This is the time of year when the temperature starts to fall and parcel prices are ready to rise, based on the annual hikes announced by UPS and FedEx. Shippers can’t control the new rates set by the industry giants (with an average increase of 4.9%, depending on the type of service), but they can control their logistics budgets — and significantly lower their costs, by as much as 35% — if they start planning cost-cutting measures now.
Why is this a good time to review budgets if the new prices won’t go into effect until the beginning of next year? Because it typically takes a few months for shippers to conduct their due diligence and be prepared to make wise choices. This includes reviewing supply chain considerations such as distribution centers located closer to customers, evaluating operations and delivery patterns, sending out RFPs, and evaluating carrier options. It starts with having good data.
In general, the greater your shipping volume, the more opportunities to lower your rates. But even small businesses have negotiating power.
Overall, companies should consider the advantages of a diversified shipping portfolio, including regional carriers that are more flexible and cost-effective than the nationals. Shippers should question doing business as usual and look for creative delivery alternatives.
With this in mind, we offer the following tips to help you cut costs:
Assess Assessorial Charges
Perhaps the most dramatic way for shippers to reduce expenses is by cutting their accessorial charges, which account for almost 50% of the total billing of UPS and FedEx. While the giants bill customers for over 100 accessorial surcharges and related hidden fees, most regional carriers have fewer than 20 of these additional charges (and lower base rates to begin with).
Typical charges above the base delivery rates are for items such as:
• Residential deliveries
• Wrong addresses
• Missing ZIP Codes
• Surcharges for certain ZIP codes
• Late payments
• Saturday and early-morning deliveries
• Missing signatures
• Special handling
Check which of these charges you can eliminate or negotiate.
Get Smart about DIM Changes
As high as the expected base rates will be next year, shippers can expect unwelcome additional charges in the way of new DIM (dimensional) billing, recently announced by FedEx and UPS. These changes apply to the weighing to all shipments, not just large packages, and this is expected to result in the shipping industry’s most dramatic cost increase in the last 15 years.
What can shippers do to fight DIM changes? Again, it’s important to be aware of what’s involved and be proactive in mitigating cost increases.
For example:
• Educate employees so they can determine your DIM weight vs. actual weight and ensure appropriate packaging.
• Secure packages of different sizes so employees can choose the proper box for the shipments; strive for smaller and denser packages, as needed.
• Meet with alternative carriers and determine projected cost increases upfront.
• Negotiate and see if you can grandfather your existing DIM charges.
Understand the Yearly Base Price Increases
While UPS and FedEx may quote an “average” price increase of 4.9%, that amount may turn out to be much higher. You need to factor in zone pricing and other tariff considerations before you arrive at an accurate estimate. So make sure you understand the variables and fine print before you sign on the line.
Keep in mind that your annual agreement is usually a fixed amount throughout the year, but carriers can tack on additional surcharges for fuel, with prices that frequently fluctuate.
Get Grounded
If you’re paying for priority air service, you’re paying a premium, including the high cost of fuel. So consider migrating shipments to ground service, especially for parcels that aren’t particularly time-sensitive and don’t need to be there first thing in the morning. Listen to what your customers tell you about when deliveries really need to arrive. In this light, you need not “over-perform” — and over-pay — for priority vs. deferred ground service.
At the same time, you want to ensure the most timely and cost-effective ground deliveries. Consider carriers that guarantee ground deliveries by the end of the next day, something the giants can’t match.
Prepare for Negotiations
As stated earlier, you need to perform your due diligence so you can exercise your leverage when you negotiate. Among the tips presented here, perhaps your best strategy is to meet with different carriers and compare apples to apples. If your present carrier is UPS, and they know you’re also talking to FedEx and regionals, that should give you a negotiating advantage.
Ask for a Shipping Analysis
Since the stakes are so high, you should take the time to study many complicated variables, and you may need outside consultation to help you navigate this process. Many logistics consultants will provide this service… at a price. At the same time, the more sophisticated regional services will typically do shipping audits for no additional charge. Ask!
Consider Other Cost-Cutting Measures
• Look into automated software to help you calculate correct addresses, etc.
• Decipher your carrier’s invoicing and make sure it’s transparent. UPS is notorious for overly complicated invoices.
• Use packaging provided by your carrier; this could help you avoid additional dimensional fees.
• Consolidate packaging. If you group packages together, you may reduce costs.
• Check out multi-year contracts.
Overall, the regionals are much more flexible than the giants, whether it’s for DIM or base rates or other customized solutions such as “over the threshold” deliveries into hospitals, offices, and homes.
Also, keep in mind that time is money, and the regionals provide later pickups and earlier deliveries, as well as quality performance that matches or exceeds the nationals.
Some things in life, like death, taxes, and weather changes, are givens. But paying higher shipping bills should not be on the “do not touch” list. Now is the time to be proactive, not complacent, in your logistics planning. So plan ahead to ensure your best solutions, lowest costs, and fewest surprises.
Jim Berluti is the President and CEO of Eastern Connection, one of the largest regional, small-package overnight carriers on the East Coast. Founded in 1983, Eastern Connection covers over 6,800 ZIP Codes in the Northeast. The company, which has 16 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Logistics & Warehousing, Trucking, Medical Logistics, and Expedited Mail. For more information, visitwww.easternconnection.com.
