A transportation management system (TMS) is often considered an ideal choice for less-than-truckload (LTL) and full truckload (FT) shipments. In reality, a dedicated TMS can be applied to improve the efficiency and dynamics of any type of shipment. For small package shipments, a TMS can prove to be an invaluable resource by providing the following significant benefits.
Shipping hundreds of small packages pose challenges for shippers. Getting a small package from point A to point B could easily vary greatly in terms of time requirements. The package may be transferred multiple times between different modes of transit as well. As a result, having an optimized route before sending small packages makes the difference between an on-time delivery and a late delivery. More importantly, the vast reaches of Amazon have made small package delivery expectations excel beyond traditional capabilities in legacy ERP systems. Therefore, the only way to effectively compete with Amazon’s rapid shipping is by ensuring small packages are assigned to the most appropriate, faster route through a dedicated TMS.
Customer service for small package shipments is more important than the same customer service for large shipments. Rather than focusing on a vast number of identical products, small package shippers need to be able to provide unparalleled customer service to hundreds, if not thousands, of individual customers on a recurring basis. Consequently, the amount of paperwork and documentation needed to improve customer service on a small-package level is much more, which can be effectively organized, managed and accessed from within a TMS.
Warehouse efficiency is defined by how many orders are processed, packaged and shipped in relation to the actual number of incoming orders. Moreover, small packages may not have the same valuation of larger items, so accuracy in completing these processes is critical to maintaining warehouse efficiency. A TMS furthers this cause by allowing shippers to integrate the process from start to finish, eliminating discrepancies and improving accuracy throughout the warehouse and into actual shipping. In addition, a TMS can help small package shipper monitor and manage inventory levels, explains Larry Lewis of PARCEL Media. In fact, this point is reiterated as one of the standards any shipper should check for when selecting a TMS solution for their business.
Small packages are usually less than 150 pounds, and as a result, they routinely fit into tight spaces. Unfortunately, small packages are inherently more likely to be misplaced, mishandled or forgotten when transferring them between modes of transit, reports Jim Greer of Talking Logistics With Adrian Gonzalez. In other words, a single small package may end up on a different truck than intended, and until a customer reports not receiving a package on time, the shipper is often left in the dark as to why the package is taking so long to be delivered. Yet, the volume of small packages continues to grow, and the carrier may not issue a refund appropriately. Therefore, increased automated auditing and enhancement of intermodal tracking and processing are critical to catching these billing inconsistencies in a cost-effective manner.
As the world has become more connected, ensuring your small package shipments adhere to any and all regulations for international transit is essential to preventing delays and the possible assessment of penalties. A comprehensive TMS must be able to automatically notify shippers of changes in shipping requirements when sending packages abroad. More importantly, some shipments may fall under specific criteria for verifying recipients and financial information before shipping. Ultimately, the TMS should serve as an automated system for verifying all small packages are ready for international shipping at the time of processing.
The manufacturers of legacy ERP systems have lost footing with the rise of the cloud. In some cases, these manufacturers may no longer provide customer service or updates to ensure your systems operates according to your needs. As a result, upgrading your system to a cloud-based TMS, such as the Cerasis Rater, may be more cost-effective in terms of simply maintaining your current operation than using your outdated system. Since the pressure to rapidly deliver small packages grows with each passing day, the need for a TMS to handle all of your small package needs has never been more important.
Buyer’s remorse is real, and customers ordering small items are more likely to decide to simply return an item due to buyer’s remorse. Unlike larger FT or LTL shipments, small packages are typically comprised of one or two items. As a result, shippers need to consider more returns will need to be processed when shipping small packages. In turn, the TMS can handle both incoming returns and outgoing shipments concurrently, reducing the incidence of lost costs for manual handling of incoming returns.
These are just a few of the benefits of using a TMS to handle small package shipments, and the real cost savings could easily add up to more than 15 percent. If you have not yet considered implementing a TMS for all of your shipping needs, including small parcels, you are losing money faster than you realize. Since the process for integrating today’s TMS solutions is much simpler than in the past, the time to act to improve your bottom line is now.
