AS A SHIPPER IN 2005, you’re likely to be saddled with extra costs from carriers. Thanks to technology advances, carriers now bill for services they physically couldn’t charge for a few years ago; in addition, they have dramatically improved their cost-to-serve pricing models.
Carriers thoroughly analyze your company’s shipping profile to figure out what discounts to offer. Following these important rules can help your company get the best rates possible:
Gather your own data
Don’t rely on the carriers to provide this information.
Get a robust sample of actual shipping data and analyze it against the 20-plus pricing components the carriers use. Assign a competent analyst with spreadsheet experience to work on the project. Consider segmenting your business for specialized carriers, such as courier services, regional shippers, or parcel consolidators.
For a representative period (at least one month), prepare summaries of the following:
- number of shipments, weights, and average published cost by service level and zone;
- primary shipping locations;
- origin/destination zip or postal code analysis;
- dollars spent by published cost, for each segment of the business;
- current rate charts or contracts; and
- add-on charges.
What the carriers consider profitable will determine what discounts they can offer you. Research what is and is not a profitable pricing matrix.
Determine service goals
Compare the carrier’s service levels with your actual lane utilization. Base your service decisions on your shipping lanes, not industry averages.
Review carrier proposals
Use package-level shipping information to analyze contracts. Run a month’s worth of data against the new proposals.
Mike Erickson is president and CEO of AFMS Logistics Management Group. He can be reached by phone at (503) 246-3521 or by e-mail at email@example.com.