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

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?

5 Actions to Offset Today’s UPS & FedEx Rates Increase

The largest percentage increase in ground parcel rates from both UPS and FedEx go into effect today. While they announced that the average increase is 5.9%, it is important to know that this is only an average. Certain weights and zones are much higher.

What can you do about it?

1. Minimize surcharges; the cost to ship to a residence is 30% more than a business. Ship your package to your recipients’ office rather than home.
2. Compare rates with other carriers; look at the cost to ship the package with the USPS or regional carriers. It could be as much as 50% less
3. Get a discount; if you have a discount, now may be the time to reassess your rates. If you want a professional analysis of whether you are getting the discounts that you deserve, let me know.
4. Eliminate mistakes; the cost of an address correction has increased by $2 or 33%. It will cost you $8 extra if you don’t have the address correct. Use the carrier’s website or third party software to validate the address.
5. Ship it with a cheaper service; ship it ground instead of express. Compare delivery times and days.

Get Lower Rates from the US Post Office

I am here in Orlando at the National Conference on Operations & Fulfillment (NCOF). This event is focused on helping catalog, online, and multichannel operations cut costs and improve their operations.

I had the opportunity to speak with Vivian Li, Product Manager at Endicia, and she shared in this video, some ways that small business shippers can save on postage by simply processing their postage online. (My company, RedRoller, partners with Endicia to provide PC Postage to our customers).

Parcel shippers that process postage online qualify for lower rates from the United States Post Office.

• Free Delivery Confirmation on Priority Mail—a savings of $.65 compared to going to the Post Office.
• Delivery Confirmation is only $0.18 for First-Class Mail parcels, Media Mail, Parcel Post, Bound Printed Matter, and Library Mail, a savings of $0.57 per package.
• Signature Confirmation for $1.75 saving $0.35 per package.

On May 12, the new changes in the USPS rate structure will provide different rates for retail and commercial shippers. Commercial shippers will save an average of 3.5% on Priority Mail, 3% on Express Mail, and up to 10% on international mail. See my post, USPS Rate Change Includes New Discounts: Do You Qualify?