Many businesses have a tendency to go hastily through small package contract negotiation processes. Unfortunately, many of these entities to end to have a large, small package or parcel spend, but a small package outside negotiator can help save significant revenue. Rather than only taking small package contract negotiation at face value, shippers need to understand why a small package contract negotiator is vital to reducing spend and what best practices can further savings in both the short-term and long-term goals.
A small package contract negotiator has more experience cumulatively than anyone in your office staff. For example, the negotiator works with more than 3,500 carriers of different sizes to ensure the best small package rates and contract stipulations are retained. Moreover, small package contract negotiation is not a process that should be taken lightly. Some shippers may feel small package contract negotiation is only something to look at in the days before contract renewal. In reality, the small-package contract negotiation should follow a series of sequential steps to achieve the best savings possible.
Using a small package outside negotiator is also beneficial as it reduces the amount of red tape and legwork required of your internal staff. The negotiator will work to define what your current processes are, what needs to be changed and what services you need among many other tasks.
It can seem as though small package contract negotiators are completely immersed in getting you the best rate and terms. However, your business can be proactive during the process if you know what best practices to follow. These best practices reflect both the steps your negotiators should take and how your business can further the savings. During your small package contract negotiation, consider following these best practices and how they relate to the use of a small package outside negotiator.
Benchmarking your current processes is the most important step in small package contract negotiation. If you do not complete this process, you cannot realistically determine how your current processes are functioning, which further lends itself to defining what processes need to be improved or reduced to maximize revenue. More directly, benchmarking let you see what you need. When you use a small package outside negotiator, you do not have to worry about developing internal resources, such as staff members or computer terminals to complete this analysis.
After determining what you need, your business should focus on small package contracts and turned that satisfy your required service levels. In other words, this is finding the right balance of value-added services and shipping option to reach a heightened return. During the negotiation process, the outside negotiator will work to create large requests for proposal (RFPs), which contain all of the details of your needed service levels, for each carrier.
There is another step that is part of the RFP process, and it involves highlighting how your business will benefit the carriers bottom line or public perception. For example, green businesses may be able to help carriers achieve incentive-based savings as government organizations become more involved in preserving the environment. This is one of the critical best practices small shippers can take to help carriers provide more competitive rates and services, explain John Heckman of Inbound Logistics.
Incentive discounts are similar to the benefits your business brings to the carrier, but that does not mean they are inherently identified during the small package negotiation process. As a shipper, you or your contract negotiator should ask for base incentive discounts, and these discounts should be included in writing within the response to the RFP.
During small contract negotiation, your business could potentially receive thousands of lives on what you need. As a result, sifting through these documents represents a significant internal time investment. However, an outside negotiator can eliminate all of that work for you by reviewing all bids and selecting the most profitable and beneficial carriers.
Outside negotiation is made more attractive as outside negotiators have a third-party viewpoint of what is and is not considered ideal solutions for unique businesses. In other words, your negotiator should suggest which carriers your business will benefit most from, but you still should have a voice in selecting the winning carrier, which is a fundamental part of small package contract negotiation with Cerasis.
Implementing the terms of your small contract is the final step in successful small package contract negotiation processes. Pricing needs to be implemented correctly, and you need to work to make sure your company is receiving the appropriate services defined within your contract. For example, Cerasis works to monitor carrier invoices for instances of double billing, incorrect freight classification, and other potential errors. As a result, you can get more saving from your small package contract negotiation and sequential processes. In other words, your small package contract negotiator needs to be present after negotiations are complete.
Small package contract negotiation does not have to be a burden, and your business could realize significant reductions in the small package by thinking outside of the box and utilizing third-party small package contract negotiator. In fact, small package contract negotiator should work with you through a compensation model that warrants payment as cost savings are realized in future months. In other words, there is little upfront investment in using an outside negotiator.
