Why Audit Parcel Service Now? Here’s 4 Reasons

If you don’t think the delivery experience is directly related to customer retention, think again. According to Dimensional Research, of customers who report a bad experience, almost all of them (97 percent) changed their future buying decisions. Further, 58 percent stopped buying from the company, more than half went to a different company for the product or service, and 52 percent told others not to buy the product or service. 

Maybe the shipment was late, perhaps it was damaged, maybe it was delivered to the wrong house, or perhaps the shipping label was wrong in the first place. In the small package shipping environment, it is hard to have awareness of the problem without parcel audit validating the service received.

Whatever caused the problem, the bottom line is that this and other issues could be making you lose customers right at a time when no company can afford to have this happen. Between the global pandemic, the economic recession, and the business volatility occurring in most industries, organizations need to be at the top of their games when it comes to customer service. 

$1.50 Per Package Adds Up Fast

No matter how much customers love your product, many won’t come back if the experience is not good. This should be reason enough to conduct frequent service audits. 

There are also other reasons, some of which do not relate to the customer experience. For example, Transportation Insight recently worked with a shipper that noticed a significant change in its per-package shipping costs. After a service audit, it realized that its cost-per-package had increased by about $1.50 due to a billing adjustment error made by the carrier (for early-morning deliveries). 

Had the shipper not conducted that analysis, there’s no telling when it would have recognized that it was being overcharged by $1.50 per package. Multiply that number times thousands of shipments per year and the value of frequent service audits becomes crystal clear.  

Why Bother Auditing?

With service guarantees being waived right now, many companies are wondering if they still need to audit their invoices and charges. The answer is “yes,” and here’s why: even with these waivers, there are still a high number of errors and ways to ferret out savings on pretty much any transportation bill. 

For example, shippers are still being hit with duplicate charges and other billing errors on top of late, incorrect and damaged shipments — problems that can directly impact customer service and retention. With fewer drivers on the road and higher demand for parcel capacity — largely due to the massive uptick in e-commerce shopping — both loss and damage incidences have increased. 

By auditing every package to make sure it’s successfully delivered, companies can manage the loss and damage process from start to finish. Audits can also uncover data regarding insufficient packaging and ensure that payments are accurate and on time. In fact, auditing is a great risk management tool that companies can use during both peak and regular seasons.    

Here are four more reasons why you need to continue service audits:

  • Good visibility into what you’re actually paying. The audit platform you use should break down carrier invoice details to the charge level to analyze all peak season surcharges, rates, and discounts. This year, we’ve seen a number of rate errors and worked on our clients’ behalf to recover over $1.4 million in savings. We’re also identifying duplicate charges and billing errors at the charge level, which is impossible to do without an invoice audit in place.
  • Make sure it gets there on time and in one piece. Sure, some service guarantees are waived right now, but shippers should still want to audit every package to ensure it is delivered and not lost in transit or damaged. This year, we’ve seen the perfect storm of greater-than-usual demand, fewer drivers, and more retailers shipping items that normally would be purchased and picked up in store. Without a doubt, that’s caused an increase in lost and damaged packages. 
  • Tracking losses and damages. The best approach is to manage the entire loss and damage process from identification to resolution and recovery. So far this year, Transportation Insight has secured over $1.7 million in loss and damage savings, and all while providing data regarding insufficient packaging details down to the SKU level. This is particularly helpful for companies that are introducing new products and/or shipping with new vendors.  
  • Pay accurate bills on time. The data collected during a service audit provides insights into how new surcharges or new carrier rules will impact transportation and the related costs. For example, FedEx recently announced a new late-payment fee effective January 2021. Using a compliance audit, companies can keep close tabs on these types of fees and either avoid them completely (by paying on time) or correcting errors (by flagging erroneous late fees). With so many staffing changes and work-from-home scenarios taking place in 2020, shippers need to be especially careful about paying their carrier invoices correctly and on time.

Helping You Rest Easier

Transportation Insight is the only parcel audit and logistics solution provider that undergoes an annual SOC 1 Type II third-party compliance audit. We check every parcel package within your supply chain to make sure you’re getting the service you selected at your contracted price. For example, if your company is paying for guaranteed service, Saturday pickup or delivery, or other services, we’ll make sure you get them. We also check for invalid pickup, as well as identify and follow up on lost or damaged packages.

Possessing deep industry expertise, our parcel team also monitors ongoing changes in the small package environment to help keep shippers apprised of the emerging cost-drivers that affect their profitable performance. 

You Ramped Up E-Commerce Shipping for COVID…Now What?

The effort didn’t go unnoticed. 

Comparing year-over-year e-commerce sales, DigitalCommerce360 says volume was up 76% in June. And while that increase leveled off at 55% for July 2020, e-commerce sales are still up 55% year-over-year for the first seven months of the year. 

Retailers are driving much of that growth as many completely changed their distribution models (either permanently or temporarily) away from brick-and-mortar and over to alternative online fulfillment strategies. Already underway pre-pandemic, the movement to sell more online accelerated rapidly once B2B and B2C customers started placing more orders from their laptops and mobile devices. 

