10 ways to gain control of your shipping costs today ways to gain control of your shipping costs...

November 2015

10 Ways to Gain Control of Your Shipping Costs Today


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CONTENT

Summary 13

4Reduce or Eliminate Air Waybills

3Introduction

5Understand Carriers’ Annual Parcel Rate Increase

6Determine If You Really Need Signature Delivery

7Examine the True Delivery Need of Your Recipients

8Create a Shipping Label Only When Needed

9Assign Department Cost Centers/Controls for Every Shipment

9The Thursday/Friday Factor

10Determine the Impact of Inbound Shipments on Your Organization

11Understand Every Surcharge

12Educate Your Organization About Preferred Services and Carriers


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How did we get to this place where parcel shipping represents such a significant cost? First, parcel shipping in the US domestic and international export parcel markets now represents over $80 billion. About 36% is represented in the air parcel market, and 2%, (and growing rapidly), is the US air parcel export market.

For most companies, depending on their industry, the shipping cost typically represents anywhere from 3% to 7% of a company’s total revenue. With shipping prices, the rates increase every year. In the past few years we’ve seen these costs increase substantially, especially when it comes to ancillary fees and surcharges, and especially with parcel shipping.

The following are ten steps, recommended for every business to utilize and take control of shipping costs starting today.

Introduction

Krish Iyer, Director, Enterprise Shipping & Logistics Marketing

How did we get to this place where parcel shipping represents such a significant cost?”


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The number one source of address correction errors is that someone’s handwriting is misinterpreted. Moisture can get on an air waybill and make them unusable or illegible. More importantly, the carriers themselves have to take that information and manually key it in—a cost they will often pass on to the consumer. This can also result in transcription errors.

The use of manual air waybills is also the number one source of shipping-related fraud. Someone who already has access to your account number, or a manual air waybill that you hadn’t accounted for, can easily use it for their own shipping purposes. In addition, one of the main reasons to consider eliminating manual air waybills is to gain access to carrier “automation bonus discounts” available by using online shipping tools.

Carrier automation bonus discounts are offered in a similar way to how online banking was adopted. When everyone started using online banking, the banks gave lots of incentives encouraging online banking because it reduced their costs. The same idea is true with shipping carriers. They discount on the cost of transportation that they, in turn, pass on to you for not having to manually key in paper air waybills.

SolutionThe easiest way to eliminate those manual air waybills is to utilize an electronic solution—automated shipping system. Neopost, other mailing companies, and the carriers themselves provide automated shipping systems. These systems give access to auditing invoices for fraud and addressing errors.

1. Reduce or Eliminate Air Waybills

Air Waybills are handwritten forms used to tender recipient and address information but are often wrought with errors.


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Each year there is an announcement of a certain percentage rate increase by all carriers. The 2016 annual increase announced for some of the major parcel carriers in the US is 4.9%. Since this is calculated using the base transportation charges across all weight breaks, when you examine the one to five pound rate, the impact is actually much greater than 4.9%.

This is most often the case when shipping those lower weights parcels. In addition, be mindful that fees and surcharges, (explained in more detail in Step 9) can greatly escalate shipping costs.

The chart below shows the average rate increase in 2016 for one carrier’s ground shipping services by weight ranges. In many cases, these increases are far higher than the stated 4.9% annual increase. The chart also shows that for 2016, the annual increase is much higher than 4.9% for shipping ground services in the 1-5lb weights for one major parcel carrier.

Do you understand the pricing program your carrier has placed you on? The major parcel carriers have moved to programs that give incentives for volume. A common mantra, “the more you ship, the more you save,” is oft-repeated by the carriers, but do you actually understand the terms of your pricing agreement? Are you able to meet the volume commitments in your agreement? One major carrier has several sets of rates, including “daily rates” versus “standard rates.” Do you know which one of these

SolutionKnow the weights of your actual shipments when discussing discounts with your carriers carriers and negotiate with them based on the actual weights of your most-shipped packages. Understand the volume and revenue commitments in your carrier pricing agreement.

2. Understand Carriers’ Annual Parcel Rate Increase

Weight

1-5 lbs.

6-10 lbs.

11-15 lbs.

16-20 lbs.

21-50 lbs.

51-70 lbs.

71-100 lbs.

101-150 lbs.

Increase

5.8%

5.5%

5.4%

5%

4.8%

4.0%

3.6%

3.0%


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Signature deliveries are frequently utilized by the legal community, architectural firms, accountants and real estate firms, accounting for a big part of their shipping expenses. Many times these firms use signature delivery to simply confirm the package was delivered which is readily available with the tracking services most shipping services already provide for free.