Shipping processes and best practices are continually evolving and adapting to help small and medium businesses gain a competitive advantage in an increasingly complex global economy. Driven by the growth of e-commerce, more shippers are involved in the global economy than ever before. Only 5 percent of shippers expand their horizons and shipments beyond the big two parcel carrier options in the U.S. In other words, only 5 percent of us-based shippers are taking advantage of the perks of working with the regional center, explains Paul Steiner of Supply & Demand Chain Executive.
As a shipper, you need to understand the drawbacks to using the big two parcel carrier options, the benefits of exploring other options, and what caution you need to consider before devoting all of your resources to either regional or the big two carriers.
There are numerous drawbacks to simply focusing on the duopoly of the big two carriers. The U.S. has a long-standing tradition of preventing businesses from creating a monopoly in the economy, but the big two parcel carrier options have managed to evade this inevitability by keeping pricing low and ensuring their partner businesses and customers are kept typing. However, shippers are faced with additional challenges with solely using the big two carriers, which include the following:
To gain competitive discount from the big two carriers, shippers must usually engage in a high volume of business with the respective carriers. If enough volume is not processed and shipped, the carrier they assess additional costs to the shipper at the end of a reporting period.
The big three carriers also have a hard time ensuring last mile delivery for businesses that do not generate a high volume of shipments within the carrier. In many cases, shipments two are transferred to smaller carriers for last mile delivery. For example, FedEx and UPS may move shipments to the United States Postal Service for final delivery.
Like communicating with many large corporations, maintaining contact with FedEx and UPS for variances and shipping needs can be difficult at best. There may not be a person with the authority to explain current rate for contract details, and as a result, small-to-medium shippers can end up paying more for their shipments. In other words, the bargaining chip for working with small to medium businesses as a major carrier is insurmountable, and small to medium businesses are left to deal simply with the rates.
There are significant benefits to working with regional carriers, which include the following:
By definition, regional carriers are more apt at ensuring last mile delivery from within the given carrier. As a result, shippers know exactly who handles the package from the beginning to the end of its journey. Furthermore, this can be a vital part of visibility and tracking of packages.
Regional carriers may also be able to communicate better and provide access to order tracking tools and assistance to shoppers when they need it.
With the rise of cloud computing technology, more regional carriers are also growing in their automation capabilities. They may be able to offer services similar to third-party logistics providers (3PLs), such as value-added services and contract negotiation, to ensure rate selection and billing is completed accurately and appropriately
Understanding how there are disadvantages to solely using the big two parcel carrier options can be misleading. Rather than diverting all resources and shipments to regional carriers, shippers need to take specific cautions when selecting regional carriers.
Regional carriers often have limitations on their capabilities. While they may offer additional hours of service for pickup or drop-off, they may not have the new technologies of the big two. Also, regional carriers are working with a more limited staff, and delivery guarantees may not be as promising. For example, tracking shipments with smaller carriers may be more complicated than using the big two, explains Jeremy Marsan of FitSmallBusiness.
Automation in regional carriers is another issue. Regional carriers may not have the financial or technological resources to improve efficiency beyond the capabilities of the big carriers. As a result, shippers need to consider their options carefully when negotiating contracts with regional carriers and not alienate other carrier relationships.
Regional carriers may also process shipments differently from the big two parcel carrier options. For example, a regional carrier that picks up shipments after-hours may not process the shipment until the next day, if not later. As a result, it may be more cost effective to select a slightly higher cost shipping via a bigger carrier for processing. In addition, regional carriers are often limited in where their services are offered, and transporting packages for shipments across geographic boundaries can take significantly longer and involved higher rates.
The only solution to the conundrum of using the big two or regional carriers is to find a combination that results in maximum optimization and efficiency of shipping processes. As a result, more shippers are turning to 3PLs to negotiate contracts and ensure the most cost-effective party processes the shipments.
