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How to Beat the Peak Season Surcharges

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While we prepare to enter what could be the strangest and certainly one of the most challenging Holiday Peak Shipping Seasons (see here, here and here for more information), major parcel shippers are trying to figure out ways to avoid not only paying the higher Peak Season Residential Surcharges, but perhaps even more importantly, how to get their products delivered to their customers in a timely fashion.

There is no doubt that all major parcel and last mile delivery service providers will be even further “capacity challenged” in the coming weeks due to the incredible, explosive growth of online shopping during the Covid-19 Pandemic.   

There are obviously cost reduction strategies these major parcel and last mile shippers are considering, (or should at least be considering), including consolidating packages to reduce overall package volumes to help them stay under the volume caps imposed by the major parcel carriers.  

Another option that is being considered by these major parcel shippers is to encourage their customers to pick up packages at local shops and delivery lockers, in an effort to avoid paying additional residential delivery surcharges.

And finally, one option that is probably least attractive, is for these major parcel shippers to pass the Peak Season Surcharges on to their customers as a cost of doing business in these unprecedented times.  We doubt however that there is a great interest in taking this action as the expected negative customer feedback may not be worth the effort to recover some or all of these additional costs.

While these efforts may seem futile, shippers cannot afford to just roll over and play dead, as their very survival may depend on how they navigate through the service and financial challenges they will face during this upcoming Peak Shipping Season.

So, if there ever was a time to take a deep dive into a company’s transportation and logistics operations and spend management, now is that time.  Year after year we hear way too often from shippers that they don’t have the time to analyze and evaluate their current shipping characteristics in an effort to finally wrap their arms around what they are actually paying for shipping compared to what they should actually be paying. 

In addition to this “leave me alone, I’m busy” response, many shippers actually lack the ability to do a comprehensive deep dive into their own shipping data to determine exactly what their shipping characteristics are, based on package size, weights, origins, destinations, zones, services utilized, versus services that should be utilized, etc., you get the picture.  Also, what options are available between the many service providers in the marketplace, and even more importantly, how to make sure their shipments are attractive to those carriers to ensure win-win relationships. 

This all sounds very complex and it is if a company does not align itself with industry experts to help them navigate through these complexities, but merely try to “go it alone” if they do not have the necessary resources in-house. But the good news is there is help available, and that help involves working with an independent third party logistics consultant who can perform the necessary data mining analyses, report their findings and provide comprehensive benchmarking capabilities to clearly establish what are the best service and freight cost options available. 

Typically, these firms work on a success fee basis, meaning their only compensation is derived as a percentage of the “actual savings” they achieve as a result of providing their comprehensive analytical and negotiation strategy efforts. 

Companies should always negotiate from a position of strength, and by utilizing a third party expert to walk you through the complexities of rates, surcharges, fees, contract terms and conditions etc., your company will be perfectly positioned to obtain the best value for your company, even in these crazy times. 

Think your firm has the best available rates for the services provided?  Let our team of specialists benchmark those rates so you can FINALLY be sure.  And if not, there could be hidden profits that you’ve been missing.

Wonder how we do it?

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Was the deal you struck, the deal you got?

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Each and every day shippers and their freight carriers negotiate pricing agreements and contracts in good faith.  The goal of course is to create a long-term business relationship that benefits both parties.  The shipper receives the services it requires and the freight carrier receives adequate compensation to provide those services and to also generate a profit so they can continue to invest in equipment, technology, and improved services to meet the ever-changing demands of their shipper customers.

But, once the negotiations are finalized, how does a shipper really know it received the rates, discounts and incentives it negotiated?  Well, of course the pricing agreement or contract would contain those rates, discounts and incentives, so there is the proof, right?  Wrong!  While the contract might in fact have all of the correct rates, discounts and incentives the shipper negotiated, absent a comprehensive audit of the actual shipping invoices from the date the new agreement became effective, a shipper really does not know if the new pricing provisions were actually put into the carrier’s billing systems correctly.

In a real life example, one of our clients recently entered into a new contract agreement with its major carriers.  The negotiation was supposed to bring substantial savings to the client however after just a few weeks of the new invoices being submitted by the carrier for payment, the client felt that it was not saving money, but was actually paying more for their “normal” shipping activity.  The client engaged our company to perform a comprehensive Financial Audit to ensure the rates the shipper negotiated were in fact being charged correctly by the carrier.

