Decoding Your Shipment Data:
Surprising Information Your Analytics Reveal
- What Shipment Data is Most Important?
- How To Use Data To Anticipate Trends And Track Mistakes
- Use Shipment Data To Uncover Hidden Money
- How Data Helps You In Contract Negotiations
Shipping data is the key to mastery over your shipping costs.
Despite this fact, rigorous shipping intelligence methods are underutilized by even the highest volume shippers. This leads to untold levels of poorly used shipping budgets. But the major shippers are hardly the only ones who can benefit from shipment data insights.
Companies with smaller volumes can benefit even more because their shipping needs might be unique — and margins matter even more when you’re small.
In this new, data-driven world, the greatest enemy is ignorance. What you don’t know can hurt you. What you don’t know that you don’t know can hurt you even more.
Fortunately, all shippers, big and small, can gain the insight they need to get a handle on their shipping costs by creating a comprehensive and accurate shipping profile.
1. What Shipment Data is Most Important?
Your shipping profile is the core of your data-driven decisions and negotiations. This is a detailed summary of the properties of your shipping operation.
It should ideally be as detailed as possible and include number of parcels shipped per day, weight distribution, claim ratio, delivery density, and other information that carriers might possibly use to calculate profitability ratios.
The more thoroughly you can prove that you can help your carrier’s bottom line using data, the more they’ll be inclined to offer discounts.
But understanding your shipping profile also has extensive benefits away from the negotiation table. Tracking your data helps you see if you’re following best industry practices. A high level of shipping visibility helps you spot any problems quickly, plus empower you to report to C-level executives with high precision and accuracy.
However, even seasoned supply chain executives can find it challenging to create a global shipping profile. Analyzing master service agreements and measuring the effectiveness of your shipping budget is a complex task.
Even if you break down all of your service agreements into the most useful data points, you will still need to know how to make sense of the figures on the spreadsheet.
Those core challenges can be easier if you start your data analysis efforts with the right first step: a qualitative and quantitative freight audit. This kind of analysis, which can be provided by freight audit companies, can give you a 360-degree view of your shipping.
On-site quantitative and qualitative analysis can help you:
- Understand your shipping weights
- Discover which zones you ship to and from
- Examine how your company handles billing, including how quick and accurate your billing efforts are
- Understand the technical specifications that are needed to manage, consolidate, and package shipments.
- Ascertain if your company’s different departments in different locations are adhering to a common standard.
- Ascertain the delivery lead time
- Know how well shipping locations respond to varying shipping volumes.
- Assess the effectiveness of your current shipment and notification technology as well as provide an avenue to assess alternatives.
- Know if the internal support needed to integrate and or update new processes and technology are present and at your disposal.
But that’s only half of the picture. You should also understand how your data fits in carrier billing agreements and your invoices. The carrier agreements outline everything that goes into calculating your particular shipping costs. Understanding your agreement can help you understand possible areas for negotiations.
Your invoices outline the final cost of each shipment. This is important because it reveals what kind of surcharges you might pay and if you’re paying more than expected because of minimums.
Your Most Crucial Data Points
There’s no denying that this is a lot of data to consider. Using big data in shipping can lead you to create reams of insights you can use to improve your business. But when you’re starting out, you should focus your analysis on four main data points: shipping zones, parcel weight, mandatory minimums, and assorted surcharges.
Where You Ship
The zones you ship to and from obviously have a huge impact on your overall costs. And it also has an impact on the complexity of your shipping considerations. If you ship to and from the mainland United States, then your zone coverage should be fairly simple.
If you ship to other North American countries, Alaska, and Hawaii, then your zone coverage is more complex. If you shipping internationally overseas, then costs associated with shipping zones can become very complex.
Weight Of Your Shipments
This is simple, but essential. Shipping has evolved over the years, but shipping weight will always be key to understanding your costs.
The weight of your shipments is pretty straightforward: The heavier your parcels, the greater your charge. But the inverse isn’t necessarily true.
