Parcel shipping is getting expensive. In reality, it already was costly and now it is even more so. The recent rate increase announcements from UPS and FedEx means that it will cost more money to ship in 2018. Reducing parcel shipping costs, without sacrificing service, has become a concern for many businesses. Profit margins continue to narrow for ecommerce companies meaning they will need to make sure that their parcel shipping strategy not only fulfills customer demands but also saves money.
Technology can assist in saving money on shipping costs. Shipping software like a TMS (Transportation Management System) allows companies to compare shipping rates, print labels, and track shipments. TMS helps shippers understand their supply chain to optimize their shipping strategies. And since it is cloud-based, it is accessible from anywhere, anytime so you can forecast daily workloads for your staff, control inventory, and let salespeople know when a new item will be ready to ship.
Conduct a Parcel Audit
A parcel audit examines carrier invoices to check for mistakes between the actual shipment and the carrier’s invoice. Parcel audits can help catch costly errors that would otherwise go un-noticed. If a parcel audit is not conducted from time to time, you may lose out on recouping money, especially if you ship high volume. This can be done in-house, but outsourcing to an expert usually results in more savings in less time.
Renegotiate Parcel Pricing Agreement
While you might have been using the services from your carrier for years, it does not hurt to entertain quotes from other carriers. It will give you leverage when you go to re-negotiate your contract. You may even find that another carrier can offer you the same or better services for less money.
Before sitting down to negotiate better discounts, however, you should analyze your current service, usage, and expenditures. In addition to overall discounts and contract terms, accessorial charges should be negotiated as well. Concentrate on those surcharges that will make the biggest difference in your business.
Consider a Regional Carrier
A regional carrier or other small carrier, can offer the same service and delivery windows as your regular carrier, but for a fraction of the cost. Regional carriers, which serve specific regions of the country, are a good fit for shippers that have several distribution centers. Discounts can be up to 40% less than a national carrier so switching a portion of your business might be cost-effective.
Customer Shipping Options
There are several options on what to charge customers for shipping and the right strategy should cover most of your shipping costs. Customers want affordable and fast shipping, but it cannot be at the sacrifice of cost. While free shipping might be good for items that are low in cost, higher-priced or larger goods will be shipped at a loss so a minimum order price to qualify for free shipping will offset it. If you ship items that are similar in size and weight, consider a flat shipping rate.
With the right shipping strategy, controlling parcel spend is possible. Work with your carrier to find out how you can lower shipping costs based on your shipping profile.
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This post was originally published on the Transportation Impact blog on January 22, 2018.
Jillian Farrington is the Marketing Coordinator at Transportation Impact.