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If You Ship with UPS or FedEx, You Should Be Auditing Their Invoices

Posted By RCVF Admin, Friday, January 25, 2019

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If You Ship with UPS or FedEx, You Should Be Auditing Their Invoices
by Kenneth Kowal, Founder of ShipStarter

The cost of shipping is a constant concern for manufacturers, retailers, and distributors who send a large volume of small packages with UPS and FedEx. Both carriers’ service agreements are complex, and their pricing is hard to understand, even for seasoned logistics pros. This makes optimizing cost extremely difficult for most companies.

What’s worse? The carriers can’t be trusted to invoice for shipments accurately. They also cannot be trusted to credit customers fairly for refunds they are owed for delivery errors like missing a guaranteed due date. In fact, the carriers make errors on an average of 5% of invoices. But since it’s so hard for shippers to audit invoices, most companies either don’t notice the errors, or see this problem as just a cost of doing business.

So, What’s a Parcel Shipper to Do?

To help recover the money they’re owed, smart small parcel shippers enlist help. Yet, the 2017 Annual Third-Party Logistics Survey from JDA reported that 68% of companies either conduct their own shipping invoice audits or are not auditing their invoices at all. And given how difficult it is to audit small parcel invoices thoroughly and well, it’s questionable if any of the companies that are conducting audits in-house are doing so effectively.

Perhaps shippers do not realize just how advantageous an audit can be, or as we’ve said, they would rather take the hit to their bottom line as a cost of doing business than spend the large amount of human resource time that’s necessary to properly audit the invoices.

Parcel invoice auditing is an integral part of confirming that carrier pricing matches the original agreement. An audit can tell a shipper if they are being overcharged for errors or late shipments, as well as find other inefficiencies in the supply chain.

Why Are There Errors?

The reason there are errors is that carrier rates agreements are complex and depend on a lot of variable circumstances. And since shipping by its nature often involves contingencies, costs can often end up being very different than what is estimated by a shipper when a package is handed off to a carrier.

There are several errors that occur regularly, including:

  • Fuel surcharge errors
  • Incorrect billing address
  • Wrong PO number
  • Incorrect exchange rates
  • Wrong weight calculation
  • Duplicate shipments or invoices

Some of the errors can be on the part of the shipper, and some by the carrier. An incorrect billing address can be easily corrected, but it comes with a hefty price tag. A mistake like this will cost at least $11 per shipment, depending on the carrier. Address errors are not always the shipper’s fault, however. But if you are not checking, how do you know?

How Much Can a Shipper Save?

On average, working with a parcel audit service will result in a savings of 2%–5% or more on the total spend. The average savings will vary by business and can end up being a lot more. So, is it worth it? Think about what a 5% reduction in small parcel shipping costs would mean to your company’s bottom line.

What Else?

It’s clear how auditing invoices can recover a significant amount of money for many shippers. But what about other areas of your business? The data on your parcel shipping program that comes out of the auditing process can also help you tighten up your shipping operation in other ways. Parcel data can provide insights into carrier performance and your overall network efficiency, down to the package level. Armed with data, logistics managers can analyze their operation to make better business decisions.

A partnership between a small parcel shipper and its audit team provides value across the supply chain. It’s a simple way to remove cost and waste from your company, while ensuring that the terms of your carrier agreement are being met.

Transportation Impact provides small parcel rate negotiation and invoice audit services to large-volume FedEx and UPS shippers. We’ve saved hundreds of companies over $100MM in the past ten years. To learn more, visit www.transportationimpact.com.

 

Tags:  audit  fedex  invoices  parcels  shippers  shipping  transportation  ups 

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Dimensional Weight Pricing Will Impact LTL Shipping Rates in 2015

Posted By Administration, Thursday, February 12, 2015
Updated: Wednesday, February 11, 2015

by RVCF


Effective January 1, 2015, carriers are changing the way domestic less-than-truckoad (LTL) freight bills are calculated. UPS and FedEx, which own more than 90 percent of the domestic small package market, are now applying dimensional weight pricing to all North American ground shipments. With dimensional weight pricing, shipping costs are based on either the weight or size of the package, whichever is highest.

Previously, UPS and FedEx only used this pricing model for packages larger than three cubic feet. However, the rapid growth of e-commerce has led to a spike in small package deliveries. According to Logistics Management, the average e-commerce package is 40 percent air and filler. This inefficiency has been absorbed by carriers that were forced to haul lighter loads in their trailers. UPS and FedEx are responding with dimensional weight pricing as a way to shift the cost of inefficiency back to the shippers.

Where will the impact be felt?
The impact of dimensional weight pricing will greatly impact packages of 20 pounds or less, which represent about three quarters of all shipped packages. In fact, the increase in shipping costs is estimated to reach anywhere from $500 million to more than $1 billion, according to Logistics Management. Some estimates expect shipping costs to rise between 20 and 30 percent and impact more than seven in 10 shipments.

Smaller LTL carriers are expected to soon follow the path of UPS and FedEx, although these carriers refer to the pricing model as density-based pricing. Many of these carriers are using sophisticated density measuring equipment to accurately calculate LTL shipping costs according to package weight and how much space the package requires. This will enable carriers to make the best use of space, but it will also result in increased costs for shippers that package products inefficiently.

Shippers should collaborate with carriers to ensure transparency into all of the variables that are used to calculate shipping rates, not just the weight and dimensions of the package. By negotiating fair terms and agreeing to a single system for measuring these variables, shippers and carriers can keep costs down while providing a higher quality of service. However, if you’re unable to come to terms on a mutually beneficial system and cost structure, don’t be afraid to look for other carriers.

Of course, because companies that fail to optimize packaging can expect to pay significantly higher shipping costs, it’s important for these companies to review and update their packaging processes and best practices. This can be a daunting task when you consider the number of items, the varying sizes and shapes of these items, and the number of cartons that can be used by a picker to package and ship an order. Many companies are unaware that it’s possible to reduce LTL costs, or they don’t have the time and resources to devote to a cost-saving initiative.

Companies should start small when optimizing packaging.

  • Are the carton sizes appropriate for the product(s) you're packing in them? Cartons should fit the product size(s) and the number of units packed within.
  • Are you under- or over-utilizing packing materials? Packing materials are intended to protect the product without being excessive or used as "filler."
  • Would single-wall cartons support and protect your products just as effectively as double- or triple-wall cartons? Excess corrugate can increase shipping costs by adding unnecessary weight and taking up additional space.
  • Are there opportunities to optimize packing configurations for your product, such as implementing order minimums or reconfiguring size runs?
  • Will your buyers work with you to synchronize orders? The ability to build truckloads will reduce costs.

Many of these questions can be answered with simple testing or through collaboration with buyers and carriers. Also, technological solutions are available that can help companies avoid increases in shipping costs caused by wasted space in packaging by automatically assessing proper carton sizes and weights for various products.

We invite you to use the Site Search function found in the upper left corner of each page of the RVCF website for more suggestions about how to optimize packaging to minimize the impact of dimensional weight pricing. If you have recommendations, we encourage members to use the RVCF forum boards to start a dialogue about how to address this issue.


CLICK HERE to return to the FEBRUARY 2015 RVCF LINK

Tags:  Dimensional Weight  FedEx  LTL  Packaging Optimization  Small Package  UPS 

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