It “Fees” Like I’m Getting Screwed!

July 31, 2010

By Guest Blogger, Jim LeRose, http://www.agilenycmetro.com/

I did my due diligence by checking flights at Kayak.com. Then I booked with the least costly airline to Ft. Lauderdale, which also happened to be my preferred carrier, and at that time I thought I had paid for my flights in full. Little did I know…when I checked in months later, I would get hit with $212 in fees for the first checked bag per-passenger. That amount represented 15.4% of my total travel expense! It “fees” like I’m getting screwed!

Wall Street investors and airline executives are laughing all the way to the bank and at you while they snatch a lot more of your money then you expect. CNN reported the airlines are getting billions from these new fees and now the US government is being asked to step in.

I say, what’s the difference between what the airlines are doing vs. what UPS/FedEx are doing to their customers? Answer – not a thing. “Fees” like you’re getting screwed too? You don’t have to take it.

Here’s an example; Last week I met with one of my best customers who discovered from an audit report that I prepared, his company is paying around $2,000 per month just for address correction fees with UPS. This is a fee that penalizes a shipper for not providing the correct information on their shipping labels. Many of these fees were incorrect addresses for shipments sent to the same customers repeatedly while others are for incorrectly spelled street names. This prompted further investigation and more analytics. He quickly realized his undisclosed fees for items such as; dimensional, oversize, delivery surcharges, residential, Saturday delivery etc. totaled 13.7% of a 3m total transportation spend. That means they we’re paying $411,000 extra to the carrier without knowing. Within months we cut this number in half and saved over $200,000 per year in unrecoverable fees. This is not an isolated incident. What’s puzzling is why so many companies either don’t care enough to do anything about it or simply think there’s nothing they can do.

What can be done about big businesses tricking their customers into paying more?

When it comes to flying, from now on I recommend you travel wearing one layer of clothing for each day you will be away, i.e. seven layers of clothing for a one-week trip, and avoid checking bags. Simply remove one layer each day. I admit this solution may be a bit flawed, as it may be slightly difficult to move about the cabin, it can only be used during extremely cold winter travel but it may help the goal of reducing fees.

As you can probably tell I may not know much about reducing fees for air travel but when it comes to UPS/FedEx, there’s plenty I know and a lot you can do!

Here are five simple suggestions to lower or eliminate carrier fees…

  1. Get a reputable auditing company auditing your UPS/FedEx invoices immediately! You will get reports every month. Analyze the monthly reports so you can identify the overcharges. Overall my customers report the value of the information in these reports far exceeds the money saved from the actual refunds the auditors get for your company. You have to realize you have a problem before you can fix it and there’s no better way to identify the areas of overpayment then by using a 3rd party auditor.
  2. Get new shipping technology (Transportation Management System – TMS) deployed at your company that will disclose these fees prior to shipping and help you save money in other areas. The free stuff such as: UPS Worldship / CampusShip / FedEx Ship Manager etc. aren’t designed to help you spend less – that’s why they are free. Today’s TMS systems can save 15% or more on your annual UPS/FedEx spend.
  3. Get started using the USPS for residential shipments and/or low weight items. Their service has vastly improved and you may not know this but FedEx airlifts freight for Priority service.
  4. Get an accurate shipping cost exposed in your shopping cart. You must be able to expose the final cost of shipping in the cart so you don’t get whacked with unrecoverable charges later.
  5. Get a professional to help you negotiate lower fees or have them completely removed from your contract. Beware carriers have just announced they will NOT cooperate with the 3rd party negotiator of your choice so you will have to work with one behind the scenes.

Check out these links to see the current list of fees charges by your carrier:

I hope this information helps you Ship Better and Save Money.

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What is a DIM Factor?

July 5, 2010

Every shipping department and mailroom needs a measuring tape and a scale. The reason is that in order to calculate the correct postage or shipping charges, you have to know the DIM factor.

A DIM Factor is an acronym for Dimensional Weight Factor. It is a mathematical factor for calculating the dimensional weight of a package. UPS, FedEx, DHL, the US Post Office, and some regional carriers use dimensions as a factor in determining the cost to send a package. For example, the USPS has a DIM factor of 1 cubic foot or 12″ x 12″ x 12″. If a package exceeds a cubic foot in volume, instead of the weight of the package, they use the volume of the package to rate it.

