How to Know if You Are Paying Too Much for Small Parcel Shipping
For many retailers and manufacturers, logistics costs are the difference between turning a profit or losing money. Technologically savvy and demanding customers are looking for a seamless transaction when it comes to delivery, which is forcing every company to rethink its shipping processes.
Shipping can represent a large expense for these companies. For retailers, as one example, shipping makes up an average of 15% of an order’s value — with small parcel shipping being a large part of that.
At the same time, many companies do not pay enough attention to their carrier rate agreements and invoices. They are unaware of the impact a small amount of attention on these areas can have on their shipping costs.
Be Serious About Rate Agreements
Getting competitive small parcel rates begins with the negotiation process. Carriers have come to expect some haggling and are trained as negotiators, with a team of analysts and marketing people behind them. When it is time to negotiate, be informed of your needs and where the market is heading.
Once an agreement is in place, pricing is not necessarily set. Pricing for shipping can be volatile, especially as carriers raise their rates when fuel and labor costs go up. FedEx and UPS raise their rates annually, and in recent years have implemented a Peak Season Surcharge as well.
Auditing Is a Must
The auditing of small package invoices is more intensive than auditing of other modes of shipping. More packages translates to more invoices and audits. Unfortunately, most shippers pay invoices without really checking them for accuracy. The audit process is complicated and quite tedious. That is not to say, however, that it is not worth the effort.
As much as 5% of all the small parcels you ship are eligible for refunds from the carrier, due either to late deliveries, invalid surcharges, or billing errors. A retailer that spends thousands of dollars yearly on shipping or uses multiple carriers might have a harder time keeping on top of its small parcel spend. And note: carriers are only required to provide a refund within 180 days of invoicing. This means that if you wait longer than 180 days to apply for the refund, the carrier is under no obligation to pay you that money.
Common Invoice Errors
Incorrect shipping charges can occur for several reasons. Some may happen regularly, but unless every invoice is audited, you may continue to overpay.
- Duplicate invoices – one of the most common errors and reasons for overpayment.
- Late delivery – if your shipment was guaranteed and arrives late, you shouldn’t pay.
- Accessorials – these are difficult to calculate since they are charged after the fact.
- Taxes – vary by state and can get complicated for international shipments.
- Invoicing of wrong service – a ground shipment was billed at the overnight rate, for example.
- Incorrect surcharges applied – like accessorials or additional charges applied after the fact.
The carriers do not make this process easy, either. Shippers that want to make sure they’re paying only what they should need to be proactive and match their invoices to their rate agreements and file a refund claim for any overcharges.
That said, most shippers don’t have the time or resources to monitor their shipments, rates, and invoices. Outsourcing the audit process ensures that it will be completed regularly and automatically — which means you will get the money you are owed and get it faster.
Transportation Impact can help — click here to learn more. The cost to you comes from the money you save, so there is never any out-of-pocket cost to begin having your invoices audited and refunds automatically sent to you.