UPS/Teamsters Tentative Labor Deal- What it Means for Shippers

Now that the Teamsters Union and UPS have a tentative agreement on a five year labor contract, the big question for all shippers utilizing UPS, as well as other freight carriers for that matter is, “so what’s this going to cost me.”

At this time of year when many transportation and logistics executives are enjoying their summer vacations, the major parcel and motor carriers are gearing up for the announcement of their annual General Rate Increases.  These increases, for as long as we can remember, have averaged 6% annually.  Is it possible that with a truly humming economy, ELD mandates, Hours of Service Rules, the continuing saga of driver shortages and the tremendous demand from on-line shoppers to have their packages delivered NOW, if not yesterday, that there is a real possibility that the level of carrier increases will in fact exceed 6% this year?  You bet there is and we believe that may be the case for the next several years for that matter.

But this really isn’t news to those transportation and logistics executives that make it their business to continually monitor and measure their freight costs.  These executives, utilizing comprehensive spend data they receive from their Freight Audit and Payment companies have already realized that rate increases for certain shipment type categories has in fact exceeded 6% over the past several years.  In fact, some fees for oversized packages for example, have increased over 500%,and that’s a fact!

What’s that you say, you don’t track your freight costs month by month, quarter over quarter, carrier by carrier, service level by service level?  If this sounds unrealistic, you’d be shocked to learn how many companies just don’t have their finger on the pulse of what’s happening with their freight costs, until it’s too late.

There is an old saying I’m sure we all have heard, “you can’t control what you cannot measure.”  So if a company has never performed an audit of their parcel or LTL freight bills for example, or never had a benchmark analysis of their shipping costs performed, how could they possibly know their freight costs are under control?  How can they be assured they have the most competitive freight costs for the services offered?  The truth is they can’t, so they just continue to pay whatever rates and charges their carriers can get them to pay.  This is certainly no way to run a business and yet that’s exactly how many shippers do operate today.

Notice we didn’t say “cheapest” freight costs, we said most competitive.  There is a strong reason for that, because “cheapest” can often times cost a company much more in the long run in terms of late deliveries, customer chargebacks, damaged freight and most importantly, loss of a customer or customers.  Again, you’d be amazed at how many companies seek out the “cheapest” carriers without knowing that carrier’s delivery service levels, liability limitations, etc.

So what can a shipper do to make sure they do not overpay for shipping?  Here are a few suggestions.

1. First and foremost, make sure all of your freight invoices are audited prior to payment by an outside Freight Audit Company.  The fees for these services are consistently much lower than what it costs companies to process freight invoices in house.  And there is a tremendous added benefit that comes from the detailed financial data a company will receive from the audit firm to help it monitor and control its freight costs year after year, after year.  These firms audit all carrier invoices, including parcel, LTL and Truckload, Ocean and Air International Invoices, as well as invoices from 3PL’s.  The cost-benefit of utilizing these services is substantial.

2. Don’t stop there, even if you utilize a company to pre-audit and perhaps even pay your freight invoices, have those same invoices post-audited by a qualified Freight Invoice Post Audit Firm.  These firms typically work on contingency fees based on a percentage of the recoveries they actually generate for your company; no recoveries, no fees, how’s that for a deal!

3. Finally, and probably most importantly, make sure you have a Benchmark Analysis performed on your freight costs on a regular basis.  Even if you consider yourself a sophisticated shipper, one who is on top of your freight expenditures, one who considers yourself a great negotiator, you can benefit from a third party benchmark analysis.   It’s as simple as “you don’t know what you don’t know.”  In other words, you know what you believe is the good deal for your company.  What you don’t know without having a benchmark analysis performed is, do you have the best deal that can be achieved for your company.  This information is invaluable for all companies as it helps you to negotiate from a position of strength that will ensure you ALWAYS get the best deal for your company.

If you’re searching for the best service providers to provide audit and benchmark services, feel free to contact us, let’s have a discussion about your company’s needs and let us help you find the perfect business partner to provide these services.