The logistics market, including shipping, was $1.7 trillion in 2017, according to the Council of Supply Chain Management Professionals’ 2018 Annual State of Logistics. A portion of that was e-commerce sales, with $99 billion in parcel delivery costs in 2017, a figure that rose 7% from the previous year. And that number is only getting bigger. For example, Amazon’s 2018 shipping costs were $27.7 billion, almost 28% more than 2017 figures. The take-home message is that shipping can be a tremendous expense for companies, whether sending retail items to consumers or stocking businesses with needed supplies. If your company isn’t managing its shipping freight rates, it’s leaving money on the table.
Smart companies realize that they can’t do everything themselves. Companies have core competencies and know that sometimes it’s better to outsource certain functions or to get expert help in order to save money or operate more effectively. It may take a little staff time, or start-up costs/operating costs to continue working with a new vendor. But sometimes those costs are funded with savings, making it a win-win situation.
Imagine saving 10-30% of your total shipping costs without it costing you anything. Or having an expert, who used to be a carrier or 3PL executive, negotiating the minutiae of your shipping contract – terms you didn’t know you could negotiate because you didn’t have the background or benchmarking information at your fingertips. But we’re getting ahead of ourselves.
Some companies outsource their shipping, freight rates management, warehousing, fulfillment and transportation to a 3PL. It’s a popular option for good reason. In fact, the percentage of a shippers’ transportation spend managed by 3PLs was 50%, according to the 2019 Third-Party Logistics Study: The State of Operating Logistics 23rd Annual 3PL Study. If they’re doing a great job, then they can save a company money and allow them to focus on what they do best: production, manufacturing and sales. Let’s put this aside for a minute, and talk about how another type of company can positively impact your bottom line for shipping. We’ll focus on three services: refund recovery, contract optimization, and transportation intelligence.
It’s nice to imagine that your bills from FedEx and UPS are 100% accurate and that all service was delivered with the promised transit times and delivery times. Unfortunately, this isn’t the case. More than $2 billion in FedEx, UPS, and LTL refunds are unclaimed each year. Shipware’s goal is for you to claim your refunds, and save on future shipping as well. Carriers offer guarantees for a reason – so you get the service they promise, or they refund the money. But if no one is watching closely, those refunds aren’t going to come. They require someone paying attention and filing those refund claims. If you send a lot of packages, it’s impossible for a human to efficiently do this – it requires technology to comb through bills looking for errors that need rectifying. If you’re not using a top-notch refund recovery software program, you are paying carriers for services you’re not receiving. That’s so nice of you!
Shipware’s customers use our propriety audit software to reduce the weekly invoice amounts automatically, saving them 1-5% on average. This includes parcel and freight cost for carrier and contract compliance issues. It’s not a difficult process. Customers easily load their shipping invoices into our Krystal software, and it identifies incorrect surcharges and unclaimed refunds, applying for those refunds on the company’s behalf. There’s no customer intervention needed.
Customers don’t have to file for refunds after an audit. Our team does it automatically on their behalf. Those refunds are credited directly on your billing. Your staff doesn’t have to do anything after providing one-time access to the carrier billing. It’s a “set it and forget it” type of system. We don’t actually recommend forgetting it, though. You’ll want to see how much money is coming back onto your invoices as credits, so you can tell others at the company how much money you’re saving them.
We mentioned we’d come back to 3PLs. We also audit 3PL agreements, as they almost all fail on their service level agreements (SLA) in some way. When outsourcing a lot of financial responsibilities to a 3PL, you want to ensure that they’re doing their job and you’re not paying more than you agreed to with the freight quote. 3PLs will do a better job when they know you’re watching, and Shipware can audit every transaction and bill of lading to confirm compliance with the contract terms and SLA. Our customers are saving up to 30% of 3PL spend from using our audit services, without additional staff time from your company.
Carrier Contract Optimization
Of course, many companies have great negotiators on staff. But do they have access to databases with $2 billion in shipping spend, to know what’s possible for discounting? Here’s a secret. Some key members of Shipware’s staff used to be carrier executives, and negotiated agreements on behalf of the carriers. Combined, our staff has more than 200 collective years of this type of pricing expertise. And now they share that expertise with shippers. They understand the rate benchmarks and what carriers can and may discount for shipping freight rates and parcel rates, for pickup and delivery.
