Bianca Barath
As we step into the new year, with renewed focus towards business objectives, it is not very common to find much attention directed towards a supplementary activity like shipping and logistics. That seems fair enough at first glance but surprisingly shipping and logistics is often a significant cost center for most businesses and is almost always the second highest expense incurred ranking only behind manufacturing costs. Not just that; every dollar saved on shipping is a dollar that gets directly added to profit margins.
If you are a business that does considerable shipping to reach your customers, the following 5 simple resolutions in the new year that pertain to your supply chain can ensure that your business starts 2017 with significant cost and time savings with very minimal effort
Negotiate
Shipping rates are among the least transparent things your business has to deal with. It often depends completely on your negotiation skills. For instance, it is not uncommon to see two very similar shippers paying prices that may be significantly different form one another. If your business has not negotiated rates in the past 6 months or more, your most impactful new year logistics resolution would simply be to open a round of rate negotiations with your current shipping
carrier and a few of their competitors. Based on how your volumes have changed and what you bring to the negotiation table, your rates can instantly reduce by as much as 45%.
The only caveat though is the fact that your responsibility does not just end with bringing shipping carriers to the negotiation table. When they do get there, they are going to come armed with a significant amount of data about your shipping and tons of other shippers that lets them have a very specific desired outcome from the negotiation.
As the shipper, it becomes your responsibility to also come armed with relevant data that helps you have a very specific desired outcome from the negotiation. Collecting such data is not hard. It only requires some ground work form your end, a lot of which is outlined in the other resolutions below. Find out how transparent your shipping charge is.
Audit
As a customer, similar to any other supplier you work with, your shipping carrier is also bound by a strict set of expectations that define the service you receive from them. Money back guarantees against late deliveries, assurances against billing errors etc. are part of 50+ service expectations that a shipping carrier mentions in their contract with you. However, the entire burden of holding shipping carriers like FedEx and UPS responsible for such errors when is craftily left to the customer. In addition to this, designing complicated systems to identify and claim against service failures
usually means it is not cost effective for a business to track shipments and hold carriers accountable for the service
promised.
Carriers do this on purpose and are pretty happy about the 97% of service failures that go unclaimed, especially since it means higher profit to them. On an average, a standard shipping invoice contains 7-15% of refund eligible refunds which are to be credited back to the customer for service failures committed by the carrier. On top of this, our experience from tracking millions of shipments every year strongly suggests that businesses which start holding shipping carriers accountable for service failures usually see an automatic reduction in service failure rates after a few months of consistent refund claims. If your business is not holding shipping carriers accountable for the service failures they commit it simply means you are overpaying your shipping carrier on every single shipping invoice in exchange for considerably lower standard of service.
A resolution in 2017 to at least setup up a rudimentary internal audit process or better still, to sign up for an automated system like LateShipment.com to monitor your shipping carrier starts paying instant dividends that continue on as long as you ship, without zero additional effort. Learn more on how to audit your shipping invoice.
Investigate
Carrier designed shipping systems usually have one objective in mind, to maximize the revenue they get from your shipping. This means options and information that could help your business reduce shipping spend or improve shipping efficiency are usually not made very obvious. For instance, if you use a carrier designed label printing system, when you select an express shipping option, it usually does not tell you if ground shipping or a cheaper shipping type could also get the package to the destination in the same amount of time.
Investigating the shipping types, internal shipping process, destinations etc. will help you identify potential areas that may be costing your business more money than necessary. This may also help you frame an exact set of shipping requirements that you can take to the negotiation table when you renovate your contract. For instance, if you rely extensively on cross country 2 day shipping, negotiating a steep discount just on that service type may be far more beneficial than a lower general discount that covers all shipping types. Unrelated to shipping carriers, this analysis should also lead to process improvements that can drastically increase the shipping throughput ofyour warehouse.
Analyze
Shipping rates for all shipments now are not based exclusively on the weight of the item shipped, but rather is the maximum of the actual weight or the dimensional weight (Usually Length* Breadth* Height/166: represents the space occupied by the package during transit). This means you may be routinely paying for all the free space your packaging has. Similarly, provisions specifically negotiated for in a contract such as cheaper rates on a specific service type or additional discounts may be incorrectly applied by the carrier or used incorrectly in internal processes followed.
As a new year resolution, it would be very beneficial to analyze your contract, carrier policies etc. In detail and ensure that every provision is taken due advantage of to make your shipping operations as efficient and cost effective as possible. The important point to note is how such an analysis and measures such as choosing more appropriate box sizes are one time exercises which continue to reap rewards till your contract terms or carrier policies change.
Take responsibility
Even if you do everything right about getting the order out of your warehouse in time, your shipment usually has a considerable probability of being delivered late depending on the destination, carrier and shipping type. Even though such failures are completely due to the shipping carrier, your customer still usually holds you responsible for the delay. in fact, research suggests 1 out 3 customers do not reorder form a store that delivered an order late.
The unfortunate reality is that all businesses that ship are forced to rely on shipping carriers as the last link between them and their customers. However, the tools, attitude and internal policies in place can enable your support professionals to take responsibility for all issues, even the ones that were caused by the shipping carrier.
Real-time tracking systems such as LateShipment Pulse now offer the ability to monitor all shipments in transit, identify service failures and solve potential issues from delays even before a customer becomes unhappy.
In conclusion, most businesses internally relegate shipping and logistics to a lower tier of importance, to pay more attention to processes directly under their control. This works well to retain sharp focus on core business activities they engage in. However, doing this also means shipping and logistics rarely gets any attention when companies seek to improve efficiency or reduce costs. Such downsides can easily be overcome by actively spending a few days every year paying close attention to your warehouse and shipping carriers. This consistently results in rich rewards that help in
achieving all other business goals.
Read other related blogs:
Five proven ways to optimise your shipping cost
3 smart tips to negotiate the best shipping rate for your ecommerce store.