Anyone who works in supply chain or logistics knows the cost of shipping has skyrocketed in the past few years. Looking at historical fuel surcharges alone, the costs to move products around the globe has risen many times in the past few years, it’s hard to keep track.
While rising transportation costs are largely out of shipper’s control, there are a few things they can do to work with their carrier to maximize the shipping service they get.
Here are five tips to help ensure your company and your customers get the most out of your shipping carrier.
1. Consider Regional Carriers: Pick a Carrier That Meets Your Needs
It’s estimated that 70% of an ecommerce merchant’s overall budget goes to transportation costs. That’s a big investment you’re putting into your shipping carrier. First and foremost, make sure you’ve partnered with the right one.
The major domestic shipping companies (FedEx and UPS, for example) are popular choices because they are proven shippers who can handle all types of packages, in any volume, and deliver to all parts of the US. Their extensive infrastructure makes them a great choice for many merchants. The downside to choosing these carriers is that they often have higher rates for their services.
There are many carrier options beyond the mainstream companies. It may take some research but working with regional carriers—even if you piece together a network to cover the regions you ship to—can provide similar services but with much lower rates.
There are many smaller carriers that have grown significantly over the last few years. With more research you might find these “regional carriers” actually have a national footprint of partners they can leverage on your behalf. Speedy, Lazership, and OnTrac are good examples. They focus on lighter residential deliveries; their surcharges are often more competitive than some of the bigger carriers.
One option if you want the reliability of a major carrier, but the low cost of a smaller company is to look for hybrid shipping services. They pair the speed of major services with a lower overall cost.
2. Know When to Negotiate Which Shipping Rates
There are so many fees and line items in a shipping invoice. For an ecommerce company it is hard figure out what each item means, how it’s calculated, and if you are overpaying.
Many merchants might not realize the places where they can negotiate rates. For example, fuel rates might seem like they are a fixed price across all carriers. They aren’t. Each carrier has a different method for calculating fuel rates and surcharges. Depending on the service you use, you may be paying more or less than another merchant.
While the “transportation fee” makes up most of the overall shipping cost (and the fee that is typically advertised), ancillary shipping fees can quickly add up. It’s not uncommon for carriers to have over 100 different types of fees. Some of the most common include peak surcharges, fuel surcharges, delivery area surcharges and residential delivery fees. It’s important to understand the most common fees, how to minimize them, and what fees are negotiable.
Having a close relationship with your carrier representative will help tremendously when trying to negotiate lower rates. A little bit of loyalty goes a long way with industry partnerships.
Hiring an expert (either in-house or as a consultant) to manage your carrier relationship can be helpful. By outsourcing this work you’ll have an expert on your side who knows the carrier landscape and can ask the right questions to negotiate a lower rate. Also, you see significant shipping savings by using a 3PL as they typically leverage the volume of multiple merchants to get reduced shipping rates.
3. Small Costs Add Up: Tracking Surcharges, DIM Weight, and Other Fees
For the shipping costs you can’t negotiate (many of them), it’s important to understand how rates change over time. Carriers reserve the right to make adjustments to the way they calculate costs without notifying shippers. Here are two examples:
DIM Factor Changes
Did you know that DIM rates change? Recently they have changed more than usual.
As shipping volumes continue to increase at an historic rate, carriers are looking for ways to maximize the space on their trucks, planes, and shipping containers. To optimize they have lowered Dimensional Weights (known as DIMs) or established them where they didn’t exist before.
The DIM factor is how carriers calculate the cost they charge per shipment. Any change to DIM weight calculations will have a major impact on the overall cost of shipping a product. Ecommerce companies have intricate strategies to figure out the best way to package their products in order to save based on the DIM weight.
The best way to improve your DIM isn’t to work with your shipping carrier, rather consult your fulfillment provider and manufacturer. They are the experts who know which shipping boxes, product packaging, and kitting strategies will be the best in the long run.
Which Surcharges Apply to Your Service?
A huge component of a shipping invoice comes from surcharges. These are extra fees, applied to services to offset the output to process higher package volume.
Surcharges come in all shapes and sizes and can start, stop, increase, or change without notice from the carrier. Some are short term (peak season charges) and some are long term (fuel rate increases). They also go by different names, “peak charges” or “delivery charges” are two of the more common ones.
A close relationship with your carrier representative will come in handy. If you’ve done the work to understand your shipping invoice, it will be more obvious when your rates change due to surcharges. If surcharges become too much for you to pay, work with your carrier to choose a different service. Or you may need to start shopping elsewhere for a different carrier all together.
4. Consider Your Customer: Choose the Right Shipping Service
At the heart of the matter, you should always keep your customers in mind when creating your shipping strategy.
The shipping service you choose is a big factor in overall customer satisfaction. How your product travels from the warehouse to the consumer affects delivery times, overall shipping costs, and both of those are big factors buyers consider.
A few things to look for in shipping service include:
- On-time delivery performance (the average percentage of times the carrier meets their stated guaranteed delivery time window)
- Service region (not all carriers delivery nationwide)
- Claims ratio (how often do they shippers submit a claim for lost or damaged package compared to the overall amount of packages shipped)
Get to know the differences between the services your carrier offers. Rely on your carrier representative to help you choose the service that fits your needs. They should help you consider your product and your customer expectations. For example, do you sell high-value goods? If so, special handling might be necessary. Are your goods perishable? If so, expedited shipping might be necessary.
5. How to Improve Customer Satisfaction: Delivery Times and Free Shipping
Two major factors that affect customer satisfaction are shipping speed and shipping cost. While both are actually a bit out of your control as an ecommerce company, consumers will still blame you if either don’t meet their standards.
How to Improve Delivery Speed
Carrier delivery times have fluctuated significantly in the past two years. The rise in ecommerce demand has left these companies struggling to manage higher than average volume. It’s important to track your carrier’s average transit times. With this data you can give customers a more accurate estimated delivery date.
Track your carrier transit times with our historical chart. If your carrier continues to not meet the standards you expect, it might be time to switch to a new carrier.
How to Offer Free Shipping
Knowing the details that go into each line of your overall shipping invoice is the first step to offering your customers a lowered rate. If you’ve done the work (mentioned above) to negotiate a lower overall shipping cost from your carrier, you’ll be able pass those savings to your customers.
Shipping discounts are a huge incentive to buyers. Consumers are five times more likely to click “buy” if free shipping is offered as part of the purchase. Offering free shipping doesn’t have to hurt your bottom line—you can make it available for limited times, or on select types of purchases. Try it out. There are many free and low-cost shipping strategies that are proven to increase average order value and improve customer satisfaction.
If you’re looking for a 3PL with fulfillment centers in cities across the US, we own and operate facilities in the Bay Area, Los Angeles, Kentucky and the East Coast. Use DCL’s national footprint of warehouses to distribute your inventory across the country to reduce transit times and save on shipping costs. If you need fulfillment or shipping support and want to partner with DCL Logistics, we’d love to hear from you.
Tags: freight