Because of dimensional weight, many lightweight, yet bulky, packages have higher shipping costs. Carriers calculate dimensional weight by multiplying a package’s length, width, and height. The resulting number is divided by the dimensional divisor, and rounded up.
Both FedEx and UPS charge whichever is higher: actual or dimensional weight.
Minimums are the price floor for each shipment. Minimums are important because — depending on your own shipping profile — they might negate any discounts that are superficially attractive. If minimums are too high, you might wind up paying more than expected for your low-weight shipments.
This is where many of the true costs of shipping come into play. And surcharges are easy to miss since you might not learn which ones were applied until you receive your monthly invoice.
Surcharges vary wildly between carriers. USPS has none, while UPS and FedEx each have a long list of possible surcharges.
Measure Your Shipment Spend With These Primary KPIs
Once you understand your basic data, it’s time to dig deeper. And that means measuring your key performance indicators (KPIs). These are the figures you should monitor regularly to see if they’re moving the right direction. While KPIs might vary from business to business, here are some of the most important:
Cost Per Package
A simple metric like cost per package can be a useful barometer to see if your shipping decisions are having the effect that you want to.
Cost Per Pound
Cost per pound is related to but distinct from cost per package. It can reveal a lot about your agreement, including if minimums are affecting your shipping budget.
Do your carriers deliver when they say they’re going to? Are damaged items rare? Partnering with carriers who actually deliver doesn’t just make your relationship with them smoother, it also leads to happier customers and clients.
Zone distribution impacts base rates, fuel surcharges, and time in transit. Understanding how and where you ship can help you find opportunities to decrease costs and increase customer satisfaction.
Third Party Freight Audit Companies
If business leaders don’t initiate this kind of audit, it usually isn’t because it isn’t needed. Rather, they’re concerned they don’t have the kind of in-house expertise necessary to perform them.
Or perhaps they’re concerned that the attention required to perform such an audit may distract from more pressing, day-to-day business.
For that reason, many executives choose to turn to freight audit companies who have expertise in collecting and understanding shipping data.
A freight audit company can:
- Act as an impartial and anonymous data collector
- Leverage their professional contacts with major carriers
- Offer you objective and independent views and ideas
- Implement software and technology capable of helping you store and analyze information easily
- Help you understand important operational issues and methodologies
- Better predict shipping costs
The benefit of working with a shipping intelligence company goes beyond improved understanding. By acting on the data and analysis, you can slash your shipping costs over time.
2. How To Use Data To Anticipate Trends And Track Mistakes
Proper data collection and monitoring clears away the fog that clouds so many shipping operations. When you see your shipping clearly, you can accurately understand how everything works and make decisions that make the most of every penny.
However, there are two areas where rigorous data monitoring and understanding trends will especially empower your business: planning your budget and catching mistakes.
Effectively Plan Your Shipping Budget
What shipping should cost in theory and and what it actually costs are often wildly divergent. The larger your shipping volume, the more challenging it is to predict how much you should actually expect to spend each quarter.
Companies often get their budget wrong because they just miss the trends happening in their own shipping. For example, if you start to ship bulkier packages month after month, you may miss how dimensional weight will impact your bottom line as that trend continues. But if you’re able to spot that trend as it’s happening, you can see how that will be reflected in future invoices.
Companies that understand the importance of shipping data are rarely caught off guard. Having access to package-level data, and understanding how that data applies to your carrier’s fees and surcharges, means each invoice is very close to your planned shipping budget.
Be Prepared For Increases During Peak Times
The true test of your shipping happens in November and December, particularly for e-commerce companies. The increase in volume every season is a strain on your warehouse, which has to increase its output without sacrificing accuracy or quality.
But it also challenges your ability to accurately plan for the increased expense. It’s sadly common for businesses to discover in January that they wildly underestimated their holiday shipping budget.
