To keep up with the strain Amazon has placed on most retail businesses, absorbing the costs of shipping has become a necessity to compete with the giant. To maintain profits, a business makes whatever efforts it can to reduce shipping costs to realize a profit. Amazon already compels its vendors to list products at the lowest prices available online – and enforces it by crawling the web to make sure listings are, indeed, the lowest. This doesn’t make selling easy for the company attempting to compete with their online business.
Even if you carefully manage your inventory to avoid dead stock and shortages, once you start relying on a third party to fulfill an order (thereby controlling your costs and profitability), you are at their mercy without an awareness of what you are being charged for and, often, overcharged for as you struggle to stay competitive.
The more products sold, the greater the impact. Yet, most businesses aren’t aware how their profits get washed down the drain. Shipping audit specialists are trained to find these profit drainers and assist businesses in weeding them out. Today, the most common carriers are FedEx, UPS and DHL and they each offer similar services with varying price points. Retailers who ship large quantities of product each month will sign a contract to lock in a rate based on anticipated transactions.
A shipping audit company can identify where your business is losing money and increase your ROI. Many businesses can see up to a 30% savings in their shipping costs by identifying the problems and negotiating better rates with the carriers.
Where Waste Occurs
- GSR (Guaranteed Service Refund) – most carriers make guarantees to deliver on time, but when it comes time to get a refund, the process is easier said than done. The forms are hard to file and your window of opportunity to do so is small. If you leave this in the hands of UPS or FedEx, they are more than happy to let you figure out how to navigate the refund on your own. After all, the more difficult it is to get a refund, the more money they keep in their pockets.
Tracking and fixing these errors for an individual package is one thing. Doing it for thousands of packages over a long period of time requires a lot of hours and manpower. Automating the process is the best way to make this task scalable and save money. In fact, you can see up to 20% savings simply by addressing late deliveries.
- Theft – yes, theft. Employee theft may go completely undetected. And the theft need not be large ticket items. Theft over long periods of time can cost a business thousands of dollars. Your business can recover lost profits by stopping crooks in their tracks.
- Overcharges – with the help of automated software, you can uncover numerous overcharges and fees.
- Rate changes – one small rate change across thousands of products can quickly add up. Identifying how to take advantage of savings by identifying the method to harness the lowest rate is the key to keeping shipping costs down. Finding incorrect rates and fees and then recouping those charges will add to your bottom line all year long. Negotiating a rate cap is the key to containing costs.
Each year, the carriers increase their costs and you are left trying to figure out how to ship your goods efficiently. While you’re busy trying to acclimate to the new rules, you’re losing money. A shipping auditor can help you navigate these extensive new rules by evaluating your contract and negotiating better terms for you.
This year, most carriers have added on accessorial and additional weight charges. Wrapped up in this year’s new rates are the decreases in weight thresholds to qualify for more fees. Dropping the needle from 70 to 50 lbs. was a big change that amounts to millions in more income yearly for the carriers. That’s a $24 surcharge per occurrence that will rack up huge fees for shippers.
And new this year are fuel surcharges, as if the carriers didn’t already have enough ways to bleed you dry.
Despite their justifications for each of their charges, the carriers are still, indeed, in competition with one another. It is that competition that offers you the leverage to negotiate your rates. But you can only negotiate when you have a complete picture of everything that goes on with your business, whether you are losing money by choosing the wrong size package or paying too much by not negotiating your rate. By understanding how the carriers operate and where the savings can be realized, you become empowered to negotiate a better contract and have additional fees waived. That knowledge will come from using analytics to evaluate all your invoices to identify where mistakes were made or refunds are owed. Your shipment profile plays a role in the contract you’ll negotiate. Having a clear understanding of package dimensions, special handling, weights, perishables, zones and more are the tools for lowering your contract rates. Your carrier representative can negotiate certain terms beyond the standard contract. Knowing what these are and how to get the lowest rates are the skills a shipping auditor can bring to the table. Most shippers don’t realize that they don’t have to wait until the end of their contract term to negotiate a better rate. What they do need is a better understanding of what costs they really need to pay, where they can find savings and how they can get refunds. A consultation with a shipping auditor can usually shed light on the kind of savings a business could see.