Unfortunately, the overwhelming majority of shippers do not use regional carriers at all, but 64 percent of them want to expand their options beyond the big two. Ultimately, having more than the two options for shipping is gaining traction throughout the industry. In fact, the following infographic, created by Endicia, details some of the most specific differences in pricing and shipping options among the big two and USPS.
Small package and parcel shipping charges can account for up to 5 percent of a shipper’s total expenses, reports Gary Oswald of PARCEL Media. However, more shippers are taking advantage of the benefits of outsourced small package auditing. Initially, this looks like just another action to get more processes out from under one roof, but outsourced small package auditing actually provides many benefits to shippers of all sizes, and as a shipper, you need to know what these benefits are and how they could impact your operation.
Some shippers may feel they have the time and resources available to audit small packages. But, how long and how quickly these audits take can be determining factors in if a carrier issues a refund. While the Trucking Industry Regulatory Reform Act of 1994 guarantees at least 180 days to request a refund for incorrect charges, have you thought about how many business days that is? In reality, 180 days becomes 125 days if you do not complete audits on the weekend.
Now, imagine your operation only conducts auditing processes on one day out of the week. This means you have 25 days of auditing over the course of 180 days, and if you have 100 invoices to audit per week, you could be losing an entire day’s worth of work. If you assume it takes 15 minutes to complete one audit, one staff member would only be capable of auditing 32 invoices in an eight-hour day. So, assume you dedicate two people to this job. That works out to a deficit of 36 invoices each week. Over the course of 180 calendar days, you will accrue 822 unaudited invoices, and if you can save 5 percent on each invoice, you would be looking at a savings of approximately $4,114. That scenario is only if your invoices average a cost of $100. Imagine how these savings grow exponentially over the course of one year and when your operation is conducting a significantly higher volume of small package shipping.
Outsourcing audits to a dedicated entity ensures all audits are completed as soon as possible, and you can free up members of your staff to perform actual work.
As described above, auditing takes time, but what takes more time than auditing hundreds of invoices? The answer is the audit to ensure the original audit is correct and request a refund from a carrier. If that sounds like a headache, it is because it is when you are trying to compete with major shippers and carriers for business. In other words, small to medium-sized shippers must consider how outsourcing all auditing processes can reduce their workload more than actually completing these audits and verification-audit audits in-house would cost.
If you had trouble following the previous sentence, you can see how redundant and mind-numbing the process can become. Instead, outsourced small package audits opens up spaces in your organization to grow.
The task of auditing small packages is larger than auditing any other mode of shipping. More packages equal more invoices and audits. However, tracking the information in each audit is not the only thing shippers have to worry about.
For example, fuel charges vary by day and time, the cost per mile impacts the overall freight rate, and the carrier may have offered discounts at different times to shippers who followed up on invoices. Each of these extraneous factors play a role in how much work goes into each audit. As a result, completing audits in-house can place an additional strain on outdated, legacy systems and decrease the responsiveness of information technology departments and leased server space.
Ultimately, the task of auditing is comparable to creating a self-sustaining fusion reaction. The costs of doing it productively are not achieved until the investment cost (amount of audits being conducted) reach a point that is almost unimaginable. So, how does this relate back to outsourcing.
Outsourced small package audits are to organizations that have made a name for themselves in the scope of performing operations on the scale necessary to bring about a self-sustaining and positive ROI reaction for the auditing process. In other words, the high volume of work being sent to outside entities for auditing allows these outside entities to complete the audits at lower costs than completing them in-house. Essentially, these results give your organization a guaranteed ROI that can then be used to increase the productivity and capacity of your staff and operations.
By definition, small packages are going to be smaller orders than larger orders, creating an infinitely larger number of invoices than larger shipments. However, the importance of auditing shipments does not dissolve simply because the package is smaller. In many ways, auditing is more important to sustaining small package and parcel shipping than bigger modes of transportation. Outsourced auditing is faster, more efficient and costs less than in-house auditing in nearly every instance, and your organization needs to start thinking about how these benefits translate into lower charges for your customers, which will help grow your business at the same time.
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