Many companies, both large and small, have significantly reduced their shipping costs by implementing a multi-carrier shipping solution that allows them to compare carrier rates and automate document production. However, you can realize even greater savings by ensuring that your shipping system is configured to actively avoid many unrealized issues that result in added freight costs.
Below are three tips you can use to not only minimize shipping costs, but also to improve your process efficiency and delivery times.
3 Tips to Eliminate Hidden Shipping Costs
1. Accurate Dimension to Weight Calculations
Have you audited your dimensional rating procedures lately? This is an area where a minor miscalculation could amount to significant upcharges from your carriers (preferred or not).
To clarify, dimensional (dim) weight, also known as cubic weight or volumetric weight, is the common freight billing method used by today’s major carriers. It’s calculated by dividing the product of a package’s length, width, and height, by the Dimensional Factor:
(Length x Width x Height) / Dimensional Factor = Dimensional Weight
Here’s an example of a freight calculation used by a carrier to charge for a lightweight or low-density package weighing 1 lb (think styrofoam packing peanuts) as if it had a greater weight, such as a 16 fl oz bottle of water weighing 1 lb). The two weigh the same, but one occupies more physical space in the truck. The standard practice followed by carriers is to use the dim weight or the actual weight, whichever is larger, to calculate shipping charges.
The typical calculation for dimensional weight is (L x W x H)/166. So, for a 20 lb package in a 24” x 24” x 24” box, it may be rated as an 83 lb package:
24 x 24 x 24 = 13,824
13,834/166 = 83
Dim weight calculation is commonly used by DHL, FedEx, UPS, USPS, and other carriers for domestic and international shipments. Many freight carriers and logistics service providers have implemented dimensioning systems to automatically measure package dim weights and calculate freight charges.
The hidden costs come into play when the shipper’s system calculates dim weight different than the carrier’s system. If the carrier’s system shows a higher charge, the shipper will be back-charged. These discrepancies may occur for many reasons including, but not limited to: data entry errors, carton shape, and pack-out processes. Some best practices to avoid these charges would be to implement a dimensioning system internally, integrate standard box types into your order process, and audit your inventory of cartons and sizes to reduce the number of SKUs.
2. Leverage Regional vs National Carriers
As the name implies, regional carriers serve a specific region within the U.S. These service providers are ideal for shippers with multiple distribution centers, especially if the distribution centers are aligned to the regional carrier’s delivery footprint. Regional carriers can offer reliable parcel delivery services at rates as much as 40% less than those of national carriers. In addition to cost savings, regional carriers are often more responsive, allow negotiated rates, have fewer fuel charges, and provide faster deliveries to customers.
3. Add USPS to Your Carrier Shipping System
Shipping with the US Postal Service is an extremely cost-effective solution for small parcel deliveries. Several cost-cutting benefits for small parcel shippers can be realized via:
- Flat-rate products to simplify shipping
- Priority Mail Flat Rate is simple and designed for weights up to 70 lbs, plus the multitude of box sizes will accommodate different sized items
- No fuel surcharges
- If fuel prices suddenly fluctuate unfavorably, your business can avoid the passthrough, as USPS does not add on fuel surcharges.
- Saturday and residential delivery without upcharges
- Compared to other carriers who may charge up to $2.50 for non-business day deliveries
To sum it all up, eliminating hidden shipping costs is easier than you might think. By implementing small changes like these (which require very few resources) into your organization’s shipping policies and processes, there’s potential to save upwards of several dollars on each package shipped.
This significantly impacts businesses of all sizes because it lowers shipping expenses, thus lowering the shipping cost paid by customers, and increases your profit margin, which enables you to reinvest these savings into your infrastructure, people, and processes.