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Shipping Knowledge

Pallet Shipping Cost: Rates and LTL Benefits

By Shipware | eCommerce, Shipping Knowledge | No Comments

Determining shipping rates for LTL freight isn’t always straight forward. There are various ways to determine fees, including a pallet shipping cost or a more complex freight cost incorporating multiple pricing elements. Shipping less than truckload (LTL) can be an expensive and slow freight shipping option, but the flexibility is helpful and sometimes it’s the only way to move the cargo in a cost-effective manner. Understanding the various pallet shipping cost options and how carriers factor into LTL shipment rates will help in planning for your shipment. Continue reading for freight shipping tips so that you can begin saving on pallet shipping.

The Importance of the Pallet and Pallet Pricing

Pallets help a shipper organize the freight and minimize damage to its cargo during transit. It also helps determine pricing, as the space used by a shipping pallet is somewhat standardized. When palletizing goods, it’s smart to use stretch wrap around it, so the goods remain securely in place. That helps protect them from damage, but also from falling off the pallet, where goods can be lost or even damage other cargo. Using the shipping pallet helps with storage as well. 

Pallet pricing is the easiest way to assess the shipping rate. It’s standardized, as pallet shipping rates do not vary by factors like freight class, dimension, weight and density, but by pallet number or weight. The shipper provides the pallet dimensions (length, width and height) along with the weight. And the palletized cargo is then put into a rate bracket. If the next pallet size or weight is different, it goes into a different pallet shipping cost bracket. It’s easier to compare rates between LTL carriers, as the pricing is simplified.

When looking into LTL freight shipments where pallet shipping rates are offered, the carrier may have rules for shipment under that model. That might include the freight shipment using stretch wrap or secure strapping. The carrier may require that the bill of lading (BOL) is posted clearly on the pallet, noting that pallet rates apply. The driver might sign or account only for the pallet shipment by how many pallets there are, not the number of items on the pallet. The carrier may require that the shipper is responsible for unloading. The carrier may specify acceptable pallet sizes and maximum weight per pallet. They may not offer accessorial services, like lift gate, unloading or inside delivery.

Pallet Type

Pallets come in varying sizes and materials. The carrier may have requirements for an acceptable pallet type for pallet shipping. The standard Grocery Manufacturer Association (GMA) pallet size is 48″L x 40″W, with heavy items not exceeding 4,600 to 1,650 pounds. More than 30% of U.S. pallets produced are GMA pallet size. But acceptable pallets can also be 42″L x 42″W or 48″L x 48″W. The slats may be 2” x 4” with the deck boards sometimes measuring 3 ½” W and 5/16” thick. The typical pallet is 6 ½” tall and weighs 30-48 pounds with no freight. The pallet weight can vary by material. Metal pallets might have a different weight than a wood pallet, plastic pallet or a paper pallet.

Pallets are made from various materials and with different features. A stringer pallet may be made from 2” x 4” slats, with slats or stringers turned on the 2” side sandwiches between the top and bottom layer on the sides and middle. A stringer pallet can be a wooden pallet, plastic pallet or metal pallets. A block pallet is the same as a stringer pallet, but the planks in the middle of the pallet are thicker blocks. Some prefer a block pallet as it may be sturdier. Pallets are built to allow forklifts to pick them up and transport them, from two or four of the sides. 

LTL Freight Rates for Pallets

Cargo in full truckloads in a freight truck may be charged on a per-mile basis or may be quoted on a weight plus fuel rate. For smaller shipments, the carrier may offer LTL freight shipping rates or a pallet rate. LTL freight shipping is used for pallet delivery or any container load that is too large for parcel carriers but too small for a full truckload. Volume freight fits into this category as well, with a higher number of pallets or greater freight weight determining which cargo is LTL and which is volume freight. 

LTL freight shipments are often between 151 pounds and 20,000 pounds. When a carrier is not giving a freight quote based just on pallet size and weight, the total weight may impact the pricing discounts from LTL carriers. LTL freight rates include distance and weight, but with additional factors like density and freight classification.

Freight Quote Breakdown

This is how carriers might break down freight quotes if they’re not using pallet shipping rates.

Distance: The further the distance, the more the pallet shipping cost. That’s because of labor, fuel, equipment use and opportunity cost for the driver and carrier. LTL carriers may specialize in specific regions, so that may impact which will offer freight quotes and which might transfer your pallet shipment to another carrier midway. 

Weight: Carriers may use a base rate per hundred pounds, that pallet rate altered depending on the freight pickup and pallet delivery location. The higher the total weight, the lower the quote per hundred pounds of cargo. It may be worthwhile to distribute the palletized cargo differently to take advantage of weight breaks, or discounts for heavier freight.

Density and cube: Cubic meter volume is one factor in LTL shipping. Cubic meter volume is assessed by multiplying length x width x height. With pallet shipping, measure the entire pallet for cubic meter volume, not individual parcels. To determine density, divide the weight by cubic volume. Density may be used instead of weight to determine pricing.

Chargeable weight: A carrier may use chargeable weight, the larger amount of either the actual or dimensional weight. If your pallet shipment is going via air freight, the chargeable weight might be the actual weight, while via ocean freight in a shipping container, the ship would be more interested in volume and dimensional weight. A freight forwarder can help you determine these amounts. 

Freight classification: Freight classification is important in LTL shipment rates. There are more than 18 National Motor Freight Classification classes, using value, product density, handling, stow-ability, and liability factors. Rates for higher classes cost more. Freight all kinds (FAK) allows products in different classes to be shipped and billed with one freight class, which can result in a cheap freight shipping cost for the shipper.

Base rates: LTL carriers determine their own base rates for each lane, the minimum freight cost to move and ship cargo.

Accessorial services: These additional services, like lift gate services, are not included in the price and are considered extra. 

Fuel surcharge: Rates are set on a determined fuel rate, and surcharges are assessed to cover the difference in actual fuel rates.

Pallet Shipping Rates vs. Traditional LTL Freight Rates

Determining pallet shipping cost is easier using the simplified freight rate quote, versus the multiple factors involved in traditional LTL freight quotes. Using pallet shipping rates makes the planning process simpler for the shipper and carrier, and can make invoicing easier. The pallet shipping cost is agreed upon in advance, and slight variations in weight would not matter. If the pallet is a standard size, then the dimensions would not matter either. The invoice would be the same as negotiated before pallet delivery – no surprises. 

LTL freight rates can change after the pallet delivery, however, if there are variations in what the shipper sent and what the carrier said they received. This can result in confusion and potential disagreement about the invoice. Perhaps freight classification was erroneous or the cubic volume was slightly off. The weight might be different. These can all result in audits and changed invoicing. The invoices may have inadvertent errors that the shipper would not understand or appreciate. Trying to find these errors or service level changes, especially if shipping many pallets and LTL shipments in various lanes and with multiple carriers, is a fool’s errand.

Shipware- Saving You LTL Costs

Fortunately, parcel and freight audit and recovery services can help with these issues. Using automated software like Shipware’s, invoices are analyzed daily for service level failures and invoicing errors. Identifying and investigating potential errors can result in found savings that are difficult and time-consuming to assess by employees. With the fine-tuned software, finding these errors is much easier and does not involve the shipper’s time. Shipware requests the carrier credit or refunds any errors, directly to the shipper. There is no out-of-pocket cost for this service, as the fee comes out of the shipper’s savings from the audit and recovery itself. If the shipper doesn’t realize any savings, the audit recovery service doesn’t either.

Shipware can also help with contract freight negotiation and modal optimization. Ensuring that the shipping service needs are met may include lowering the shipping cost, choosing the right carriers, and negotiating the right freight contracts. Shipware’s in-house experts come from the carrier side, where they negotiated shipping contracts on behalf of the carriers. They now use that knowledge to help shippers get the best shipping rate and contracts possible. Call Shipware to see how we can help you lower your shipping costs.

How to Get Cheap Freight Shipping With No Extra Costs

By Shipware | eCommerce, Shipping Knowledge | No Comments

While Amazon and many vendors offer free shipping to customers, those products first have to get to the distribution centers and warehouses. To keep prices as low as possible for customers and the shipper’s own bottom line, there’s a constant need for cheap freight shipping. It’s not an easy problem to solve, but there are ways to lower freight shipping costs to be more economical. 

When shippers ask, “how much does freight shipping cost?” the answer is always “it depends.” Freight shipping rates depend on the distance, the lane, the weight, the volume, the freight classification, whether it’s a full truckload, or less than truckload LTL shipment. It depends on whether the cargo is on a pallet, if it’s oversized, if the cargo contains heavy items or lightweight items, and the delivery date needed. Getting cheap freight shipping is possible, but that comes with a lot of planning and education.

Tips for Getting Cheap Freight Shipping

Here are some freight shipping tips for lowering shipping rates and minimizing additional costs.

1. Consolidate with Full Truckload Freight

Shipping a full truckload of freight is usually around 430,000 pounds and equals about 18 to 26 pallets. A shipper may not always have that much freight, but consolidation is one option to get there. LTL freight rates are higher when distributed across the entire freight shipment, so if it’s possible to ship more freight on one truckload, the shipper can realize savings. LTL freight shipping includes cargo too large to ship by a parcel carrier and too small to ship via full truckload freight. If shipping multiple LTL freight shipments to the same customer or warehouse in a short timeframe, they can be combined into one. If these shipments occur regularly, combining them to ship less frequently can help provide cheap freight shipping.