Why is this a good time to review budgets if the new prices won’t go into effect until the beginning of next year? Because it typically takes a few months for shippers to conduct their due diligence and be prepared to make wise choices. This includes reviewing supply chain considerations such as distribution centers located closer to customers, evaluating operations and delivery patterns, sending out RFPs, and evaluating carrier options. It starts with having good data.
In general, the greater your shipping volume, the more opportunities to lower your rates. But even small businesses have negotiating power.
Overall, companies should consider the advantages of a diversified shipping portfolio, including regional carriers that are more flexible and cost-effective than the nationals. Shippers should question doing business as usual and look for creative delivery alternatives.
With this in mind, we offer the following tips to help you cut costs:
Assess Assessorial Charges
Perhaps the most dramatic way for shippers to reduce expenses is by cutting their accessorial charges, which account for almost 50% of the total billing of UPS and FedEx. While the giants bill customers for over 100 accessorial surcharges and related hidden fees, most regional carriers have fewer than 20 of these additional charges (and lower base rates to begin with).
Typical charges above the base delivery rates are for items such as:
• Residential deliveries
• Wrong addresses
• Missing ZIP Codes
• Surcharges for certain ZIP codes
• Late payments
• Saturday and early-morning deliveries
• Missing signatures
• Special handling
Check which of these charges you can eliminate or negotiate.
Get Smart about DIM Changes
As high as the expected base rates will be next year, shippers can expect unwelcome additional charges in the way of new DIM (dimensional) billing, recently announced by FedEx and UPS. These changes apply to the weighing to all shipments, not just large packages, and this is expected to result in the shipping industry’s most dramatic cost increase in the last 15 years.
What can shippers do to fight DIM changes? Again, it’s important to be aware of what’s involved and be proactive in mitigating cost increases.
For example:
• Educate employees so they can determine your DIM weight vs. actual weight and ensure appropriate packaging.
• Secure packages of different sizes so employees can choose the proper box for the shipments; strive for smaller and denser packages, as needed.
• Meet with alternative carriers and determine projected cost increases upfront.
• Negotiate and see if you can grandfather your existing DIM charges.
Understand the Yearly Base Price Increases
While UPS and FedEx may quote an “average” price increase of 4.9%, that amount may turn out to be much higher. You need to factor in zone pricing and other tariff considerations before you arrive at an accurate estimate. So make sure you understand the variables and fine print before you sign on the line.
Keep in mind that your annual agreement is usually a fixed amount throughout the year, but carriers can tack on additional surcharges for fuel, with prices that frequently fluctuate.
Get Grounded
If you’re paying for priority air service, you’re paying a premium, including the high cost of fuel. So consider migrating shipments to ground service, especially for parcels that aren’t particularly time-sensitive and don’t need to be there first thing in the morning. Listen to what your customers tell you about when deliveries really need to arrive. In this light, you need not “over-perform” — and over-pay — for priority vs. deferred ground service.
At the same time, you want to ensure the most timely and cost-effective ground deliveries. Consider carriers that guarantee ground deliveries by the end of the next day, something the giants can’t match.
Prepare for Negotiations
As stated earlier, you need to perform your due diligence so you can exercise your leverage when you negotiate. Among the tips presented here, perhaps your best strategy is to meet with different carriers and compare apples to apples. If your present carrier is UPS, and they know you’re also talking to FedEx and regionals, that should give you a negotiating advantage.
Ask for a Shipping Analysis
Since the stakes are so high, you should take the time to study many complicated variables, and you may need outside consultation to help you navigate this process. Many logistics consultants will provide this service… at a price. At the same time, the more sophisticated regional services will typically do shipping audits for no additional charge. Ask!
Consider Other Cost-Cutting Measures
• Look into automated software to help you calculate correct addresses, etc.
• Decipher your carrier’s invoicing and make sure it’s transparent. UPS is notorious for overly complicated invoices.
• Use packaging provided by your carrier; this could help you avoid additional dimensional fees.
• Consolidate packaging. If you group packages together, you may reduce costs.
• Check out multi-year contracts.
Overall, the regionals are much more flexible than the giants, whether it’s for DIM or base rates or other customized solutions such as “over the threshold” deliveries into hospitals, offices, and homes.
Also, keep in mind that time is money, and the regionals provide later pickups and earlier deliveries, as well as quality performance that matches or exceeds the nationals.
Some things in life, like death, taxes, and weather changes, are givens. But paying higher shipping bills should not be on the “do not touch” list. Now is the time to be proactive, not complacent, in your logistics planning. So plan ahead to ensure your best solutions, lowest costs, and fewest surprises.
Jim Berluti is the President and CEO of Eastern Connection, one of the largest regional, small-package overnight carriers on the East Coast. Founded in 1983, Eastern Connection covers over 6,800 ZIP Codes in the Northeast. The company, which has 16 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Logistics & Warehousing, Trucking, Medical Logistics, and Expedited Mail. For more information, visitwww.easternconnection.com.
