One of the primary ways shippers can streamline their supply chains is through mode optimization. While many companies have figured out the small parcel air to ground service level optimization, many of those same companies don’t make the right decisions when shipping small parcel hundredweight or LTL. When it comes to deciding whether to use LTL or parcel shipping, an overwhelming majority of shippers stumble.
Many companies make their decisions based purely on physical weights of multi-piece shipments. For example, they set a policy where all shipments less than 150 pounds are sent via parcel and anything greater than 150 pounds ships LTL. Other organizations are under the impression that hundredweight is not an option to them because the shipments won’t all arrive at the same time (as opposed to a palletized LTL shipment). The reality is that UPS and FDX Ground miss delivering guaranteed hundredweight shipments about 2% of the time on average.
Shippers need to do their due diligence and very carefully analyze their policies and decision making processes. The key to driving sustainable savings is creating an enforceable and repeatable process based on the most recent carrier and shipping data. There are a number of areas shippers need to evaluate to ensure they are making the best choices. Here are several key areas:
• Make sure you are making your decisions based on total landed cost. A common pitfall that I see with companies comparing small parcel freight costs to LTL freight costs is the failure to include the accessorial charges associated with each shipment. Failing to include the fuel surcharges for LTL versus parcel causes many shippers to make the wrong choice. Currently published index LTL fuel surcharges are running a little over 30%, whereas current small parcel hundredweight surcharges are running around 7%.
• Make sure you are factoring dimensional weight into your decision making process. A common error by shippers is making decisions based on actual physical weight instead of dimensional weight. Many shippers have developed the right business rules to optimize modes but aren’t using the correct data for which the rules apply. For instance, a company may have the correct weight break set and ship everything 300 pounds and over LTL. That same shipper has a shipment they are sending with a physical weight of 250 pounds but a dimensional weight of 400 pounds. If they aren’t making the decision based on dimensional weight then they are going to make the wrong choice.
• Factor shipment minimum charges into your analysis. LTL minimum charges and small parcel hundredweight charges vary greatly. In general hundredweight minimum charges are much lower than LTL minimum charges.
• Careful analysis of small parcel hundredweight minimum average billed weight per package also is critical to making the right decision. FedEx regularly sets their minimum billed weight per package at 25 pounds and the UPS standard is 15 pounds. Similar to dimensional weight, if shippers are not calculating the correct billed weight then there is lots of room for error.
UPS has a service called UPS Ground with Freight Pricing that helps shippers make the right choice. It’s a contract service that needs to be approved and in my experiences is usually only used in competitive situations – to convert LTL business that is not being shipped via UPS Freight. In order to qualify for the service you must have a UPS Freight Agreement in addition to being approved to use the service. Small parcel shipments are rate shopped between Hundredweight and Ground with Freight pricing for the lowest cost. It’s similar to the way shipments are rate shopped between single piece and hundredweight. If you aren’t familiar with the service you should ask your UPS Account Executive if you qualify. Carefully analyzing all of the variables and services that are available is one of the keys to optimizing your shipping.
Many companies make their decisions based purely on physical weights of multi-piece shipments. For example, they set a policy where all shipments less than 150 pounds are sent via parcel and anything greater than 150 pounds ships LTL. Other organizations are under the impression that hundredweight is not an option to them because the shipments won’t all arrive at the same time (as opposed to a palletized LTL shipment). The reality is that UPS and FDX Ground miss delivering guaranteed hundredweight shipments about 2% of the time on average.
Shippers need to do their due diligence and very carefully analyze their policies and decision making processes. The key to driving sustainable savings is creating an enforceable and repeatable process based on the most recent carrier and shipping data. There are a number of areas shippers need to evaluate to ensure they are making the best choices. Here are several key areas:
• Make sure you are making your decisions based on total landed cost. A common pitfall that I see with companies comparing small parcel freight costs to LTL freight costs is the failure to include the accessorial charges associated with each shipment. Failing to include the fuel surcharges for LTL versus parcel causes many shippers to make the wrong choice. Currently published index LTL fuel surcharges are running a little over 30%, whereas current small parcel hundredweight surcharges are running around 7%.
• Make sure you are factoring dimensional weight into your decision making process. A common error by shippers is making decisions based on actual physical weight instead of dimensional weight. Many shippers have developed the right business rules to optimize modes but aren’t using the correct data for which the rules apply. For instance, a company may have the correct weight break set and ship everything 300 pounds and over LTL. That same shipper has a shipment they are sending with a physical weight of 250 pounds but a dimensional weight of 400 pounds. If they aren’t making the decision based on dimensional weight then they are going to make the wrong choice.
• Factor shipment minimum charges into your analysis. LTL minimum charges and small parcel hundredweight charges vary greatly. In general hundredweight minimum charges are much lower than LTL minimum charges.
• Careful analysis of small parcel hundredweight minimum average billed weight per package also is critical to making the right decision. FedEx regularly sets their minimum billed weight per package at 25 pounds and the UPS standard is 15 pounds. Similar to dimensional weight, if shippers are not calculating the correct billed weight then there is lots of room for error.
UPS has a service called UPS Ground with Freight Pricing that helps shippers make the right choice. It’s a contract service that needs to be approved and in my experiences is usually only used in competitive situations – to convert LTL business that is not being shipped via UPS Freight. In order to qualify for the service you must have a UPS Freight Agreement in addition to being approved to use the service. Small parcel shipments are rate shopped between Hundredweight and Ground with Freight pricing for the lowest cost. It’s similar to the way shipments are rate shopped between single piece and hundredweight. If you aren’t familiar with the service you should ask your UPS Account Executive if you qualify. Carefully analyzing all of the variables and services that are available is one of the keys to optimizing your shipping.
John Haber is Founder/CEO of Spend Management Experts. He can be reached at 404-840-2010 orjhaber@spendmanagementexperts.com.