Our Financial Audit of this client’s actual shipping invoices involved validating that all pricing aspects of the new contract were being charged properly by the carrier.  We re-rated every shipment to validate the accuracy of the carrier’s base rates; that the applicable discounts were correct; and that every accessorial fee was charged correctly.  The Financial Audit we performed also involved re-rating every shipment to validate that the Custom Dimensional Weight Factor the client had just negotiated was correctly applied to each and every eligible shipment.  (To be perfectly honest here, the computer actually re-rated all of the shipments, but I guess you knew that!)

The audit results were quite revealing, because the client’s concerns were in fact validated.  Many of the revised pricing provisions the shipper negotiated were not properly uploaded in the carrier’s electronic invoicing system.  The carrier did not apply many of the newly negotiated surcharge percentages.  Therefore all shipments subject to the revised surcharges were being overcharged.  The audit also provided some very interesting findings that would have gone undetected without the comprehensive audit process having taken place.  You see, the shipper also did not sign away its right to file claims for late delivery refunds, however for some reason the carrier inadvertently marked the account as having signed such a waiver, preventing the client from filing claims for refunds they were in fact entitled to.

Over a 180 day period, this Financial Audit identified over $100,000 in carrier invoicing errors for our client and they are now in the process of receiving a full refund from the carrier for these excessive costs.  Needless to say, our client now knows they actually “got the deal they struck!”

Business People Sitting in an Office Building Chatting

Your business is disrupted; we’re here to help

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We understand you are facing unprecendented business disruptions.  The challenges are immense and every company’s sales and personnel resources are being negatively impacted by this Pandemic.

Here’s some encouraging news; Your company doesn’t just have to see its sales plummet without having any options to improve its bottom line.

 You may already know that ICC constantly monitors our clients transportation and logistics expenses to ensure their costs remain under control.  But what you may not be aware of, is that now is the time to seek significant logistics cost reductions at a time when they are most needed, and we can help you do that.

What’s more, our business solutions do not require a great amount of your time– allowing you the space and bandwidth to tackle the immense work on your plate without adding any more–and more importantly they do not require any financial commitment from your company.

 We’re here to help.  If you would like to hear more, please call us so we can share with you the tips and tools you need to thrive during this challenging business disruption — we’ve been helping companies just like yours get through difficult times for the past 45 years.

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Seven Steps to Better Negotiating

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We’ve said it before…negotiation is a fine art.  Whether you are negotiating logistics contracts, or new partnership agreements, proper negotiating tactics yield tremendous results.  Below are seven of my top tips for negotiating in business and beyond.

Know The Rules. The better you know the rules of engagement, the more effectively you’ll make your case. By rules, I mean the terms that govern the buyer-seller transaction. Terms can be detailed in the contract you are about to sign, in a service provider’s service guide, defined by state or federal legislation, codified by regulatory decisions, or specified in industry practices or codes of ethics. The rules may be complex and are always subject to change and negotiation for that matter. Don’t negotiate anything with anyone until you know all of the rules you will be subjected to.

Update Your Knowledge Base. In other words: Keep current on changing industry trends and never stop  learning. The more you know about your business’ operations, total costs, etc.and the more you know about your suppliers business, the better off you’ll be.

Bring Time To The Negotiating Table. While money is rarely, if ever the only transaction variable, often it becomes the sole focus of negotiators. You know the scenario: one side says $X, the other says $2X, and confrontation begins. To break the logjam, bring other variables to the negotiating table such as time. Can you, for instance, accept a protracted delivery schedule? If, so how valuable is that to the carrier.  Will your freight vendor further discount their invoices if you pay their invoice promptly, say within 10 days? Can your service provider accept payment in 60 days rather than 30 days? 

Give To Get. Before you sit down at the negotiating table be prepared to offer several concessions in return for what you actually need. In negotiations it is always critical to separate wants from needs!

Understand Your Own Goals. Too often businesses sit down at the negotiating table without having assessed their own long-term goals. Ask yourself: What do you really seek from your supplier or strategic business partner in this intended relationship? What will it take to arrive at that goal? The answers may totally reshape your deal-making process.

Never Use Criticism To Leverage Price. Yes, most businesses sit down at the negotiating table to lower their costs. But don’t knock the service provider’s service currently being provided to your company, don’t belittle the other teams negotiator or the products they sell and don’t demean the vendor to get what you want. Believe me you won’t get what you think you’ll get.

Always Be Courteous and Professional I’ve seen too many negotiations boil over because the parties at the table took things personally. Remember this is not about you, it’s about achieving desired results that affect many more individuals than yourself.

I hope these tips prove helpful to you.

Five Step Plan to Lower Freight Costs

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They say, what goes up must come down and we believe that includes shipping costs!