When you have the power of data on your side, you can accurately estimate how much your shipping invoices will total at the end of the year, regardless of how crazy the holiday season is for your business. Having the data to predict expenses is extra important since carriers started imposing holiday surcharges. Every year, carriers have to deal with extra expenses associated with a stretched-to-capacity network.
Historically, they simple bore the extra cost and made up for it in volume. But starting in 2017, UPS and FedEx began charging extra fees especially for the high volume time of the year.
The fact that some charges only apply during part of the year adds yet another layer of complexity. But it gets even more complex: UPS and FedEx have different holiday fee structures.
UPS added a per-package fee and increased the surcharges for overweight and large packages. FedEx, on the other hand, didn’t add a per package fee, but instead added a peak season surcharge for additional handling and oversized packages.
When the holiday season rolls around will these surcharges affect you? If so, how much?
When you have the data at your fingertips, you can quickly see what percentage of your shipping volume will be impacted the increased fees and calculate the extra expense.
Effectively Manage Customer Expectations
Your data can also serve as a powerful customer relations tool. For example, if you know precisely how often your packages are delivered on time and how quickly they are delivered, you can put that information in your marketing, sales, and customer support content. That proves to your customers that you take delivery accuracy and speed seriously.
Catch Mistakes In Your Billing
All the major carriers are huge, sophisticated companies who have spent decades refining their shipping processes. So it’s tempting to assume that they don’t make mistakes when it comes to something as rudimentary as billing.
But due to quirks in the system, errors are surprisingly common. Here are a few of the most frequent billing errors.
Residential Charge Error
When a package is delivered, the driver manually categorizes it as either residential or commercial. If a driver mistakenly marks a commercial delivery as a residential delivery, you might erroneously be overcharged for the delivery of that package. This can add an extra three or four bucks per package to your invoice.
Invalid Address Correction Charge
Carriers often apply a surcharge for an invalid address that has to be corrected. For example, let’s say a delivery address is 123 Fake Street, but after the carrier picks up the package, the address has to be corrected so it’s delivered miles from the original address at 123 Fake Road. In this instance, you should expect to see that surcharge on your invoice.
However, an address surcharge is only valid if the original address impedes the driver’s ability to deliver a package. For example, let’s say that a driver has to deliver an item at 123 Fake Road Apartment # 5. But the driver, seeing that the residences at 123 Fake Road are called “units,” changes the address to 123 Fake Road Unit #5. In this case, though the surcharge is automatically applied, it’s not a valid charge and you’re entitled to a refund.
Improper Dimensional Weight Adjustment
Dimensional weight is still fairly new for carriers, so errors in applying it happen once in awhile. When you know your normal package sizes, it’s easy to anticipate what dimensional weight charges you should expect. It’s also fairly simple to spot when dimensional weight charges are improperly applied.
Manifested But Not Shipped
Occasionally a shipping label will be printed and tossed out before it’s used. This can create issues if you ship with UPS, which bases its charges on the labels you create.
It’s easy for these phantom packages to show up in invoices, causing you to pay for deliveries that never happened. A data-driven company can root out these errors and save a lot of money in the process.
Late delivery impacts virtually all businesses that ship, but shockingly few catch the tardy packages. Every day somewhere between three and five percent of packages are delivered late.
Companies are entitled to a refund in those instances — even if the package is just a few minutes late. However, they have to make their refund claim within 15 days. Having systems in place to flag those shipments can save you throughout the year.
Real World Example: The San Diego Zoo
The larger and more complex your shipping needs, the more crucial it is to have data insights that can catch errors. And few companies have as complex shipping operations as the San Diego Zoo.
The non-profit organization is much more than a tourist attraction — they’re also a world-class animal research and preservation facility. They need to ship everything from merchandise from their store to blood and urine samples for veterinary purposes.
Reveel’s Contract Analysis & Negotiation services alone helped the organization save more than 20% on their rates with FedEx. But the non-profit also benefited from Reveel’s invoice auditing services, particularly when it came to catching one costly error.
