Is your parcel carrier the best fit for your company?
It’s always a good idea to do a little self-scouting.
When it comes to your business and its shipping needs, this means reviewing shipping contracts annually to ensure you are getting the best deal.
So, how do you go about this?
Deciding which approach works best begins with understanding your company’s needs.
Knowing your shipping data — what you ship, how much of it you ship, where it goes and how long it takes — is more important than anything else. Once that data has been organized into a shipping profile, consider contract changes.
Your savings are in the details
The first major part of your shipping profile is understanding how much volume your company ships.
Most major carriers have incorporated revenue-based discounts into their contracts. And they set them up in such a way that if shippers moved some of their business elsewhere, they’ll suffer huge losses in discounts.
If you spend millions on shipping, you can use multiple carriers — if each account still qualifies for volume discounts. But say you’re a specialty carrier with a relatively small account. If you choose multiple carriers, it could cost you your volume discount.
The second major objective is to figure out how far your packages travel. This will help decide whether it’s best to go with a national or regional carrier or a mix of both.
If your shipments travel to all areas of the country, national carriers are typically more efficient with their larger infrastructure and additional technologies.
But if the majority of your customers reside in one area of the country, or in metro areas, regional carriers can often offer more competitive pricing, better customer service and deliver with greater speed and efficiency.
If your business has pockets of regional customers, as well as customers across the country, using multiple carriers may be most beneficial. But that will require more management and attention.
For instance, national carriers charge largely the same rates for shipments of comparable distance, but regional carriers might calculate pricing at the ZIP code or county level. If you are able to map their parcel data with that level of detail, you can model how much you might benefit — or lose — in a shift to regional service.
However, understanding what smaller carriers can provide is also critical. They cannot leverage enormous networks; national carriers have to ensure two-day delivery. So if a regional carrier can’t guarantee the level of service your customers demand, they could cost customers — and money.
You must ask yourself: Is that a good fit?
At some point you have to ask yourself: are you satisfied with your current parcel carrier?
What are the pluses and the minuses? And, most importantly, where could you be saving money?
If you are not satisfied, you’re in the majority.
In a 2017 survey by PARCEL Magazine, about 36 percent of executives surveyed said accessorial surcharges were their biggest source of frustration with their carriers. About 16 percent said their biggest complaint was pricing. That means more than half of those surveyed were frustrated with their contracts, not necessarily their carrier.
If you know your transportation data inside and out, identify areas to target for savings in your next contract. At this point, you can compare carriers, and seek out one or several who are most amenable to the changes you want, and frankly, need to make.
But your biggest enemy in this process is time. Your time.
A trusted partner could mean money in your pocket
Companies that use multiple carriers have to sign contracts with each, likely including revenue commitments. These negotiations require careful research and preparation. Reveel’s consultants specialize in helping executives prepare for such negotiations, and can help your team fully understand their options.
Managing relationships with multiple carriers is time-consuming, too. Many companies use carrier-supplied platforms to track their activity; those seeking multiple carriers have to seek out new third-party platforms. Multiple carriers also mean auditing twice as many invoices and, possibly, twice as much time on the phone with customer service.
Plus, as multiple carriers increase rates and modify surcharges every year, evaluating how those changes will affect your company — including whether your current service mix still makes sense — becomes ever more complicated. Reveel’s reporting and analytics tools can help companies stay on top of those relationships.
When your next shipping contract negotiation begins, Reveel can be a partner to companies navigating rate increases. Dozens of companies trust our expertise to help them secure the best possible rates, and we routinely help them save 15 percent or more.
The U.S. Postal Service is generally the cheapest carrier, and it doesn’t tack on many of the surcharges that corporate carriers do. And though its reliability has been criticized over the years, its point-to-point tracking system is winning back consumers.
Then, companies must identify what’s most valuable to them and their customers to decide which surcharges they’re most willing to pay. Are buyers primarily residential or business addresses? Are they domestic or international? Do they require package tracking or insurance? Will your shipping needs change dramatically during the holiday season? Each of these come with possible fees, all of which can be negotiated.
FedEx and UPS compete for market share, and both have historically applied similar surcharges. But in 2017, UPS announced a peak-season surcharge, increasing fees by almost $1 per package shipped during the holidays. FedEx has not imposed a per-package holiday surcharge. Instead, the carrier is increasing select accessorial charges.
Finally, service matters. Do packages reach their final destinations on time? FedEx scored highest on these questions in the Parcel survey: Companies rated FedEx 8.06 out of 10 for on-time service performance and 7.53 for delivery performance, compared to 7.27 and 7.35 for UPS, respectively. The U.S. Postal Service received sixes in both categories.
Some companies even choose to use multiple carriers, often one for local and regional service and one for national service. While FedEx and UPS are similar in many ways, pricing and offerings from regional carriers can vary dramatically. Again, companies who know their shipping profiles inside and out are best positioned to take on those confusing negotiations.
We hope you enjoyed the promoted piece as much as we did!