Here is a Five Step Plan to rationalize your current transportation costs and use that data as a starting point to reduce those costs. We caution in advance however that this plan will require not just time on your part, but a commitment from the various key stakeholders within your organization. Ideally, this should include the most senior people in the organization. They need to understand the value of this mission and how it could positively impact the company’s bottom line. Follow these steps, commit to your savings goals, and you can do this.

Quantify Your Savings Goals:
Any cost reduction process must begin with goal setting. Ask yourself: How much do we WANT to save? How much do we NEED to save? Is there a delta between the two, and if so why? A sound knowledge of transportation cost structures is the key to successfully benchmarking costs and achieving savings. If your firm does not have the expertise to thoroughly understand the various cost structures, (including of course the assessment of accessorial fees and multiple surcharges), it may be time to outsource these services to a qualified Third Party. Remember in any negotiation, Knowledge is Power!

Identify Your Baseline:
What are your true transportation costs? Many costs may be hidden; perhaps your topline freight invoices don’t always reveal the whole story. For example, freight terms dictate how freight costs are captured, reported and expensed. In some cases firms purchase goods on a delivered basis. In many of these cases suppliers bury transportation costs in their product pricing, therefore masking the true cost of these shipments.
Transportation companies frequently overcharge shippers on invoices, and will make refunds ONLY when overcharges are detected and claims are filed for recoveries. Make sure your company has a comprehensive freight audit process in place to help find the money you never knew was missing!

Review and Update Your Supply Chain Strategy:
Supply chain economics change frequently; so should your supply chain activities. Many sourcing decisions that favored off-shore manufacturers for years are getting revised today. Similarly, consider consolidating fewer smaller deliveries into larger consolidated deliveries to reduce costs and improve efficiencies at the receiving dock. Remember there are hard savings in dollars, but equally important are the soft savings achieved as a result of process improvements. While we are on this topic, this is an area of savings that almost never gets the attention it should.

Develop and Track Key Performance Indicators, (KPI’s):
This is a mirror image of step #2, focusing on your internal processes. Here you’ll be measuring your basic transportation expenses across various platforms and materials: costs by product, by weight, by origin, destination, across various shipping modes, and so on. Settle on the number of KPI fields necessary to properly evaluate the success or failure of your initiatives. Do not overcomplicate the process by including metrics that have absolutely no value towards tracking and attaining the savings goals.

Initiate Your Cost Reduction Program:
You’re probably saying: sure, it’s that easy? Just like that! Well it can be just like that and here’s why: If you clearly establish your company’s current total cost of shipping, then you can clearly identify your cost reduction goals. Now you know exactly where you are and where you need to be to attain the realistic savings your company deserves.

A word of caution before getting started; you should never attempt to tackle this process alone if you are not absolutely sure of your starting point, (AKA current costs), and have clearly identified through a Comprehensive Benchmarking Process, where your company should be in terms of shipping expenses. Carriers will see right through your attempt to reduce costs without a clear and concise process and comprehensive documentation that proves beyond a doubt, that your company is entitled to the savings you are requesting.
Remember, there is help out there to make these negotiations simple, quick and more importantly, 100% successful, we are here to help.

UPS Claims Procedures – A Warning to Shippers

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Continuing in our series of “The Devil is in the Details,” our friends at The Transportation and Logistics Council have identified provisions in the UPS Terms and Conditions of Service that apparently violate federal statutes regarding time limits for filing of claims.

The UPS Service Guide, published on September 23, 2019 creates the following provision, Time Limit for Notice and Filing of Claims for Loss or Damage to Property.  In that provision, UPS states that “as a condition precedent to recovery, all claims for loss or damage to property must be noticed and filed in writing or electronically within the following time limits“

UPS then states that for Domestic shipments, including shipments to and from Puerto Rico, UPS must receive a notice of claims within 60 days after delivery of the package, or in the case of non-delivery within 60 days after the scheduled delivery date. This provision goes on to state that claims must be filed within 9 months after delivery.  

The inference here is that if a shipper does not file a notice of claim within the 60 day timeframe, their claim will be disallowed. 

Under provisions of the Carmack Amendment, 49 USC 14706 (e), “a carrier may not provide by rule, contract or otherwise, a period of less than 9 months for filing a claim against it under this section.”

According to the legal experts at the Transportation and Logistics Council, “while these UPS provisions are arguably illegal, shippers should be aware of them and not accept a UPS declination of claim based on these provisions.”

If you would like more information regarding these claim provisions and how they may affect your business, please contact The Transportation and Logistics Council at 631 549-8984 or at www.TLCouncil.org.