The Zoo paid FedEx to deliver an animal to New York for an appearance on a morning television show. A data-driven audit uncovered that FedEx delivered the package a few minutes later than promised. FedEx admitted the error and refunded the San Diego Zoo $13,000. That’s an additional $13,000 that they were able to put towards helping their animals.
3. Use Shipment Data To Uncover Hidden Money
Once you gather your most important data and understand what it means, you’re ready for the most important part: using that data to save money.
If you haven’t negotiated your contract recently, you’re likely overpaying for shipping.
One of our clients had seen 5% rate increases every year for eight years before Reveel consultants worked with company leaders to dramatically lower its shipping spend. Companies typically negotiate their contracts on a yearly basis, to make sure their rates are competitive despite annual price hikes.
If you don’t want to inadvertently overpay your parcel carrier for years, here’s how you can use your data to identify invalid charges.
Identifying Invalid Charges
There’s a broad range of opportunities to recover money spent on shipping. Companies should look closely at rebates, penalties, minimums, late payment fees, and service failures.
Several carriers have rebate programs that allow businesses to save on shipping services. For example, FedEx has a rebate program called American Express Savings@Work. When your company becomes a new American Express Corporate Card client, it gives companies a 5% rebate on eligible shipping.
UPS also provides extra discounts as part of its “deferred tier thresholds” program. Every quarter, UPS might cut you a check that’s equal to a certain percentage of net transportation charges for a quarter.
Check all the rebates you negotiated for beforehand and examine your data to ensure you’re getting every penny you’re entitled to.
In addition, FedEx and UPS often offer additional discounts and rebates they don’t advertise. Working with an expert who has knowledge of your particular market, along with your carrier rep, can help you take advantage of these easy ways to cut shipping costs.
This is especially a concern for anyone who ships internationally. Shippers are responsible for penalties for non-compliance. For example, U.S. Customs might issue penalties for a variety of reasons, including:
- Commercial fraud and negligence
- Drawback penalties
- Customs broker penalties
- Recordkeeping penalties
- Falsity or lack of manifest
A single penalty might cost you tens of thousands of dollars or more. But if you can establish with data that these penalties were illegitimate or that they happened because of an error by the carrier, you are off the hook.
Late Payment Fees
All shippers charge an additional fee for late payments. For example, UPS charges if a payment is not received within 14 days of an invoice due date. Shippers are obligated to pay six percent of the total past due balance. But what happens if a carrier bases that late fee on an incorrect balance?
In the late 70s, the slogan for FedEx was “When it absolutely positively has to be there overnight.” Every single carrier adheres to that general policy: shippers only pay when the shipment delivers all guaranteed services.
Sometimes you might be overcharged because of common processing or administrative errors. You might literally be inadvertently charged for the same package twice. It’s easy for these kinds of isolated errors to get lost in the shuffle, but if you have your data drilled down you can quickly spot the error.
Filing Claims For Shipping Refunds
Organizations who want to ensure every invoice is fair need to get familiar with the claim filing process. Different claims sometimes have different processes. Both FedEx and UPS have web tools and support staff that can help you verify a claim.
If you file a claim regarding incorrect pricing issues, there are typically additional steps required, including contacting your account representative.
You typically have anywhere between 15 and 180 days to make a claim, depending on the carrier and the disputed charge. Some carriers require you to go through the claim process before you pay the invoice, while others require you to issue claims on a subsequent invoice.
Each carrier has a different process for applying discounts and credits, and it’s important to be familiar with them so you can accurately communicate them to your accountant. Depending on the size or complexity of the claim, you may not receive approval for weeks.
Pricing Error Refunds
How exactly should you go about requesting a refund for an invalid charge? There are typically five steps to the process.
- Validate that the rates that the rates you paid accurately reflect the rates you agreed to in your contract.