2. Increase Shipping Flexibility

An LTL carrier may tell the shipper it will take more time to get the cargo to its destination because the carrier will wait to fill the truck, and will make stops along the way to deliver freight and possibly pick up more. This can be economical for the shipper if the freight cost is right. Flexibility gives a shipper negotiating power to help lock in that cheap freight shipping. Being realistic about delivery timelines is important. The shipper shouldn’t promise the goods to the customer in a short time frame if they’re planning to take advantage of a slower and more economical freight shipping service.

Volume freight, a freight level in between an LTL freight shipment and a full truckload, can often be a good choice for a shipping quote. Multiple carriers may be able to offer a spot rate based on the freight carriers’ capacity.

3. Pack the Pallet Properly 

If the LTL shippers have small parcels that can be stacked together on one pallet, instead of shipping them individually, they can go via cheap freight shipping, and be tracked once instead of individually. Ensuring the pallet is packed tightly, without loose spaces, can help with efficiency. Be sure to measure the pallet correctly so there is no overage, which brings additional charges. Also, shrink wrapping the pallet will keep everything in place so it won’t slip or fall off, and will minimize damage to the goods. Keeping the top flat means the pallet is stackable. If it’s not stackable, this can affect the pallet shipping cost, as the carrier may charge for the unusable space above it. 

4. Know Your Shipment

If you’re able to measure your shipment dimensions, that can help in planning for a freight quote and comparing freight shipping service. It also helps avoid surprises after the invoice arrives. That includes weight and dimensions (length x width x height) rounded up to the next inch. Carriers will weigh pallets and use dimensioning machines to know exact specifications. If there’s a mismatch between your calculations and theirs, you’ll be charged for it. They need accurate information to know what will fit on the truck. Freight classification matters as well, and it must appear on the bill of lading (BOL). 

5. Understand the Pricing

Understanding the freight rate means understanding base rates and minimum charges. Freight carriers have an absolute minimum charge for LTL freight costs so they know they will clear a certain amount. Carriers may use a chargeable weight, which means they charge the higher of the dimensional weight or the actual weight. This makes a difference when shipping via air freight compared to ocean freight shipping. For air cargo the airlines are most concerned about the actual weight, while ocean freight carriers focus more on the dimensional weight or volume. So the same freight going on a container ship via sea freight may be charged differently than by air shipping. Pay attention to discounts for LTL freight costs as well. The base LTL freight rates may vary between LTL carriers, so discounts are then affected as well. 

6. Invest in Insurance

While a carrier may include some liability coverage in the price, the shipper should consider whether to get additional coverage from the carrier or elsewhere, depending on the value of the LTL shipment. The carrier liability limits may not be up to par for the goods shipped. While insurance is an added cost, using cheap freight shipping and relying on it for full liability coverage may not pay off in the end. 

7. Review Your Accessorials

Accessorials and surcharges are not included in a freight quote, so it’s important to understand what they are and whether you might need them. They can add a lot onto freight shipping rates. Accessorials include lift gate service, delivering to locations with limited access, delivering inside a building, deliveries requiring an appointment or delay, and residential delivery or pick-up. Fuel charges, while not an accessorial, are commonly added as a surcharge. These fees may be negotiable, but not all LTL carriers offer them. Understanding where the cargo will be picked up from and delivered can help with this equation. Does the destination have a loading dock? Is an inside delivery required? Does the consignee require an appointment? This all affects cheap freight shipping costs.

8. Work with a 3PL 

A 3PL can make it easier for a shipper to ship freight, with that company handling the logistics and freight booking. But that doesn’t mean it will be less expensive, even if they have negotiated a discounted freight rate with the LTL carrier. If you’re working with a 3PL, you may be contracted to use their LTL freight shipping services. Shipware can help your company ensure you’re not paying more for the services than you should, through contract optimization services. Our 3PL contract optimization experts worked at 3PLs in executive positions and are freight experts, understanding the nuances of the freight contracts to help your company get a fairer deal. To get the most out of our contract, contact our experts for logistics consulting.

9. Determine the Best Modes

In order to get cheap freight shipping, the shipper will want to create a good shipping strategy before collecting a freight quote. This strategy requires understanding the shippers’ past and forecasted shipping data to understand how much capacity was used before, along with characteristics of the cargo, including freight class. Compare that to anticipated needs going forward to determine how the shipping needs will differ. Don’t assume that the shipping strategy must be the same, however. Understand the type of goods, delivery destination, frequency, volume and weights. 

The modes your company is using for cheap freight shipping may not be the best ones. You can use air freight, ocean freight, rail freight or trucking. Depending on delivery destination, your freight could travel via regional carriers, with long-haul transport provided by long-haul carriers. If small enough, your goods might be better sent through USPS as ground shipping. Shipware can help you analyze your shipping mode needs based on past and anticipated LTL shipping. Using modelled analytics, Shipware would offer solutions that would improve transportation time and lower freight cost. While carriers prefer you to stay with their service, and offer discounts to do so, you might need multiple carriers to fulfill all your transportation and shipping needs. 

10. Optimize and Negotiate shipping contracts

Freight shipping is a labor-intensive process full of hidden fees, service levels and tracking. So is small parcel service. Shipware can analyze your full freight spend and shipping profile to help identify potential savings through contact optimization. That includes understanding parcel contracts and how they might be better negotiated. Our volume shippers find they are spending more than they should on the same services, and that renegotiating their contracts, with help from Shipware, can save them up to 30% on annual shipping costs, and they’ll receive best-in-class pricing. Our contract freight negotiation experts are former carrier executives who understand what is negotiable and by how much. They can look far beyond a general discount rate to find hidden savings opportunities the shipper wouldn’t find on their own, and they wouldn’t have the negotiating strategy to get these rates.

11. Conduct an Invoice Audit and Recover Shipping Costs

Getting better negotiated rates is one thing, but holding the carriers accountable for those rates is another. Inadvertent errors are made on 90% of invoices, in our experience. Identifying these errors is nearly impossible, given the bulk of shipping invoices and the lack of intimate knowledge about each shipment and pricing policies. Even an expert combing through the invoices daily will miss many of the errors. As a service to our clients, Shipware offers parcel and freight audit and recovery services using an automated software program with artificial intelligence. Invoices are analyzed each evening, combing through for invoice errors and service level failures, and then sending credit requests to the carriers. The credit arrives in the shippers’ account without any work on their part. With no out-of-pocket cost, the invoice auditing and recovery service pays the fee out of the shipper’s savings. If there is no savings, Shipware makes nothing.

Cheap freight shipping is only one part of the big picture with shipping. It’s possible to pay less, but the shipper has to be on top of the many factors involved. As freight experts, we know how to make it easy to save on shipping. Call Shipware to find out how we can save your company money on many levels.

8 Ways CPG Companies Can Stay Agile in a Changing Marketplace

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How to Optimize Freight Contracts to Save Money

By Shipware | Contract Negotiation, Invoice Auditing, News, Shipping Knowledge | No Comments

Freight contract negotiation is a prime way to improve operating expenses. Shipping is expensive and a vital function of many companies. Optimizing the transportation contract, whether with a shipowner, trucking company, or parcel carrier, means a leaner supply chain and better financial. Below we’ll cover different freight contracts and offer different freight shipping tips that will help you optimize your contract.

Types of Freight Contracts

There are various types of freight contracts. In the big picture, they detail the liabilities and responsibilities for the carrier and those of the freight broker or shipper. Freight contracts typically include information about the freight carried, the agreed-upon rate, the delivery time range, and any necessary verifications required for delivered freight. Freight contracts can be signed on a yearly basis or for a set time period, or they can be one-off contracts where you get spot market rates for less frequent or variable shipments. Volume freight shipping also impacts contracts and rates depending on if it’s for FTL or LTL shipping.  

Broker-carrier Agreement

The broker-carrier agreement (also called a motor carrier-broker agreement) includes the broker and the carrier’s contact information and corporate names, and the motor carrier (MC) number. The agreement contains the date, delivery fee, how many days the shipper has to pay, any invoicing procedures, and liability and insurance information. It may specify subcontracting rules, how to handle pricing or other disputes, and customs compliance information. This may be considered a master contract for the relationship, with details such as rates and destination changed or negotiated per shipment. That resulting information would then be on the rate confirmation and load tender agreements.

Bill of Lading

The freight broker or shipper provides a bill of lading before the cargo is hauled. It’s considered a receipt that is given to the consignee by the freight carrier. It includes details about the freight, special instructions, destination, and delivery time period. It acts as proof of delivery and is often needed to submit for payment. The bill of lading might have a separate rate confirmation page or the rate may be included on the bill of lading.

Load Confirmation or Load Tender

This type of freight contract includes logistics details like pick-up and delivery address, hours of operation, the trailer type and details (measurements), anticipated weight, and freight description. It may also include a trip number for tracking purposes. If there is a commission or brokerage fee structure, that would be included as well.

Accessorial Charges

Even if the payment is already determined, accessorial charges are sometimes added if the services exceed the transportation service scope. They might include waiting time, shipment refusal, storage, tarping, fuel surcharges, or other delivery parameters. Contract labor is not necessarily an accessorial charge, but may be an additional fee if contract laborers will be used to unload the truck at the consignee’s location. A separate receipt may be given for this.

