This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.
Decoding and minimizing the cost structure of shipping is a challenge for many ecommerce companies and any business that sends more than a handful of packages every year. Each day may bring a new set of customers with varying demands, making it difficult to project requirements and craft savings strategies. But even if your small-package shipping volume is less than Amazon’s and seems more complex, your company may be able to save on shipping costs.
A first step to saving money is to understand the shipping environment. Here are some basic rules of major small-package players, namely UPS and FedEx:
Next, consider the nuances of your business’s shipping requirements. Are many of your shippable products oversized? Are many of your customers in remote locations? Do your customers plan their purchases well in advance of their needs or do they often need rush shipments? Do you service businesses or consumers? Do your competitors offer free shipping? Consider what will most benefit your company in terms of cost structure and service levels.
Advise your representatives that your small-package shipping business is up for bid and negotiate contracts based on your company’s unique shipping challenges.
Rates and discounts that can be negotiated include:
Making a decision on which carrier to use exclusively (or mostly) can be difficult as rates probably won’t be quoted in a way that invites apple-to-apple comparisons. Your company might get a higher standard-rate discount from one carrier but greater concessions on accessorial charges from another carrier. Additional factors to consider are pick-up times, claims settlement processes, and adherence to service-level standards. Your specific business needs should guide the analysis of proposals. And, though, your company can use both UPS and FedEx but splitting volumes will mean less opportunity for volume-based discounts.
Certain types of shipments may be served most effectively through the United States Postal Service (USPS), which offers the following advantages:
Companies that ship small parts and media, and those that ship frequently to remote locations (including Hawaii) and APO/FPO addresses may find that USPS rates are significantly lower than other small-package carriers. However, value-added services, such as real-time tracking and guaranteed service levels, may not be available. Again, knowing your customer and defining your goals in regard to shipping is essential to making a good decision regarding rates and services.
Businesses of all sizes may be able to negotiate discounts off standard rates. In addition to contract negotiations, companies can also save these ways:
Don’t stop scrutinizing shipping costs after you’ve negotiated a contract. Audit your invoices to verify that your company is receiving agreed-upon discounts; challenge discrepancies. Make periodic reviews to discover nuances associated with calculation of shipping charges. Study your shipping mix to detect trends, such as greater and greater volumes going to remote locations or fewer requests for oversized items; then adapt your negotiation strategies and shipping plans to keep costs low, year after year.
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