What You Don’t Know About Shipping Will Cost You Plenty!

When it comes to shipping packages, I am known as the expert (at least in my family). I have been in this industry since 1976—too many years to add up in my head. I can almost intuitively look at a package, guess its weight, and declare what the best carrier and service will be. Who needs rate shopping software?

So, when my wife asked me to ship a “care” package to our 25 year old son in South Carolina, I knew the best way to ship it. I made the following assumptions:

• The package was light—weighing 5 pounds.
• It was being shipped residential.
• It was going a relatively short distance, from New York to Charleston (as compared to a zone 8 which would be cross country).

So, based on what you know about shipping, which carrier would you choose?

My choice was the US Post Office. We all know that the USPS is the best way to ship light-weight, residential packages; right?

I went to www.usps.com and selected the option to calculate postage. Here are the results:

Can you imagine that I was shocked! I couldn’t believe that this package was $20! So, I did the next thing a savvy shipper would do, I went to www.fedex.com to compare rates. Here is what I found:

My cost was $11.86 with FedEx Home Delivery for the same level of service as USPS Priority Mail at $19.50 (with my discount for paying for postage electronically).

I saved $7.64 or 40% by choosing the carrier that I assumed would be more expensive!

Now, my dear readers, who can figure out why this happened? Please comment your thoughts on why the USPS was 40% more for this light-weight residential package. In my next post, I will share the answer. There was a reason my assumption was wrong.

In the meantime, don’t assume that you know because what you don’t know about shipping, could cost you plenty!

CEO Wakeup Call! What You Don’t Know About Shipping Can Be Costing You.

I know how hard it is to be a CEO; I ran my own company for 20 years. There are so many balls in the air and too little time. It is difficult, if not impossible to take a deep dive in any area. There is a hidden cost that if you don’t know about, will cost your company significantly. It is the cost of shipping. Shipping can be easily masqueraded from your view.

I recently had a CEO tell me that she felt guilty because she was overcharging her customers on shipping. When I took a close look at what was happening in her company and showed her, she was shocked to learn that she was losing $100,000 a year.

Here is what happened.

Many businesses bill their customers for shipping; some even add shipping and handling charges. Most companies will invoice the UPS and FedEx published rates and believe that they are making a profit on shipping because their logistics manager has negotiated a discount with the carrier. This was her case and why she believed she was making a profit.

We looked at her financial statements–the go to place where a CEO judges how the company is doing. On her income statement, there was a revenue line for shipping and it was named, shipping (recouped). The $200,000 listed looked very positive. CEOs love the top line.

I inquired what about this and she told me that it was the profit that they made on shipping. On further examination, we discovered that it was the total amount of revenue (not profit) for shipping that was invoiced. So, when a customer is invoiced for the goods, they also invoiced their customer for shipping and kept track of that amount in their chart of accounts. (This is a good practice; some companies don’t keep track of it separately and it is hidden from inspection.)

We then looked at where the payments to UPS were showing up on her income statement. Those costs were buried in the Cost of Goods Sold.

The total–$300,000.

“How is that possible?” she exclaimed.

She was losing over $100,000 a year on shipping and had no idea.

Stay tuned and you can learn what we discovered.

8 Ideas from the PARCEL Forum on Reducing Transportation Costs

I just got back from the PARCEL forum in Chicago. I had the opportunity to facilitate the PARCEL Key Executive Forum where a group of peers in the parcel industry met for the sole purpose of helping one another tackle the most challenging issues they face in running and growing their operations. One of the key issues was reducing transportation costs; the collective wisdom of this group of experienced parcel and logistics managers came up with 25 actionable ideas. Here are 8 of the suggestions:

1. Evaluate parcel consolidators, like FedEx SmartPost, which offer a low cost way to ship high volumes of low-weight packages to residential customers. FedEx will pick up, sort, line haul, track and deliver packages by leveraging the delivery network and capabilities of the USPS for the last mile.
2. Ship express packages with a hold for pickup option instead of First Overnight to substantially reduce express costs. The recipient can pick up the package at a nearby location.
3. Charge customers for freight and shipping. Even if the cost is distributed internally it will increase awareness about the cost of shipping and choosing express options.
4. Compare ground delivery guaranteed times to second day and third day air; many times ground will get it there faster for 25% of the cost. Use day definite instead of time definite services.
5. Re-negotiate parcel contracts; hire a third party negotiator that works on a gain share basis.
6. Use the US Postal service for brochures sent to sales people working out of their homes rather than UPS or FedEx. Check out the pricing for Priority Mail and First-Class Packages. It could be significantly less than the discounted rates with the residential surcharges.
7. Create a global routing guide; compare Less-than-Truckload (LTL) to parcel and specify which mode shipments should utilize.
8. Rather than importing shipments into the distribution center, investigate consolidated clearance for shipments coming to the United States. Manifest and label the packages overseas and have them sent directly to the carrier’s hub to reduce the cost of bringing them to the distribution center and re-shipping to customers.