In most instances, what’s really required is a delivery confirmation and not the signature, which can be set up for free as an email return, or by utilizing the available carrier tracking report. Carriers charge additionally for signatures and those can range anywhere from around $3.00 to more than $5.00 a package.

There are also options for direct, indirect or adult signature requirements. Unless you are in an industry where specialized signature delivery is needed, e.g. high value goods, alcohol shipping, etc, a lot of times the signature simply isn’t necessary.

The USPS® Electronic Return Receipt®, or eRR, is an advantage over using the traditional USPS manual “green cards” for certified mail For example, green certified mail cards cost about $2.80 but if you switch to the electronic version, it can cos as little as $1.40 (as of the May 31, 2015 USPS rate change) instead. If you really need a signature and pay that extra $3.00 to $5.00, or if you’re using certified mail with the USPS, do you really need to use the traditional return receipt? Can you switch to an electronic system to save time and money?

SolutionUse email notifications with tracking numbers or the USPS Electronic Return Receipt (eRR) unless a signature is absolutely needed.

3. Determine If You Really Need Signature Delivery


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Take the time to examine what you’re true delivery needs are for both you and your recipients. Do you know the time that your recipient really needs the package delivered? Do you know if the recipient will even be around when the package is delivered?

A Neopost customer in the legal industry analyzed their areas of shipping spend to uncover where they had a lot of overspend. The analysis revealed that one of their administrative assistants had been sending out contracts every day overnight for several years, using a “first flight out” overnight delivery service. These overnight services are some of the most expensive overnight delivery options and can cost as much as $100, or $150 just to ship just one overnight letter. The consequences of using this high priced delivery service over the course of days, weeks, and years every day is a clear example of how easy it is to spend if controls are not in place. The worst part about this specific customers experience was that it turned out that the intended recipients weren’t even around when the envelopes were getting delivered, and the letters were actually just being slipped under the door, thus negating the extra cost paid for this service over days, weeks and years.

Another important delivery concept: selecting the right time of day the package materials are needed. Typically when you send a package with an air parcel service, the delivery time is specified as either an early a.m. (usually 8:30 a.m. or 9:00 a.m., or 10:30 a.m.), noon time or end of business day. The end of the business day option usually gets delivered by 3:00 p.m., especially for ground services. The wide variety of delivery times also has a wide range of associated costs, so the time of day needed is something else to consider.

SolutionBe sure and take a look at the services you actually use, and compare the delivery times for the services and cost as a comparison.

4. Examine the True Delivery Need of Your Recipients


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Many businesses aren’t aware of the fact that when you create a shipping label and don’t send that shipment, you can actually be charged, even though you never tendered that package to a carrier. This mistaken charge (often called a “manifested not shipped” package) is one of the things that customers notices when they see an analysis of their shipping transactions. A shipping analysis can identify these charges for packages that were never even tendered to a carrier. This is an easy way to save on shipping costs so be sure to void shipping labels created for packages that were not sent.

In addition, keep track of return labels that are printed. Even though they may only charge a nominal fee, carriers can charge anywhere from $0.35 to over a dollar for just printing a return label. These costs can add up quickly if the labels are not used. A very common scenario is that when somebody prints a shipping label just for safekeeping, they print out a return label and throw it in the box. Every time you print you could be charged a fee. Can you produce a return label when needed and email it to the recipient? An additional consideration here is for shippers who process packages on Saturday, even if there is

no Saturday pickup. When package data or manifests are transmitted to the carrier on a Saturday, they can sometimes result in an invaid Saturday pickup charges. Carriers generally will allow a shipper to go back six months to claim a credit for an invalid Saturday pickup charge.

SolutionCreate a label only when needed for shipping and return labels. Utilize reports to identify times when a package was “manifested not shipped.” Pay close attention to a Saturday pickup.

5. Create a Shipping Label Only When Needed


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During Neopost’s April 23, 2015 webinar “10 Ways to Save Money on Shipping Today,” a polling question revealed that 100% of the registrants used department cost codes at their businesses to properly assign the right costs to the right person or department in an organization. Even if you have cost center codes set up for purchase and billing, it’s important to be sure to include shipping costs as part of the costs that go back to the right department. It’s a best practice to assign a department cost code on every shipping transaction. That way, it’s easy to trace back to the department, or customer for every package shipped. Without assigning

a department code, you won’t be able to identify areas of fraud or pinpoint the services that are costing your organization the most money. These are all things department cost centers have a tendency to fix.

