Suppose you're the head of logistics at an e-commerce company, and it’s your quarterly review. Tension fills the boardroom, with ground parcel delivery costs soaring 29.5% since January 2018. Eye-watering numbers flash on the screen, amplifying pressure to keep shipping affordable while pleasing customers. Carrier discounts provide some relief, but they only soften the underlying issue. Eyes turn to you, expecting answers.
Welcome to the complex world of parcel spend management, where effective control is not just about cutting costs but ensuring survival. With shifting logistics trends and carrier rate increases, it's more than a task; it's a strategic approach that can save 5-8% in total costs. This article offers insights into making this achievable.
Carrier contracts are vital to optimizing shipping costs in complex parcel networks. Through careful negotiation, shippers can achieve significant savings and maintain operational control.
Carrier contracts are vital in parcel spend management, enabling the careful negotiation of costs and promoting savings and compliance. With the rise of regional and local carriers, these agreements ensure a strategic approach to managing hundreds or even thousands of origin points, enhancing efficiency and visibility.
Negotiating carrier contracts takes blending insight with strategy. Here are some tips:
Specific mechanisms such as volume discounts, service-level agreements (SLAs), and rate benchmarking can help control parcel spend. Here's how:
Packaging isn’t just a way to protect goods during transport; it's a crucial determinant of parcel costs. Both the packaging's physical attributes and dimensional weight play a role in shaping those costs.
Packaging is a vital part of cost management, akin to choosing the right vehicle size for freight. Using a large box for a small item wastes space and money, while compact packaging allows more parcels to fit, reducing costs. Additionally, lightweight and eco-friendly packaging can align with sustainability goals and even earn discounts from carriers.
Dimensional weight (DIM weight) is a pricing strategy considering a package's weight and volume. Using a formula like 24 × 12 × 6/166 = 10.4 for a 2-pound box measuring 24" x 12" x 6", carriers like USPS, UPS, and FedEx would charge for an 11-pound DIM weight, not the 2-pound actual weight. This approach ensures that large but light parcels reflect the transport resources needed to optimize space and control fuel costs.
Remember- in shipping, every cubic inch and ounce counts. So consider some of these effective strategies:
Efficiency equals success in logistics. Let's explore why streamlining shipping processes and integrating automation is necessary for more effective and economical shipping.
Streamlining shipping through logistics network optimization and management systems cuts costs and leads to timely deliveries, enhancing customer loyalty and encouraging repeat purchases. Companies also create a responsive approach by emphasizing precision in ground-level management and routing, driving sales, and reducing expenses, creating a win-win for businesses and consumers.
Automation in shipping enhances accuracy and speed while reducing costly errors. Consider the following benefits:
Shipping software and automation tools are revolutionizing logistics and driving significant cost savings. McKinsey reports that well-executed automation could cut port expenses by 25-55% and increase productivity by 10-35%. Freight audit specialists like Intelligent Audit bring this to life, enhancing freight audit and payment efficiency and enabling data-driven decision-making.
The mounting complexities of the shipping world call for strategies to control costs without compromising efficiency. Businesses can accomplish this and control parcel spend by focusing on three key strategies — negotiating favorable carrier contracts, optimizing packaging and dimensional weights, and streamlining shipping through automation.
However, it takes a strong partner with robust solutions to make this happen. Utilizing parcel audit software from top freight audit companies, Intelligent Audit can make this happen and turn shipping challenges into growth opportunities. Reach out today to see for yourself.
Set up a call with one of our experts to discuss how Intelligent Audit can help your business uncover opportunities for cost reduction and supply chain improvements through automated freight audit and recovery, business intelligence and analytics, contract optimization, and more.
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