- February 10, 2020
So much attention is paid to understanding the complexities of carrier agreements that companies, especially resource-constrained small and midsize businesses, often overlook simple best practices.
If you’ve ever worked in an SMB environment, you know how hard it can be to remember what day it is, much less to understand how the fees defined on page one hundred-whatever of a gazillion-word service guide will be applied to today’s batch of shipments.
Therefore, it’s nice to be reminded that part of this really is easy. Here are three things any business can implement to control their own costs:
1. Pay Carrier Invoices on Time
If this sounds obvious, that’s because it is. Still, like so many things about carrier pricing, rules and fees around late payment fees are ambiguous and vague. Outlined within your carrier agreement, however, is a section outlining payment terms. Typically, this is a 15-day term, though a longer payment term can be negotiated.
If you have an electronic copy of your carrier agreement(s), hit Ctrl+F and search “payment.” This will highlight the sections that specifically talk about when services are deemed provided by each carrier and the terms under which payment for those services is due to the carrier.
Late fees are applied as percentages of the outstanding amount of the invoice; not as set fees many of us are familiar with in other financial transactions, like with banks or credit lenders.
While the fees are essentially non-negotiable, the payment terms are. Remember that your carrier does better when you do better. If you are having trouble making payments on time, call your carrier and ask to discuss the terms.
2. Update Invalid Addresses
Each carrier assesses a $17 fee for Address Corrections. That amount makes a regular audit of your internal contact database a worthwhile endeavor. E-commerce SMBs can leverage USPS API tools to make sure customers input valid information when checking out, or they can batch compare customer information contained in their ERP or CRM.
Even legacy B2B companies should periodically update their customer and vendor databases to ensure margins don’t erode to due easily preventable address correction fees.
While Address Corrections discounts aren’t unheard of, they are increasingly rare for SMBs since alternative solutions are available to limit the occurrence of incorrect information. Third party audit providers can be a great resource if they provide the customer with a way to update inaccurate data as opposed to charging a fee to recover credits when they occur.
3. Choose the Correct Services
Before you dismiss this tip as too hands-on to be “easy,” remember the role of your carrier representative. And while not all service optimization scenarios are practical, there are several things your business can and should be doing to make sure you aren’t needlessly spending extra dollars.
Foremost, make sure you are putting your packages into the correct network. For example, a FedEx shipper with a heavy residential profile, should be moving shipments through FedEx’s Home Delivery network; not FedEx Ground. FedEx charges a Delivery Area Surcharge for packages shipped in both networks, but it’s higher for a residential package in the Ground network, which is designed to process commercial deliveries.
Another easy exercise is to ask your carrier to do a time-in-transit study on a sample of your past shipments. This will show you whether packages shipped via expedited services could have arrived just as quickly if shipped using a cheaper ground service.
In many instances, SMBs tend to underutilize resources available to them through their carrier(s). Cost and complexity of carrier agreements can create strain in shipper-carrier relationships – as can service-related issues that result in late deliveries, lost or damaged merchandise, or missed pickups – so it’s helpful to meet with your carrier periodically to make sure your incentives are aligned.
A strategy that only attempts to align interests through terse rate negotiations is short-sighted.
Make no mistake, paying a fair price is a key tenant of a good strategy, but companies often overlook easy steps they can take to shore up costs, and forego a lot of value as a result.
Brandon Staton is President and CEO of Shipmint, Inc. and has spent the last decade helping corporate shippers plan and execute sustainable cost-control and cost-containment strategies. Brandon earned an MBA in Entrepreneurship, Leadership and Strategy from UNC Kenan-Flagler Business School.