Managing shipping is not easy. You have so many carriers, classes, surcharges, paperwork and requirements that it can get overwhelming. Every year you are getting 3-10% increases, and with the new dimensional rating requirements, it could be much more. Based on what you are shipping, it may or may not make sense to use free carrier provided software to process your packages. In this article we will look at what factors you may need to consider; not only from a cost of shipment, but also from areas that may make your shipping process more efficient.
One of the main reasons that companies use third party shipping systems is because they have found significant savings by rate shopping packages based on cost and time of delivery. There are two new developments that make this crucial to consider:
1. Both of the major small parcel carriers announced this year that they are dimensionally rating most items. As an example, a 5LB box could be rated at a much heavier weight because of its size. The USPS® did not follow the major carriers and may be less expensive for items under 1 cubic ft.
2. The USPS® mandated that Priority Mail® and Priority Express Mail® would no longer receive Commercial rates when processing through a postage meter and require a 4x6 label with the destination address and barcode. At the same time, they reduced their rates for heavier items.
The most common reasons rate shopping is helpful:
1. Comparing Rates and Delivery Times Within a Carrier - Most people who ship any significant volume have a negotiated discount with one of the private carriers. These carriers provide no cost shipping software either on their website or with customized systems they set up in your office. The question is how easy it is to compare rates between service levels and delivery times. They can all show you the different rates for next day to ground service levels. But will they tell you that based on a destination zip code, that the ground package may get there faster and less expensive than a two or three day shipment? Most private party systems will do this calculation for you.
2. Comparing Rates Between Carriers – The USPS® is having their fastest growth in the shipping market. The primary reason is that we are all buying more items that are being shipped to our homes. Regardless of your carrier discount, the USPS® may be less expensive for less than 10LB items. The issue is that it depends on the factors related to that particular package to determine if your negotiated private carrier rates or the USPS® will be less expensive. This is where third party shipping systems prevail.
3. Comparing Rates between Small Parcel and LTL - To be able to use one system to compare 100 weight shipments sent through your small parcel carrier to your LTL provider. Also, to process bills of lading from the same platform.
Who should consider carrier provided systems?
If you are primarily shipping with one carrier and your method of shipment is determined by the customer, there are a lot of benefits to using the systems provided by the carriers beyond the fact that they are free. These include the following:
· Simplicity – These systems are designed so the average user can get up to speed quickly.
· Support – The carrier has a vested interest in your system being up and running so you can process shipments that generates revenue for the carriers.
· Improved functionality – The carrier provided systems seem to be getting better in their offerings. They have cloud hosted options and have developed many of the features that used to be unique to third party systems.
· Free Extras – Based on your size, the carriers may provide you scales, label printers, scanners and or credits to buy PC’s. They will help you set up the system and provide training for your operators. In some cases they may help you integrate it to a host system or database. Finally, they provide free labels that can save thousands.
What to look for in a third party shipping system:
There are many feature sets that will be important in determining if you need a third party shipping system. Here are some additional functions where these systems shine:
· Data Connectivity – If shipping is the core part of your business, this is the most important feature in a system. How are you going to get the data from your order entry system (Address, requested date of delivery etc.) to your shipping system, and then be able to write back information about that shipment (Tracking number, estimated delivery date and shipping costs)? This can be done real time or as a batch process at the end of the day. Depending on your relationship with your carrier, they may be willing to do some of this integration for you. This is the core item that should be discussed with the carriers and third party providers.
· Rules Enforcement – Many companies want to put constraints on how their people ship items. This is important with desktop users who may not be educated in the carrier rules or in shipping where you need to control how packages are processed. An example is only specific users are allowed to ship Next Day Early AM because it is an additional $30 per package charge over 10:30 AM delivery. Rules can be set up across all carriers and service levels, and can be defined by the traffic managers who are educated in the best ways to ship.
· Enterprise Access – New shipping systems can allow you to process packages from multiple sites and by thousands of potential users working in offices or out of their homes. As these systems expand, so does their cost, so keep in mind the core needs of the application.
· Internet Postage – As we saw in the rate shopping example, many systems will be able to process postage on the same type of thermal label as the private carriers. This will include tracking information.
· EDI Rating – Third party systems used to have rates that were sent on a DVD once per year, but this has changed where most rates are connected real time through an EDI (Electronic Data Interchange) interface to the carriers. This is far superior because you are using the most up to date discount levels and terms for your particular carrier agreement.
· Inbound Processing – Some third party shipping systems will integrate with inbound tracking systems. In one place, you have the visibility to all of the incoming and outgoing shipments for your organization. This is especially helpful when items are moving from different locations inside your organization because it allows you to track from the desktop where it originated to the desktop that finally received it.
· Reporting – All systems will have standard reporting but you may have more detailed needs around how the data is formatted or made searchable.
· Third Party Partnerships – Many third party shipping system providers will partner with companies that offer different value added areas that may benefit you and should be considered. Here are some examples:
o Freight auditors that will find overcharges in your invoices.
o Parcel contract negotiators.
o Third party parcel insurers.
o HazMat support providers.
Choosing the Right Supplier
Assuming that you are now convinced that you need a third party shipping system, there are many areas that should go into your final decision.
· Ease of Use – Look at the screens and make sure it is something your operators will be able to use and understand. This system may be used in your shipping area or by casual users who want to ship from their desktops.
· Vendor Support – How are they going to customize your system, train your staff and support you when there is an issue? Will they have people on site or will it all be from a remote support model?
· Features – All of the items that were mentioned above are going to be different for each provider. Make sure the system you are looking at can do everything you need.
· References – Make sure that you can find similar types of companies locally using this system that are happy with the software and support.
· Pricing – I left this for last because it deserves the most attention. These systems can range dramatically from the thousands to hundreds of thousands of dollars based on what you are asking the system to do. I would strongly recommend getting at least two quotes. Pay close attention to the costs they are putting in the professional services sections (Programming and training) because this can vary drastically between providers.
There is nothing wrong with the systems provided by the carriers. In some cases, based on your relationship, they will do some customization to make the system work better for you. Third party shipping systems have a cost and should be justified with the added value from the items mentioned above. Hopefully this article gave you a framework to better evaluate if these systems are right for you.
Adam Lewenberg, CMDSS, MDC, President of Postal Advocate Inc., runs the largest Mail Audit and Recovery firm in the United States and Canada. Their mission is to help organizations with large numbers of locations reduce mail related expenses, recover lost postage funds, and simplify visibility and oversight. Since 2013, they have helped their clients save an average of 52% and over $17 million on equipment, fees and lost postage. He can be reached at (617)372-6853 or firstname.lastname@example.org.