Special Report - Operations & Fulfillment: 7 Ways To Cut Parcel Shipping Expenses Right Now
Parcel shipping costs are on the rise, with UPS, FedEx and the USPS all recently increasing general rates. While costs are going up, successful catalog/multichannel companies are finding ways to reduce expenses and improve their bottom lines. What about you? Here are seven keys to getting started.
1. Understand your shipment profile and costs. Know your breakdown by weight, carrier zone and service. The recent FedEx Ground increase was announced as an average of 5.9 percent, but low weights (1 pound to 9 pounds) have increased to 8.9 percent for zones 2 and 3, while heavier weights for zone 8 are as low as 5.3 percent.
The residential and delivery area surcharges (residential) both increased 10 cents per shipment, or about 4.3 percent. Do your homework, and determine how changes in carrier pricing impact your freight costs. Take a sample of six to 12 months of actual shipments, and calculate them at 2008 rate levels vs. 2009.
2. Substitute ground for air. Both FedEx and UPS offer guaranteed delivery for ground service as well as air/express. Save money by using ground instead of air when guaranteed on-time delivery still can be made by ground.
Talk to your parcel carrier, and request ground delivery standards by ZIP code. Update your shipping system to “downgrade” overnight and two-day air services that can be served by ground in one to two days.
While implementation may require a system upgrade, or even a new shipping system, the payback should be worth it. For example, the FedEx published rate for a 5-pound parcel going to zone 3 is $27.55 via standard air, $11.95 via two-day air and $5.44 via ground. Do the math and use ground when possible.
One final caution: Rewrite your shipping and handling policies. Avoid using terms like “Overnight Air” or “2-Day Air.”