Rate Confirmation

This confirmation can be an independent freight forwarder agreement or part of a load tender form. The rate confirmation clarifies the rate to be paid to the carrier by the shipper or freight broker, and it must be signed by the carrier to be valid.

Optimizing Your Freight Contract Through Negotiation

Negotiation is an important tool in controlling each shipping cost whether it’s pallet shipping cost or accessorial charges. If you’re asking, how much does freight shipping cost, the answer depends on each carrier’s rates. Shipping can be a huge expense for companies, and those who don’t negotiate the best rates will be hurting their bottom line. If shipping overseas, the shipper will likely negotiate through freight forwarders to get pricing from shipowners. Freight negotiation with shipping companies for larger shipments like full truckload (FTL) or partial truckload (PTL) may be separate than negotiating contracts for parcel services.

Areas to Optimize For

There are a number of areas for carrier contract optimization negotiating. Here are some of them.

Exclusivity

Parcel carriers are always trying to figure out how to get contracts with shippers, either new companies or taking away parcel shipping services from their rivals. This provides shippers with some leverage. They can promise all their parcel shipping to one carrier in exchange for lower rates. Or they can negotiate with multiple carriers, but know that the rates per carrier may be higher as a result. It may be worth it, if committing some of that capacity to regional carriers. Carriers want to qualify shippers for discounts using revenue bands, and shippers commit to a certain volume to get these discounts. Being exclusive to one freight carrier is a good way to stay in the revenue band.

Charges

Minimum charges and dimensional pricing are two areas where charges can greatly differ for each shipper. Carriers like to assess a minimum charge to ensure they are making a certain amount of money on each package, no matter the size or weight. Dimensional pricing has changed over the years. The carriers use a dimensional (DIM) weight, which is calculated as length x width x height, divided by a standard 139 divisor. That divisor is not set in stone. The number has gone down in recent years, which makes it more expensive for the shipper. The number, however, is negotiable as part of the contract freight rates. The minimum charge is also negotiable.

Accessorial Costs 

Just like accessorials are part of the freight contract for large shipments, they’re part of the parcel contract as well. Accessorials are surcharges for conditions outside of what the carrier sees as typical. They added fuel charges when fuel costs were high, and those stuck around. Carriers charge extra to deliver to residential addresses, to deliver oversize packages, those that won’t easily run through their automation equipment (e.g. additional handling), and those delivered outside the major service areas. 

Reviewing Services

A shipper might be getting services that aren’t necessary, which costs more money. For example, a shipper can opt for SurePost which charges no residential delivery fee, instead of sending residential items through UPS. They may be using air cargo instead of ground service, when ground would get the parcel to its location in a reasonable timeframe. Companies can also negotiate for faster transportation service or better customer service instead of a rate decrease.

Negotiating freight contracts is best done with an understanding of your shipping needs, your past shipping history, and your shipping characteristics. There is a lot of data to parse and analyze, and it can be confusing to know all the details are necessary for the most effective negotiation. Understanding how much of the shipping falls under DIM weight and minimum weight is key, as is understanding which accessorial charges are most frequent and driving up your freight costs. These are just a few of the characteristics that drive negotiation requests. 

Shipware, through our parcel rates negotiation consulting services, helps shippers gather and analyze the data and a negotiation plan. Our shipping consultants worked as executives at the big carriers and know what areas they can negotiate, and by how much. Some shippers go it alone and are able to make a dent in their contract rates and services, but Shipware can see the negotiations and the shipping contracts holistically. We can walk you through the process behind the scenes, guaranteeing that you will get a better carrier contract and a cheap freight shipping cost than you’d get on your own.

Optimizing your Freight Contract Through Parcel Audit

Negotiating freight cost and contracts with shipping companies is important. But ensuring you are not paying charges you shouldn’t be paying is important too. Parcel audit is sometimes called audit recovery. Carriers make promises to deliver a package by a certain time or you get your money back. Companies don’t have the time or resources to track every package and compare the delivery time to the invoice, and then follow up with a credit request. There are other charges that come through as well, that are even less obvious. That might include charging accessorial charges that are incorrect. Perhaps a package went to a business address but was tagged as a residential delivery. Your company would be paying an additional fee for that, if it’s not caught and tagged by a parcel audit.

Save Money with Shipware 

Having a team of parcel auditors will save your company money, and not necessarily cost you anything. For Shipware it starts with a free analysis of your parcel service to identify whether you are paying for services you’re not getting, or if there are recoverable mistakes on your invoices. Shipware uses a software system that combs through each invoice at the end of the day, requiring no shipper work. It identifies errors and automatically requests a credit from the carrier. The system flags any questionable items, followed up by an auditing expert who can manually investigate the charge and request a credit if needed.

Using a parcel auditing service is like finding money on the ground. It may have fallen out of your wallet when you weren’t looking, but it’s your money. The service costs the shipper nothing, and results in cost savings. The auditing fee comes from the amount saved, so the shipper comes out ahead no matter what. These shipping errors will not be highlighted by the carrier. It’s up to the shipper to find and request them. It’s a great way to lower the cost of shipping while making no effort.

Freight negotiation with shipping companies and for parcel contracts is an important way to lower your transportation costs. It can be time-consuming initially, to get ready for an effective negotiation. But the cost savings are worthwhile. Shipware can be your partner in this process, making it easy for you to negotiate better contract rates and terms. Reach out to us to see how we can help.

Minimum Charges: What Do They Mean to Shippers?

By Shipware | News, Shipping Knowledge | No Comments

Hello, I’m Keith Myers and today we’re going to talk about Minimum Charges and what they mean to shippers. I’m a Senior Consultant here at Shipware and looking forward reviewing this.

As far as what we’re going to talk about, we’ll start with what Minimum Charges are and then we’ll discuss how they work and, really, why you should be concerned about them. Because, they do matter, and they matter a lot.

The best way to define a Minimum Charge is that it’s the lowest rate that a shipper will pay to ship a product. Every single service for UPS and FedEx has a Minimum Charge and how those are defined varies by Service. Typically, it’s going to be based off of the least expensive current list rate for that service.

So, for example, if you’re looking at Ground or UPS SurePost or FedEx SmartPost, the starting point for that will be the Zone 2, 1 lb. rate. Then, typically, there are further adjustments from there. If you’re looking at UPS Next Day Air or the matching service for FedEx, Priority Overnight, and it’s the Zone 102 for UPS or the zone 2 FedEx 1 lb. rate — letters and envelopes, it’s the same ideas in 102 or Zone 2, but its weight is irrelevant, of course. The weights for letters and envelopes aren’t factored into that.

For import and export, it’s going to be the 1 lb. rates. So, it’s going to vary; for every individual Zone there will be a different Minimum Charge. The Zone definitions are slightly different between UPS and FedEx. Again, this is where you start, and there will be reductions off of those as you’ll see when we discuss what the minimum looks like on your actual agreement.

FedEx and UPS have set up their agreements differently. FedEx groups their Minimum Charges with the corresponding service.

So, as you see on the left, this top section is from the Ground services. You have Ground Domestic Single Piece, Home Delivery Domestic Single Piece, Applicable Zones and the Minimum Charge associated with that zone. Down below we have the Domestic Express and a subset of services from there – Priority Overnight Envelope, Pack Overnight, etc. You have the Minimum Charge Zone 2 Envelopes, Zone 2, 1 lb., and then the reduction off of that Minimum. Keep in mind this says “Reduction,” so for Priority Overnight Envelope, the Minimum Charge is not $10.50, it is $10.50 less than whatever the Zone 2 Envelope rate is.

UPS, over on the right, group their Minimums by Domestic and International. This is a domestic minimum section that you would see on your agreement. You can see you’ve got the Express services listed first and then Ground Commercial and Residential down at the bottom. Same kind of idea – you can see the Ground rate for the Ground Minimum is Zone 2, 1 lb. for Commercial and Residential. For the Express Services, it’s the same thing — the 102, 1 lb. rate and then there’s an adjustment off of that. That adjustment is 55%. Same logic applies as FedEx. so that’s the minimum charge you would pay would be 55% less than the Zone 102, 1 lb. rate.

How this works – there’s a lot of numbers thrown at you there – but really, I think the best way to do this is to show a simple example how the Minimum Charge really comes into play. What we’re going to talk about is a 10 lb. Ground shipment that’s going to Zone 4 with a 50% discount on FedEx. If you look in your service guide, you would see that the FedEx Zone 4, 10 lb. rate is $13.27, and you have a 50% discount on that, then you would pay $6.64 for that shipment.

However, the Zone 2, 1 lb. rate, which is the Minimum Charge that we looked at previously, is $8.23. So, the shipper in this example would pay $8.23. They would not pay that $6.64. Effectively, they’re only getting a 38% discount instead of that contracted 50% discount. Essentially, they’re paying about 24% higher than what they would if the Minimum was not in place.

Something to think about, if that customer went to FedEx and said, “Hey, I want to improve my rates,” FedEx came back and said, “Great, we’re going to give you a 65% discount on this shipment.” How much would they save? They’d save absolutely nothing if they don’t do anything about that Minimum Charge. They would still pay $8.23. That’s really how the Minimums can impact what a customer is paying. It prevents you from getting the full benefit of that discount.

