Shipping is a critical part of your business, but it’s becoming more complex and expensive than ever. Rate increases, damaged goods, billing mistakes, and late shipments all affect your bottom line. Could you be shipping profit out the door? What controllable costs are being ignored that could help boost your bottom line? And, on the flip side, what are the uncontrollable costs affecting your bottom line, and is it possible to reduce these costs? Let’s take a look at some common pain points.
1. Rate Increases
Parcel carriers announce rate increases and accessorial changes each year, and 99.99% of the time, these increases result in higher net costs for sending any shipment through the carrier networks
The Solution: Whether in-house or with a third-party partner, developing a multi-carrier solution that fits your needs will help lessen the impact of these annual increases.
2. Improper Tendering of Shipments
Not selecting the proper service for the address type results in avoidable overspend. This can account for as much as 80% in additional shipping costs for the transactions.
The Solution: Shipment execution software that can be used to determine best-in-class rating and routing will avoid this overspend, as will changing habits with your customer base and knowing how carriers can help support your new delivery initiatives.
3. Misleading Carrier Incentives
In the past, discounts given to shippers were primarily based on weight, zone, or even level of service. Carriers soon realized giving shippers large discounts, at low spend levels, didn’t favor the carrier. So how does the carrier respond? Revenue-based incentives were introduced to compel shippers to increase their shipping spend with a carrier, thereby putting more money into the carrier’s pocket.
The Solution: Make sure you know the intimate details of your carrier incentives, whether you task someone in your organization with this responsibility or engage a third-party solutions provider. The bottom line is, you need to know the details. Also, that shipment execution software mentioned earlier is a great tool to help eliminate or reduce these charges as much as possible
4. More Dimensional Weight
Dimensional weight (DIM) hasn’t always been a regular charge included in shipping rates. In the past, packages were only billed by weight, regardless of the size of the package. As most shippers can tell you, that is certainly not the case anymore!
The Solution: Package density and studies are one of the main areas skipped in today’s logistics process, and the tactic of just asking the carrier for discounts isn’t enough anymore. If you haven’t already, take a good look on your packaging process and materials used, as this can have a significant impact on DIM weight fees.
5. Incorrect Accessorials
Accessorials account for a larger part of transportation spend than ever before. Most carriers can have literally hundreds of accessorial fees that will impact your bottom line, which is one reason we say shipping is more complicated (and expensive) than ever! Accessorial fees are those charged for additional services outside the standard transportation costs.
The Solution: Again, it all comes down to the data. Knowing what you are charged — compared to what you should be charged — is the first step in combatting these fees and negotiating steps to reduce their impact.
Shawn Shaw is President/CEO, GTMS (Utah Global Transportation Management Solutions Inc.) He will be speaking more on this topic at the 2019 PARCEL Forum; join him on Wednesday, October 30 at 12:40 PM.
This article originally appeared in the September/October, 2019 issue of PARCEL.