Editor's Note: We ran the first installment of this Tuesday's Tip the week of April 9, and for this week's Tuesdsay's Tip, we've added tips #4, 5, and 6 below. Check them out!
Just about every day, a shipper asks me what FedEx or UPS incentive they should be achieving for their specific spend level. But it doesn't work that way.
While overall volume and revenue certainly play a role in pricing, the discounts you get from UPS and FedEx are largely based on their understanding of your distribution footprint and package characteristics, which are directly tied to the carriers' "cost to serve" pricing model.
Package profiles that are relatively easy to handle are priced more competitively than those in which the carrier is likely to incur additional costs. Revenue management teams at FedEx and UPS have become quite adept at understanding just how much it costs the carriers to move a customer's packages through its networks.
While a shipper might not be able to make dramatic changes to its package characteristics, there are several ways to lower your cost profile in order to obtain deeper discounts from FedEx and UPS.
Start by asking your carrier rep what changes you can make. In addition, here are several suggestions:
1. Limit the use of 800 Call Center — The majority of Call Center inquiries are to track packages. Minimize the use of this high cost center by using online and carrier-provided software tools for package tracking.
2. Reduce claims — Ensure proper packaging to minimize damage claims.
3. Consider service guarantee waivers — Do you file for late delivery credits? Quantify how much you're actually getting back on an annual basis. It's probably not much. Some shippers find it advantageous to secure deeper incentives upfront in lieu of the service guarantee.
4. Use third party automation – How much is your “free” shipping system costing you? The more automation deployed throughout your organization, the higher the cost to serve. Plus, most of the carrier provided systems do not allow a shipper to rate shop with other carriers. The carriers also offer online tools to process shipments.
5. Throw away handwritten airbills – Ensure that all packages are processed through some type of automation so that all shipping labels are “smart” labels. These labels allow for faster and more accurate routing of packages throughout the carrier network, minimize the chance of misdelivery due to illegible addresses, eliminate the need for manual entry, and make carrier invoicing much more efficient.
6. Work with your carrier to better understand those packages that spike your cost profile, and consider giving those to an alternative carrier. Alternatively, there may be ways you can alter package dimensions or other characteristics to reduce your cost profile.
Stay tuned for more tips next Tuesday!
Rob Martinez, DLP is President & CEO of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Rob offers more than two decades experience negotiating parcel contracts for some of the most recognizable brands in the world, and is a sought after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858-879-2020 Ext 114 or rob@shipware.com.
Just about every day, a shipper asks me what FedEx or UPS incentive they should be achieving for their specific spend level. But it doesn't work that way.
While overall volume and revenue certainly play a role in pricing, the discounts you get from UPS and FedEx are largely based on their understanding of your distribution footprint and package characteristics, which are directly tied to the carriers' "cost to serve" pricing model.
Package profiles that are relatively easy to handle are priced more competitively than those in which the carrier is likely to incur additional costs. Revenue management teams at FedEx and UPS have become quite adept at understanding just how much it costs the carriers to move a customer's packages through its networks.
While a shipper might not be able to make dramatic changes to its package characteristics, there are several ways to lower your cost profile in order to obtain deeper discounts from FedEx and UPS.
Start by asking your carrier rep what changes you can make. In addition, here are several suggestions:
1. Limit the use of 800 Call Center — The majority of Call Center inquiries are to track packages. Minimize the use of this high cost center by using online and carrier-provided software tools for package tracking.
2. Reduce claims — Ensure proper packaging to minimize damage claims.
3. Consider service guarantee waivers — Do you file for late delivery credits? Quantify how much you're actually getting back on an annual basis. It's probably not much. Some shippers find it advantageous to secure deeper incentives upfront in lieu of the service guarantee.
4. Use third party automation – How much is your “free” shipping system costing you? The more automation deployed throughout your organization, the higher the cost to serve. Plus, most of the carrier provided systems do not allow a shipper to rate shop with other carriers. The carriers also offer online tools to process shipments.
5. Throw away handwritten airbills – Ensure that all packages are processed through some type of automation so that all shipping labels are “smart” labels. These labels allow for faster and more accurate routing of packages throughout the carrier network, minimize the chance of misdelivery due to illegible addresses, eliminate the need for manual entry, and make carrier invoicing much more efficient.
6. Work with your carrier to better understand those packages that spike your cost profile, and consider giving those to an alternative carrier. Alternatively, there may be ways you can alter package dimensions or other characteristics to reduce your cost profile.
Stay tuned for more tips next Tuesday!
Rob Martinez, DLP is President & CEO of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Rob offers more than two decades experience negotiating parcel contracts for some of the most recognizable brands in the world, and is a sought after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858-879-2020 Ext 114 or rob@shipware.com.
