Transportation is a huge expense in distribution, so shaving costs in this area is often an operations priority. Simply comparing parcel shipping rates is not enough, however: You need to evaluate all of the associated and trickle-down costs that drive your total transportation spend, including the cleanliness of your customer address data.
Your success in controlling costs and providing a positive service experience may directly relate to how well your customer address file is managed and updated.
The financial and inventory losses tied to packages that are undeliverable due to bad addresses can be as much as 4% of a marketer’s address file. And with address correction fees costing as much as $10 per incident through some carriers, total costs to support these losses can be debilitating–not to mention the negative effect on the customer shopping experience.
Consider this sample formula for calculating the cost of bad ship-to addresses:
500,000 shipments X 4% bad address file data = 20,000 Misshipments X $10/incident = $200,000
How can you reduce these costs? Companies that generate the package volume required can take advantage of contractual-based shipping programs. Such carrier programs help you scrub and update your address file through the support of a cost-effective coding accuracy support system (CASS) certified-address-verification system.
Merchants that rely exclusively on the U.S. Postal Service for parcel delivery (and don’t have a manifest system installed that supports CASS functionality) can implement an Internet-based postage/shipping system. Many of these systems have features configured in, and some of which may offer the flexibility of using the services of a parcel consolidator, which can further reduce costs.
If your business relies on multiple carriers, or you have a commercially available or home-grown manifest system, several systems enable you to implement a CASS-certified system within your environment. An Internet search will reveal a large number of technology companies that offer these services to shippers.
A cleaner file can not only helps you control the costs associated with address correction fees that may be assessed by your carrier, but can result in reduced call-center costs tied to customer frustration. The costs for a “where’s my order” customer call can be as high as $5 to resolve an issue, while taking the representative away from a revenue generating call from another potential customer waiting in the queue.
And should the solution involve a reshipment—even assuming the merchant successfully retrieves the first shipment—additional merchandise in the network needed to fulfill another customer’s order can have a negative impact on inventory and revenue. This can be particularly painful for seasonal merchants where inventory is constrained.
As e-commerce continues to grow and m-commerce rapidly evolves, the impact that bad address information can have on your business will increase as well. If your company has a negotiated service agreement with a carrier for shipping services, scrutinize your carrier bills to identify the expenditure tied to address corrections and undeliverable shipments.
If the numbers are alarming, ask the carrier what programs it may offer to help reduce those costs. If the carrier is unwilling to work with you in identifying a solution, look at other systems options. The savings could be worth dollars per transaction. The right solution can help you reduce those dollars per package to pennies per correction, all while providing a better level of service to your customer.
Kevin Brown is director of marketing at Newgistics, a provider of small parcel delivery, intelligent returns management, and freight management services. http://www.newgistics.com/