We have formed a group on LinkedIn for PARCEL and I invite you to join and get feedback for your shipping challenges.

http://www.linkedin.com/groups?home=&gid=2076153&trk=anet_ug_hm&goback=%2Eanh_2076153

Mobile Workers Face Problems Shipping Packages

 

The second type of parcel shipper is a mobile worker—this is a person that often works for a large corporation but from home or spends a majority of their time on the road.

The number of mobile workers is significant. By year-end 2011, IDC expects nearly 75% of the U.S. workforce will be mobile.

How does a mobile shipper send an overnight letter or a package?

In conversations with managers of large corporations, this has been a serious problem. Here are some of the issues they face.

 

1. Most of the carriers offer pre-printed airbills with an account number and return address embedded in the form. The mobile worker hand writes the addressee information and drops off the envelope. The problem is that hand written addresses are often illegible and can lead to delivery errors or address validation charges. Furthermore, it is more difficult to track these packages unless the mobile worker has a good system for saving and filing their copy of the airbill. In addition, this method makes it difficult for the corporation to properly account for the shipping charges and the accounting department often has to chase down the worker to properly apply the correct general ledger code for accurately classifying the charges.
2. Many corporations offer access to a single carrier’s website to employees for shipping items. While this is better than an airbill, it is limited to the services offered by that specific carrier and does not compare rates or services from other carriers which can result in overspending. This is inherently a more costly method of shipping. For example, a worker will typically send an envelope using an express service which is four to five times more costly than shipping it through the US Post Office with Priority Mail.
3. When mobile workers are traveling they often will ask the hotel to ship an envelope for them and add the charges to their hotel bill which is reimbursed by the company. This is the most expensive way of shipping possible. The hotel typically charges retail and sometimes even adds a handling charge. This can cost two to three times more than using a corporate account number.

 

Are you a mobile worker? I would love to hear about some of the issues that you face in shipping envelopes or packages when you are away. Please let me know.

Consumer Parcel Shippers Pay More for Shipping

The intention of my next several posts is to provide distinctions of the different types of parcel shippers. I am doing this for several reasons:

1. Parcel shippers and readers of this blog can identify themselves and their needs.
2. Once identified, they can see what others in their category typically do and discover ideas for saving on shipping that are suitable for them.
3. Technology companies that offer shipping software can also use this to segment the market and design appropriate solutions with the features and price points for that segment.

The first category is the Consumer— someone who occasional ships a package. In the parcel industry, the consumer shipper is sometimes referred to as the gift shipper because they are typically someone who only ships when they have a gift to send. These are some of the characteristics of consumer shippers:

1. This is the single largest group of shippers.
2. Most of them ship by going to the US Post Office and paying for postage over the counter.
3. If they don’t go to the Post Office, they go to a UPS store and have their packages packed.
4. Convenience is the most important benefit they seek in shipping.
5. Consumer shippers pay the most for shipping a package; most pay retail or higher.
6. Many consumer shippers pay for services they don’t need because of their ignorance about options available. For example, they pay for second day or next day service when a ground package could get there the same day or sooner for a fraction of the cost.

Taylor’s Tips for Consumer Shippers

1. Ship online and save.
2. Compare services.
3. Package it yourself.

13 Categories of Parcel Shippers—An Integral Map

One of the challenges shippers face is making decisions about, well about everything—processes, technology, carriers, rates, etc… regarding their shipping operation. Circumstances change depending on the type of shipping. For example, if you ship from an office, you have different needs than if you ship from a warehouse.

All shippers are not alike. Too many shipping vendors try to have a one size fits all solution—from carriers to software companies. My contention is that if you can find yourself on a map, you can increase the likelihood of getting what you need to be as efficient as possible. Shippers needs differ. By creating a map you can make sense of your segment and get a better solution.

I got this idea to create a map of shipping operations from of my favorite authors, Ken Wilber. Ken is a contemporary American philosopher that has written dozens of books including, A Theory of Everything. In this book, he says “What is the point of using this Integral Map? First, the Integral Map helps make sure that you are “touching all the bases.” If you are trying to fly over the Rocky Mountains, the more accurate a map you have, the less likely you will crash. An Integral Approach ensures that you are utilizing the full range of resources for any situation, with the greater likelihood of success.”

So that you don’t make a mistake shipping and crash, I am going to use this approach to map out the territory for parcel shippers in a series of posts. Today, l will lay out 13 different kinds of parcel shippers.

1. Consumer—occasional ships a package
2. Mobile worker—works for a large corporation but from home
3. eBayer—sells products part time on ebay or amazon.com
4. SOHO—small office, home office
5. Internet retailer—has a website and ships product to customers
6. Office—ships a small volume, mostly urgent envelopes and an occasional package
7. Legal—ships documents
8. Mailroom—processes envelopes mostly but needs to ship urgent envelopes and packages
9. Warehouse—a distribution center or manufacturer that ships packages weighing less than 150 pounds
10. 3PL—third party logistics company that fulfills and ships products for multiple companies.
11. Campus—university or corporation with multiple shipping points on a campus type environment
12. Multi-Warehouse—a company that has multiple distribution facilities
13. Global—an organization with multiple shipping points globally

What kind of shipping operation do you have? Does one of these categories cover your type of shipping? Let me know if I missed a category and stay tuned as I will detail some of the different need of each type of shipper.