This inside information is important, because carrier pricing agreements are confidential. Companies can’t compare notes with colleagues without violating these agreements, making it difficult for shippers to understand whether they are well-served by the contract. Using an outside analyst at Shipware allows a company to gain advantages of negotiating with a more complete deck of cards, without violating any carrier agreements.
While it may not feel like the shipper has any power in the carrier pricing arrangement, you have more than you think – even if you’re not willing to walk away from the carrier relationship in a failed negotiation. The negotiation process starts with a thorough evaluation of a company’s shipping profile. Shipware analyzes the contract by considering: contract terms, current discounts for surcharges, pickup and delivery trends, LTL shipments, freight classification, freight service, shipping rates, delivery times, ZIP codes, transit times, delivery times, minimum pricing parameters, dimensional pricing, parcel and freight volume, and its own benchmarking rates. This allows the experts to understand the available cost-saving targets, and to develop a customized business case. The Shipware experts then coach the shipper’s team through the negotiation process, with specific pricing requests that can be given to the carriers, so your company can get the best available terms and rates from your preferred carriers. If it doesn’t work, the shipper is not out any money, as fees are self-funded from carrier savings. That’s how much Shipware believes in its value.
Shipware can offer a similar service for 3PL contracts as well, focusing on benchmarking rates, SLA and contract terms. The problem with 3PLs is that the contracts disguise the actual costs, making it impossible for shippers to know if they’re getting the best-in-class rates. They may apply fees and surcharges that are not needed or disclosed, like for LTL shipments or origin and destination fees. The SLA may not be optimized or implemented fully, yet there is no recourse for underperformance, and the performance metrics themselves may not be tracked or easy to find.
Our clients are able to improve cost savings with a comprehensive Shipware analysis and evaluation, whether negotiating on your own or with Shipware taking on that role. If the current 3PL isn’t working out, Shipware can also identify other 3PL partners who might be a better fit. As with carrier negotiations, the Shipware fees are paid with realized savings.
While this negotiation service can stand alone, it makes sense that after getting the better rates, you would want to continually audit the bill of lading or invoices when the new rates take effect. That ensures that the shipper is adhering to its terms and that all applicable discounts and refunds are applied.
At the heart of our business is Krystal, an optimized artificial intelligence software platform that includes our database of pricing knowledge and helps customers generate data specific to their company and usage. The state-of-the-art user interfaces allows customers to see their shipping data displayed in interactive and dynamic charts. Clients access the system through a portal, to see KPIs and essential data. They allow for accurate decision making on cost-savings. Meanwhile, the data is stored and processed with cloud-based technology, minimizing the client’s computing resources and allowing them to access it from anywhere.
The platform employs predictive analytics and machine learning technology, to provide those cost-saving analytics. It performs the proprietary invoice audits and monitors carrier and contract compliance. It’s always running, so the company doesn’t have to devote its own resources.
Why You Need Shipware
Shippers are at a lot of disadvantages when it comes to working with carriers. The shippers are often the little guys trying to gain some fairness when negotiating with the big carriers. Without numbers and intimate knowledge of what’s available in contract pricing and terms, the little guys will not be treated equally. That’s where benchmarking data and expertise come in. Shipware has both – with $2 billion in shipping spend locked away in our databases, ready for consultation. Our experts come from executive positions in the 3PL and carrier side, giving a unique view into negotiating strategies that will easily result in savings. And Shipware has the cloud-based technology providing visibility – line by line – into what parts of the carrier agreement weren’t met. That results in refunds and savings, that is not easy to collect without a solid plan in place. That plan should not include a human going through each invoice with magnifying glass. That isn’t going to cut it. What’s needed is a finely tuned software program that not only identifies each savings opportunity, but resolves it by sending off claims each day.
Shipper should not get locked into a bad contract. When working with a company like Shipware, if the savings aren’t there, you don’t pay. Shipware proves its value, to the tune of 10-30% customer savings on average. That’s why one company told Shipware that the reporting tools highlighted inefficiencies on their end, and enabled them to improve delivery methods and rates, saving them $35,000 off the bat.
Curious companies can start with rates negotiation services, or they can start with audits, but a comprehensive system-wide approach to evaluate and monitor shipping costs makes financial sense.