- Quantify specifically how much you overpaid and specify the timeframe in which the error occurred. This allows you to verify that you’re filing the claim within an eligible time period.
- Contact your account representative to notify them about the issues, and send them the detailed information regarding improperly billed shipments per the terms of your agreement.
- Receive confirmation from your account representative that the claim is valid and that the pricing issue will be corrected on future invoices.
- Submit the refund application. Your account representative may be able to handle this, but every carrier has a different process.
Reveel handles the entire claims process from start to finish. We identify and appeal the charge to make sure you receive any credits you’re owed.
Making Impactful Decisions With Data
But the usefulness of data goes far beyond identifying errors. It can also help you understand if you’re wasting any money in your processes. In addition to the primary KPIs mentioned above, these data points can help you can quickly spot and fix inefficiencies.
Accessorial Fees And Surcharges
A growing chunk of every shipment is surcharges. These might include fuel surcharges, residential surcharges, and additional handling. If not managed, it’s easy for these extra fees to grow uncontrollably. Tracking these fees can provide money-saving ideas on shipping or give you something to negotiate on your next contract.
You might rely on a third party, such as a manufacturer, to handle your shipping for you. How do the cost of their shipments compare to shipments you might handle yourself? Additionally, both FedEx and UPS charge a 2.5% third-party billing surcharge.
Understanding costs associated with third-party shipments can help you understand if it’s worth it to consider shipping more packages yourself.
If a carrier fails to deliver on their services, you’re entitled to a refund. But you should also consider the costs to your brand.
If your customers regularly receive late shipments, it can decrease overall customer satisfaction and hurt your business in the long term. Checking to make sure that carriers maintain a consistent and high level of reliability can give you the confidence to continue to rely on them.
If reliability slips, then you’ll know it’s time to consider other options.
4. How Data Helps You In Contract Negotiations
Almost all carrier contracts are heavily slanted towards benefitting the carrier. Which is understandable: carriers are the ones that set the initial terms.
They naturally want to err on the side of helping their bottom line. But that doesn’t mean that companies are always at a disadvantage.
By reviewing your internal data and comparing it to your contract, you can gain the insight and the leverage you need in order to decrease your rates and save on shipping for years to come.
Data-driven negotiations have three steps: examining your contract, reviewing your shipping profile, and understanding the carrier’s needs.
Step One: Examine Your Contract
Carrier contracts are lengthy and written in a special type of legalese designed to obscure the true extent of the shipping charges. But they’re easier to decipher if you understand the factors that go into what you pay.
The amount you’re billed is determined by four factors: your base rates, surcharges, dimensional divisor, and minimum charges. Here’s a breakdown of what all four mean.
- Base rates: This is the amount you pay per package based on zones and weight. This is pretty straightforward: the farther distances, faster shipping, and heavier packages all add up to pricer shipping costs. Generally, the only way to decrease your base rates is by increasing your shipping volume.
- Surcharges: These are the extra charges that are tacked on in addition to the base rates. Many are added only after the package leaves your facility and are reflected in your invoice. They include the residential surcharge, the fuel surcharge, and additional handling charges.
- Dimensional Weight: Dimensional weight is a fairly new and special kind of charge that increases the cost of bulky, lightweight packages. It’s calculated by multiplying a package’s length, width, and height, then dividing by the carrier’s dimensional divisor. If the dimensional weight is higher than the actual weight then you are charged for the dimensional weight. For 2018, the standard dimensional divisor is 139 for UPS and FedEx.
- Minimum Charges: This the lowest amount that you can be charged per package. This is especially important if you ship a lot of lightweight items. In this case, your contract may give the impression that you stand to spend little on shipping. But in reality, minimum charges can raise your shipping budget considerably.
Step Two: Review Your Shipping Profile
Your shipping profile is what’s unique about your shipping data. Carriers are flexible about rates because every company has unique shipping needs. As much as they try to create a system of rates and surcharges that’s fair for everyone, one-size-fits-all contracts are almost never ideal for shippers. Understanding your shipping profile, and how your contract may not be a good fit for it, is the most important step to successful negotiation.
