How global shippers can reduce parcel freight costs

January 22, 2016 Pieter Kinds

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Controlling parcel shipping costs is undeniably the hot ticket in todays logistics and supply chain environment. With rising e-commerce sales, DIM pricing and growing consumer expectations, even some large companies struggle with parcel distribution challenges and excessive parcel transportation costs.

 What stones are lifted?

E-commerce is one of the most important drivers of the global courier service industry. The e-commerce business primarily consists of B2B-companies and online shopping. As businesses are expanding, both internationally and domestically, parcel courier companies are becoming increasingly important to competitiveness of companies, especially those with large shipping volumes.

A good indicator that demonstrates the growth of (international) parcel freight is the share of courier express services in the air cargo market, growing by an average of 3% a year in real terms between 2008 and 2013. The most important players in the parcel express industry are United Parcel Service (UPS) and FedEx (FDX). Logistics providers C.H. Robinson Worldwide (CHRW), Expeditors International (EXPD), and Con-Way (CNW).

On the other hand is a growing customer experience demand causing extra pressure to a companies parcel delivery operation. The (online) shopper of today and the shopper that was willing to wait for around five to seven weekdays before their online bought product landed on the doormat are a millions miles apart.

People simply don’t want to wait. Why? Because your competitor around the corner is able to deliver what your customer desires, regardless of any geographical factors. It has never been more clear that your customers are the ones that hold the key and their wish is your command. With the pressure rising, delivery is becoming a key differentiator between them and their competitor.

How is the growing E-commerce market affecting logistics managers worldwide?

- More and smaller shipments - Parcel shipping management is becoming more important and time-consuming
- Carrier benchmarking becomes increasingly important
- More complex and expensive logistics flows
- Companies need to deal with return shipments

Why parcel billing is not easy but complex. Get your savings finally!

How can you as a shipper reduce parcel shipping costs?

To take a closer look at the possibilities of reducing parcel freight spend, I have taken a few results from the 2015 PARCEL Forum, Shipware parcel pricing and benchmarking survey, in which 77 shippers responded to survey questions about their parcel usage, carrier preferences, pricing discounts, cost reduction strategies and other valuable benchmarking data. Survey respondents collectively commanded approximately $2.8 billion in annual parcel spend.

If could change UPS or FedEx Pricing Agreement, how would you?

When asked to rank the top three ways shippers would change their UPS and FedEx pricing agreements, minimizing surcharges was the highest weighted response (85.1%), amazingly higher than get- ting deeper discounts (63.5%). Shippers would also like to have more favorable minimum charges (48.6%) and DIM factors/thresh- olds (45.9%).

To keep shipping costs in check...

Visit our content hub to view more great insight and the full results of the survey:

 Pricing and Benchmarking study

Parcel freight audit: Why you need to pay attention to your parcel freight invoices

With parcel shipment volumes growing almost everywhere in the logistics industry, I feel that it makes sense to highlight some of the complexities involved in parcel billing. In contrast to popular believe, the correct billing of parcel shipments can be quite complex.

Typical parcel freight invoice issues

- Volumetric Weight discrepancies due to carrier’s own scanning
- Service level discrepancies
- Application of Accessorial Charges not stated in the rate agreement
- Application of Accessorial Charges that cannot be audited (insurance, appointment surcharge)
- Regular changes in the Remote Area zoning definition
- Consolidation rules not properly specified
- Complex rounding mechanisms (sometimes triple rounding)
- Complex conversion mechanism (conversion p/parcel)
- New surcharges popping up
- Inaccurate shipment data on Shipper side
- Parcel carriers claiming there is just one standard for all, no customization possible

How ControlPay Freight Audit can offer a solution to rising logistics costs

- Cost efficient outsourcing of freight invoice audit & electronic coding/posting: reduced FTE spend
- 100% invoice audit versus no or little control
- Overbilling reduced to 0%
- BI data for reporting and analysis, input for tactical SCM decision-making RFP base-line data, calculate RFP offers, cost impact to base-line.
- Shippers gain carrier benchmarking strength

 financial consolidation of shipments

More (parcel) freight audit content that could help your company reduce freight spend

1. Freight Audit Payment - 10 Freight Invoice facts that everyone should know
2. What is Freight Auditing? How can it help you companies bottom line
3. How Logistics & Finance benefit from freight invoice consolidation

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