2. 10 Ways to Gain Control of Your Shipping Costs Today
2
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
3. 10 Ways to Gain Control of Your Shipping Costs Today
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How did we get to this place where
parcel shipping represents such a
significant cost? First off, parcel
shipping in the US domestic and
international parcel markets now
represents over $80 billion. US
domestic, international, and ground
represent just over 60% of that. 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?”
4. 10 Ways to Gain Control of Your Shipping Costs Today
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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 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.
Solution
The easiest way to eliminate those manual air waybills is to
utilize an 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.
5. 10 Ways to Gain Control of Your Shipping Costs Today
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Each year there’s an announcement of
a certain percentage rate increase by
all carriers. This year, the annual
increase announced for both of the
major parcel carriers in the US was
5.9%. Since the 5.9% 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 5.9%.
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 that for 2015,
the annual increase is much higher
than 5.9% for shipping ground services
in the 1-5lb weights.
Solution
Know the weights of your actual
shipments when discussing discounts
with your carriers.
2. Understand Carriers’ Annual Parcel
Rate Increase
Weight (lbs.)
1
2
3
4
5
Zone 2
6.2%
8.8%
8.8%
8.8%
7.9%
Zone 3
8.0%
8.7%
8.7%
8.4%
8.3%
Zone 4
7.8%
8.4%
8.4%
8.5%
8.4%
Zone 5
7.8%
8.5%
8.5%
8.5%
8.4%
Zone 6
7.5%
7.6%
7.6%
7.2%
7.2%
Zone 7
7.5%
7.5%
7.3%
7.3%
7.1%
Zone 8
7.6%
7.4%
7.4%
7.3%
7.1%
2015 Annual Increase for Shipping Ground Services*
*This example is used for illustrative purposes only and represents one shipping carrier’s 2015 rate increase from 2014.
6. 10 Ways to Gain Control of Your Shipping Costs Today
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Signature deliveries are most
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 over
$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?
Solution
Use 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
7. 10 Ways to Gain Control of Your Shipping Costs Today
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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 can also be a
delivery time choice. The end of the
business day is another common
option and 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.
Solution
Be 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
8. 10 Ways to Gain Control of Your Shipping Costs Today
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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’re probably being
charged a small fee. Do you really
need to do that? Can you produce a
return label when needed and just
email it to the recipient?
Solution
Create a label only when needed for
shipping and return labels. Utilize
reports to identify times when a
package was “manifested not
shipped.”
5. Create a Shipping Label Only
When Needed
9. 10 Ways to Gain Control of Your Shipping Costs Today
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During our 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. 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 notice
those shipping costs. 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.
Solution
Implement 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.
Now, while carriers do offer a Saturday
service, the extra surcharge is about
$15 to $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.
Solution
Confirm 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
10. 10 Ways to Gain Control of Your Shipping Costs Today
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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. On
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.
Solution
Determine 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.
8. Determine the Impact of Inbound
Shipments on Your Organization
11. 10 Ways to Gain Control of Your Shipping Costs Today
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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 Workshare products. The
Workshare products were introduced
in response to the increasing volume
of ecommerce-related shipping and
utilize the USPS for final mile delivery.
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
at $12.50 apiece?
Are you paying a weekly pickup fee
with your carrier?
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 $0.90 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, a Workshare product can
make sense.
Another surcharge that is critical to
check ahead of time relates to the
account number being used. A
surcharge of $12.00 to $13.00 can be
charged each time for incorrect
account number that’s determined to
be out of date or invalid.
Solution
The 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.
9. Understand Every Surcharge
Common Surcharges
• Delivery Area Surcharge (DAS): $2.07-$3.65
• Additional Handling Surcharge: $9.00
• Address Correction: $12.50
• Weekly Pickup Fee*: $11.00-$12.00
• Declared Value**: $2.70
• Residential Surcharge: $2.85-$3.65
• Invalid Account Number: $12.00-$13.00
*Depends on revenue spent per week
**$0.90 per $100.00 value
12. 10 Ways to Gain Control of Your Shipping Costs Today
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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,” 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, 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
express or air shipments for years.
Length times weight 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 you 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.
Solution
Communicate 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