Another way to illustrate this is looking at some net rates.

If you’re a near-Zone shipper and a lot of your products are going 150, 200, 300 miles away where your customer base is, or if you’re shipping a lot of lightweight products, that Minimum Charge is really going to be important. This example lists the net rates if you have a 40% Ground discount with FedEx. You can see that in all these rates that are shaded in red, $8.23, you’re not getting the full benefit of your discounts in this example. You’re not getting that full 40%, you’re getting less than that. If you’re a Zone 2/Zone 3 shipper and your products are up to 14 lbs., you’re not getting that full discount, even all the way up to 20 lbs. for Zone 2. If you’re shipping lightweight packages, 3 lbs. or less, you’re not getting the full 40%. You’re going to pay $8.23 no matter where you’re going in the country. So, it’s important to really be aware of what those Minimums can do to your rates.

If you’re trying to find out, “Did I pay a minimum on an invoice?” – it’s not the easiest thing to figure out. FedEx is a little more transparent than UPS is. Here are examples for both.

You can see on the left; FedEx has a very simple sentence. It says, “Net charge represents minimum package charge for this parcel.” That’s FedEx saying you did not get your full discount, the Minimum Charge came up, and that’s what we’re reflecting here.

UPS has their invoices structured a little bit differently. They have these invoice message codes that they use to show what changes were made or what rating logic was applied to each individual shipment. For UPS, they have this message code called “ag” which means Minimum Rate Applied. So, if you see that message code at the bottom of your shipment, then you’ll know you did not get the full benefit of that discount, that you had to pay the Minimum Charge. You can see from this example, of the $8.23, they only got about a 6% discount instead of the 35% or 40% that would be on their contract.

Now that you understand what they are and how to find them, what do you do about Minimum Charges? The first thing you want to do is understand how many of your shipments are getting impacted by those Minimum Charges. If you’re a heavy Ground shipper, or you do a lot of SurePost or SmartPost shipments, then those Minimum Charges are really going to come into play. Express shippers, it can happen as well, but it’s not quite as common. You still want to go through and work them out, particularly if you’re sending a lot of light packages Express.

Once you get all that quantified, it’s important to know these Minimum Charges are negotiable, just like everything else on an agreement. Put that information together and go to your carrier and say, “Look, I’ve learned that 30% of my shipments aren’t getting the full discount. I need to get a concession on my Minimum Charge.”

Thank you for learning about Minimum Charges. If you have any questions or comments, please email us at inquries@shipware.com. Thank you and have a great day.

How to Reduce Transportation Cost

By Shipware | eCommerce, Shipping Knowledge

It’s never been more important, nor more challenging, for less-than-truckload (LTL) and parcel shippers to reduce their transportation costs. Demand for carrier services is high, especially in parcel as the COVID-19 pandemic drives e-commerce volumes to unprecedented levels. LTL and parcel carriers operate in high barrier-to-entry businesses. The relative lack of competition has allowed them to consistently raise their prices faster than inflation. How can businesses better understand the shipping industry and reduce their transportation costs? At Shipware, we offer shipping consulting to get businesses the best out of their shipping contracts and help you save money. Our experts have put together a guide that will help you understand your business’ transportation costs and learn how to optimize them.

An Inside Look Inside the Shipping Industry

The parcel segment, in particular, has become a tough nut for many shippers. Besides levying higher rates, FedEx, UPS, and to a lesser degree, the U.S. Postal Service, impose what are known as “accessorial fees” to cover the cost of services beyond the basic pick-up and delivery. Accessorial charges continue to increase in number and in price, dinging shipper budgets as a result.

Even more concerning in the era of e-commerce, carriers are leaning more on dimensional weight, rather than a shipment’s actual weight, to build and bill their rates. This penalizes shippers who tender lightweight consignments that are bulked up with dunnage, the inexpensive waste material used to load and secure cargo during shipping but which add heft, and cost, to a package.

Meanwhile, Amazon.com. continues to apply the pressure by offering next-day shipping at no cost for Amazon “Prime” members. In the age of Amazon, shippers face the prospect of lost sales and lower revenue for charging too much or taking too long to ship parcels.

How to Optimize Transportation Costs

The good news is there are concrete, common-sense steps that shippers can take to mitigate the upward spiral and reduce transportation cost. Some steps are specific to each mode. Others can be used in both. Let’s start with LTL:

LTL Solutions

LTL carriers offer nothing but time and space. LTL charges are based on weight and space. That’s why it will cost more, on a relative basis, to ship something bulky like pillows than a dense product like bricks. The less room your shipment occupies on a truck, the more space the carrier has available to sell to other people, and the less they need to charge you. 

1. Efficient Packing

Because of the above, you may receive immense cost savings from efficient packaging. Use the smallest container that will hold your product safely during shipment, and bundle or stack your cartons together firmly. The smaller the total volume of your load is, the more cost-savings you can receive.

Investing in improved packaging solutions is money well spent, because packaging costs are minimal compared to shipping costs. Your logistics staff should also get involved in the package design and development process, and they should know what makes a product easy to stack and ship for cost-effective logistics. While higher-end packing may seem like a costly endeavor now, it will help you minimize the size of your shipment, thus paying for itself and more when it comes to negotiating with LTL carriers. 

2. Group Shipments

If time-in-transit is not important and your products are non-perishable, consider grouping shipments together as opposed to shipping a few smaller shipments at different times. It is more efficient for your LTL carrier to pick up a few, larger shipments versus filling a truck with a ton of smaller shipments. By doing this, you can negotiate better rates with your provider.

Your carrier may also offer tiered pricing based on the different weight thresholds. For example, there may be a base rate for loads up to 499 pounds and different rates for loads that weigh between 500-999 pounds, 1,000-1,999 pounds, 2,000-4,999 pounds, etc. It’s important to know what these thresholds are because you may be able to get your load to qualify for a low-cost weight class if you combine your shipment. One 1,500-pound shipment could cost much less than three 500-pound shipments.

3. Ship on Off-Peak Days

If there is no time-sensitivity or urgency for shipments, consider shipping your business’ products on off-peak days, as this can bring additional savings. Work closely with your carrier to create an LTL shipment schedule that’s designed for efficiency in logistics and shipping costs.

4. Look at ALL Costs

When you negotiate, look at your overall cost, not just the base rate. The carrier will likely add a fuel surcharge and accessorial fees. Accessorial fees include waiting times, storage, packing and extra fuel, all of which can be negotiated.

5. Build Long-term Carrier Relationships 

It is very important to develop solid long-term relationships with your carrier. Being a “shipper of choice” carries tangible benefits, especially in a market for tight capacity. When your LTL carrier sees that you are actively trying to reduce costs and delays, they will be more than happy to pass those savings on to keep you as a customer. Being a “shipper of choice” also includes providing carriers with correct shipment weights and dimensions at the front end to avoid the cost and hassles of an audit.

6. Collaborate With Shippers

When possible, collaborate with other shippers to build enough freight to justify the use of a more efficient full truckload operation. Shippers use LTL because they lack the volume to afford the cost of full truckload service, which is cheaper than LTL on a per kilogram basis. You may not have enough freight to fill a full truckload. However, if you and other vendors regularly ship to the same retailers, restaurants, grocers, or other businesses, think about combining your shipments to generate a full truckload. You and other shippers can then split the transport costs accordingly. In addition, consider working with a third-party logistics provider that specializes in freight shipment consolidation to get the job done.

Parcel Solutions

The surge in e-commerce demand will continue to drive increases in parcel spend and rates. At the same time, shippers will be pressured to offer free or low-cost shipping. According to some estimates, more than 60% of consumers will abandon their online shopping carts if they see higher-than-expected shipping charges.

1. Implement a Parcel Management Program

To tamp down carrier rate increases without compromising service or turning away business, shippers of all sizes should consider implementing parcel management programs from an expert like Shipware. 

The top consultants employ sophisticated parcel shipping platforms, data warehousing, and business analytics technology that make it easier and more affordable than ever to get full, real-time visibility into your parcel spend. Enterprise parcel shipping platforms capture and store shipping data from across the enterprise and compare the data against the carrier invoices. Business intelligence tools can analyze and identify transport cost reduction opportunities. With clear data, shippers can implement improved parcel shipping processes across the enterprise. 

You cannot manage what you can’t measure. With actionable, measurable data at your disposal, you hold a strong hand with your carriers, and you can do a better job of pricing your services to your customers. For more tips on implementing technology in your shipping processes, check out our blog on logistics automation.

3. Conduct a Parcel Audit 

In addition, don’t underestimate the power of a parcel audit. Shipware estimates that up to 10% of all carrier invoices contain errors. For a company with $1 million in annual parcel spend, this is serious money. Parcel audits represent a source of recaptured revenue and help hold carriers accountable for their service commitments and performance. The consultants at Shipware are masters at identifying carrier overcharges. In more than 25 years, we have saved clients, in aggregate, hundreds of thousands of dollars in carrier overcharges.

A robust audit platform will do an excellent job of identifying and analyzing accessorial charges. Some accessorials are legitimate. However, many are questionable. All of them are negotiable. However, you first have to find them before they can be bargained away.

