While I am generally involved in deploying solutions for large shipping operations, I was recently impressed with some significant numbers that were achieved by employing improvements in ‘non-production’ shipping areas.

The easiest definition of ‘non-production’ shipping is there is no front-end integration to an order entry or warehouse management application. Data is either entered manually, or is often pulled from the shipping applications address book.

Who utilizes non-production shipping? The companies I saw posting some impressive numbers included a national laboratory, a major soft drink manufacturer and an internet retailer selling clothing. 

What type of numbers are we talking about?

- The soft drink manufacturer reported savings of nearly 1 million dollars, annually
- The laboratory posted $250,000 saved
- The on-line merchant saw $80,000 in savings 

From someone who is involved in calculating ROI for large shippers, these non-production numbers are impressive; how did they achieve these savings? First, you need to realize that for many companies, the non-production shipping involves samples, contracts, displays, any number of items not directly related to an order that would come to a production shipping area. Quite often, this shipping is done in a very ad hoc manner with few controls; indeed with all three instances the impetus for looking at a solution was not from someone who ran the shipping operation -- it was from someone in the finance team. Imagine Accounts Payable receiving a shipping bill for $50,000 with no real way of saying “This is accurate” or “That’s what was shipped by us, and here is how it was allocated across the company.” 

The problem with the ad hoc shipping methods of scientists, sales professionals, lawyers, doctors, and whoever might have a need to ship an item is that they go to the UPS or FedEx Store, or the post office, or they swing by the warehouse with a piece of paper taped to a box and interrupt the folks on the dock to get a package out for them. The receptionist at the front desk might be the shipping clerk for the office employees. The same professionals may also give out their account number to have items shipped to them. The reality in this situation is that the Accounts Payable person has no idea if the $50,000 bill is accurate. They have no idea who is shipping or what they are shipping. Often, they just pay the bill.

By implementing within a company’s firewall a shipping system that is accessible to all employees, the situation improves significantly as shown by the previous numbers. Here are two simple rules that accounted for most of the savings previously mentioned:

Rule one: It very rarely has to positively, absolutely be there overnight. And even when it does: Standard Overnight (as a rule for the preferred carrier service) can provide significant savings as compared to an ‘early a.m.’ service. Indeed this simple change accounted for the majority of the nearly one million dollars in savings by the soft drink company.

Rule two: Everyone has to use the online system, and everyone has to enter their department or cost center. Sounds simple, right? This not only provides the accounting professional with an easy way to allocate shipping charges by department, it can also facilitate a very easy method to determine what was NOT shipped on the company’s shipping solution. The laboratory savings of a quarter of a million dollars was primarily due to recovering misuse of their account number with non-approved third party billing to their account. A quarter of a million dollars saved in one year by just being able to see who was shipping against their corporate accounts who were not employees of the company. I find that amazing and by my way of thinking is a form of identity theft that I did not realize was as prevalent as I’ve come to understand it is.

So where did the $80,000 come from with the online merchant? Duplicate billing errors. The lesson here is that when you give the finance team the ability to determine if the shipping bill is actually what they shipped and should be seeing for an invoice; you’ve enabled them to uncover all sorts of errors when the numbers don’t match up. Many software solutions for shipping provide for the capabilities I’ve discussed, quite often, with a low entry cost that enables you to start realizing ROI right away. I suggest two inquiries would be worth pursuing. Tirst, talk to your finance team to see to what carrier invoices are coming in that are not related to production shipping, and secondly, if there are unmanaged shipping charges coming in, determine if your shipping software can extend to these non-production areas.

Peter Starvaski is Director, Product Management at Kewill