06 Mar Small Parcel Auditing: What Every Shipper SHOULD and SHOULD NOT Do
If you’re a small package shipper in today’s world you’ve likely heard your carrier say: “Our on-time performance for your account is greater than 99%.” Followed by: “We’ll give you an extra 1 or 2% discount to earn (or retain) your business and cover that gap.” In most cases, this is a strategy employed by carriers to get shippers to both contractually and psychologically avoid the merit of small parcel auditing.
As a shipper, regardless of volume, you must be wise. Negotiate contracts from a position of knowledge, using business intelligence tools that measure the real cost of shipping. Upon agreement, a shipper must remain vigilant and engaged to reduce expense and keep carriers honest. Here is the short list of what every shipper SHOULD and SHOULD NOT do:
1. Shippers SHOULD NOT Audit Small Packages Shipments In-House
An in-house transportation team simply does not have the time and bandwidth to perform a comprehensive, package-level audit. Small parcel auditing can require extensive IT support, dedicated tracking software, and staff assigned to reviewing carrier contracts, loading rate schedules, transmitting carrier remittance, claim monitoring, and reconciliation. This is where farming out freight bill auditing becomes very cost effective with a strong return on investment.
2. Shippers SHOULD Outsource Small Parcel Auditing
Don’t play into the game that small parcel carriers don’t make mistakes. They do, and sometimes in copious amounts. If the shipper is looking to optimize the supply chain and reduce shipping expenses, every shipment (or transaction) must be audited. Outsourcing small parcel auditing is the best solution. Standard audits will check for duplicate bills, rate errors, billing discrepancies, and service failures. Elite freight bill auditing companies will create a custom audit policy and review the addendums, small-print references, and custom services negotiated with the carrier.
3. Shippers SHOULD NOT Sign Carrier Agreements that Restrict Audits
As referenced above, small parcel carriers are skilled negotiators and will often try to extend additional (but minimal) discounts in exchange for waiving any claims against service failures or proof of delivery. Don’t be duped. Carriers negotiate to win and profit from any agreement. Never relinquish your right, or the right of a third-party auditor, to review and submit claims on your behalf.
If you have entered into an agreement that restricts your audit capabilities, during your next negotiation, re-insert that privilege. During the interim, use reports harvested from your freight bill auditing company to analyze on-time delivery, rate errors, duplicates, and bills without POD. Although your rights to submit claims will be limited, you may still receive and review the carrier data.
4. Shippers SHOULD Use Small Parcel Auditing Reports to Optimize Contracts
Using a freight payment company’s business intelligence reports and tools, a shipper can benchmark activity to identify areas where a company can save money using current shipping trends and models. During a contract negotiation, inexperience and lack of industry insight can quickly tip the scales in favor of the carrier.
Add-on, or ancillary, fees can ultimately be a budget breaker for many companies. Experience has illustrated an increase in their use by carriers to pad profits. A shipper must understand their business and minimize their use. This is not only possible but often implemented by highly optimized companies that have thoroughly analyzed their shipping activity.
Carriers have increased the complexity of tariffs and contract language. Regardless of the reasoning, this only serves to further complicate the management and administration of correct billing. Not only does this favor the carrier and its invoicing process, but it requires the outsourcing of small parcel auditing to a reliable supplier that can work with you to accurately implement safeguards against erroneous billing. A well-educated shipper will skillfully review, simplify, and direct the formation of a tailored tariff structure and contract so as to more accurately audit, track, and pay carrier bills.
Develop an Action Plan Today
In 2014, small parcel carriers raised rates and made sweeping changes to dimensional weight calculations. Now in 2015, FedEx and UPS have again implemented General Rate Increases (GRI). Industry consensus has the average rate increase for both carriers at 4.9%, effecting FedEx* Express (package and freight), Ground, and Home Delivery, and UPS** Air, Ground, and International.
Transportation costs are high up on the watch list for many shippers. Supply chain optimization and cost reduction is within reach if you partner with the right freight payment and auditing firm. There is no better time than the present to review your process. With SSI, small parcel auditing is a high priority, customizing each audit to the unique specifications of our clients.