One Inch Can Cost You Big When Shipping Packages

June 17, 2010

In my last post I challenged you to figure out why the USPS was more money for a light-weight residential package weighing five pounds. Congratulations to Steve Foster of the US Post Office. He noticed that the dimensions of my package were 12 x 12 x13, which put it in the category of a Large Package. The USPS charges more for packages that are larger than one cubic foot. So in my case, if that package were just 1″ smaller, it would have only cost $11.76 and the USPS would have been my least expensive carrier. That one inch cost and extra $9.59!

The lesson learned is this: when you are comparing rates and services amongst various carriers, make sure you include the dimensions of the package. Failure to do so will cost you plenty!


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

May 16, 2010

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 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 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!

Shipping Myth: More Money Does Not Necessarily Mean Faster Service

April 30, 2010

Many of us grew up with the expression, “You get what you pay for.” This was meant to be a lesson to not be cheap. If you buy inexpensive junk, you couldn’t expect it to last long or perform as well. While this may be true in some areas, it certainly is NOT true when it comes to shipping. I can’t tell you the amount of waste that I have seen from shippers, who pay more, sometimes 10 times more, with the false belief that it will get there faster!

I have a peculiar hobby. I love to look at invoices and ask provocative questions. I was reviewing a FedEx invoice of a client the other day and saw the following:

  • A FedEx 3Day Freight shipment from San Francisco to Los Angeles for $745. I asked the logistics manager why he chose FedEx 3Day Freight for this shipment as was told, “We had to get it there in three days and did not want to take any chances. This customer would have been very angry if the shipment was late.” I checked and found that there were several Less Than Truckload (LTL) carriers that would have delivered the same shipment for $125 with a one day guarantee. He paid 6 times more because he thought that by paying more would be faster service.
  • I was in another client’s office and watched this Corporate Headquarters mailroom processing UPS 2nd Air packages. There were 100 packages in a pile on the floor, all being sent UPS 2nd Day Air and I asked why these packages being sent this way. The answer was that they received a corporate discount on UPS 2nd Day Air of 50% and that they wanted to be sure that all their sales people received this package by the weekend. Just for fun (and with permission from my client), I went through the stack and found 40 packages that were being sent in the tri-state area (NY, NJ, CT). All 40 packages could have been shipped ground and were guaranteed to be there by the end of the next day. (They were shipping on Wednesday and they were guaranteed to be there by 5:00PM on Thursday). The cost for ground was $8.00 per package. Their cost for UPS 2nd Day Air with their 50%, $11 with a guaranteed delivery of Friday—one day longer. So they paid 30% more and wasted over $320 with the false belief that because it was air, it would be faster.

The bottom line is that more money in shipping does not necessarily mean faster service! What can you do about it? Compare prices and delivery. Don’t assume.

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!

How Are You Losing Money in Shipping?

April 10, 2010

Are you throwing your shipping dollars down the toilet?

As you may recall from the last post, I met with a client that was surprised when she discovered that she was losing over $100,000 a year in shipping. It did not seem possible because they were billing their customers for shipping at the published rate that the carrier charged. Let me provide a specific example, they shipped a package UPS 2nd Day Air and the published charge was $34.25; the billed charge was $26.71 because they have negotiated a 22% discount with UPS (which is poor but we will leave that for another time). So logically, you would think that they made a $7.54 profit on shipping this package, which would be great. However, on the UPS invoice there was an adjustment of $19.16. This additional charge shows up on the invoice after the package the shipped and after the customer was invoiced. So the result was that instead of making $7.54, this company lost $11.62 on this package!

Let’s look deeper and discover how and why they are losing money.

The first step is to review the carrier’s detailed invoices. In our example, we see that UPS made an adjustment. This additional charge shows that the package was re-rated at 14 pounds and it says Dimensions =20 x 15 x 9. What that means is that this package was charged based on the dimensions, not the weight. Let’s look further.

The next area to examine is what the shipping system computed for the shipping charge. In this case, my client has a UPS WorldShip software program for processing shipments, sometimes referred to as a shipment execution system or a manifest system. You can generate a report from this system or lookup a specific transaction. We researched the UPS 2nd Day Air package in question and saw that according to the UPS shipping system, it cost $34.25. So what was the difference? Why was my client charged $19.16 more?

Two reasons:

  1. The person that shipped the package did not enter the dimensions of the package and the parcel carrier based its charge on the package dimensions. For details on how parcel carriers compute this type of  charge, see my previous post, A Quick & Easy Way to Calculate Dimensional Weight. These type of errors occur because the person does not know to enter the dimensions or skipped it for some reason. It is generally a process error or training issue. If they had entered the dimensions, the system would have computed the correct base charge, but there was another problem.
  2. The UPS WorldShip did not add the 7% fuel surcharge to the published charge. Why? Because it was not setup properly so that the fuel surcharge is added to the base charge; this requires a knowledgeable person to configure the shipping system and to constantly maintain it!

The consequence was that my client was not really charging their customers the correct published charges because the shipping system was not properly calculating the rates due to setup and processing errors. The customers are invoiced based on data from the shipping system, not the actual invoices. Accessorial charges come after the customer has been charged. In this case, it was 33%of the published rate!

How to audit your parcel shipping:

  1. Review the Delivery Service Invoice item by item from your carrier; find all shipping charge corrections or adjustments.
  2. Research all adjustments by comparing the invoiced amounts to the charges in the shipping system.
  3. Find out why they are different and fix the system, create a process, and or train the operator.


    To be continued…

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