In business school we learn to focus on the core competency and outsource the rest. Or, at the very least, outsource the painful or mundane, which you’d prefer someone else do. In the overall scheme of things, a parcel audit ranks dead last on all accounts, yet it is as essential to shippers as a good manifest system. Surprisingly, for many companies that ship with FedEx, UPS, or DHL, the parcel audit isn’t even on the radar screen. That’s a problem. Continue reading
In business school we learned to focus on the core competency and outsource the rest. Or, at the very least, outsource that which you’d prefer someone else do.
In the overall scheme of ‘core competencies’, freight auditing ranks dead last for most companies.
On the scale of necessary but painful experiences, parcel auditing ranks in the top 5. So… why not outsource it? Continue reading
There’s an assumption that shipping with FedEx, UPS, DHL Express is better, faster than Ground delivery options. It’s certainly more expensive, but better and faster? Not necessarily. In many cases Express shipments are in transit as long as, or longer than, Ground shipments.
The Air to Ground Conversion Analysis identifies Express shipments that could have been shipped Ground without compromising delivery time, and itemizes the potential cost savings of converting to Ground. The results can be staggering.
For one decentralized customer the Air to Ground Analysis identified a full 35% reduction in shipping costs attainable by using a very simple rate shopping tool available in the Direct-Recovery interface. That’s 35% of transport spend that goes straight to the bottom line.
Standard savings? No, but attainable savings in the more egregious cases. The role of Direct-Recovery is to discover these operational inefficiencies and provide the tools to correct. We do that for free given our revenue model. It’s the customer’s job to fix the problem. These are the soft cost savings – operational changes you make based on the information we provide.
Why do shipments go Express unnecessarily? Sometimes it’s about perception. Air is ‘more important, more valuable’, and that’s worth the premium. That’s fine. These shipping expenses are incurred by well-informed shippers, making sensible choices.
If you ship packages, especially less dense packages, you’re probably aware of the dimensional weight changes that went into effect in January 2011 for both FedEx and UPS rates. To encourage denser packaging, FedEx and UPS dropped the dim weight divisor from 194 to 166. Sounds innocuous enough, but what does it mean? Continue reading
Freight consultants add value by applying industry insight to a company’s unique shipping profile in order to optimize carrier discounts throughout the negotiation process. Interpreting parcel carrier tariffs can be as daunting as navigating the tax code, so consultants play a role similar to that of tax accountants. Hiring a professional with an inside perspective usually results in better discounts. But there’s a hitch.
In October 2009 UPS and FedEx announced they would no longer work with third-party consultants hired to negotiate for shippers. Shortly thereafter one of the bigger third party negotiators filed suit against both carriers, claiming colusion and price-fixing — a claim being investigated by the Dept of Justice at the time of this writing. The question we’re all asking is, “can they (FedEx, UPS) really do that?”
A little known reality is that in practice this anti-consultant policy is more guideline than law. Third parties like Direct-Recovery are still involved in the process, but that’s another discussion. The question at hand – is there a way to achieve better rates on my own? Here’s a simplified, mostly DIY approach:
1. Don’t marry your parcel carrier. Fidelity to spouse is good, but play the field with your carrier, even if you’d prefer not change. At the very least, appear to keep your options open, and even be slightly discontent with your provider.
2. Determine how competitive your current rates are. This is where a company like Direct-Recovery can advise, based on aggregate data of comparable shippers, just how you compare to industry averages. If there’s room to discount, put a number on it. 5%? 10%? Set a target.
3. Submit a Request For Proposal to selected carriers, indicating your desire to achieve overall rate reductions of your target established in step 2.
4. Don’t neglect the regional carriers. There are more companies than UPS and FedEx serving the US market, and many more on the international level. What’s more, many carriers interline with others to expand service territory. Evaluate your domestic and international shipping needs, and help keep the industry competitive. If US based, ask for a proposal from the US regional carriers such as:
- Eastern Connection: services the northeast and mid-Atlantic
- Lone Star Overnight: Texas and several contiguous states
- OnTrac: West coast, Arizona, Nevada, Utah
- Spee-Dee Delivery: Illinois and upper Midwest
- US Cargo: Midwest and some east coast
5. Mind the accessorial fees. These vary considerably based in large part on a company’s internal shipping operations. While these may account for as much as 30% of a shipping bill, the good news is that many are within your control. Not fuel surcharges perhaps, but Dimensional Weight Adjustments, Saturday Delivery, Address Corrections, and many more can be remedied with operational changes. Sometimes these accessorials can be negotiation targets as well.
6. Compare contracts in real life. Rate proposals are complex and can be difficult to decypher. The best way to assess a contract proposal is to rerate your actual shipping history. Apply the new rates to the last 12 months of your shipping history to determine what, if any, savings may materialize. Direct-Recovery has a tool to do just that in the reporting interface.
7. Mix and match. If there are elements of a proposal you’d like to see in another, it seldom hurts to ask.
8. Don’t give up your right to claim for guaranteed service refunds. It doesn’t behoove you, or the parcel industry for that matter, to absolve the carriers of their service commitments.
Prompted by a recent conversation with a customer, it’s time to shed some light on our parcel audit pricing structure. We consider it a simple gain-share model, but it can be a bit confusing.
We deliver hard and soft cost savings to companies who ship with any major parcel carrier – FedEx, UPS, DHL, TNT, US Cargo, BlueDart, etc. The net result is that our customers pay less to ship parcels than they would without our services. How do we make money? Continue reading
There’s a potential untapped revenue source for companies that ship with parcel or ltl carriers. As mundane as a parcel audit may sound, it can reap rich dividends. Consider the impact of discovering 6 months of refundable FedEx or UPS charge errors. Continue reading
This week Las Vegas hosts the National Conference on Operations and Fulfillment – the NCOF Show for those in the industry. We’re getting a bit teary eyed around here because we launched Direct-Recovery at the same show 11 years ago.
This year I have the privilege of participating in a panel discussion regarding shipping cost control. It’s sure to be riveting and provocative, watched closely by celebrity bloggers everywhere… Continue reading