With the holidays behind us, the logistics industry can finally breathe a collective sigh of relief. However stressful, the past few months of peak season have also shown more signs of economic recovery. Consumers came out in record numbers, making the fourth quarter of 2010 a bright spot on what was undoubtedly a barometer for future retail trends. Some may wonder, “What does this have to do with shipping?” The answer is quite a bit, actually.
Competing in a Changing Marketplace
The days of simply focusing on creating a positive in-store experience are long past. New technologies, combined with an increasingly perceptive consumer, force all of us to find ways to meet growing customer demands without breaking the bank. The fact that many customers no longer “marry” themselves to a brand (as price is the number-one purchase factor) means that merchants’ ability to drive long-term customer loyalty is dependent not only on the products that they offer, but also on the total landed cost of putting those products into their customers’ hands. This is where shipping costs play a critical role in building customer loyalty.
The Rising Costs of Shipping
Nobody likes rate increases when it comes to shipping, especially when it can account for as much as 40% of an organization’s total landed operational costs. Nevertheless, there are several things to keep in mind as we negotiate contracts with carriers:
- Fuel rates are volatile and cause uncertainty in cost structures
- Investments in new technologies rise as shipping companies identify ways to reduce their carbon footprint in meeting customer demand
- In some cases, heavy fixed overhead and real estate costs associated with lower volumes must be absorbed
Because shipping is such a large factor in an organization’s budget, it is often one of the first places executives go to identify areas in which to reduce costs to remain competitive. While it’s always smart to work with your carrier to negotiate the best deal, I propose that you look even further than your rate chart for opportunities to save, which many merchants are missing out on today.
Additionally, as you look at alternative carriers, remember that your most loyal customers expect a certain level of service from you. As long as you establish customer expectations through a comprehensive policy that clearly communicates expectations, there is no harm in offering a lower-cost shipping alternative. Reducing costs may even help you attract new customers and build customer loyalty among long-time customers.
In Conclusion
In order to continue serving customers profitably, merchants must ensure that they’re doing everything possible to improve the level of service they receive from existing service providers, or be willing to utilize the services of others when their needs aren’t being met. And rather than placing the entire burden of cost reduction on service providers, businesses must also look to ways to reduce their own costs while meeting customers’ expectations. In an increasingly competitive market, your customers are not the only ones looking to you to deliver a better value — your shareholders are as well.
TLC Transportation & Logistical Concepts’ team is here to make sure you are getting the best freight rates every time. Call us today at 800-882-4852 or visit us at www.tlcforfreight.com
No one makes it alone.
by Malcom Gladwell
Last month at the PARCEL Forum, about a dozen executives sat around a conference room all day helping each other tackle the most challenging issues they faced in running and growing their operations.
It was a candid give-and-take, where trusted peers asked each other tough, in-depth questions that got to the heart of any shipping and operational problems they were facing. Participants received direct and honest feedback and derived actionable ideas that they could take home and implement.
A beautiful thing that happens in a group like this: people help one another. I am constantly amazed at the power of a group to make a difference. Vistage developed a process for discussing issues over 50 years ago. I know from my own experience that this process works. I have been a part of it no less than a couple of hundred times. The steps are listed below.
What is the issue or opportunity that you would like help with? Be concise; state it in one or two sentences that get to the heart of the matter. Is it a concern, challenge, opportunity or problem?
Next, tell us why it is significant. What is the effect on dollars, time, people, products, services, customers, family, timing, the future, etc.?
What is your ideal outcome? What do you really want to happen?
Give some relevant background information. Short bullet points on: How, When, What, Why; Various options you could take, have taken or plan to take.
What specific assistance do you want from the group? For example: higher confidence on the right decision; possible solutions; alternatives; identification of consequences; where to find more information; critique of current plan.
The important part of this process is that after the issue has been presented, the group does not jump to providing solutions. On average, the team should spend at least 30 minutes asking questions for greater clarity. Sometimes, we discover that the original issue is only on the surface and the real issue is something different. After the time, the questions will begin to die down. Then it is appropriate to have each group member provide their perspective, solution or recommendation. Finally, we ask the presenter what they heard and what actions they are committed to taking. This is important because it creates accountability and results. The process works best when one person takes the role of facilitator.
Dimensional Weight Changes are Here
At this time of the year, one of the hottest topics is the parcel carriers’ published General Rate Increase (“GRI”). Although the excessive increases continue to bring disappointment, this year’s announcement brought few surprises; the excep-tion being the significant reduction to the dimensional divi-sor (dim factor) from 194 to 166 for domestic shipments and 166 to 139 for international shipments. The three cubic foot rule continues to apply for ground shipments, so ground shipments that are smaller than 5,184 cubic inches will continue to be billed based on actual weight (no change there… yet!). * To calculate dimensional weight, measure length x width x height of the package. To play it safe, round each measurement to the nearest whole inch. The result is the size measured in cubic inches. Divide the cubic inches by 194 to determine the chargeable weight.
The following illustrates how some shipments will be impacted, based on the actual weight being less than the weight stated:
OS rules applied based on combining the length (longest side) and girth of the package. Shipments were then charged at a 30 lb, 50 lb., 70 lb. or 90 lb. rate, based on the applica-ble length plus girth.
So that leads us to this latest change, as well as anticipated future changes. Most experts had likely anticipated that the three cubic foot rule would have been the next item that the carriers would target, rather than the dimensional divisor, so we can expect this to be something that the carriers go after… with FedEx and UPS basically matching one another each year, with FedEx awaiting UPS’ announcement, what’s to stop them, right?
With that in perspective, there are solutions available to help one address this. One needs to be adaptable, educated and prepared in these instances. So what can we do now, and what should we do to prepare for future changes?
First, you have to understand how these changes impact your business. This is arrived at by having absolute thorough visibility to your shipping data. Reference fields should also be completed with dimensions, to validate the carrier’s measurements. In addition, if there is an opportunity to reduce package dimen-sions, consider working with your package distributors to adjust the package dimensions accordingly. Finally, if a custom dimen-sional divisor is not in effect, negotiate it, as needed. Again, understand the impact and request a factor that’s impactful and appropriate based on your shipment profile and volume.
Although impactful, you can control how dimensional weight affects your bottom-line.
Be sure to check out www.BestFreightRate.com, we can assure that you get the best freight rate every time.