Lately Ive been spending a significant amount of time with larger shippers (>1K/packages per day) helping to define business rules, routing guides and taking as much of the guess work out of shipping as possible. In most of these large implementations, the shipping component is a black box that doesnt require any real-time human interaction once its in production.
So, it was a refreshing change when I had the opportunity to work with a smaller customer that was shipping with an attended station. Some of the information for shipping came from an automated integration with another application mostly address information. However, the real bulk of the shipping decisions were being made by the shipping attendant.
The client was concerned over discrepancies in its carrier invoice, relative to what the shipping software was providing. This was hurting his bottom line: he was under-billing his customers for shipping.
Step One: Reviewing Invoices and Shipping Processes
We started by reviewing a recent invoice from one of the major carriers. One of the first shipments we looked at was a zone 8 that was dimensional weighed at 2lbs (actual weight was one pound). It detailed the fuel surcharge ($3.64), the Residential Surcharge ($2.30) and a Delivery Area Residential Surcharge ($2.30). The total cost of the shipment was $23.29. I suggested we go to their shipping system and find that package. The shipping system had posted the total cost of the shipment at $14.93. A difference of $8.36 from what the carrier charged.
The client, and more specifically the operations manager I was working with, had his finger on a lot of the changes with accessorial fees and suspected the reason for the discrepancy. Im sure that most readers of this article could have also ventured an informed guess and got it right: The user had not entered in the dimensions, and the shipment had not been flagged as residential. When asked about the dimensions, the user stated that he had selected the packaging type, which he assumed would have populated the dimensions. Thats a reasonable assumption, but in this instance it was not true the flexible bubble type envelopes he was using can have a varying height depending on whats placed inside it.
Moreover, the shipper was not checking the residential indicator. Although he didnt come right out and say it, the culprit in part was the shipping software; although it could have been configured to set a flag for him, it hadnt been configured that way. In this example, it was costing the company a total of $3.10 for one package. A commercial delivery area surcharge of $1.50 was applied, but it should have had both the residential surcharge ($2.30) and the residential delivery area surcharge ($2.30) for a total of $4.60 in residential surcharges, rather than the $1.50 commercial charge.
Additionally, had they entered in the accurate information, another carrier would have been selected based on any comparison rate shop, because this particular weight/zone/residential combination also happens to be the sweet spot for another carrier.
I Saved Money! How Did that Happen?
One positive take-away in all of this is that the shipper folded the soft packing in half, over the top of the box. He stated he did this because he thought it would protect the container better. While he did provide more padding for the top of the parcel, he shortened the length of the soft-sided package in half (a 16 inch side became 8 inches) and only slightly raised the height by a inch or so.
Folding this packaging reduced approximately one and a half pounds from the dimensional weight, calculated as LxWxH divided by a dim factor of 194.
Unfolded: (12.X16 X 3.5)/194 = 3.5
Folded: (12 X 8 X 4)/194 = 2
Step 2: Identifying the issue:
They were willing to take an extra amount of time to tape up the side of the package (the tape dispenser was right there next to the scale) but didn't like navigating to other areas of the shipping software to select the residential indicator. I found that interesting and acknowledged to myself that the key here wasn't educating the shipper as much as it might be fixing the software.
While management knew of all the accessorial issues and had sent out notices regarding dimensions and other aspects of the shipping operation that needed to be adhered to, (there was even a post-it on the terminal); shippers were doing what was convenient for them and/or they were misinformed.
Managing your accessorial fees involves periodically reviewing your invoices from the carriers, and then checking them against what your shippers enter into the system. Many shipping managers do not review their shipping invoices periodically, they go directly to accounts payable and the only time they get to see them is when a problem arises (and you can define problem as something that has been going on long enough to get the attention of the CFO).
Step 3: Fixes, and Getting Buy-In:
Shipping software today should have convenient methods for providing dimensions, setting residential indicators, and working with any of the other accessorial fees. Even though they are not a fully automated, black box solution, the best shipping software solutions out there allow for setting defaults at a variety of levels (by location, user, carrier, commodity, customer, etc.).
In this case we handled the dimensions through the software as it allowed for creating custom boxes; we created two soft packages with dimensions using the height for two of the most common commodities they shipped. For other soft packaging we set the width and length, but prompted just for height to reduce the amount of data the shipper was required to enter.
Another example that can be cumbersome is the use of address validation. When we continued to look at invoices I noticed a number of address corrections. With the invoice in hand we processed one shipment which had a $6.00 address correction fee. The shipment went through - no problem. I didn't understand it, the standard software provides city, state and zip validation. Moreover there are options that can validate to the street or apartment number. The invoice stated that the zip code was wrong and the carrier had also modified the street address. Why was the software accepting it? Who was wrong? The answer was neither: The shipper wasn't using the address validation.
We turned the basic validation on and tried to process the same package; sure enough it caught the zip code error right away and prompted with the correct zip code based on the city and state. That was $5.00 of the $6.00 fee on the invoice.
With high volume shippers we suggest to them as a best practice that they scrub their address at the sales order stage. For varying reasons there are companies who validate addresses at the time of shipping. In this case we simply turned it back on and we changed the privileges of the shipper so they couldn't turn it off. Not elegant, but it worked.
I wondered how many other shippers out there that have turned this feature off once, and never turned it on again?
This is another example of staying on top of your invoices, and periodically checking your shipper's process.
The return on investment with these changes can be dramatic how much does it cost to change the privileges? Or to work with your shipping provider to create new default values for certain areas of the product to reduce keystrokes, or to always prompt in for other values?Even if some engineering hours are required by your provider the ROI can often be measured in a few weeks. So grab an invoice, look for some accessorial fees, review them with your shipper and make sure his data matches the carriers, and if not, work with your software provider to make it fool proof.
Oh, and put that tape dispenser right next to the scale for the soft sided packages too!
Peter Starvaski is the director of product marketing for Kewill Enterprise Shipping. Peter can be reached at firstname.lastname@example.org or visit www.kewill.com for more detailed information.