2. Diversify Your Carriers

Consider expanding your universe of carriers. For example, USPS delivers to every U.S. address, its rates are affordable, and its service is “surprisingly good,” said Chuck Clowdis, a long-time logistics executive who runs his own consultancy. Also, send out feelers to the network of strong regional carriers. They may not have national footprints, but they do a terrific job in the regions that they serve. What’s more, their accessorial charges are minimal compared to the national carriers.

The parcel delivery market has become more regionalized than ever as businesses look to shorten their transit times, which, in turn, drives down their freight costs. However, it can be very expensive to build and manage an in-house network of physical distribution locations. Building relationships with a network of regional carriers could be a much more cost-effective option.

3. Put Your Shipping Contract Out For Bid

If you’ve been working with the top two parcel carriers for years, don’t be afraid to put your contract out for bid. Not only might you find a better deal from other providers, but you could strike a better deal with your incumbent if it feels you are about to shift some or all of your business to a competitor. (One caveat: Keep in mind that your incumbent’s rep may warn you that less business will mean that you will drop into a lower, less attractive price band.)

Clowdis recommends an annual “shop-around” process by opening up dialogues with a shipper’s non-regular carrier. “You don’t have to do a full RFP, but you could see what’s offered,” he said. “This way, you get to gauge a willingness and interest in your business.”

4. Last-Mile Delivery

Positioning your package for last-mile logistics can work wonders for your costs. For example, USPS offers an extremely inexpensive service called “Parcel Select.” Here, consolidators induct large package volumes deep into the USPS infrastructure for final delivery. This avoids the first and middle miles of the USPS network, which can be inefficient, and capitalizes on the “final mile” from local post office to the residence, which is the strength of the network. 

5. Zone Skipping

“Zone skipping” is another important strategy to reduce costs. Parcel carriers carve up the U.S. in eight zones, with rates being set based on distance and the number of zones a package travels through. With zone skipping, shippers combine parcels into a full truckload shipment bound for the same destination zone, typically the final delivery zone. This saves shippers significant money by avoiding multi-zone moves. Zone skipping can also speed up delivery times and reduce the chances of delays and potential shipment damage.

Earlier on, we talked about the push by carriers towards dimensional weight pricing, where bills are generated based on the dimensions of a parcel rather than the actual weight. It is easy to make the carriers out to be the villain here. In fairness, they simply want to recover the cost of filling a trailer with bulky items that often carry unnecessary weight. Like with LTL, the less space your shipments occupy, the less you will be charged. 

Shippers play an important role in changing the game. Many don’t pay enough attention to the weight and size of their parcels. The excess dunnage leads to a shipping a bigger box which then incurs higher freight costs. Wouldn’t lighter, or even no dunnage suffice? 

6. Invest in Efficient Packaging

Shippers also need to explore advances in packaging technology. Can you use more polybags and fewer boxes and still accommodate the items? For example, going from a box to a bubble mailer can reduce a parcel’s weight by four to six ounces. It may seem trivial, but multiply that reduction by millions of packages a year, and the freight cost savings can be dramatic.

Small Changes, Big Cost Savings

LTL and parcel carriers have one feature in common: They live and die by density, which is the amount of space a package occupies relative to its actual weight. Much of the power to improve density, drive down shipping costs, and achieve efficiency, rests in the shipper’s hands. 

For more tips on how you can optimize your transportation cost, reach out to Shipware. We’re dedicated to helping shippers ship more and pay less. Contact us today to learn how we can help your business receive up to 30% in potential savings.

How to Save on UPS Shipping

By Shipware | eCommerce, Shipping Knowledge, UPS

UPS is a respected veteran of parcel shipping. Founded in 1907, the brown delivery trucks are well known to anyone shipping or receiving in both the residential and commercial markets. They set standards for the industry, often pushing competitors to match services, network size, and capabilities. Today, there are very few places that UPS or its partners can not deliver a package to. It is for this reason that UPS is one of the most widely used shipping services. 

The expansive shipping service requires a vast network of aircraft, trucking, depot, and even courier assets to ensure both speedy and accurate delivery. This costs money. For most businesses, just starting on parcel shipping, the published rates (“book rates”) are a fact of life. But, as a company grows in activity, UPS negotiates new shipping rates at a steep discount from those published ones. While these discounted shipping rates are a better deal than paying a straight quoted rate, there is more that a company can do to control, manage, and reduce their shipping costs with UPS such as parcel contract negotiation.

If you’re wondering how to save on UPS shipping, you’ll need to focus on 3 areas simultaneously. First, reduce the cost of today’s shipping. Second, understand how changes to the business will affect future costs. And third, include UPS shipping services and its cost structure in your plans for the future.  

Managing

1. Invest heavily in standardization.

Standardization, whether it be in processes, data, equipment, or packaging, is key to controlling your daily shipping costs. Standardized carton sizes produce predictable shipping charges. But the standardization of processes and data is even more impactful. Correcting shipping addresses to avoid the address correction or redelivery charges can remove unpredictable costs. Focusing your attention to product information over time will allow the shipping company to better utilize the cartons full size for each order. The key to this is removing variations and ad hoc responses to normal business demands to have high integrity, high efficiency, and high brand recognition.

2. Use the appropriate service

Too often, businesses get into a pattern of habit in their operations. Not from design or data, but purely from ease. UPS provides branded packaging for its Express services at no cost to the shipper when included in their contract. This makes it very easy to pack an order and even label it correctly. But that means the Express service is being used for every order. That includes orders that are going across the state, across town, or even just down the coast. Switching to UPS Ground shipping may get the package there in the same amount of time, with a lower shipping cost. Make sure the level of service matches the company’s customer expectations, but don’t ignore alternative UPS shipping services that meet those expectations at a lower cost.

3. Use the best size packaging 

One of the easiest ways to control sources of the shipping cost for UPS is to minimize the impact of dimensional billing. Dimensional billing is the practice of taking the dimensions of the package to determine the volume, dividing the volume by a factor, and creating a dimensional “weight.” The heavier of either the actual or dimensional weight is then used to determine the charge for a package. 

Addressing the density of packaging into smaller, heavier shipments can reduce the impact of dimensional weight and the disparity in cost produced on carrier invoices. As customer order attributes change, the size of orders in unit count, value, and physical size will change. And as SKU catalogs grow in size as companies expand offerings, again the carton sizes, weight and even quantities per order will also change. Thus, revisiting the optimal packaging for business is a constant, everpresent investment that can yield results. Ignoring the shifts in this area will only cause more expenses.

Planning

Next, factoring in the practices and structure of the pricing contract to future plans is required.

1. Know when and how minimum shipping charges apply

The pricing zone charts of UPS can be misleading. When the shipment is small or going a shorter distance, instead of the listed rate in the zone chart, a minimum shipping charge is used. Couple this with the dimensional weight aspect, and it is easy to expect a shipment to be charged at a much lower rate than the invoice eventually shows. 

Often, companies focus on negotiating the rates of the zone charts based on their activity, but do not understand where the minimum charges come into use. If other forces in the customer arena like smaller, more frequent shipments, new product lines, or even subscription service style routine shipping occur, the minimum may impact more than it has in the past. Knowing where and how minimum charges are applied to rates is crucial for near term planning, especially as daily business evolves.

2. Know which surcharges are applied and why

Surcharges are not all occasional fees for unusual service. Yes, surcharges like international redelivery fees are exceptions to normal costs. But others are more present or predictable and, therefore, controllable. For example, fuel surcharges apply to every shipment while others apply depending on the recipient’s address, such as the remote, extended, or delivery area surcharges. But some are more difficult to predict and therefore control. The additional handling surcharge is applied for oversize shipments and cartons. Whether a depot charges it for a specific shipment is up to the supervisors and staff of the depot and other surcharges are specific to how UPS classifies an address. If the recipient is in a residential area and therefore is not on the route for commercial deliveries, residential surcharges may be applied. 

What complicates this is that these surcharges will differ between ground, air, international, and freight services. It is difficult to know which surcharges will be used for new business, new locations, and even seasonal shipping shifts. While the base rates for shipping are more easily negotiated, surcharges often end up being a significant line item in the shipping budget. Controlling the occasional, minimizing the consistent, and avoiding the obvious surcharges are key to handling the ebb and flow of shipping costs in the near term. One way you can control the costs on your invoice is by conducting a parcel audit. This allows you to review each line item and get refunds on shipping costs.

Strategy

Finally, the details of the contract and the capabilities of UPS should be considered in strategic plans.

1. Determine the ideal facility locations based on activity

The data collected by UPS during shipping operations is both specific and large. Every shipment, every charge, and every package is tracked and logged. This information can be used to determine many things about future plans of a company. The pattern of carton weights can help determine if shipping charges are too high and an incentive program to increase shipment weight would help margin. The level of shipping correction charges can help determine the quality of data entry and lead sources. 

One of the most useful, and often ignored, is the volume activity from each UPS shipping site. Remember that zone maps are specific to the shipping location. What is considered a zone 3 for one site is considered a zone 6 for another. The value is in analyzing where shipments go for each site and the similarities or differences in the shipments. A company expanding into eCommerce will begin to ship smaller shipments to customers. Often this is done from the largest, most experienced, or most flexible existing location. But looking at the data from UPS can suggest a new location to reduce ecommerce shipping costs. And by segmenting the data by weight, it may suggest a location best for ecommerce different from the older style commercial shipments. This is all contained in the data UPS has about each company’s shipping volume.