Reacting quickly to an event that hit fast, hard and unexpectedly, companies made e-commerce shipping decisions based on a desperate need to stay in business. As a result, those decisions do not always include a complete analysis of the true cost of shipping those goods to customers. As added costs emerge, including peak parcel surcharges from UPS and FedEx, the true cost picture becomes blurry. 

It’s time for a thorough assessment of exactly what your COVID-related e-commerce strategy is costing your company.

Take a Step Back, Assess E-Commerce Costs

As you continue to hone your business model to accommodate e-commerce growth and changing customer demands, it is time to take a step back and truly assess the costs associated with these models. 

Many of these companies will continue handling more e-commerce volume than they did pre-COVID (even with their physical stores opening again). Managing both sides of the equation profitably requires a thorough investigation of the true cost of shipping and a strategy that factors in customers’ needs with organizational profitability. 

Companies should also weed out their “losing” SKUs, assess shipping costs right down to the package level, practice good margin management across the entire organization, utilize data for good decision-making, and work with a reputable logistics partner. 

Master E-Commerce Shipping, Master Order Profitability

Continue shipping products without closely examining the time, effort and money that goes into sending out each package and you will soon find yourself underwater. As pandemic pushed e-commerce sales and residential orders to new heights, was your organization among those that raced into reactive mode?

Do you know the true cost of your e-commerce shipping decisions? You can not afford to ignore this problem.

To help you master your response to online demand, our Supply Chain Masters created “You Shipped It, but … Did It Make Money?” Read today and access strategies to protect profitability for every order and every customer.

Carrier Surcharges: What’s the Real Impact?

Now we know more peak carrier surcharges are on the way for the traditional holiday season. Between the major carriers, the UPS plan is quite a bit different than the FedEx strategy for applying new costs.

FedEx has set peak surcharges to begin as they plan to pull back the COVID surcharges, in essence, keeping the charges in place through the Christmas season. The biggest difference between the FedEx and the UPS charges is the SmartPost charge. It appears all SmartPost customers will have the charge, while the UPS and Home Delivery surcharges will be used for larger customers.

In particular, it appears the FedEx SmartPost charge looks to jump 100% for one week in December and then drop back to $1 the remainder of the season. This type of complexity between carriers and service impacts makes it difficult to manage cost.

Unlike global changes that impact all shippers (i.e., the modification in dimensional weight definitions introduced in 2015 and again in 2018), surcharges affect companies differently.

For example: 

  • An e-commerce apparel company sending most of its orders to residential addresses likely felt the brunt of COVID-related surcharges. 
  • A large B2B company delivering primarily to commercial addresses, on the other hand, was likely shielded from the brunt of these impacts, unless they were moving larger packages. 

The good news is that even though individual companies can’t control parcel carriers’ surcharges, they can minimize the budgetary impact with accurate shipping data, experienced logistics partners, and quick responses to carrier announcements.

What are Carrier Surcharges Costing You?

One 30-cent surcharge on a residential parcel shipment may seem innocuous. Multiply that fee across thousands of parcel shipments, and it’s clear just how burdensome this unexpected fee can be to a company’s bottom line. 

Furthermore, spend management becomes more complicated when carrier surcharges are based on average volume benchmarks, especially when they become retroactive to all shipments once thresholds are crossed.

Consider this: 

If a retailer averages 200,000 weekly packages shipped through UPS Ground Residential or SurePost in February, what’s the cost impact of a 30-cent surcharge when that volume increases to 250,000 weekly packages?

*After average threshold is exceeded, surcharge applies to all packages shipped.

  • If a distributor averages 50,000 weekly packages shipped residential through FedEx Ground, what’s the cost impact of a 30-cent surcharge when that weekly volume increases by 75,000 packages?

*FedEx surcharge volume threshold was higher at 40,000, and included the stipulation that weekly volume had to be 120% higher than the February weekly average.

Factor in any additional fees for oversized packages, and a shipper operating on tight margins can quickly find itself losing money on every order. And without a plan for dealing with unexpected surcharges, SKU profitability moves out of reach quickly. 

Adding to the complexity, carriers can make changes in how or when surcharges are applied – at any time. We saw this with the reduction in dimensions and weight for when carriers applied additional handling surcharges.

Although not a specifically a surcharge, shippers saw a significant change with the migration of the DIM factor from 194 to 139, which increases the billable weight for many packages.

Manage Carrier Surcharges to Avoid Budget Shock

Both the predictable and unexpected carrier surcharges are likely here to stay.

As you plan your transportation spend for the remainder of 2020 and into 2021, be sure to factor in the reality of carrier surcharges. It doesn’t take a global pandemic to create peak season pressure on carriers’ profitability and spur added fees on your parcel shipments. 

While none of us has a crystal ball — nor can we control the steps carriers take to shore up their own operations during peaks and difficult periods — preparing in advance, understanding the impetus behind the charges, and taking the proactive steps can improve your ability to control costs in the current and future parcel freight environments.

To help you improve your ability to plan for and respond to carrier surcharges, we created “Manage the Surge: Avoid Surcharge Shocks, Power Performance.” It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your profit.