ideas to reduce parcel shipping costs

IDEAS

To Reduce Shipping Costs

Ideas

• FedEx Prepaid Stamps– These have embedded fuel surcharge, no

Residential Surcharge, No delivery area surcharge, no reweighs

– Based on single zone (5) – Can be purchased in overnight or 2-day– http://www.fedex.com/us/services/options/

returns/returnstamps.html

Ideas

• Priority Mail Flat rate Box– All inclusive flat rate to all 50 States and

Puerto Rico– There is currently a Large Box version – Depending on the destination and your

discount wit the commercial carriers this can save as much as 25 to 50%

– Yes, its good to Alaska, Hawaii and Puerto Rico

Ideas

• The USPS provides free packaging in certain sizes

• For volume they can design custom packaging for you

• For volume they can co brand the packaging with your logo

• “http://shop.usps.com/webapp/wcs/stores/servlet/ProductCategoryDisplay?catalogId=10152&storeId=10001&categoryId=13354&langId=-1&parent_category_rn=11820&top_category=11820

Ideas

• Packaging Labs– Some carriers have packaging labs where they will

test your packaging for free to make sure its suitable for the inherent risks of parcel transportation

– This can significantly reduce your claims costs– Get approval in advance of your packaging so that

when you get a damage claim their claims department cant deny your claim based on insufficient packaging.

– Carriers give recommendations on packaging

Ideas

• Surcharges– Negotiate a cap– e.g. 15% on fuel– Or a non variable surcharge for the year– Have the carrier embed all the surcharges in

the freight rate

Ideas

• Supplemental Charges– Know how supplemental surcharges impact your firm– Its easy to get a monthly shipment detail report or to use your

weekly electronic billings to do pivot charts to determine how many delivery area surcharge shipments you have or how many address corrections or how many residential surcharges.

– Focus on the ones that have the greatest impact to you when negotiating

– Try to get the carrier to bill all the charges up front and not after the fact. UPS has a new billing program you can ask for which bills you after the shipment is delivered and all the charges associated with the shipment are applied at one time. It may only be available at this time with their internet ship product.

Ideas

• Convert zone 2 and 3 air shipments to ground– You might find you are using 2 day air where

ground is guaranteed overnight, or worse using 3 day air (Express Saver with Fed) where ground is guaranteed overnight

Ideas

• Make your incumbent carrier nervous– Your worst friend in the world is the sales rep for your

incumbent carrier because there is no financial incentive to lower your rates, only the converse of that.

• A perceived low likelihood to change by your incumbent will not get you their best offer.

• If they view your account as possibly leaving or potentially diverting some traffic they will lower your rates.

Ideas

• Weight Adjustments– Challenge your carrier to prove out the validity

of its reweighs. – Make sure you are calibrating your system

scale. – Challenge the carrier about shipments where

they find the weight is lower than you declared. All the reweighs cant be over, a similar amount should be under using their logic.

Ideas

• Dimensionalization– Try to design your packaging so that your

declared weight is equal to or greater then the dimensional weight.

– If you cant change your packaging its possible to negotiate the dimensional divisor to something other than 194 e.g. 300 or 250 to mitigate the impact of dimensional weight

Ideas

• Minimize pricing exclusions– Look for services with no discount– Make sure you get a discount for every service. Residential and

commercial, outbound prepaid, inbound collect and their party billed. Each type of package e.g. letters, Return Service.

• Be willing to concede little or no discount for rarely used services but make sure those shipments and revenue count toward your revenue threshold calculation

– Make sure all your account numbers are included in the contract and there is a method and means to add account numbers.

– Look at how high the revenue requirement is before you get any discount. In this shrinking economy you might find your well negotiated discount shrink to zero even with considerable volume with the carrier

Ideas

• Be aware that carriers only guarantee morning delivery to 45% of the zip codes in the USA.

• Its financially worth it to you to “downgrade” those shipments going to the 55% of the zips to “next day” service for the lower cost and there is no degradation in service.

Ideas

• Package content can matter– Books and CDs, software, tapes can qualify

for very low postal rates for Bound Printed Matter of Media Mail versus what the parcel carriers would charge to transport a similar transaction. Savings as much as 50%

Ideas

• Audit your bills– Carriers will bill you for shipments transmitted even if

you never shipped them. They have the method and means to verify that every shipment they bill you for has scans

– Audit for on time performance and request refunds for late shipments outside of their published guarantee

Audit the correct application of the surcharges

in particular challenge the address corrections

Ideas

• Supplemental charges– These are mostly Residential add-on’s,

reweighs and dimensionalization.– Know how these impact you– Try to clean up and or capture these at the

front end or have a process to correct the root cause so the errors like a bad address in your system does not perpetuate

Ideas

• UPS Authorized Returns Service– You can put the label in the box – flat fee– Can be used for shipments back to your

corporate offices– Rates are based on an average box

weight/size

Ideas

• Shipping Collect (Caveat Emptor)– If Receiver does not have credit with a carrier

shipper may end up charged with the transportation.

– Shippers liability does not go away.– Watch for surprises

Ideas

• UPS has a drive on to encourage the routing of inbound collect shipments to ones contract.

• They feel this keeps shippers from using other carriers other than UPS

• And they have incentives for the salespeople to ask for the inbound shipments.

• This can be a big carrot for you to get better discounts if you can offer up your inbound

Ideas

• Courier Company Waybills– Could be like having $5 bills laying around the

office.– Carriers can charge up to $5 if you use a

paper waybill instead of their web based shipping site.

– Make the users either use the carriers web ship product and manage that or have them use the automation you have in shipping or your mailrrom.

Ideas

• If you have a high degree of residential shipments or some portion of your traffic that is highly residential be sure to invite parcel consolidators like Newgistics/Cornerstone,Blue Package, Southwestern Parcel Express, UPS Basic, FedEx Smartpost, American Parcel Solutions and the regional carriers such as Eastern Connection and Ontrac.

• There may be far more competition for your packages than you believe and competition makes for better pricing.

Ideas

• Alaska Hawaii and Puerto Rico

• Apart form Priority Mail being a great cost effective consistent reliable service

• Look into Parcel Pool and IDS

Ideas

• To attract better rates from the carriers– Define to the carriers your package characteristics

(commercial vs. residential, air vs. ground, close zone vs. far, high package density vs. dimensional….and so on)

– Value per pound– Opportunity you are presenting for the future vs. what

you used to have.– Watch for snitches in your operation feeding info to

the carrier reps or drivers of what's being negotiated and with whom

Ideas

• Want to get the best deal in a contract• Then today’s environment is way too complex

for you to get the best deal• Use a parcel consulting company but negotiate

those terms as well so our savings are not eaten up by fees

• If you want a presentation on negotiating with parcel consulting companies you can send me an e mail at gmhempstead@aol.com and ill send you the fine points

Ideas

• Some consulting firms recommend placing all your business with one carrier

• It’s a win-win-win• The shipper- the carrier- the consulting company• It makes their job easier to maintain the billing

and reporting post selection and implementation• But may not result in the best cost or lowest risk

to the shipper, so go this route with knowledge of that fact.

• Never ever, ever, ever use carrier insurance– Use UPIC, PIP Insure, DSI, Marsh & Mclennon

• Use Pre-purchased options– Ship Ready & Fedex stamps

• Use the USPS unlimited weight products– Letter/ pack/ box– No delivery area surcharge, no residential surcharge,

no address correction fee, no fuel surcharge