Another aspect to consider are the validity of cost centers themselves, as often times employees will give incorrect or invalid ones, thus negating the original purpose of a department cost center. It is then important to then have technology tools and department policies that mandate department cost centers but also ensure that the ones used are valid.

SolutionImplement department cost centers and, more importantly, implement the technology that allows you to manage it effectively.

When a package is shipped on Thursday by a two-day service, it typically means that it will be delivered on Monday. If you ship it overnight on a Friday, that’s also a Monday delivery. A lot of businesses don’t understand that, to main parcel carriers, the Thursday/Friday next business day or two day service really means Monday for most carriers. While carriers do offer a Saturday service, the extra surcharge can be as high as $16 per shipment. Also, the US Postal Service considers Saturday a regular business day. This is important to know if a shipment really needs to get there on a Saturday, as you can avoid any surcharges by sending the package with the US Postal Service, or by planning effectively for a Monday

delivery. It is important to note that there are some carrier services that do consider Saturday a business day that does not have a surcharge. Researching options on the exact carrier services offered that can meet your needs then becomes extremely important to save time and improve your shipping service levels.

SolutionConfirm the true delivery objective on a shipment being sent out on a Thursday or Friday. When does a package truly need to be delivered to your recipient? And at all costs, if you can avoid it, don’t pay the Saturday delivery surcharge with a major parcel carrier. If it needs to arrive on Saturday, you may wish to consider using USPS.

6. Assign Department Cost Centers/ Controls for Every Shipment

7. The Thursday/Friday Factor


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Do you understand the process flow of a shipment arriving at your workplace and how it gets to the recipient? As an example, an employee of a law firm always sent out packages with the “first flight out” overnight service and it was slipped under the door. Upon further analysis it turned out those same packages weren’t accounted for at the time when most deliveries came. They often were not delivered to the intended recipient until a day or two days later. While this is not a typical example, it does illustrate how this can happen, especially if a monitoring process isn’t in place.

This is why you need to understand what the process flow is of a shipment coming to you, and ultimately the person that you want to receive it. If the shipment’s arrival is later than needed that can have a negative impact on getting business transactions completed. In the legal community, a letter or package delivery timing is essential for matters including business contracts or scheduling court activities. It can also seriously impact manufacturers needing to ensure the delivery of finished goods to their customers. It’s not always better to pay for overnight shipping as opposed to paying overtime for employees.

Do you have policies regarding personal shipments into your organization? A recent survey conducted by Swiss Post Solutions* concluded that nearly 75% of all employees ship or receive personal packages to work locations. Furthermore, the study revealed 20% of survey respondents did so two or more times a week. What is the impact of the sending and receiving of personal shipments on your organization and can you set policies that can be enforced?

SolutionDetermine the process flow of a shipment arriving at your workplace and getting to the final recipient. Be able to map that out and identify where there may be some inefficiencies. Set policies—and enforce them—regarding the shipping and receiving of inbound personal shipments.

8. Determine the Impact of Inbound Shipments on Your Organization

*2015 Swiss Post Solutions study, “Research by Swiss Post Solutions Reveals 75% of Employees Ship Personal Packages to Work Locations.” Used with permission by Swiss Post Solutions.


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Surcharges are one of the most important points needed to be understood to save on shipping costs. In recent years, major carriers have increased surcharges year over year by as much as 133%. One of the surcharges, (on the chart below) is the delivery area surcharge, and it’s much lower for products that utilize the USPS for the final mile of delivery to residences. These final mile products were introduced in response to the increasing volume of eCommerce-related shipping. These services typically have volume and weight restrictions, and are typically only available for delivery to residential addresses, so it is important to determine if these services are right for you.

As for other fees and surcharges, many of them have increased substantially over the past few years. These include the delivery area surcharge, a fee the carriers assess for delivery to what they consider harder-to-deliver areas. Ironically, the delivery area surcharge zip codes encompass over 55% of the zip codes in the U.S.

How many of the surcharges listed on the chart to the right are familiar?

Are you aware of an additional handling surcharge?

Are you aware of address correction that can be as high as $13.00?

Are you paying for declared value on your parcels?

Declared value, which differs from insurance, is the amount that parcel carriers ask you to declare as the value of your package, and they’ll charge you $1.00 per $100 of value. If you don’t put in a value, then the amount that they’ll refund if there is damage or loss, is only $100. Consequently, that becomes the carrier’s limit of liability.