Here are the steps for a 12 ” x 12″ x 13″ package:

  1. Multiply 12 x 12 x 13 = 1,872.
  2. Next, divide the total by 194. 1,872/194=9.65.
  3. Round up the result to the next whole number to get the dimensional weight of the package. 9.65 = 10 pounds.
  4. If the dimension exceeds the actual weight, you would use this number to calculate the shipping charges. So, in this case, even if you had a 5 pound box, (which is what happened to me) you will be charged for a 10 pound box.

For more information on how USPS calculates dimensional rate, click http://www.usps.com/prices/USPS_prices_dw_pop.html

For UPS, click http://www.ups.com/content/us/en/resources/prepare/dim_weight.html#How+To+Measure+the+Cubic+Size+of+Your+Package

For the FedEx dimensional weight calculator, click http://fedex.com/be/tools/dimweight.html

For the DHL dimensional weight calculator, click http://www.dhl-usa.com/IntlSvcs/dimweight/dimweight.asp?nav=Inttools/DimWeiCal

The USPS has a different factor than UPS and FedEx for domestic packages. You should compare rates between carriers based on package dimensions. For USPS, if the result exceeds 1,728 inches, you must use the dimensional weight. For UPS and FedEx, if the result exceeds 5,184 inches, you pay the dimensional weight.

Domestic is different than International. Here are the current factors:

  • Domestic you divide by 194
  • International you divide by 166

The Top Complaint About UPS and FedEx

April 24, 2010

What do you hate about your parcel carrier? The number one complaint about UPS and FedEx was accessorial charges. (Morgan Stanley Parcel Annual Best Practices 2009 Survey)

Accessorial charges are better known as surcharges, additional charges, ancillary fees, or adjustments. There are more than 90 of these add-on charges! Here is a link to the UPS 2010 Surcharge and Accessorial Price Increases.

The survey also found that in 2009, 11.5% of the overall transportation costs were for accessorial charges. What are these charges? Here are the top ten:

  1. Fuel Surcharges
  2. Address corrections
  3. Residential delivery
  4. Delivery Area Surcharges
  5. Rural Area Surcharges
  6. Dimensional charges
  7. Saturday delivery
  8. Declared value (insurance)
  9. Additional Handling
  10. Large Package

The big reason why businesses hate these charges is that most of these additional charges are not included in the published price and are added to your bill after you have shipped the package, making it difficult if not impossible to recoup from your customers. If you are processing your packages using technology, you have to correctly maintain your technology and enter all the data fields. As you may recall from my last blog entry, How Are You Losing Money in Shipping?, one of the reasons a client was losing over $100,000 a year in shipping because the person processing the packages was not entering the dimensions of the packages in the carrier’s shipping system.

How can this happen you wonder?

In this particular case, the problem was that my client had outsourced her shipping to a third party logistics company. I called them to find out why they were not entering the dimensions and was told that they didn’t do it because dimensional rating was only for air shipments, not ground. They are wrong! This was a company that bragged about their expertise in shipping packages that had been doing this for 30 years and they did not know that UPS and FedEx charge based on the dimensions of the package for ground shipments as well as air! Here is the link to how to compute a dimensional weight, A Quick & Easy Way to Calculate Dimensional Weight and also here is a link, Parcel Shipping Ain’t Easy, to a very funny video about it. My client was depending on an expert and the expert didn’t know that they didn’t know!


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

March 30, 2010

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.


Here is a Great Tip on How to Save Money on Shipping

March 23, 2010

My post last week about guaranteed service refunds triggered a number of responses. Steve Thomas, the warehouse manager at Polek and Polek, a leading distributor of copier parts, fax supplies, and printer products, told me how he gets his money back on packages that are not delivered as promised.

Steve sets up every package he ships with an email notification from UPS to inform him of any exceptions. Exception notifications indicate anything that may cause a delay in the delivery of the package. This way he gets an email when a package has been mis-routed or is going to be late. After he is notified, he calls the carrier and asks for a refund. (You can even set it up so that another person gets notified, so you can delegate this task to someone else such as an accounting clerk). UPS and FedEx both offer this service for no charge. Steve saved his company over $2,000 last year by simply doing this.

You can set up your shipping system to notify you of exceptions by selecting the box to be notified. See below for an example.

Steve, thank you so much for sharing your advice!

What are you doing to save money in your shipping department? Please let me know and I will post your suggestions for the benefit of all shippers. You can email me at mark.taylor@myshippingcoach.com.


Nobody Beats My Shipping Rates

February 27, 2010

“I have got the best UPS rates in Manhattan.”

“My FedEx rates are better than anyone in my industry.”

“Nobody can get better DHL international rates than I can.”

