Many small-business owners struggle with trying to reduce their shipping costs. But how can the average business shipper cut costs while FedEx and UPS keep increasing rates and the U.S. Postal Service threatens to close branches and reduce personnel? Unless you ship at Amazon-level volumes, it can be more and more difficult to gain leverage and cut a break with your shipping carriers.
But there is some good news: A number of opportunities exist for small businesses to save on shipping. They all involve a certain level of investment in time and, to a certain degree, knowledge. As a 15-year veteran of the shipping, logistics, and e-commerce industry, having not only worn the shipper's shoes—managing shipping and logistics for a retail chain—but also the carrier's shoes—running a FedEx group that helped thousands of small businesses optimize their shipping operations—here are my three suggestions to save money on shipping and put it where you need it—back into your business.
1. Get a Refund
One relatively unexplored opportunity is guaranteed-service refunds. FedEx and UPS provide a money-back-guarantee for overnight and ground shipments, assuming these shipments are outside of the carriers' "service level agreement" (late deliveries) and you file a claim within a specific time period. For larger companies with a full shipping department, this could seem like a worthwhile function to perform. However, for the majority of small and midsize companies, the task of auditing every parcel shipment, comparing against the published service level, and filing claims could end up being very time-consuming. On top of that, many of the 43,000 zip codes in the United States come with exceptions to the carrier’s published guaranteed time, making the audit process even more cumbersome.
Nevertheless, small shippers can still find savings opportunities. On average, overnight shipments by FedEx and UPS meet their time commitments 94 to 97 percent of the time, while ground service is on time 95 to 98 percent of the time. Depending on your mix of overnight/ground shipping, you could expect between 4 to 6 percent of your shipments to be delivered late, and be eligible for refunds. To get these refunds, you can file claims online or call the carrier's customer service department.
2. Find a Shipping Auditor
But the question you still need to answer is: Who at your company will audit these late shipments? Most shipping department personnel are hired to ensure daily orders are fulfilled. Rarely does a shipping manager have the time or resources to analyze their past shipments and identify what could have been shipped more cost efficiently. If you have the appropriate in-house resources to focus on guaranteed-service refunds, you should definitely consider it.
However, since many small businesses have limited personnel allocated to their shipping/logistics operations, it might be worth exploring a shipping auditor. Shipping invoices are very difficult to understand, as carriers print various and different product codes and acronyms seldom used in daily business vocabulary, and invoices have mistakes for which you end up paying. No matter how large your operation or how small your number of daily shipments, you should consider talking to a shipping auditor. You can find one through online searches or industry publications. Many work on a contingency-based fee, meaning they only collect a fee once they've identified savings for you. Since shipping auditors are not on your payroll, they do not represent a fixed cost. Many have experience in auditing invoice charges and identifying late-delivery shipments.
3. Talk to Your Carrier
Lastly, but not least importantly, is to talk to your carrier. When you meet your carrier's account representative, ideally once every six months, ask to go over the last six or 12 months of shipping history. As all savvy business owners know, knowledge is power.
The more you know about your numbers, the more you know about your business. Leverage your data to have more productive discussions with your rep. They should be happy with keeping your business, but more importantly, they should continually work to earn it. Ask your carrier what else they can do for you. The more knowledgeable you are about your company's shipping history and profile, the more your account rep can help you support your shipping operations to grow your business. An additional 10 percent discount to western states might sound really enticing to accept, but it won't do much for your bottom line knowing that 80 percent of your customers are located on the east coast. More than half of small businesses do not get any discounts from their shipping provider. You may get an extra discount just by asking. As the saying goes, you don’t get what you deserve, you get what you negotiate.
Jose Li is Founder & CEO of 71 Pounds. He formerly ran FedEx's retail & e-commerce practice and has worked with thousands of small businesses. Jose has 15 years of experience in shipping, logistics, and e-commerce with Jamba Juice, Alibaba.com, and FedEx. He can be reached at firstname.lastname@example.org.