Most carriers also have a residential surcharge. Are you sending packages to residences? Sometimes it can’t be avoided, but it does mean that it’s something that you want to consider in the cost of your shipping in advance if possible. For businesses, it’s not always certain that the address you’re sending a package to is a residence or not, but the idea here is to plan for that scenario. If you regularly ship to residences, services that utilize the USPS for the final mile delivery can save costs.

Another surcharge that is critical to check ahead of time relates to the

account number being used. A surcharge of up to $13.00 can be charged each time for incorrect account number that’s determined to be out of date or invalid. Additionally, a new surcharge of third party billing by one carrier should be noted. This 2.5% charge, instituted in late 2015 by one major parcel carrier, is expected to have a drastic impact on those who utilize a vendor to ship, such as a 3PL (third party logistics provider).

SolutionThe best way to avoid unnecessary surcharges is to audit your invoices regularly and understand which charges are avoidable. Utilizing reports that give you a true understanding of these surcharges is critical. Also, give regional carriers, the USPS, and “work-share” last mile products a second look, as their surcharges can be substantially lower. Talk to your current carrier about options to reduce these costs, including alternative services where the surcharges are lower or less prevalent.

9. Understand Every Surcharge

Common Surcharges

• Delivery Area Surcharge (DAS): $3.00

• Additional Handling Surcharge: $10.50

• Address Correction: $13.00

• Weekly Pickup Fee*: $12.50-$25.00

• Residential Surcharge: $3.00-$3.65

• Invalid Account Number: $13.00

• Reroute of Shipment: $13.00

*Depends on revenue spent per week

**$0.90 per $100.00 value


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Are you able to educate people in your organization about preferred services and carriers? Does everybody know what kind of rates you have negotiated with certain carriers for the services that you use the most?

One of the biggest areas of cost savings for your organization are the “onesies-twosies,” these are shipments that go into drop boxes, often for regional, satellite or sales offices around the country. Maybe these offices ship only one parcel a day, but if they’re not using the preferred carrier or a service with a negotiated discount, they’re missing out on cost-saving opportunities.

In addition, carriers typically give an incentive when you move your shipping accounts over to them to add to the volume that they get. They’ll pass on some of those discounts back on to you. Regional offices, sales offices, and users shipping from home, are all areas where you can identify and communicate what your policies are and the carriers and services you want them to use. The results of everyone understanding the policies can contribute to some very big cost savings for your organization.

Lastly, do people in your organization understand the impact of changes that have come with the new dimensional weight or DIM pricing? Dimensional weight has been used for air or ground shipments for years but have become much more stringent in the past two years.

Length times width times height divided by a divisor is the definition of dimensional weight. But in the last year, DIM rules have been added as a price requirement for all ground shipping, and across all weight breaks.

Up until 2014, the carriers only charged dimensional weight from shipments that would start at three pounds and above for dimensional weight on ground, and now any package, regardless of the mode that you ship (air or ground) will potentially be subject to dimensional weight. This is even true when you use the carrier’s own packaging.

DIM is the amount of room that a shipment takes on a plane, on a truck, in terms of the actual space, as opposed to the actual weight. For example, you can’t take a very large box and put a feather in it. Or, the typical situation that most of us have during the holidays: you have an iPad®

to ship, but you find the largest box and throw a lot of stuffing into it. With DIM, you can’t do that anymore or you’ll be subject to a heavy dimensional weight charge.

Education and understanding behind what the latest changes and trends in shipping are is very important in helping maintain optimal organizational costs.

SolutionCommunicate across your organization the preferred carrier rates and services to everyone that actually ships packages. Also, implement tools that restrict or give this ability to shipping, including, a ship request or a traveler type of document, where the final power is given to the mail center to make that final determination, and make the necessary changes, including changing your packaging, potentially, to account for dimensional weight rating.

10. Educate Your Organization About Preferred Services and Carriers


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Are you prepared for changes in parcel shipping? As stated before, 4.9% year-over-year doesn’t really mean 4.9%. It really means it could be a lot higher. Are you prepared for those new surcharges? Are you prepared for dimensional weight, especially as the holiday season picks up?

Have you implemented tools and technology to give you the visibility of the surcharges that you have, or who’s shipping, or parcels that are manifested and not shipped? Are you

evaluating shipping and recipient delivery information itself, the needs of what your recipient is versus the actual service that’s used? Finally, are you communicating to the right people in your organization the right policies, the right carriers and the right services to use?

Keeping these ten steps handy as a reference will serve your business well and contribute significant cost savings over the long run.

Summary

© 2015 Neopost USA Inc.

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