To take a common example, your company may ship single packages to residential addresses. Under normal circumstances, carriers don’t offer a lot of wriggle room in this scenario. But when you consider other factors in your shipping data, such as service mix, weight distributions, or zone distributions — you may spot discount opportunities.
Having detailed information on the following data points can help you score maximum savings:
- Package Weight: What is the average weight of your packages? How much of your shipping budget is spent on dimensional weight charges?
- Parcel Volume: How many packages do you ship every quarter? How does your parcel volume change seasonally?
- Shipment Geography: Which zones do you ship to and from?
- Price Floors: How many of your packages are subject to the minimum charges? How much would you save if minimums were lowered?
- Residential or Business: Do you primarily ship to a home or a business?
Regularly reviewing your invoice is crucial to gathering this data. Since your shipping profile is always changing, regular invoice auditing can help cutaneously uncover new insights that can help you save more money.
Reveel offers a 45-point audit that examines the important data about your shipments.
This data-driven approach not only helps you better understand your profile, it also uncovers opportunities for refunds. If the data shows that your company was incorrectly billed for a particular surcharge, you can request to get that money back.
Step Three: Understand The Carrier’s Needs
Good negotiation comes from understanding the person at the other end of the table. So before you sit down to negotiate with carriers, it’s important to understand two things: their razor-thin margins and their desire to keep you as a customer while you grow.
If you do the math, that means that they only make around 62 cents per package. Since each package literally means mere pennies in profit, you can understand why they are wary about offering discounts.
However, the only thing that hurts their bottom line more than slashing their rates in your contract is losing your business entirely. That’s doubly true if you’re a high volume shipper or have the potential to become a high volume shipper.
If you have the potential to grow your shipping volume in the coming years, they’re more willing to cut a deal. It’s better for them to invest in you and keep you happy as you expand than lose you to a competitor.
How much can companies benefit from negotiation?
Consider the case of KC HiLiTES, an auto parts producer near Flagstaff, Arizona. They had long considered their remote geographical location an unavoidable disadvantage.
But during a review of their contract with FedEx and UPS they found away they could turn their location into an asset. Both carriers had routes in the region but they didn’t always have pickups. This meant that trucks were often empty as they returned to a shipping hub.
KC HiLiTES pitched their business as a source of regular pickups. This attractive option allowed the company to slash their shipping costs by 18%.
How A Trusted Partner Can Give You An Edge
The crucial factor in all negotiations is information. Unfortunately, this is where carriers intentionally put companies at a disadvantage. They are opaque about their rates and fees, and make very little information public.
This disadvantage leaves most companies overpaying without even realizing it.
Your company might be paying one rate while another company with your same shipping volume and zone coverage might pay significantly less.
That’s why Reveel can uncover the truth behind shipping rates. Reveel’s team of former FedEx, UPS, and DHL shipping company executives understand how carriers calculate rates. That insight can help you understand where you can save.
How Reveel Helps Companies Save With Shipping Data
The experts at Reevel dig into data to discover the inefficiencies in your current contract. This includes identifying where you have opportunities to ask for better rates.
Reveel only gets paid after clients successfully shrink their shipping costs. We share in the amount you save. After contract negotiations, clients usually reduce their shipping costs by a total of 15 to 20 percent. Invoice auditing can uncover further savings of around 3 to 5 percent.
Clients can save even more with referral bonuses. If an existing client refers a new client, the original client keeps an additional 5 percent of the shipping savings.
So if a company evenly splits shipping savings with Reveel and then refers a new client, that company keeps 55 percent of the shipping savings. There’s no cap on referrals, so a company can keep their entire share of the savings simply by referring enough clients.
Are you ready to see how much money you can save through shipping intelligence? Contact us today to see how we can help you save up to 20% on your shipping costs.