Carrier surcharges and add-on fees are proliferating and rising. And we hear again and again from all types of shippers that managing these costs is a concern. In response to a survey Pitney Bowes recently conducted, about 42% of the respondents named rising costs as a trend impacting the way they ship. Cutting costs was also one of the most often-mentioned operational goals for the year.

To combat these rapidly rising costs and surcharges, todays shipping environment requires a no surprises approach to cost control. For every package you ship, you must have complete and correct information about the costs you will incur and your service options, thereby allowing you to make your decisions accordingly. Your shipping system can provide the tools you need to implement that strategy.

Fuel Surcharges Pack a Punch

Fuel prices are one of the biggest drivers of shipping costs. Carriers recoup their fuel investments by passing along the cost to customers in the form of fuel surcharges. Many industry experts are waking up and taking notice of this. Janice Ginsburg authored The Pain of Fuel Surcharge Shock, which appeared in the April 28, 2005 issue of Business Week Online. In her article, she noted that a 40% rise in diesel prices between 2004 and 2005 resulted in a 14% increase in shipping costs. Think about that and then think about how much energy prices have increased in the year since.

Unfortunately, theres little you can do to control fuel surcharges. The best strategy is to be aware of carrier fuel surcharges upfront, which will mean fewer surprises when the bills arrive. A Web-based shipping system that receives regular updates to fuel surcharges from the carriers is a good start, as most major carriers adjust their fuel surcharges monthly and set them as a percentage according to the U.S. Department of Energys monthly fuel indexes or spot prices. Also, be sure your shipping system allows you to compare the total cost of shipping via the available carriers and services including fuel surcharges. Fuel surcharges on air services are several times greater than on ground services, and when presented with the total costs, you and your employees should have complete information to make the decision if shipping via air services warrants the extra cost.

You can also offset increases in fuel surcharges by keeping other surcharges and fees in line. In other words, control the fees and surcharges that are within your control.

Other Charges Can Add Up

To get a complete picture of the cost of shipping a package, you need a system that not only displays the shipping rate, but also any surcharges or special fees applicable to the service, destination or type of package you are shipping. An independent, multi-carrier system is likely to show all these charges upfront, allowing you to make informed choices on the carrier and services. In addition to fuel surcharges, youll want to be aware of delivery area surcharges, residential delivery surcharges, address correction fees and dimensional rating charges

Delivery Area Surcharges: Most major carriers assess a Delivery Area Surcharge (DAS) on packages delivered to ZIP Codes outside their normal service areas. The DAS ZIP Codes are listed on the carriers Web sites; charges range from $1.30 for commercial delivery to $2.10 for residential delivery.

A current shipping solution technology should identify if a destination ZIP Code will have a delivery area surcharge applied and add this cost to the total cost computed for the package. Delivery area surcharges may vary by carrier, so it is very important that you consider all carrier options for these packages. You should know up front if these surcharges will be applied and how much they will be.

Residential Delivery Surcharges: Most major carriers apply a surcharge to packages delivered to residences versus commercial businesses; a survey of carrier Web sites indicates these charges usually range from $1.75 to $2.10, depending on the type of service.

Having a Residential Delivery Indicator (RDI) tool within your shipping system will enable you to automatically compute residential charges. RDI is a complementary tool to a CASS engine. This indicator can help you choose the appropriate carrier and more accurately determine the resulting charges, including residential delivery charges.

Address Correction: Charges for address correction typically range from five dollars to $10 per shipment, depending on the type of service. A multi-carrier shipping system with automatic address correction will also help you avoid unnecessary costs.

Dimensional Rating: Dimensional rating has been common in air freight for a long time, but it is becoming more prevalent in the package shipping space. Dimensional rating takes the dimensions of the package (L x H x W) along with a standard divisor for density and compares it to the actual weight and determines if the package requires space disproportional to its weight. The classic example is shipping feathers or anvils. The shipment of boxes of feathers will be rated by its dimensions, and the shipment of anvils will be based on weight. Dimensional rating is here to stay and is being used by all carriers for air shipments.

As a part of auditing your shipment processes, closely review carton sizes and their actual weights. Smaller cartons more densely packed will help avoid dimensional rating. Check your carrier bills carefully to see what packages are being dimensionally rated and start with a close evaluation of those items. It may also be beneficial to enter the dimensions of cartons during the shipping process to compute the dimensional rate compared to the actual weight. A shipping system will make this calculation for you and determine whether the carrier will bill you based on weight or dimension with no surprises.

Be Aggressive and Get Results

In addition to increasing your awareness and control of surcharges and fees at the front end, its also worthwhile to pay close attention to the actual shipping bills. If you continue to see charges for address or delivery errors, clean up your database. If you continue to see dimensional charges for odd-sized packages, pro-actively tailor and modify your operations and standardize your box sizes to eliminate the charges.

In addition, if multiple employees are involved in shipping packages, establish company-wide rules for shipping and enforce them through your Web-based shipping system. Your policy should indicate which carrier services are allowed, who can use them and if approvals are required for certain types of services (such as for a next-day, early AM delivery). Another tactic is to pass along surcharges and fees to your customers, using a shipping system that will allow you to identify those charges upfront and eliminate surprises.

The time and attention you invest in monitoring and controlling surcharges and fees and the money you invest in shipping tools will pay big dividends. Consider the case of one of our customers, a wholesaler of architectural products with three locations throughout North America. This customer relies mainly on UPS for shipments as well as LTL and TL. We worked with the company to set up a shipping process flow that allows it to identify address correction, fuel surcharges, residential deliveries, dimensional weight and delivery areas upfront and pass those charges along to its customers. By using the address correction feature on its shipping system, the business has eliminated approximately $3,000 per week in charges. All in all, effective use of its shipping system is saving the company about $1.2 million per year. A great return on investment, wouldnt you say? More importantly, its a great way to beat the high cost of shipping.

Johanna Boller is Vice President Enterprise Software Product Management for Pitney Bowes Global Mailstream Solutions. She can be contacted at johanna.boller@pb.com.