PHILADELPHIA — The growth of e-commerce has led to the growth of something else: charges and fees. FedEx (NYSE: FDX), UPS and the U.S. Postal Service continue to raise their shipping fees, and for some shippers, it has become too much.
Fuel surcharges are an example. According to Josh Taylor, senior director of professional services at Shipware, the fuel surcharge to ship a 10-pound package in 2020 was the equivalent of buying one-quarter gallon of fuel. In 2022, that surcharge is equal to one-half gallon of fuel.
Many believe there isn’t much they can do.
“It’s a complex surcharge that doesn’t have a whole lot to do with the price of fuel,” Taylor told an audience on Wednesday at Home Delivery World 2022 at the Pennsylvania Convention Center.
Shipware offers brands shipping expertise and pricing tools and analytics regardless of which carrier they ship with. Taylor himself spent 20 years working with UPS (NYSE: UPS) before shifting into a pricing environment.
On Wednesday, Taylor laid out a 10-step approach businesses can follow to reduce their shipping spend.
1. It takes a team.
Taylor said that to effectively negotiate the best rates on shipping, a business needs three people: a negotiator, an analyst (who never speaks to the carrier) and a decision-maker.
2. Have a plan.
Too often businesses enter negotiations without a clear understanding of what they need. What are the cost drivers in the business? What do you actually need in a carrier partner? What can you give up in order to get a better price? These are among the questions Taylor said need to be answered before entering negotiations.
3. Be the partner you want.
“The clients of ours that have the best success often have great relationships with their carriers,” Taylor said. He added that shippers should provide some benefits to drivers to make their experience better and improve that relationship.
4. Educate yourself.
Taylor said business leaders often listen to sales reps, but there is plenty of value by listening to earnings calls of the big carriers. “It really gives you better information than you can get from your sales reps,” he said.
Also, learn how the carriers view your business, know the contract language and ask questions on things you don’t understand, and benchmark against industry averages and competitors when possible.
5. Know your needs and options.
Taylor said shippers need to understand their current needs and what options might be available to them. Saying that perception may not be reality, Taylor advised learning and assigning value to time in transit versus price, reputation and value. When possible, conduct A-B testing, as Taylor said it will identify what is most important.
Many shippers believe they get the best rate because they have all their business with one carrier, but Taylor said look into whether those same rates may still be available if the business was split among several carriers. In many cases, they may still be. Also consider regional carriers or postal aggregators, he added.
6. Retain (and use) your leverage.
This is an important step, Taylor said. Explore other carrier options and leverage those conversations to either split your shipping spend or get a better rate from your existing carriers. “It is hard for people to do this because you have a relationship with the carrier, but if they don’t believe you will switch, then they won’t give you the best rates,” he said.
7. Everything is negotiable.
Taylor said while shippers sometimes assume the price is the price, that is not always the case. For example, Taylor said he has seen plenty of customers negotiate DIM rate concessions, lower fuel surcharges, use of on-site help during peak periods to get items into the carrier’s network quicker, and even lower charges for additional handling.
“There are hundreds of levers carriers can pull, and many are not likely, but they are all costly,” Taylor said.
8. See the big picture.
Taylor said many shippers look at a single line item. “Don’t fixate on the one charge,” he said. Instead, look at the overall bottom line and target a savings amount, not a specific discount. For example, he said that address corrections are a common fee and while shippers view these are time consuming, unless there is a specific problem with addresses, they often are not worth the 2% excise charge for this service.
“The carriers are doing the analytics in the background and they know you are giving up something to get something, so focus on the bottom line,” he said.
9. Trust but verify.
Saying that carriers aren’t generally dishonest, mistakes still happen and they can cost the shipper. “It’s very easy for the carrier to leave something off the carrier contract,” he said, noting that sales reps don’t always communicate what was discussed with the customer to the carrier team drafting the contract.
Taylor also said that shippers should do their own calculations and ensure the carrier is using a sample of packages when crafting the pricing model that matches well with the shipper’s business. If there are peak periods in the shipper’s business, the sample should reflect that. Finally, read all of the contract, Taylor said, as that is the only legal document that is valid.
10. Get it in writing.
“In writing means you have an executable contract,” Taylor said. Some shippers see a PowerPoint presentation from a sales rep and assume that is what the contract will say. A PowerPoint is not a legal document and not enforceable, he noted. Everything must be in the final contract or the shipper could be left holding the box.