Ways to Teach You How to Reduce Small Parcel Shipping Costs
As a business executive of a manufacturing, distribution, or any company who ships small parcel, you are often wondering ways on how to reduce small parcel costs. As your CFO or accounting department may tell you, and your business experience, when it comes to small parcel costs, it’s not only the hard cost of shipping the small parcel, or the small parcel rate, but it’s the whole picture you must take a look at. Meaning, what are both the hard AND soft cost savings that you can realize when you are better armed with the following top 6 of 11 considerations when processing small parcel shipments.
1. Not all discounts are the same; Lower Base Rate vs. Carrier Discounts
When processing a small parcel shipment, the first thing most look at when processing a small parcel shipment is the quote or small parcel rate given by a carrier as the first step in how to reduce small parcel costs. All carrier discounts do not have the same value. For example, a base rate for Carrier A could be as much as seven percent higher than for Carrier B. Depending on your shipping patterns, a 45-percent discount from the carrier with the lower base rate can be more beneficial than a 50-percent discount from the other carrier. Remember to always dig below the numbers.
2. Accessorials Know How
Some of the most common unforeseen and “add on fees” caught in small parcel auditing, both manual and automatic through small parcel technology, after a small parcel shipment is made are from not understanding, and not applying accessorials. The more you know about how to identify when they may occur and the more you know about your own shipping activity and lanes, the easier it is to mitigate and eliminate these costs adding up in the holy grail of how to reduce small parcel costs. Some common accessorials are:
- Residential adjustments
- Weight Adjustments
- and Additional handling accessorials.
The more you know about the possibility of accessorials, the better you can budget your total small parcel costs. By performing thorough analyses of your company’s shipping history and characteristics internally or with the assistance of a qualified third party, it is possible to see that your accessorials are discounted or waived entirely.
3. Fuel Surcharges
Carriers have different and vastly varying fuel surcharges. With some simple math by using your small parcel data, level the playing field by proposing a single fuel surcharge that you develop to create an apples-to-apples comparison of these charges. By doing so, you eliminate one variable you have to analyze when comparing carrier costs and seeking how to reduce small parcel costs.
4. Mode and Route Optimization
One of the easiest ways to realize both soft and hard costs savings as it relates to your small parcel expenditures is knowing the right mode and route to ship your small parcel. Often, if you can optimize and break out a truckload to LTL or to drop-ship, you can maximize savings by decreasing your overall risk, but also making your small parcel more attractive to LTL carriers who may give you a better rate as they are looking to maximize profits and capacity themselves. Conversely, if you have specialized or unique small parcel that ways below a TL small parcel shipment, but has say many pallets, a volume or spot quote may be the way to go. The point is to not take the shipment at face value, but to think long term and what will save you the most money over the long haul.
5. Address Book and Data Entry
How much money do you think you lose by simple data entry or using the wrong address when requesing a small parcel quote or rate? Common errors are big problem areas when seeking how to reduce small parcel costs. Probably more than you think. Furthermore, how many man hours are wasted having to fix those errors on the back end? One of the easiest ways to tackle complete small parcel cost waste is to use small parcel technology which can integrate with your ERP or contact management system to essentially eliminate the need for manual data entry.
6. Proper Classification
Each year the National Motor small parcel Classification guide re-classifies small parcel in various ways. Do you keep up with all of it? Most likely not, and who really has time for that? Well, it may behoove you to implore your Logistics Director or the person who process your small parcel shipments to stay up to speed on the small parcel you specifically ship. We are not asking you to be the expert in all classes, but the more you know the more you can save. We often hear from our customers, “No one has ever asked us what class we should ship, we usually just pick 70 so we are close.” That is like leaving pennies on the table, and over time, pennies add up. Conduct an historical small parcel invoice analysis and see how much money you would have saved if all small parcel shipments were classed correctly. We bet you’d be surprised.
Managing your small parcel costs are more than just the rate you see in front of you. As a person running a business, don’t let your small parcel be your focus, let DMG focus on the details. so you can grow your business, and thus…..ship more small parcel! Look out for 5 more