2. Focus on increased volume to earn better discounts

Due to the factors of dimensional weight and minimum charges, there is a tendency to focus on increasing non-parcel shipping, shifting to LTL when possible. To really save more money on UPS shipping charges, however, the key is to increase the amount of parcel shipping across all services and zones. UPS offers tiered discounts based on the total amount a company spends. The more spent, regardless of how, the more the company earns in a flat rate discount. This creates an incentive to both concentrate the shipping of parcels with UPS and to explore more options and services for new business. Services like cross-border consolidation, customs clearance, even LTL deconsolidation may allow more shipping expenses to be funneled through UPS, increasing the savings.

3.  Consider alternate forms of shipping 

Over the years, UPS has added new forms of shipping services to meet both service and cost demands of its customer base. From early A.M. Next Day Air services to Surepost to even hundredweight shipping, there are many options for any company shipping parcel. When planning for new products, locations, customers, or even distribution models, it is best to consider more than just the obvious services from UPS.  

An excellent example is the UPS Surepost service. This shipping service uses the United States Postal Service (USPS) for the actual delivery to the destination but the UPS distribution network for the major portions of the transport. It exists as a costconscious alternative to pure UPS ground shipping service. When considering future business operations, companies who need a low cost, non-delivery datespecific services should consider Surepost. This is a great shipping option for the sending of spare parts, large scale kit distribution, and high volume seasonal shipments such as subscription services. 

Knowing the alternatives that UPS has internally for each shipping need can help make costsaving easier while not endangering the discounts and negotiated rates already in place.

4. Renegotiate your contract

9 times out of 10, volume shippers are overspending in their UPS contracts. As you can see, there are so many factors that contribute to your overall shipping costs. Parcel contract negotiation allows you to re-evaluate your contract and get the most out of your contract. With experts like Shipware, you have inside knowledge of the carrier industry to help you save on UPS shipping. Shipware works on your side, negotiating for the rates that your carrier isn’t telling you about. For more tips on contract negotiation, check out our guide on how to prepare for parcel rate negotiations.

Conclusion

UPS is not only an experienced handler of parcel shipping, but a large network of services and capabilities. To actively save money using their services, focus needs to be maintained on current operations, planning for the near term, and including UPS and its structure for future operations. For more information, contact a professional from Shipware today.

Cost Reduction Techniques in Logistics

By Shipware | eCommerce, Shipping Knowledge

Whether companies ship items in high volumes or just occasionally, logistics can contribute a large percentage of costs. One consideration when looking at the annual budget is ensuring the company has a cost-effective logistics operation. Management and logistics are a big part of the supply chain, and fortunately, many areas can be trimmed and tweaked to work more efficiently. But it does take thought and understanding, which can be achieved through logistics consulting and an audit on your shipping invoice. A company must be willing to seriously dive into various cost centers and departments, while keeping an open mind to upgrading systems and processes. The top reason that businesses reexamine their supply chains is to lower the overall operating costs, according to the 2019 Third-Party Logistics Study

Here are several methods and tips for cost-effective logistics.

1. Understanding Your Costs

Logistics management covers many areas, including warehouse space and inventory-carrying costs, picking and packing, and transportation. The total logistics expenditure as a percentage of sales revenues was 11% in 2019, per the study, a percentage that remained stable over the past few years. The first step to reducing logistics costs is looking at your current costs. Understanding the landed costs of goods is important to understanding the big picture, as it can influence the various components and choices involved. A shipper might choose to source or manufacture goods from a different location if tariffs become unreasonable and don’t balance out the lower production costs, for example. 

2. Business Processes Automation and Planning Software

One way to better understand costs is by using business processes software. In this connected era, it seems surprising that not all shippers rely on modern software. Some companies continue to do what has worked for them for decades: using paper and pencil or an Excel sheet. About 72% of shippers surveyed use enterprise resource planning software (ERP), 56% use warehouse management systems (WMS), and 38% use transportation management systems (TMS). About 38% of shippers use supply chain visibility software, and others are also using analytics systems. Integrating planning software systems can make a world of difference when implementing cost-effective logistics management plans.

While understanding costs helps, lowering distribution costs is the main focus. These software systems offer different ways to help operate a business while assisting with cost-effective logistics.

Warehouse or Inventory Management Software

Warehouse management software has several components that help with logistics, including real-time inventory tracking, reordering, warehouse organization, and forecasting tools. 

  • Inventory tracking: By tracking inventory accuracy in real-time, the company can alter its eCommerce fulfillment strategy or better control it. The eCommerce fulfillment strategy might be first in, first out, or first expired, first out. Using tracking software for this, warehouse staff can better identify the correct items to pick so that the products are freshest (e.g. food), or are the oldest products, to ensure these don’t become obsolete before they can be sold. This reduces inventory loss, increases inventory accuracy, and tracks specific items so the best ones are sent to meet your company’s goals. 
  • Reordering products: The WMS software can help determine reorder timing so the right amount of product is in the warehouse at any given time. By setting parameters and automating this process, your company minimizes warehouse storage costs. 
  • Forecasting: Demand forecasting is an art and a science. However, getting it wrong means overstocking or understocking. That results in less cost-effective logistics because of lost sales or excess inventory that is tough to sell. Using forecasting software, the algorithms and data from previous sales are used to deliver more accurate forecasts. Forecasting can be done on a location level as well as a global level for your business.
  • Warehouse organization: WMS systems offer warehouse space organization tools to help maximize the storage space, while helping employees find items more easily when picking. It also tracks individual items in the system. This helps with accuracy in fulfillment and distribution, and decreases rates of return due to error.

Transportation Management Systems

TMS software allows companies to increase efficiency and reliability for the use of transportation companies. The software focuses on planning, optimization, and execution of the modes of transportation, with greater visibility and information. The more helpful the TMS is, the less time you need to spend managing your air freight, ocean freight, or land transportation needs. That means your time can be better spent on other activities, whether getting new customers, optimizing the warehouse space, or working on other company initiatives. Some components of TMS are:

  • Route planning and optimization: Using these features for both inbound and outbound shipping, along with load building, can help reduce shipping costs and increase efficiency.
  • Carrier selection: The software helps companies track their carriers and modes of transportation, along with affiliated information, like fees, transactions, savings opportunities with higher booking levels, carrier availability, and sometimes carrier ratings.
  • Customer service: Whether selecting a carrier or planning a route, your customer will be affected. Understanding how the customer is affected influences choices made around transportation companies. Carriers with high excellent delivery time and ratings, and low damage or loss rates is important to customer service. So is a transportation company’s reporting capabilities. These features may be more important than price, to retain customers and give them the service they deserve. 

Alternative Software

Companies are using other software systems to increase operational efficiency and improve the cost-effectiveness of their logistics.

  • Analytics: Big data is a big concept these days, for good reason. Companies are often swimming in data but unsure how to use what they generate to their advantage. Big data analytics programs can sift through the data to provide actionable ideas that can save the company money and provide insights into the operations. That includes process quality, resource utilization, worker performance, manufacturing performance, financial insights, and other areas of interest. Especially when using predictive analytics, these programs can include assistance with decision making in all areas of business, including logistics.
  • Visibility: Control tower type visibility programs provide eyes into various data streams and operations. Using transportation data, companies can integrate weather, traffic, and shipment information to better optimize load and labor scheduling.

3. Logistics Automation

Warehouses have increased their use of logistics automation, with good results. Business process software applications not only help warehouses efficiently place items in particular places, but help the picker find them easily and quickly. They track what products are entering and leaving the warehouse, to plan for new stock. Fulfillment operations using logistics automation can determine the appropriate packaging, the right shipping service, apply the proper postage, and route the packages to the warehouse pick-up spot so it can get to the recipient in the shortest time possible.

Robot usage has increased in warehouses, in multiple ways. Robots can palletize cargo without causing injuries or worker’s compensation claims. Robots can work independently or with warehouse staff to shift items in the warehouse for storage or fulfillment. Automated conveyors swiftly carry parcels through the warehouse to other locations, using sensors and the internet of technology, or RFID tags. 

The result is a more efficient operation with cost-effective logistics. Warehouse space can be maximized, with fewer mistakes and more insights into the operations. It can help with key performance indicators.

4. Supply Chain Planning and Collaboration

Collaborations help with cost-effective logistics. Shippers don’t have to do it alone. Shippers commonly collaborate or outsource to 3PLs, and collaborate with competitors and their network to lower prices for everyone, while increasing the service quality. 

One way to do this is by mitigating supply chain disruption. When shippers don’t have a plan in place for dealing with possible disruptions, that leaves them scrambling when the unthinkable happens. With any disruption, distribution costs can increase for the shipper. By anticipating and mitigating those disruptions, it’s easier to plan for them financially. Disruptions come in all forms:

  • Increased logistics and transportation expenses: Rising real estate prices can increase warehouse costs. Rising gas prices or constrained trucker availability can increase transportation prices. A tight labor market can mean higher fulfillment costs. Increased carrier rates can also increase logistics costs. 
  • Increase in supplier expenses: Suppliers of all stripes impact costs paid by shippers. That includes product or raw ingredient costs, as well as increased energy prices. A shortage or competition for specific items means higher rates for you.
  • Transportation and logistics network disruptions: Natural disasters can flood roads or delay air freight. Pandemics can halt the supply of needed ocean freight or shut down manufacturing. 

