For years, UPS®, FedEx®, DHL®, and other carriers have given away free shipping software and systems to their customers. At first glance, the free systems appear to be helpful – software, and even hardware, that automate shipping procedures. Most recipients think the free systems save money which, ostensibly, keeps department and company budgets low. Seems like a good offer.
Are there any catches? Of course there are. In several areas. The old adage warning us about deals that seem too good to be true applies especially well in this situation.
Why would a shipping carrier be offering you a free system? The answers are easy: to capture your business, to make you feel obligated and to keep competitors away from you.
Take a few minutes to deconstruct a carrier’s free system offer and you’ll see the many reasons why a vendor-supplied, multi-carrier system is the right business choice for your company.
REASONS ONE, TWO AND THREE: CHOICES, OPTIONS AND COMPETITION
Shipping choices abound. You can select an express carrier, the United States Postal Service, a regional carrier or TL freight (truck load), and LTL freight (less than a truckload). Choices expand if you are located in an urban area. Consider using a small, local delivery company or messenger service.
You want shipping options – a multi-carrier approach to shipping – rather than a single-carrier or even a dual-carrier model. Why? To exploit the inherent benefits of competition. It’s the basis of all free-market consumerism.
In the shipping world, you forfeit the ability to shop for the best service and price for moving a package when you accept a carrier-provided system. Think about how you shop for a specific product in a store.
You expect several choices to be available. You compare features, prices, quality and appearance before making an attribute-based or price-based purchasing decision. You’d be disappointed if you only saw a single product on the shelf and you’d understandably and correctly feel that a better product exists at a better price.
Carrier-provided systems display only their branded sponsor’s individual rates. Those companies are betting that you will opt for at-hand convenience rather than shopping for the best available rates.
A vendor-supplied shipping system gives you three competitive advantages: the ability to choose among multiple-carrier options, the ability to assess the service options that will save you time and money as well as the ability to plan for extra services, surcharges, guarantees, fees and other performance factors that affect shipping costs. That range of shipping information allows you to pick the best service for the best price for each package you send.
REASON FOUR: FANTASY AND FACT
Carriers want you to believe that their free systems provide you the best deal possible and that discounts last forever. If someone told you that in person, you would be skeptical, with good reason.
Carriers presume you will offer your shipments to them and only to them when you take their free shipping systems. In the real business world, options, choices and competitive market forces can be marshaled to work to your economic advantage. You have the power of knowledge to help you capitalize on the variety of available market prices, even with available discounts.
Plus, using a vendor-provided system gives you clout at the negotiating table. Carrier-provided systems dilute your future negotiating leverage because carriers count on you taking the path of least resistance.
They presume that if you use their systems to process your shipments now, you will probably not want to change that method in the future. Making that change, by the way, isn’t always easy. It’s best to research options before making a shortsighted decision that could cost you more in the end.
REASON FIVE: ALL ZONES ARE NOT CREATED EQUAL
All carriers use zones – predetermined shipping geographies across the United States – to determine their rates. All shipments costs are calculated from the point-of-origin zone (which contains your ZIP Code™ as the origin point) to the delivery zone. The further the destination zone from your ZIP Code, the higher the shipping cost.
Carriers also use several other parameters to calculate their rates: shipment weights, shipment dimensions, the cost of the delivery and an accommodation for profit. Carrier costs to any given zone will also vary based on their own processing methods and distribution network. Distance, weight and size influence the costs of a shipment. That’s why UPS, FedEx and the USPS® will charge different prices for a five-pound package sent from the same point-of-origin ZIP Code to the same destination ZIP Code with the same level of service. In this scenario, a five-pound package shipped by UPS will cost the least but a 10-pound package sent to the same zone will be cheaper if sent by USPS or FedEx.
Carrier-supplied shipping systems don’t allow you to comparison-shop. You cannot take advantage of the cost variables that a vendor-supplied system provides. You will probably overpay for shipments even if you have discounts from the carrier who supplied the free system.
You need a vendor-supplied shipping system. It is the only way to make the competitive market work for you. A vendor system will present all the shipment rating options with service names and delivery times based on the origin and destination you select. You simply choose the lowest-cost option.
REASON SIX: WHAT LIES BENEATH THE SURFACE?
Visible costs related to your shipment are the costs you can see. What you don’t immediately see on the surface are extra services charges, fuel surcharges and post-delivery costs added to shipments.
Look at almost any of your carrier’s invoices and you will probably see added fees you did not anticipate when you processed the shipment. Carriers rely on post-shipment fees to offset rate increases and augment their revenue stream. They may tack-on the fees after the fact for several reasons; most often for non-compliance in the way you processed a shipment, an oversized package or packing irregularities.
The most common of these fees are address correction fees which are added to your shipment if the recipient’s address is incorrect. The delivery driver makes the correct/incorrect address determination in most cases. An address correction fee may add $10 or more to your package shipment cost. Free, carrier-supplied systems do not provide address validation. Vendor-supplied systems do. Free, carrier supplied systems could cost you money. Vendor-supplied systems that validate every address for every shipment can save you money.
Also, be aware that carriers add new fees regularly and the fees cannot be negotiated for discounts.
REASON SEVEN: BACK-OFFICE CAPABILITIES AND DATA
Carrier systems are limited in their capability to integrate with order-entry systems or accounting systems. This is relevant if cost charge-backs are an integral procedure in your company, for instance if your transportation environment is incorporated into your back-office infrastructure.
Vendor systems contain several salient features that make managing your business easier. They come with the technology and staff to develop and integrate your back office processes that suit your company. Vendors’ systems can also provide custom scripting for additional business requirements for invoicing, cost accounting, and WMS systems performed locally as well as adapt to your specific business rules about assigning specific shipping carrier service by package attributes, by recipient, by user, by department or by project. Additionally, vendor systems can automatically generate an invoice or provide invoice details to your invoicing system. That eliminates data entry errors and helps you avoid revenue collection delays.
Vendor systems also generate spend, performance and customer reports from the database within the system. Their administrative features and integration tools also adapt to your changing business environment. As your business needs change, you can count on vendor-supplied systems to create custom applications.
REASON EIGHT: THIRD-PARTY INSURANCE
Most shippers are not aware that third-party insurance is available. There are several private parcel insurance providers that can save you as much as 50 percent of the amount carriers charge for insurance. You will be unable to access third- party insurance providers if you use a carrier-provided system. That means you will have to pay whatever amount the carrier charges for its insurance. Depending on your volume of packages that you need to insure, those costs could be significant. Keep in mind carriers are not in the insurance business.
Typically shipping carriers provide insurance up-to a maximum value of either $50 or $100 per package for no additional cost. An additional benefit to using a vendor system and third party insurance is to save money. Vendor systems help maximize insurance savings by utilizing the no charge insurance limits provided by the carrier then insuring the difference with a third party provider.
Beware of free gifts from shipping carriers. The only way to maximize shipping cost savings and leverage the competitive market to your advantage is to procure a shipping system from a full-service vendor. A vendor-supplied system gives you the information and power you need to make smart, economical shipping decisions.