Many companies that want lower shipping rates start by looking at the rates themselves. After all, that’s what determines their monthly spend. If they could only convince their carriers to come down in shipping charges, they could see a huge benefit to their bottom line.
That’s true. But it’s only half the story.
All but the most high-efficiency shippers have some excess spending within the parameters of their existing contracts. These are expenses like paying for air service when you really need ground and shipping boxes that are too large for the items inside.
A shipper can make a number of operational improvements to lower shipping their costs internally. At the same time, savvy shippers should stay in constant touch with their carriers about whether or not their needs are being met and different shipping options that are available to them.
When you can zero in on specific requests and shipping services for your carrier — narrowly focused contractual changes you can make to reduce your shipping spend — it shows that you’re serious about your bottom line. You’ve done research and cleaned up your own house, so to speak. And it shows that you recognize that your carrier is running a business, too.
Undertake operational improvements as you seek rate improvements this fall. By attacking your shipping spend on two fronts, you can reduce it twice as effectively.
Package Optimization and Dimensional Weight
Parcel shipping by air is expensive. (So is shipping ground, for that matter.) And with dimensional weight pricing increasingly becoming the norm for carriers, using boxes that are larger than you need could be eating into your bottom line. Don’t use more packaging material than you need, and experiment to optimize your box size.
However, make sure you don’t over-stuff your packages. Bulges can cause packages to be billed at larger dimensions than you expect — which can tip you into unexpected surcharges.
Optimize Your Truck Shipments
This might require some in-depth supply chain analysis, but it can be done. Try to ship in full truckloads and avoid less-than-full truck shipments. One way to do so is by trying to keep your shipments under 600 miles, or within Zone 4. Packages traveling to Zone 7 and Zone 8 will likely need to be on less-than-full trucks, but if you can maximize transportation within the first four zones, you may be able to consolidate costs.
Additional or Centralizing Order Fulfillment Locations
Relatedly, it may benefit you and your customers to add another fulfillment location, run either in-house or by a third-party logistics provider. This could be on the edge of the Zone 4 radius and serve as a hub for longer deliveries, or it could allow you to serve a high concentration of customers in another part of the country more quickly or at lower cost for on-time delivery
To become cost-effective, this requires order and inventory management to be highly integrated. But for shippers who already have retail locations, it may make sense to open others close to customers. These can serve as small fulfillment centers and help you cut back on those outer-zone costs.
Selecting The Correct Shipping Service For You
You likely don’t need to pay for air delivery for a Zone 2 shipment. Express shipments to Zone 2, and even Zone 3, can usually reach their destinations in the same amount of time by ground as by air. With careful data reporting and analysis, you can spot opportunities to choose more efficient service levels.
Comparing Multi-Carrier Shipping Methods
Review your invoices to understand which services you use most. You may consider switching carriers for some of those needs. For example, three-day service is 17% cheaper with UPS than with FedEx. Could another provider serve certain aspects of your business better? Third-party shipping consultants, like those at Reveel, can help you find out.
Improved Shipping Rates
As you optimize your existing contract, consider what you’d like to change in a new one. Start by understanding exactly how much leverage you have with your carrier: If you’re a large shipper, with a contract worth more than $100,000, carriers will work hard to keep your business.
Smaller companies have less leverage, so their negotiations need to be more narrowly targeted. Carriers also rarely consider the impact of losing these clients. It can be useful to shop around and see if a competing shipping carrier can offer you a better deal — as long as you can protect your brand’s reputation while you do.
To decide which aspects of your contract to target, start with the data in your invoices. These documents, dense as they may be, contain a wealth of information about service usage, zone frequency, pick-up and delivery density, and package weights and dimensions. Review them with an expert to identify the elements and service categories that are most important to your profile, and target those.
Many if not most shippers are spending too much money on certain accessorial fees. A full analysis will reveal those that are most eating into your bottom line. An average shipping spend is about 65 percent base rates and 35 percent surcharges — so targeting the right ones can lead to significant savings.
It All Starts With Data
At Reveel, we talk constantly about how important it is for shippers to know their data — what they ship, where it goes, and how much it costs. Every path toward reduced shipping costs, whether it’s an operational improvement or a rate improvement, starts with collecting this information.
Carriers count on shippers lacking this information. That’s how they get away with unnecessarily high package minimums, a dropping dimensional divisor, and an ever-growing suite of accessorial charges. But shippers who are armed with detailed data can outwit carriers in contract negotiation.
If you need help gathering or analyzing data, reach out to Reveel today. That’s why we exist. We can help you start saving money on shipping today.
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