Instead of planning for these alone, shippers should be working with partners to share ideas and resources. The idea that two heads can be better than one is true – it benefits both parties. Using each other’s expertise and contacts, mitigating potential disruptions can be easier.

5. Reducing Transportation Costs

One of the most common concerns for shippers in 2019, according to the survey, was transportation and logistics network disruption, at 73%. But the top concern for 75% of shippers, was the increase in transportation and logistics cost. 

One way to collaborate and reduce logistics costs is to share transportation costs with other companies – even a competitor. Shippers who have multiple suppliers in one area, even one country, can do load consolidation. This may allow them to use a full container or full truckload, rather than a partial one, saving in the process. 

Another way to reduce transportation costs is by focusing on last-mile delivery. Having a cost-effective logistics strategy for last-mile delivery is paramount, and only 53% of shippers surveyed felt they effectively managed those needs. Outsource to a 3PL, or use newer alternatives, like delivering to storage lockers. There’s no right answer, and much of it depends on your customers and what makes sense for your business.

6. Audit Service and Contract Negotiation

Managing the actual costs of shipping is another way to improve what you’re spending on logistics. There are two ways to do this: contract optimization and negotiation and invoice auditing. You probably know that carriers are constantly adjusting prices to remain competitive, especially for fuel fees. Contracts can be regularly renegotiated as well. 

Shipping Contract Negotiation

Going into a parcel contract negotiation without a good plan is just planning to fail. Experts, like those at Shipware, can offer more insights than typical shipping departments of companies. Shipware’s experts have decades of experience working at the shipping companies themselves. Shipware has benchmarking data and the expertise to know what terms can be negotiated, and by how much. Shipware experts can do the negotiating for you, or provide the information for you to conduct negotiations yourself. Either way, you’ll gain more benefits than by doing it without this help, thus saving more money.

Shipping Invoice Audit and Recovery

Conducting a parcel audit is another way to save. Parcel carriers like FedEx and UPS offer guarantees to customers, and if those guarantees aren’t met, they give money back. Manually tracking each parcel or shipment to determine if all elements of the carrier agreement were met is impossible, and not worth the time. Here’s where logistics automation comes in. Using a cloud-based solution, Shipware’s auditing software gives line-by-line visibility into the tracking information and carrier agreement, identifying logistics savings opportunities and sending claims to the carriers on a daily basis. The fees come from cost savings, with no out-of-pocket costs for the service. 

Call us to see how we can help you save money on your logistics.

How Logistics Automation Cuts Costs

By Shipware | eCommerce, Shipping Knowledge

Robots. Software applications. Smart machines. Internet of technology. All these modes of logistics automation can make a major difference in a logistics company’s efficiency and operations, resulting in lower costs. Companies don’t have to use every method of logistics consulting available to take advantage of the benefits of logistics automation. But they should know what’s available and formulate a plan to find the methods that make the most sense for their situation.

Logistics automation uses automated machinery or business process automation to improve logistics operations’ efficiency. That can be in a warehouse, a distribution center, or other areas of the supply chain including transportation, procurement, forecasting, and enterprise resource planning software (ERP). Systems working together to coordinate inputs and outputs are the best suited to make the biggest impact on cost-cutting. 

Of course, there are other benefits of logistics automation that can’t be overlooked. It can also impact labor, improve quality and accuracy. Ultimately, that means improving customer service.

Warehousing/transportation is in the top four market segments using logistics management that are ripe for automation, according to McKinsey Global Institute. That’s because of the labor shortage in recent years, as well as growth in e-commerce. Warehousing/management is behind accommodation/food services, manufacturing industries, and agriculture. Technological advancements make automation possible now more than any time before.  

Types of Automation

In warehouses, logistics automation comes in many forms. 

Machinery

Warehouse operations (as well as manufacturing industries) use many types of automated or smart machinery. For example, automated storage and retrieval systems employ robots, which allows for denser storage and better use of existing space. Some warehouses find success with automated guided vehicles to move cargo and items to the human workers for picking and packing or storage. Machines can weigh packages, determining if items are the right weight. Or that automated weight machine helps with packaging determinations, some even applying postage, after the software determines the appropriate amount.

Industrial Robots

Larger robots are used to load, unload, and move pallets and cargo. These may do so using RFID tags or bar codes. Arm sensors can determine the size and shape of a package to best grasp it, without dropping or damaging it.

Conveyor and Sortation Systems 

Conveyor and sortation systems in some warehouse operations are automated to route bins and other items into specific parts of the warehouse, using scanners.  

Software

Business process automation is a big part of what the software can do. Amazon warehouses, for example, use software applications to determine the best storage spot for e-commerce items, to place in a moveable bin. Items are tracking with a barcode. The software monitors not only the product placement, but chooses which products should be moved to a different warehouse for fulfillment if needed. The fulfillment operations software determines a pick list, sending the robots to retrieve items from the closest bins to go to the fulfillment operations picker. Software applications serve many purposes in the automated logistics setting, whether it’s the ERP, TMS, or another type. The business process automation software can be used for analytics, route or shipment optimization, energy savings, or other uses.

3D printing

3D printers can print needed parts or goods, saving time, labor, and expenses.

Drones

Drones are increasingly used for logistics management in warehouses and yards for inventory management, whether reading RFID tags or delivering items in a small area. 

Assisted Fulfillment Operations Picking

Even when human workers are doing the warehouse picking, they still may be assisted with automated logistics technologies. One example is smart glasses, where images of the items appear in the glasses, and a robot directs them to the next item. 

The Challenges of Automating

Not all logistics companies are automating. They might resist because they don’t yet know which technologies will be most helpful. Automation can be expensive to implement and the planning process can be long, depending on the plan. Some companies have a hard time proving value to the decision-makers in the C-suite. Or logistics companies don’t want to invest without knowing they have contracts to pay for it.

In the various market segments, warehouse automation is projected to have the slowest growth, according to McKinsey research. They estimate warehouse automation to grow at 3% to 5% annually until 2025. Yet in response to warehouse automation, costs could fall 40% owing to the cross-functional alignment between operations and cost-effective logistics. In comparison, McKinsey estimates that the pharmaceutical industry’s logistics automation will grow at 8% to 10% annually, and retail and automotive sectors will grow their automation at 6% to 8% annually.  

Market Segments in the Supply Chain Management

Other market segments and their supply chain management can also benefit from logistics automation

  • Transportation: This sector offers opportunities in logistics management for air, ocean, rail, long-haul trucking, and last-mile delivery. In rail, some terminals are already using automated machines to move containers on and off trains. Automated safety systems like Positive Train Control (PTC) allow the trains to slow down or stop when a safety issue is detected, especially important for avoiding human operator error.
  • Retail: This sector finds logistics automation and logistics management especially helpful when operating in an omnichannel environment. Shippers can’t always find a logistics company that can meet their automation needs, so they create their own solutions or have a hard time evaluating companies because they don’t know what would help them. 
  • Parcel: Companies in this sector rely on the benefits of logistics automation to remain competitive and carry increasing numbers of packages and cargo. They’re using automation software that provides visibility and tracking for customers and for themselves. This allows customers to schedule services without needing help from the parcel or logistics company. The software provides efficient routing for drivers and delivery proof. Logistics automation is important in the sortation of shipments as well. Given the time expectations and guarantees, the parcels must move efficiently, and automation is key for that. Loading and unloading in the hubs is an important part of this. Parcel services use automation equipment which increased employee productivity, to an estimated 3,000 items per hour in unloaded shipments, up from 700 to 1,000 items per hour.
  • Trucking: This sector introduced the electronic logging device, which is controversial, but stores information about the driver’s hours on the road. Truckers also use logistics automation to schedule pick-ups, accept jobs, and allow customers to see where the trucks are at any given time. Some logistics systems allow refrigerated trucks to track temperature to ensure quality, feeding this information to cloud-based solutions for instant updates. And of course, there’s the move toward automated driving of these long-haul trucks. It’s estimated that if trucks were fully automated, operating costs would decrease by 45%, saving $85 to $125 billion per year.

Areas to Employ Logistics Automation

Labor

The first reason to consider automation is the labor pool. Until the coronavirus hit, the U.S. was experiencing record low unemployment rates. Warehouse operations were paying higher wages and needed to use recruiting companies to fill roles. Finding labor was difficult. It remains to be seen how the pandemic will affect labor availability. But until a successful immunization is widely circulated, with herd immunity, safety might continue dictating that employees need more space between them. Increased worker illness rates can lead to more employee absence. Automation can help the facility run more smoothly.

E-commerce

E-commerce is bringing in more business, and the winners are companies that are stocked and able to ship and deliver quickly. Customers are accustomed to getting their deliveries within a day or two, often with free shipping. If a retailer doesn’t offer that, the customers often take their business elsewhere. Logistics automation can increase the efficiency and visibility of the retailer’s ability to deliver goods at the right price and at the right time. 

