to $2.45. To manage this cost you need to know the frequency of occurrence relative to all of your shipments. If virtually all of your shipments are residential you may want to negotiate a lower residential rate and perhaps even have it built into your base rate. If you have a mix of commercial and residential shipments you may want to watch for trends and seek to negotiate this charge with your carrier if your business mix changes. The key here once again is the opportunity that visibility to this information provides. 

At this point you are probably seeing that there is an opportunity to improve carrier negotiations and control of your parcel spend by gaining improved visibility to robust actionable information. The real surprise comes when parcel shippers realize that this is a process that pays for itself. When parcel bills are processed through accounts payable they are rarely audited before they are paid. By engaging Data2Logistics to audit your bills, the audit savings will pay for the service which includes allocating parcel charges to the appropriate business unit, cost center or SKU. The actionable information is made available to you as a by product of the Data2Logistics audit process.

Our Client Logistics Intelligence Portal (CLIP) is a reporting solution to service the global enterprise with information requirements that range from simple to sophisticated. This tool is easy to use, intuitive, and empowers users to make informed fact based decisions. Our CLIP tool alerts you to changing trends, allows you to report on virtually any data element for any market you serve, and roll up information for corporate wide analysis with easily accessible standard and ad-hoc reports. 

Functionality includes the ability to:

 View your global transportation dashboard
 Filter and establish grouping levels
 Create pivot tables
 Drill down on data elements
 Perform mathematical functions resulting in new fields
 Create charts and graphs

CLIP allows for multiple (concurrent) users. You have the ability to view or print reports online. Reports can be automatically saved so the user can generate the same ad-hoc format again without rebuilding the report. Ad-hoc reports can be scheduled to run on a predetermined frequency and can be automatically printed or e-mailed. Results can be delivered in an Excel, PDF, CSV or XML format. Data2Logistics provides a single source solution serving clients on a global basis. 

Contact Data2Logistics today so you can begin to ship smarter and save!