Smart Shipping Made Easy

Seven Tips to Eliminate Hidden Shipping Costs

Multi-carrier shipping software is a great cost reduction tool, but even greater savings can be gained by ensuring your shipping system and your shipping processes are tuned up to preempt common problems that result in hidden freight costs.

Following are seven tips that can yield dramatic cost savings.

1. Use Address Correction Software

When is the last time you checked your freight bill to analyze up-charges related to incorrect shipping addresses? Address correction surcharges from the carrier can quickly add up. One expert, Satish Jindel, founder and president of Pittsburgh-based SJ Consulting Group, estimates that parcel shipping errors add 5% to 7% to a shipper’s annual freight bill. Given that companies collectively spend some $55 billion a year on domestic parcel services, those mistakes translate into serious money.[1]

Costs related to incorrect delivery addresses can be huge and accumulate in several ways:

  • Incorrect Delivery Addresses – Address correction charges by parcel carriers can range from $13.00 per package, up to $91.00 multiple packages addressed the incorrectly addressed shipment.
  • Residential Deliveries Erroneously Classified as Commercial – If residential deliveries are erroneously classified as commercial deliveries, the carrier may fix it, but at a cost of $2.50 or more per package.
  • Increased Customer Service Costs – Labor costs also increase when employees are diverted from their regular work to resolve address-related problems.
  • Unhappy Customers and Cancelled Orders – Delivery address problems can also lead to frustrated customers, order cancellations, even the loss of a customer.

Numerous address correction software options are available. Your shipping system vendor can help you decide which tool best fits your needs. Learn more in our blog, “How Address Verification Software Reduces Hidden Shipping Costs.”

2. Add Postal Carriers to Your Shipping System

Postal carriers can be an extremely cost- effective small parcel shipping option. The U.S. Postal Service®, for example, can offer attractive rates and other cost-cutting benefits for small parcel shippers, including:

  • Flat-rate products to simplify shipping
  • No fuel surcharges
  • Saturday and residential delivery at no extra charge†
  • No extra charge for residential delivery
  • Largest delivery network in the U.S.
  • Comprehensive delivery tracking

Your shipping system vendor can help you assess the cost savings you may achieve. The U.S. Postal Service also provides consulting services for shippers. Learn more in our blog: “Add USPS to Your Carrier Portfolio.”

3. Make Sure Your DIM Weight Calculation is Accurate

Have you audited your dimensional rating procedures lately? Hidden costs occur if your system calculates dim weight differently than the carrier’s system. If the carrier’s system yields a higher charge, you will be charged additional fees by the carrier. Discrepancies can occur for many reasons, such as:

  • Actual carton measurement discrepancies – One of our customers found that their package measurements for their carton sizes differed from the carrier’s measurements, resulting in higher freight rates and back charges.
  • Carton shape – The volume used to calculate the dimensional weight may not be representative of the true volume of the package, especially if the package is of any other shape than a right-angled box. If not, surcharges may result.
  • Data entry errors – If your staff makes errors when entering dimensions into the shipping system and the carrier discovers that they are larger, you will be billed back for the difference in freight cost.
  • Packing processes – For example, you pack a carton so full that it causes the size to bulge. Say you report a 20 lb. carton at 20” x 20” x 20” for a freight charge of $40.00. If the carton is bulging out to 22” x 22” x 22”, the carrier’s dimensional system will calculate freight at $45.00. Result? Additional charges.

To avoid these charges, implement a dimensioning system and eliminate data entry of dimensions by uploading them to your host system; integrate box types into the order fulfillment process, and audit your inventory of carton types and sizes to make sure package dimensions are accurately represented in dim weight measurements. Learn more in our blog, “Five Tips to Minimize Dimensional Rating Costs.”

4. Eliminate Shipping Data Entry Errors

Data entry errors can occur at many points during shipment processing and add up to significant hidden costs. Here are some trouble areas:

  • Third-party billing errors If the account number is manually entered incorrectly, the carrier will charge the costs back to the shipper, and your odds of collecting those freight charges from the customer are slim at best.
  • Incorrect delivery addresses – When a carrier encounters an incorrect delivery address, they will fix the problem – for a price.
  • Incorrect or missing customer reference numbers – Companies shipping to retailers need to ensure that the customer reference numbers provided by the retailers are accurately entered in the correct field on the freight bill.  Failure to include this number so that it is automatically transmitted by the carrier can result in hefty fines.
  • Infrequent invoice analysisIt’s a good idea to regularly perform carrier invoice analysis to identify delivery problems and resolve them before they amount to significant costs, but this is often too time-consuming to perform manually. Consider adding invoice analysis services to track carrier performance.