Transportation

A transportation management system (TMS) can bring freight savings. The shipper receives live carrier rates, choosing the best options and understanding all the terms. The TMS system might also give statistics and analysis of on-time rates and other quality factors. This can mean actual savings for companies as they reduce transportation costs, or it can mean keeping a customer happy even if costs a little more.

Customer Service

Keeping customers happy is imperative. It’s cheaper to retain current customers than to accrue new ones. The benefits of logistics automation include customer service. Companies can offer customers the right type of insurance, live tracking, customer-specific freight accounting, automated scheduling, and other perks. 

Error Reduction

Does your company have higher error rates than you’d like? Perhaps manual data entry introduced costly errors or the wrong freight classification system was chosen. Errors from human workers can be expensive and difficult to track and fix.

Cost Recovery

Parcel carriers like UPS and FedEx offer service guarantees. It’s hard to manually track each package to see if it was delivered on time, using the correct elements of the carrier agreement. Not only is manual labor expensive to use for this task, but it’s also time-consuming. It’s more efficient and arguably more accurate to use a well automated auditing system.

Shipware uses cloud-based solutions that provide line-by-line visibility into the carrier agreement and tracking information. The system identifies each savings opportunity, automatically sending claims daily. The service takes its fee from those cost savings, so there are no out-of-pocket costs. 

Reaping the Benefits of Logistics Automation

The benefits of logistics automation can be reaped even with baby steps. A seemingly small project can yield quick savings with surprisingly little effort. Shipware’s parcel audit and recovery system is one project that pays off instantly and is a quick fix with big results. It can be set up in five minutes and runs in the background. It requires no installation and provides found money. The shipping optimization tool results in returns of deserved savings from the parcel company, without any hassles or haggling on the customer’s part. Parcel contract negotiation is another one-and-done solution that provides automated cost savings going forward. Call us to see how it works and we can set you up with a trial and see how much we can save you.

Ecommerce Shipping: Costs and Solutions

By Shipware | eCommerce, Parcel Market Trends, Shipping Knowledge

Today, eCommerce is not a side gig for your business. In some cases, it is a driver of growth and, for many businesses, it is the only area of revenue. Many business owners, large and small, have to convert from retail and warehouse operations to consider the unique challenges of eCommerce. Ecommerce is distinctly different from brick and mortar or store distribution operations. Besides the small number of units per order, the additional customer service, and other challenges, the other major difference is the need for parcel shipping. 

With the help of our shipping consulting experts, we’ve put together a guide on how to save on your eCommerce shipping costs.

The Current State of Ecommerce Parcel Shipping

Ecommerce generates more packages, smaller in size, and higher in cost per unit than other forms of sales. Instead of pallets, you produce cartons, pouches, or envelopes. Instead of lump-sum charges covering more than one sale, you end up with one or multiple shipping charges per sale. And, instead of mutually interpreted terms, your charges often depend on the judgment of personnel multiple times in the life of the shipment.  

Parcel shipping has a few major players and new, more regional providers emerging every month. Depending on how many services you use, you may have different terms and conditions, possibly even multiple sets per shipping provider. It is important to follow those regulations to avoid any surprise shipping fee, but that is not enough.

Estimated Shipping Costs

Some shipping platforms can estimate shipping on the order based on product weights and other stored information (like oversize product dimensions). This takes a great deal of daily management as new products are introduced to your eCommerce store and updating existing products with new packaging information. The resulting shipping estimate can help you decide what to pass on to your customers and a rough budget for your shipping costs.

Discretionary Charges

Note that is a rough estimate. Why? Because some charges are dependent on the final package dimensions, terms in your contract, and even the discretion of a handler at the parcel shipping company who handles the package. Some of those charges can show up after the billing period, even months later. So, the control of your shipping costs is sloppy at best. It can be an expensive and futile exercise to improve that estimate, almost like balancing a teeter-totter on a ship underway.

How to Save On Ecommerce Shipping Costs

With the shipping industry being tricky and costs adding up due to estimated shipping and discretionary charges, what can you do to save costs? Follow these steps.

1. Estimate the Impact

Well, first, use that estimator. Even if the value is inaccurate, having a shipping cost estimate per order can help you understand trends in weight, cost, and services requested by your customers. This can help you plan how to apply free shipping, the budgets for shipping in general, and even the impact of your packaging on your costs.

But that is not enough. You need more advanced options and cost-reduction strategies. Ones that help you ensure you pay what you should, not just what you are billed. Let’s start with auditing your invoices.

2. Audit Your Invoice

First, why? Well, all of the surcharges are discretionary, depending on the supervisor or delivery driver. Even things like discounted shipping rates for bundled packages or signature options can be misapplied at either end of the shipping process. You need to check your invoices to find out if all of the charges make sense. And, depending on the shipping service each package used, you should verify if your parcel shipping carrier met their service guarantee. This is a big one if you are a smaller shipper and paying extra for overnight or even a 2-day shipping service. You have to deal with the customer service implications but you should not have to pay for the extra cost with no benefit.

The problem with auditing, though, is that you have a learning curve. Which services to which shipping zones have the most problems? Should you be looking at actual vs. dimensional cubic weights for discrepancies? Or, is the occasional address correction or handling charge something to watch instead? It can become an activity that may or may not save you money, or at least enough money to justify the effort.  

In that case, consider a professional firm like Shipware to take care of a parcel audit. Our experience helps reduce that learning curve to almost nothing.  And, as our exposure to your shipping efforts increases, we’ll help you find new ideas and strategies to help you control your existing costs

How much can this shipping solution help? Over time, you might save between 1 and 5% of your total shipping parcel cost depending on what you ship, the type of service you use, and even where your shipments are headed.  

At this point, you have tools to budget both your spending and your customer service options for shipping and a way to catch mistakes on your invoices. You have more control and maybe some appreciable savings. With that said, even more can be done to help you save costs.

3. Negotiate Your Shipping Contract Terms

Negotiating your shipping contract will give you the most desirable outcome and the best shipping options for eCommerce operations. However, this is best done with help. There are several concepts to consider when you look at a new parcel contract.  

  1. The salesman you work with is not your ally. They are a resource to work with, helping you to use their company’s services to do business. But they are paid by the parcel shipping carrier to make as much money as possible from you. Therefore, that contract? It probably benefits them more than you.  
  2. Averages are bad. Not because the math is incorrect, but because an “average increase” or “net change” often does not impact your total costs the same as the individual charges or costs in that “average”.
  3. This is a contract, not a bill. All of it can be negotiated. The nuance is knowing which areas of the contract are better to pursue than others.
  4. Given your business changes, this contract may not fit your evolving needs. International shipments, new product lines, and even new shipping locations may radically affect the contract and its impact on your expenses.

Like auditing your own invoice, you can negotiate your own contract but you have a learning curve. For every term or clause you bend to your benefit, you also have to look for other areas your shipping provider is holding onto. Which are valuable to you? Which are worth pursuing, given how you ship? And do you know how your parcel shipping company will adjust with annual GRI announcements, zone changes, or even service alterations during the contract to negate your savings?

Get A Partner to Audit and Negotiate

This is why you need an expert in your corner.  Not because you can’t do the job of negotiation, but you can’t learn fast enough to overcome the years of experience your eCommerce parcel shipping company has.  

Finding the Loopholes

So where do they focus on? What would a parcel contract negotiation company zero in on first?

They look for shipping surcharges that you shouldn’t need to pay. Additional handling, address corrections, even oversize package charges may be due to how the shipping company interprets their own terms. You might be able to avoid them with internal efforts like packaging changes or correcting your customer address database.

They look for surcharges that everyone pays, but may be possible to reduce. Fuel surcharges and the dimensional weight calculation get applied to every shipment, to every carton you ship. Knowing what other companies have negotiated for their sliding scale fuel surcharges or even the calculation of dimensional weight helps you to know where there is “fluff” to negotiate with.

They look for minimum charges that can negate savings. The trend of shipments to go into smaller packages, envelopes or pouches mean that the minimum charge applies to more shipments than you expect. Add in a new drop shipping location, shipping site, or partner company and you may be losing savings due to that minimum.

They even look for service level versus cost mismatches. Are you using a service that costs more but goes to addresses that can be served just as fast as a cheaper service? They know how to identify options for this, as well as where alternate services like hundredweight or cross-border consolidation might be beneficial to add to a contract.  

Impacting Your Bottom Line

So how does this help you? Depending on how much you ship and how much you spend to do that, you could save between 10 and 30% of your bill. While you might be able to reach those levels in a few years of experience with negotiating these contracts, a partner can help you get there much faster, saving you much more money more quickly and helping you increase profit margin at the end of the day.

Control Your Costs Now

To control your eCommerce shipping costs, get ahead of those cases. Estimate your shipping cost for each order to have a forecast for future billing. Audit your current invoices to make sure you only pay what you should. And to get real control, negotiate your contract to avoid fees, cap your maximum charges, or reduce their impact whenever you can. With these eCommerce shipping solutions, you’ll be able to cut costs significantly and improve your eCommerce shipping strategy.

The best way to do all of these is to consult experts who not only know nuances of the industry, they know how to find the savings in your data to benefit you quickly.  Shipware supplies not only the knowledge but deep industry negotiating experience to both audit and aid your negotiations. Wondering how you can improve other aspects of your eCommerce business’ supply chain? Check out our tips for cost-effective supply chain management!