Take Control of your Expenses

7 Ways to Reduce Courier Costs

At the end of May 2010 the average gas prices in Ontario was about 95 c/L. A year later we are paying over $1.30 a liter which is a staggering increase of about 40% in a year. Jet fuel prices are also up about 45% over the same period. The result is increased shipping costs for businesses, particularly overnight courier shipments. Here are 7 tips to help bring down your courier costs.

1. Choose the right service level – most carriers have multiple service levels where the main difference is the speed of the delivery. Careful analyze what service is best for your business. Express service costs more partly because it is based on the assumption that the carrier is flying the package to the destination. However, often these packages never see the inside of an airplane. They travel alongside the “ground” shipments in a truck and may even be delivered at the same time as the “guaranteed delivery” packages. If your shipment has to be at its destination by the specific time then the guaranteed service may be necessary, if not, you can reduce courier costs by using the “ground service”. Also, some carriers charge a higher fuel surcharge for express shipments than ground shipments. In some cases the express fuel surcharge can be double the ground rate.

2. Use the right box and packing materials – all of the carriers use some form of dimensional weight calculation. Shipment charges are generally based on the weight of the package. However, there is a minimum weight for the size of each box and the calculation is different depending on the carrier and the destination (domestic vs. U.S. vs. international) so it takes some investigation to understand if there is an impact on your shipping. For example, a domestic shipment via UPS in a box that is 15”x12”x8” would be charged a minimum weight of 11 pounds while Purolator’s minimum charge is based on 13 pounds. If you ship light products or if the box is larger than the product requires than you may be incurring higher charges. Also, make sure the packing material is appropriate for the item being shipped. Higher weight generally means higher costs.

3. Multi piece shipments – if you are shipping more than one package to the same address make sure that the carrier treats them as a single shipment and the charge is based on the total weight of the shipment. In some cases, carriers will charge each piece as a separate shipment. For example, two 10 pound packages shipped from Mississauga to Hamilton: multi piece base rate is $23.95 and as two separate shipments the base rate is $43.00. Make sure you understand the carrier’s rules and don’t hesitate to ask them to make sure that shipments are consolidated even if entered separately.

4. Use electronic order systems – most carriers use now using bar coding systems to manage and track packages. The advantages to the carriers and customers are many but the main advantage is the ability to track the progress of the package from pickup to delivery. It costs the carrier more to process a shipment with hand written waybills and most carriers will pass on some of the savings to the customers who use the electronic ordering systems which will reduce courier costs.

5. Understand your insurance risk – all of the carriers offer insurance for your shipments, however, it can be expensive so make sure you understand your requirements and what you are buying. You can significantly reduce courier costs by eliminating any unnecessary insurance charges. In many cases the carriers don’t call it insurance on their electronic ordering systems so you may be buying insurance without even realizing it. For example, with FedEx and UPS when you include a “declared value” you are effectively buying insurance for your shipment. The first $100 is included in the cost of the shipment but after that the charge is $3.50 per $100 of declared value with FedEx and $2.10 with UPS. If you are shipping high value goods you may want to talk to your general insurance representative to see if you already have coverage or if you can add it to your policy.

6. Fire unprofitable customers – as shipping costs continue to rise it is time to re-evaluate if all of your customers are profitable or if it makes more sense to “fire” some customers and refocus on areas with better upside. Not everyone is an ideal client and higher shipping costs may be the trigger that puts them over the edge.

7. Ship documents digitally – as the digital world continues to evolve it is time to rethink whether documents could be sent digitally over the internet instead of the hardcopies via courier. The best way to reduce courier costs is not to send the shipment at all. Depending on the nature of your business, electronic documents with digital signatures could be the key to allow you reduce courier costs by a significant amount.

In the past, cost reduction was one of many options to achieve a company’s strategic mission. However, in today’s business climate, it is now an imperative function to stay in business. With a disciplined approach, you can achieve your objectives without negatively impacting your ability to react to changes in the business environment and take your business to the next level.
Price Controllers specializes in helping companies that want to reduce uniform costs, reduce courier costs and reduce waste and recycling costs.

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One Response to 7 Ways to Reduce Courier Costs

  • Marie says:

    Great post! These are very helpful tips for any business owner. It’s staggering to think of the percentage increase in fuel costs over the last year. You forget that it has such a big impact on everyday business expenses. Thanks for sharing the ideas.

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