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3 Easy Ways to Lower Your Shipping Costs

With the rising cost of freight it is an ongoing battle for companies to lower their shipping costs. For some companies their strategy is to switch back and forth between the big two – UPS and FedEx. And the battlefield becomes a place where the sword slashes away at prices and the winner rises only temporarily because they had the edge up on discounts for that round. But there are plenty of other ways your company can lower shipping costs and be in better control of the processes that may ultimately add up to huge savings.

Lowering shipping costs is challenging for any small, medium or large size company. The bottom line is that you will be affected by the continuing rise of freight no matter what size your organization is. And whether you pass along the freight expense to your customers or absorb it into your product cost, it not only puts a strain on the pocketbook but it can also sway purchasing decisions. In order to combat the rising costs we put together a simple list of 3 highly effective ways to lower your overall shipping costs.

Carrier and Service Selection

If the carrier and service is already defined on the order then this is typically how it ships – without thinking is there a better alternative? At the time the order is received is when it makes the most sense to question and recommend a better shipping method.

What date does the customer need the order to be received by? This information should dictate which service level is used. If you are able to ship the order the same day and the customer needs it within a week a ground service is the most economic and can often get it to the destination in time. If your distribution is on the East or West Coast you may want to negotiate your best rates with the carrier on their 3 day service. You would be surprised how many customers consider “expedited” as getting their shipment from across the country in 3 days guaranteed vs. an estimated 5 business days for ground.

Is the shipment time sensitive? Unless the package contains documents for that early Monday morning meeting or a critical part for surgery at 10:30 AM, having it delivered by the end of business day often is sufficient and many carriers offer a “Saver” or “Economy” service for next day and even second day deliveries. And be sure to check the transit time for ground service to that destination because if it falls within 1 or 2 days then you can save a bundle on shipping. Regional carriers often have a larger overnight footprint than the national carriers so be sure to check their transit times as well.

If the customer needs the order expedited, do they need the whole order shipped this way or only a certain item or quantity? Offering the customer to split the order into two shipments can save money on shipping. Depending on your Order Entry system you may have the ability to specify the ship method at the line item level. If this is not supported an easy alternative is to create two separate orders or consult your system administrator on how to handle split shipments.

Are you rate shopping? Rate shopping does not just have to be comparing carriers to one another (i.e. UPS vs. FedEx). It can also mean comparing the rates of the different service levels a carrier offers (i.e. UPS Next Day Air, UPS Next Day Air Saver, UPS 3 Day Select, UPS Ground). Make sure you are rate shopping using your negotiate rates and set up meaningful rate shop groups such as “UPS-ONLY”, “1DAYSHOP”, “2DAYSHOP”, “GROUNDSHOP”, etc. If your shipping software utilizes time in transit in the rate shop logic make sure to add the ground services to your air rate shop groups.

It’s in the Packaging

Weight is not the only factor in determining the price. The package dimensions can often bump up the weight to “dimensional weight” or “billable weight” that can be considerably higher than the actual weight of the package resulting in higher shipping costs. In some cases if a package dimension exceeds a certain value you may also be paying for “Additional Handling” or “Large Package” surcharges.

Surprisingly for many companies they can save money if they went with a slightly smaller box or packed the order in two boxes instead of one. Also by eliminating bulky packaging that is not necessary where more than 50% of the content is packing material. Packing your product carefully doesn’t mean you need a box twice as big as the contents. The solution may be as simple as getting a higher crush-rated corrugated box or using different packing material that is more absorbent to impact or dropping. Consult your carriers because often they can recommend what to use and how to pack your product – they may even be willing to perform a crush/drop test.

Take the time to review the carrier invoices even if you have data available from your shipping software because you may discover that dimensions are not being captured at the time of shipping and the over charges will only appear on the carrier bill. Auditing services can also detect these discrepancies and help you capture the right information at shipping to avoid excess charges that should have been billed to the customer.

Shipment consolidation is another way to reduce shipping costs. If the customer has multiple orders then it may make sense to palletize the cartons and ship using an LTL (less than truckload) carrier. Other ways to consolidate is to band smaller cartons together and ship as a single package or use a hundredweight service.

Hiring a Professional

The first step to hiring a professional is to get over the notion that you didn’t do your job. Hiring a consultant or 3PN (third party negotiator) to do a full assessment of your freight bills, carrier agreements, and shipping processes can be very beneficial. Unless you have worked for many different companies then the one key factor you lack is knowing what other companies are doing and being able to measure yourself against the statistics. Professionals deal with companies of all sizes and know all the right areas to help you negotiate better rates with the carriers and improve your shipping operations. And in some cases you may not have to pay for their services but just share a portion of the savings on your contract re-negotiation. It is a win-win situation and you can look like the hero who knew it was the right time to have an outside person step in and help your company save money.