Rising small parcel costs are a concern for everyone. E-commerce is driving demand, pushing UPS and FedEx rates up more than twice the rate of inflation. At the same time, Amazon is raising consumer expectations, not only for free shipping but also free premium services, including same-day and Sunday delivery. All of these trends add up to margin erosion, which is why it’s more important than ever to be vigilant when it comes to monitoring what carriers are charging on their invoices.
Going Beyond the Audit
The need to audit invoices isn’t a novel idea for most small parcel shippers. Carriers have been known to overbill for shipments by incorrectly applying rates, not crediting for shipments when they miss a service guarantee or charging residential rates for commercial deliveries. Auditing is important, but it doesn’t completely protect shippers from paying more than they should. The gap between what shippers assume they will pay when they calculate charges at the time of routing or shipment processing and what they are actually billed is widening due to the proliferation of surcharges and accessorial fees.
It is important to note that freight invoice audit only ensures the payment of the correct fees. Matching carrier invoice charges against the manifest provides a more comprehensive way to measure, manage, and ultimately avoid these extra costs.
By doing an invoice match, managers can take steps to control their transportation budget.
Overlooked Small Parcel Shipping Fees, Surcharges, and Accessorials
There are over 100 potential fees and surcharges in most small parcel service agreements. Here are the most common:
Address Hygiene: It’s expensive for carriers to attempt delivery to an incorrect address and they will make you pay for these mistakes. Take steps to ensure address accuracy either at the point of order entry or point of shipping.
Residential vs. Commercial: It’s more expensive to deliver to a residential address than a commercial address. You need to be able to validate what each carrier considers to be a residential address (they do not all apply the same criteria) in order entry or point of shipping. Failure to do so will result in unexpected fees.
Out-of-Area Surcharges: If you regularly ship to rural or remote locations, you could be subject to an extended delivery area fee. This charge is applied to packages picked up or shipped to certain ZIP codes. Be aware that sometimes the charge will apply in populated areas simply because they share a ZIP code with a rural area.
Fuel Surcharges: Carriers apply fuel surcharges on every shipment, but the amount can change week to week, and also vary by carrier. This charge is calculated as a percentage based on indices published by the U.S. Energy Information Administration.
Unauthorized Shipping: Third parties and employees may not be authorized to use your corporate transportation services. You won't catch these shipments without a process to match an invoice to an approved list of shipments.
Dimensional Weight: DIM weight accounts for both the size and weight of a package, plus the amount of space it will take up in a truck. A light and oversized box can cost more to ship than a smaller flat and heavier carton. Taking steps to minimize packaging, such as using shipping optimization software, can provide an immediate ROI. Learn how to reduce unexpected DIM weight fees and better control parcel shipping costs.
Reviewing and matching carrier invoices provides insight into where any additional, unbudgeted charges are coming from. It’s the first step to prevent unnecessary shipping costs and to make sure your company’s small parcel shipping spend is as low as it can be