Why We Don’t Care How Much We Pay for Shipping

 

In my last post, I shared a real life example of a company that could have saved over $2,000 on shipping. I explained that ground service was guaranteed and would arrive at the same time as 3 Day Select for specific zip codes. I asked him if he would begin to compare rates and his response is astonishing—yet one I have heard too many times. He said no.

“Why?” I asked.

“Because we bill our customer for the shipping charge.” He responded.

“But you could save the customer 50% on those packages.” I replied.

“It doesn’t matter; it is too much of a hassle to change and it doesn’t save us any money.”

I see his point. Yet this is a serious problem. The carrier is the only one that benefits from this scenario. Why should he change? Why should he try to set up a system to compare service levels if it does not save his company any money?

What do you think?

Today is the USPS Busiest Day of the Year!

Thinking of going to the Post Office today to ship your packages? 960 million pieces will be processed today, making it the busiest day of the year, according to the USPS.

Wednesday, December 17, will be the busiest delivery day. This validates that the average delivery time for USPS Priority Mail is two days.

If you want to avoid the lines, try shipping online. You can even save some money.

The following are some sites that you can process postage online, obtain discounts, and get free Delivery Confirmation with Priority Mail—a $.65 value.

For about $15 a month, and a 30 day free trial, you can get a subscription at the following:

www.endicia.com

www.stamps.com

and for no cost, with limited options, you can try

www.usps.com

How to Cut Your Shipping Costs in Half

Would you pay double to ship a package for convenience?

As a small businessperson, I was always too cheap to even pay for full-service gas. If you’re going to the carrier’s shipping store to ship your packages, you are paying way too much!

Many people don’t realize that if they are a walk-in customer who goes to a parcel carrier’s store or shipping counter, that they pay a premium for that convenience. This is even true at the US Post Office. See USPS Rate Change Includes New Discounts: Do You Qualify?

Recently, a Wall Street Journal article talked about how a walk-in customer typically pays a premium because they are too small to negotiate volume discounts. I was curious about how much of a premium.

I walked into a major carrier’s store and was told it would cost me $18.71 to ship a one pound package from New York to Houston ($12.71 for shipping and $6 for packing). I compared that price to the same carrier’s website and saw that it would be only $7.27 (of course I would have to pack it). That is a savings of $11.44 on one package!

If you are an eBayer or a small volume shipper, you can cut your shipping costs in half by doing it yourself and shipping on-line!

Taylor’s Tip #6: “Don’t wait in line–ship on-line!”

10 Items to Equip Your eBay Shipping Center

If you are new to shipping or selling on eBay, you will need to set up a shipping center. This video will show you what you will need. The following 10 items will get you started with the basics:

1. Packing Tape & Dispenser—I suggest the clear plastic tape that is 3 inches wide.
2. Boxes—use a corrugated box that is new or in good condition. Choose a box that your item will fit in with a minimum 3 inches of space around it for packing material.

Taylor’s Tip # 5: Carriers provide free boxes for express shipments & the US Post Office has free Priority & Express Mail boxes.

3. Packing Material—depending on the item you are shipping, you will need to prevent it from breaking or shifting while traveling. You can use packing peanuts, crumpled up newspaper, or bubble wrap.
4. Shipping Envelopes—keep a supply of flat envelopes from the shipping carriers (free) and some brown padded ones for smaller items like books.
5. Tape Measure—to measure the size of your package. Carriers charge based on the actual weight or what is called dimensional weight. Dimensional weight is based on the cubic size of a package. This is the length x width x height of the box in inches.
6. Calculator—now that you have the measurements of your box, you will need to calculate the dimensional weight. For example: a box with the dimensions of 20″ (L) x 20″ (W) x 20″ (H) = 8,000 cubic inches, divided by 194 = 41.2 pounds for a “dimensional weight” of 42 pounds (always round to the next full pound). Now you know why you need a calculator. Or you can enter the measurements in this calculator.
7. Shipping Scale—a digital shipping scale that weighs in pounds is essential; you can find one on eBay. Most parcel carriers ship up to 150 pounds but if you never ship anything over 50 pounds, you don’t need to overbuy.
8. Label Printer—the ink-jet printer that you use with your computer is sufficient for printing labels when you ship online; if you ship more than a few packages every day, you may want to consider a thermal label printer that prints directly on 4 x 6 labels.
9. Computer—the best way to ship is to go online. Shipping online provides discounts. Don’t waste time and money going to the US Post Office or a UPS, FedEx, or DHL retail store.
10. Internet Connection—to get to the carrier and shipping websites, you will need an internet connection; hopefully, you are not still using a modem.