A Transportation Management System is a great cost reduction tool, preempting common problems that result in hidden freight costs. Following are four ways this technology can yield dramatic cost savings.
1. Transportation Management Systems Perform Address Correction
When is the last time you checked your freight bill to analyze up-charges related to incorrect shipping addresses? Address correction surcharges from the carrier can quickly add up. One expert, Satish Jindel, founder and president of Pittsburgh-based SJ Consulting Group, estimates that parcel shipping errors add 5% to 7% to a shipper’s annual freight bill. Given that companies collectively spend some $55 billion a year on domestic parcel services, those mistakes translate into serious money.
Costs related to incorrect delivery addresses can be huge and accumulate in several ways:
- Incorrect delivery addresses – Address correction charges by parcel carriers can range from $13.00 per package, up to $91.00 for multiple packages.
- Residential deliveries erroneously classified as commercial – If residential deliveries are erroneously classified as commercial deliveries, the carrier may fix it, but at a cost of $2.50 or more per package.
- Increased customer service costs – Labor costs also increase when employees are diverted from their regular work to resolve address-related problems.
- Unhappy customers and cancelled orders – Delivery address problems can also lead to frustrated customers, order cancellations and even the loss of a customer.
2. You Can Add Postal Carriers to your Transportation Management System
Postal carriers can be an extremely cost-effective small parcel shipping option. The U.S. Postal Service®, for example, can offer attractive rates and other cost-cutting benefits for small parcel shippers, including:
- Flat-rate products to simplify shipping
- No fuel surcharges
- Saturday and residential delivery at no extra charge
- No extra charge for residential delivery
- Largest delivery network in the U.S.
- Comprehensive delivery tracking
3. Transportation Management Systems Eliminate Manual Transport Order Booking
If you’re booking transport orders manually, data entry errors can occur at many points and add up to significant hidden costs. Here are some trouble areas:
- Third-party billing errors – If the account number is manually entered incorrectly, the carrier will charge the costs back to the shipper, and your odds of collecting those freight charges from the customer are slim at best.
- Incorrect delivery addresses – When a carrier encounters an incorrect delivery address, they will fix the problem – for a price.
- Incorrect or missing customer reference numbers – Companies shipping to retailers need to ensure the customer reference numbers provided by the retailers are accurately entered in the correct field on the freight bill. Failure to include this number so that it is automatically transmitted by the carrier can result in hefty fines.
- Infrequent invoice analysis – It’s a good idea to regularly perform carrier invoice analyses to identify delivery problems and resolve them before they amount to significant costs, but this is often too time-consuming to perform manually.
4. Transportation Management Systems Enable You to Leverage Regional Carriers to Reduce Freight Costs
Consider using regional carriers to handle some of your deliveries. This can be extremely cost-effective for companies with a concentration of customers in certain geographic areas.
Regional carriers can be categorized in several ways. Some focus on small parcel delivery, while others offer less-than-truckload (LTL) services for heavier shipping. Certain regional carriers provide multi-state solutions, while others are couriers or “micro-regionals” that cover smaller geographic regions such as cities or partial state. Regional carriers offer numerous benefits:
- Lower freight rates – Regionals can often pass along savings of 10% to 40% over UPS and FedEx pricing.
- Fewer surcharges – Many regional carriers do not assess the same delivery surcharges that national carriers do, which can range from $1.85 to $3.00 per package based on rural zip codes.
- Negotiating power – Adding regional carriers can put you in a better negotiating position with all your carriers.
- Responsive service – Regional carriers may be willing to take on special shipping requirements and have more flexibility in terms of the kinds of services they can offer.
It’s important to make sure that your Transportation Management System will accommodate the addition of regional carriers. Perform a carrier cost/service analysis to determine if/where makes sense to add regionals to your delivery network.
As these suggestions show, you can find tremendous opportunities to reduce shipping costs. The bottom line? Today’s leading Transportation Management Systems are designed to manage a wider range of shipping scenarios.
Contact us to discuss ways to optimize your shipping operations and systems.