Five Tips for Lowering Shipping Costs

Apr 11, 2007 8:50 PM  By

Ensuring that you do not overpay on your small-package shipments can seem like a monumental task. Because of the extra expense incurred in residential deliveries, shippers such as FedEx, United Parcel Service, and DHL charge significantly more for residential shipments. Using the U.S. Postal Service is often a less expensive option but can take significantly longer, with fewer tracking options. Commercial shipments are less expensive than residential shipments but can incur additional costs via pricy surcharges.

With all that in mind, here are five tips for lowering your overall transportation spend.

1) Ask for discounts. If you are shipping packages via FedEx, UPS, or DHL, work with your account representative to ensure that you are getting the best discount program possible. Just about all shippers, regardless of size, are eligible for some level of shipping discounts, but you’ll need to ask in order to receive a specialized pricing program. Incentives for residential packages are typically much lower than those for commercial shipments, so you won’t see huge discounts for these packages, but you should see some savings on all shipments. Discounts are subject to minimum package charges.

2) Consider alternative shipping options. If cost is a bigger factor than delivery time for your residential shipments, then FedEx SmartPost may be a better option for you. With SmartPost, FedEx will sort your packages and haul them to the closest post office, with the Postal Service delivering the package to its final destination. This “zone-skipping” strategy can improve your delivery time over that of standard USPS delivery at a cost that is less than standard FedEx, UPS, or DHL residential shipping.

Express residential shipments can be extremely expensive, due to the higher express list rates and residential surcharges. Even if your shipment is time sensitive, though, you will want to check that it actually require express shipping, as many ground delivery times are faster than you may realize. This holds true for all shipments, whether the package destination is residential or commercial.

3) Use hundredweight pricing when appropriate. Shipments of multiple packages to a single location may be eligible for hundredweight (also known as multiweight) pricing.

Under hundredweight pricing, multiple packages being shipped to the same destination are rated as a shipment at a rate per pound (instead of per package, unless the per package rate is cheaper). Express shipments greater than 100 lbs and ground shipments greater than 150 lbs are eligible for this special hundredweight pricing.

Express hundredweight shipments will automatically receive this pricing, but your account must be set up with special pricing in order for ground shipments to receive it. The tier of ground hundredweight pricing that your account is eligible for will depend on the freight class being shipped. Your account representative can work with you in setting this up.

4) Manage your surcharges. Surcharges can significantly increase your shipping costs, and it is up to you to monitor them. Note that certain surcharges are higher for residential packages and are incurred in addition to the standard residential and fuel surcharges. Address correction charges can be especially costly at $5 per package for ground shipments and $10 per package for express shipments, so it is essential to ensure on the front end that addresses are correct. Pickup fees, which can be $4 per package for express shipments, also add up quickly and should be avoided whenever possible.

Lightweight shipments in larger boxes, such as clothing, are often subject to dimensional weight charges, which take package dimensions as well as weight into account (see ”A New Dimension in Packaging”). Additional handling charges can also be incurred if package dimensions do not meet the standards outlined in the shipping tariff.

5) Use one provider for all shipments. DHL, FedEx, and UPS often offer increased incentives based on shipping revenue or volume. Known as threshold or earned discounts (different companies use different terminology), these incentives are in addition to base discounts and reward customers for meeting certain shipping levels. They are meant to encourage customers to use one provider for all their shipping needs and can add considerable savings. These earned discounts can be more difficult for seasonal shippers to achieve, so if you are a seasonal shipper, you should discuss your situation with your account representative to ensure that an adequate earned discount program is designed for you.

Colleen Paulson has almost ten years of analytical and management experience with two Fortune 100 companies, having worked most recently as a senior pricing analyst with FedEx. Ms. Paulson has her MBA from the University of Pittsburgh and is now a freelance writer based in Pittsburgh.

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