Controlling your parcel shipping costs requires ongoing effort. With shipping rates and surcharges increasing every year, those who don't proactively seek opportunities to find savings will see costs increase and profit margins erode.
That being said, finding savings can be tough when you don't know where to start. With so much information on every invoice where is the best place to look? There's many areas of an invoice that may contain cost savings, but these are the 4 most common and easily fixed areas of overspend we see on our clients invoices.
1. Overuse Use of Declared Value
Both Fedex and UPS insure every shipment up to $100 in value. Which, for a large portion of shippers, should be enough to cover the cost of replacement on any item your shipping. Everyone has their own level of risk tolerance, but at around $3 to declare value and only a minute percentage of shipments being damaged or lost, it’s likely not worth the cost unless you’re shipping high ticket items well above the $100 standard insurance.
The amount of risk your willing to take is up to you, and not my place to recommend. But it’s important to have standards in place and to educate employees on when declared value should be used. Some employees may assume that adding a declared value is a standard practice when manifesting shipments and does not lead to added cost. And if you absolutely must have insurance on items worth less than $200, it would likely be worth your time to consider a 3rd party shipping insurance provider, who may be able to offer more cost effective solutions built to your needs.
1.1 File For Lost and Damaged Shipments
This may seem like a given, but we see companies neglect this more often than you might think. Remember that every package is insured up to $100 even if you didn’t declare a value or purchase 3rd party insurance. So if your package goes missing or is damaged in transit, you are entitled to at least a partial refund. Make sure to take note of missing packages and file a refund claim within the time period given by your carrier.
2. Third Party Billing Charges
Another common unnecessary cost is freight collect shipments being charges as 3rd party billing. 3rd Party Billing is often mistakenly chosen instead of Freight Collect, adding a 2.5% additional fee to the shipment. True 3rd party billing is a pretty rare occurrence for most companies, referring to situations where the shipment is to be billed to someone that is neither the shipper or the recipient of the package. Freight Collect is a much more common situation, and should be selected when the shipment is to be charged to the recipient.
When your manifesting a package and billing it to the recipient, 3rd party billing sounds close enough and is often selected. If these charges make their way into your invoice, and you wouldn't usually use 3rd Party Billing, go over the proper usage of this billing method with any employees manifesting shipments and make sure they know the proper uses of each option.
3. Unnecessary Scheduled Pickups
Scheduled weekly pickups run anywhere from $14.50 to $29 per week depending on the weekly shipping spend out of a location. These standalone charges might not be large enough to raise a red flag, but since they are recurring weekly, they can add up fast especially when your shipping out of multiple locations.
Your weekly scheduled pickup services should be audited at least annually. Certain locations may no longer require scheduled pickups, and some may never have needed them in the first place. In which case you're getting a weekly fee for a service you don't need. If you’re auditing this regularly, you probably won’t find massive savings every time. But the goal here is to not let unnecessary pickup charges get out of hand in the first place.
4. Address Correction Fees
Address Correction Charges are a fact of life for just about any large volume shipper. All it takes is one number or letter getting input incorrectly for you to get hit with this $16.00 charge. So if your shipping thousands of packages a month, some amount of these charges is inevitable, unless you want to invest in an expensive address validation software platform(which may be the right move for extremely high volume shippers).
Whats important here is to prevent them from becoming a recurring charge. If you get hit with one of these, it likely means you have an address incorrect in whatever system you hold customer information. Both major carrier attach a list of incorrect addresses to each invoice, so fixing them each week isn't a difficult task. However, what we usually see is that these charges may not be large enough on one individual invoice to raise alarm, or the information gets lost in transit as whoever receives and pays the invoices probably isn't the same person in charge of managing customers data.
But these charges do add up. Especially for B2B shippers regularly sending packages to the same location, we've seen individual incorrect addresses cost companies well over $5,000 per year in charges. But purging your database of incorrect addresses should be a weekly practice for both B2B and B2C shippers to avoid these costs.