“The Vice President of FedEx came to our warehouse and said he couldn’t compete with the rates we are getting from UPS.”

“I saw General Motor’s rates and ours were better.”

“I hired a professional parcel negotiator and he couldn’t do any better. In fact, he asked me if I would negotiate rates for his customers.”

“My UPS rates are better than the Federal Government.”

The above statements are ones that I have heard. The people stating them honestly believe them. Do you?

I don’t.

Over the past 30+ years in this industry, I have made friends with many former FedEx and UPS sales people, pricing managers, and executives.

Here is a secret.

The carrier sales people are trained in negotiation strategies and one tactic is to get you to believe that you already have the best rates.

I found an interesting site where I learned about various negotiation tactics, one of them is called Flattery.

This tactic involves making you look good by telling you how clever and intelligent you are. For example, what a great negotiator you are. It makes you feel good about yourself and puts you in a position where you will want to be a friend with them.

I have heard those lines too.

“My UPS rep is my friend; I couldn’t possibly ask him for more.”

“My FedEx rep is the greatest and really went to bat for me.”

You may indeed be friends with your carrier representatives but are you really getting the best rates possible?

How do you know?

Are you 100% confident that you couldn’t do any better?

And, if you could, let’s say even reduce your shipping costs by 10%, what impact would that have on your organization?

Could you compete more effectively?

Increase profits?

UPS did last quarter; they tripled to their profits and reported a fourth-quarter net income of $757 million dollars.

How did you do in comparison?


What is the Cheapest Way to Ship a Package?

February 7, 2010


What is the cheapest way to ship a package? It all depends.

I received the following email from one of my readers. Thank you, you have raised some very good questions. Read my response below in blue:

I invite any of you with questions to email me at mark.taylor@myshippingcoach.com. I may not be able to get back to you for a few days, but I read all my emails and respond.

I stumbled upon your blog and I’ve got to say, it is very helpful.  I am a new Ebay seller and am new to this whole shipping business.  I was wondering if you could answer a question for me.  I use USPS for my shipping; I’ve found it to be cheaper than FedEx and UPS. Priity Mail Flat Rate Options

 

 

  Price Size
Priority Mail Flat Rate Envelope $4.90 12-1/2″ x 9-1/2″
Priority Mail Small Flat Rate Box $4.95 8-5/8″ x 5-3/8″ x 1-5/8″
Priority Mail Medium Flat Rate Box (FRB1) $10.70 11″ x 8-1/2″ x 5-1/2″
Priority Mail Medium Flat Rate Box (FRB2) $10.70 13-5/8″ x 11-7/8″ x 3-3/8″
Priority Mail Large Flat Rate Box (Domestic Addresses) $14.50 12″ x 12″ x 5-1/2″
Priority Mail Large Flat Rate Box (APO/FPO Destinations) $12.50 12″ x 12″ x 5-1/2″
Here is the priority mail flat rate prices.  What if I want to use my own packaging or some of their other boxes not on the list, such as their shoe box?  How will I know how much it is going to cost?  It is based on weight?  Basically, I just want to know how USPS determines shipping costs.   And, do you have any tips to get the lowest shipping price possible? I ship mostly clothing and shoes, not anything that would be too heavy.  I would like to get them shipped at the lowest possible price.  How can I do that with USPS? Thank you so much!!!

The cost to ship a package depends on the weight, zip code, and dimensions, among other factors. For USPS you can ship in your own box, or in a Priority Mail box that you can get for free. Priority Mail Flat Rate Boxes can be the best way, but not necessarily. It all depends. Let’s look at a few examples:
  • You have a 2-pound package that is shipping to a zone 2 (someplace close). If it fits into the Priority Mail Small Flat Rate Box, you can ship it for $4.95. BUT, if you put it in another box, it would only be $4.90. If you used the bigger Priority Mail Large Flat Rate Box, you could pay $14.50—way more money!
  • If you have a 5-pound box, the rating becomes more complex. For a Zone 5, you would pay $11.76. It would be cheaper not to use the Priority Mail Large Flat Rate Box. But the same package going to Zone 8 (cross country) would be $16.37, so it would be cheaper to the Priority Mail Large Flat Rate Box. Now, I could ship that same box with FedEx Home Delivery for $10.59 and save $5.78 with the rates I get from FedEx (email me and I will tell you how).

The bottom line is this: no carrier is the cheapest carrier for every kind of package. The USPS does a great job and is the cheapest for package shipping to residences that weigh less than 2 pounds. My advice is to compare carriers and services.