Identifying these gaps requires a little common sense and a good checklist to ensure that data entry gaps are being identified and closed.

5. Add Desktop Shipping for All Departments

You’d be surprised how many non-warehouse packages such as documents, product samples and marketing materials are shipped by other departments every day, and processed manually, without the benefit of carrier rate shopping.

Implementing a browser-based desktop shipping solution that is integrated with your warehouse shipping software system can reduce freight costs in several ways:

  • Ensure lowest cost shipping on all packages
  • Provide data to support negotiations with your carriers
  • Track shipping details and identify shipping cost refunds on all shipments
  • Reduce costly surcharges that often result from errors on handwritten shipping, address corrections, etc.
  • Eliminate manual labor related to package and label preparation

These are just a few of the ways that you can benefit by implementing an organization-wide desktop shipping solution.

6. Leverage Regional Carriers to Reduce Freight Costs

Consider using regional carriers to handle some of your deliveries. This can be extremely cost-effective for companies with a concentration of customers in certain geographic areas.

Regional carriers can be categorized in several ways. Some focus on small parcel delivery, while others offer less-than-truckload (LTL) services for heavier shipping. Certain regional carriers provide multi-state solutions, while others are couriers or “micro-regionals” that cover smaller geographic regions such as cities or partial state.[2]  Regional carriers offer numerous benefits:

  • Lower freight rates. Regionals can often pass along to customers savings of 10% to 40% over UPS and FedEx pricing.
  • Fewer surcharges. Many regional carriers do not assess the same delivery surcharges that national carriers do, which can range from $1.85 to $3.00 per package based on rural zip codes.
  • Faster delivery for a lower cost. “Savings can be as much as 40% with any loss of delivery time,” says Rob Shirley, president/founder of Austin, TX-based shipping solutions consultancy ExpresShip.[3]
  • Negotiating power. Adding regional carriers can put you in a better negotiating position all your carriers.
  • Responsive service. Regional carriers may be willing to take on special shipping requirements and have more flexibility in terms of the kinds of services they can offer.

It’s important to make sure that your multi-carrier shipping system will accommodate the addition of regional carriers.  Perform a carrier cost/service analysis to determine if/where makes sense to add regionals to your delivery network.

7. Update Your Document Printing Tools

By stepping back and taking a bird’s eye view of your shipping workflow, you can quickly see how many times your staff stops to produce a shipment document:

  • Packing lists often require the staff to stop, print the packing list, fold it and insert it into a pouch.
  • International shipments are often created manually using a template or standalone software.
  • Hazmat documents may come from yet another system, causing the shipping staff to stop and retrieve the right labels.
  • USPS Customs documents US postal shipments are also often hand-produced.

Integrate Smart Document Printing Technology 

Today’s multi-carrier shipping solutions, integrated with host order entry, WMS systems and smart printing technology, can eliminate most manual document preparation. For example, you can

  • Auto-generate a Zebra z-slip, an all-in-one packing slip solution.
  • Generate a fold-under combination pack/ship label from your shipping system.
  • Auto-generate carrier-compliant shipping forms, Hazmat labels, and export shipping documents.

Your multi-carrier shipping solution provider can help you assess the best way to automate shipping document generation tasks.

Summary

As these suggestions show, you can find tremendous opportunities to reduce shipping costs.  The bottom line? Today’s leading multi carrier solutions are designed to manage a wider range of shipping scenarios.

Contact us to discuss ways to optimize your shipping operations and systems.

[1] “Six Steps To Cutting Your Parcel Shipping Costs,” http://www.shippingsidekick.com/news.wml?id=331

[2] Kent Szalla, “Regional Parcel Carriers: A Historical Perspective,” Parcel Industry, May/June 2012.

[3] William Atkinson, “Close to Home,” Multichannel Merchant, December 1, 2006.

[4] Rob Martinez, “A Look at Regional Parcel Carriers,” Multichannel Merchant, April 1, 2011.