Related to:
July 26 2006 12:44 PM

Having a son serving in the military today can put any parent on edge. What my wife and I soon realized was that sending care packages took a lot of work to package and prepare and that the cost could get expensive. Although our volume of shipping was chump change for most companies, it soon became personal to us. My wife and I became experts in what we could send, how to send it and the best, yet lowest cost, method.
This reality check reminded me of the importance of conducting a shipping cost and compliance audit regularly, at least annually. I have worked in this industry for 20 years and an audit is more vital now then ever before. Multiple vendors offering price discounts, specialized services and add-on fees are only the tip of the iceberg.
Conducting, at minimum, an annual audit can provide many benefits related to cost and compliance, such as:  
� Fees charged to your account(s) for optional services
� Determine how any rate increases affected your operation
� Identify if multiple shipments are sent to the same address        on the same or consecutive days
� Identify if packages were returned with issues related to packaging and/or new regulations under the Homeland Security/Patriot Act
� Identify if the appropriate rates and fees were charged
� Determine if service and delivery standards are being met if you are under contract
� Volumes � an increase or decrease in volume might effect your discounts
In addition, the audit or assessment can add a review of the shipping operation by reviewing the workflow and process and determining if volumes have increased or decreased, thus bringing up important questions. Of course, you know your operation better than anyone and can add or eliminate other items to the assessment. 
Let�s take a look at several on the above list in more detail. 
Additional fees can begin to add up quickly and end up being a major contributor to excessive cost for the shipping of packages. Also, many of these costs may or may not be included in the cost if you are charging or charging-back your internal or external clients. Vendors may include the following charges as part of your regular invoice: tracking, address correction, re-delivery service, remittance processing or collect on delivery, COD payments. In addition, if no weight is registered on the bill of lading or manifest form, the vendor can arbitrarily determine the weight. 
Rate increases by your vendor during or in the midst of your organization�s fiscal year can impact your budgeted line item for shipping. The audit can bear out the exact impact of these rate increases and can assist you in preparation of your next fiscal budget. As we experience flux in gasoline prices, many supply chain and transportation firms add temporary price hikes to offset these increases. Be sure these are accurate and not permanent as prices fall.
Bad addresses can be a thorn in any organization�s side, but many remedies are available. If addresses are random and data-entered in a retail shipping environment, it may be helpful to verify addresses off of the credit card used for the order or run a batch of orders through address cleansing software prior to report generation. The only problem with credit card verification is that an order can be placed by one individual and sent to another individual�s address. The chance for error of either a wrong address or a data entry error is possible, so this makes the address cleansing software the best solution. If your address list is fixed, such as an insurance company or membership organization, it is imperative to determine a policy of updating the address. The policy should include confidentiality, frequency and what department within the organization will be responsible. In many organizations it is common for one department to receive notification and one database is updated while other departments on different systems are not notified. In some cases, legacy software is used and the cost of re-shipments can be used to justify new or improved software. 
Service and delivery standards must be reviewed regularly. This is especially true for ground transportation where you are not tracking the piece. In most cases, if you are shipping packages by ground transportation, the recipient does not call the customer service department to complain if a package is delivered one or two days past the published delivery standards. However, if you are a retail company, your customers may turn to a competitor next time if they sense or know for a fact that they can get their order a day or two earlier. It is vital that you recognize delays in regular shipments to your customers, employees or staff in the field or prospects. This data should be used in negotiating or selecting a primary vendor for your shipping needs. 
One of the last areas I would like to touch on is the compliance issue. New regulations issued by Homeland Defense following 9/11 might impact your operation. Are you preparing the packages properly? Do you currently or expect to have irregular shaped items? Are you completing the proper domestic and international documentation required to assure the packages arrive intact and on-time? Understanding the rules and regulations of your carrier or vendor is essential, and having this information available is critical. 
Finally, is your workflow and process up-to-date? Is increased volume impacting the methods you use and slowing down the shipping department? At some point, it is essential to determine new and enhanced operational methods. This might include automating the transportation method to the shipping department or updating the package and shipping work stations.
The ultimate goal of any audit should be to identify issues, improve your internal process, enhance vendor relations and improve service levels. The numbers that are gathered and put into meaningful reports will bear out the facts! Go to work!!!!