Consolidate Shipping for Strategic Advantage

Shipping product is one of those "nuts and bolts" of operating a business that most companies don’t often focus on as long as it seems to be running smoothly. Customers conventionally pay freight charges, so suppliers build their operations around the expectations that customers will include their shipping account information on the purchase order. Those shipping charges will automatically be added to the total product cost when it is time to send the invoice. That all sounds good on paper but the reality can look something more like this.

• It turns out that a customer is in Canada and their designated carrier cannot act as the customs agent to get their goods across the border. The resulting delay can be as much as two weeks;
• One account uses a small regional carrier, but they only come to your area twice a week. You paid overtime for a shipping clerk to hang around until the truck showed up. The clerk finally left after waiting two hours when the driver didn’t show.
• In a hurry, a customer bought an emergency replacement part to ship to their repair facility. They called back after the product shipped and wanted to re-route the package to their customer location, but it turns out their carrier didn’t have a re-route service.
• One account was past their credit limit on their shipping account and when you tried to ship the product it was denied.

These are examples of the sort of events that people just take for granted as being part of the complexity of logistics. However, it is estimated that about 5% of shipping costs are due to avoidable errors. This is 5% that would go straight to the bottom line. That is not even including any wasted time fixing the problems. There is a better way.

Ideally you could convert all of your shipping activities to a uniform and consistent process that is completely under your control. If you did, your error rate would plummet to nearly zero. Here’s how this can be done.

1. Choose a carrier that offers all of the services that you need (re-routing in transit, cross border customs activities, Saturday deliveries, etc.)
2. Negotiate a fee structure with the carrier based on the assumption that all of your freight business will go through that one carrier, and ship by the same method (unless otherwise restricted by current contracts)
3. Commit your technical resources fully to this carrier’s platform
4. Announce to your customers that shipping is now free within the parameters you have arranged with your shipper (this might be limited to continental US for 2^nd day air only for example)

This is a greatly simplified version of the process and of course shipping is not free to you. But you might be surprised at how competitive carriers can become if they have a chance to win an exclusive contract with a local supplier. Get quotes and run the numbers and keep in mind that on top of negotiated savings, additional savings come from a reduction in errors. You may find that you need to phase in some incremental price hikes on some items to cover your costs, but it can be done. What you will gain is that virtually every customer that is used to paying for freight will gladly say yes when offered free freight for a 2^nd day shipment (or whatever equivalent you can negotiate). You also gain a huge strategic advantage over your competitors as "free freight" is still not a standard in the manufacturing industries. Simplifying this one step helps gain market share, and the added profits ultimately cover the freight costs.

Of course every business change requires an adjustment to your technology suite. For our example lets say a hypothetical ABC Shipping Co. is your chosen vendor. You may need to install or re-code a barcode system. You will likely have to install a new label printer, and update Order, Invoice, and Bill of Lading documents to conform with their standards. Tracking numbers need to appear in your database in their standard format. Country of origin needs to appear for international shipments, etc.

Below is a list of some of the most common causes of shipment delays so you will want to make sure that your new system avoids these common errors.

LACK OF VISIBILITY. Tracking numbers provide clarity through the entire shipping process; from creation of the shipping label to item level scans, waybills and signature at receipt.

OUT OF DATE TECHNOLOGY. Shipping software needs to be able to interface with your ERP and with the carrier’s systems. Staying current with upgrades in this area is a necessity.

LOST PACKAGES. In all probability the package was received at the customers warehouse, signed for, but never scanned into the customer’s system. Having proof of signature often resolves the problem quickly.

FAILED DELIVERY ATTEMPT The driver will have to move on to pending orders to avoid delays. The reality is they only have a short time to wait before they move on. A track and trace system ensures that your customers are updated in real-time and will know when they should be at the delivery address to receive the package.

CUSTOMS DELAYS. Without the proper documentation, delays will happen and the authorities may decide to inspect your cargo - leading to further delays. Having a carrier which can act as the export agent and who knows how to handle customs paperwork can work wonders in helping shipments move smoothly through customs. Again, technology can help here in terms of automatically generating the proper documentation.

LACK OF CLARITY. The quality of shipping labels plays a crucial part in the overall delivery system. Large, clear bar codes that don’t smear when wet or when contacted by common commercial cleaning products are necessary. Most shippers have robust labels. You just want to make sure your software can interface with their label printer.

If you can see your way clear to standardizing all of your shipments through a single carrier you will immediately see the benefit of lowered shipment costs, less time chasing down missed shipments, having a top-rated on-time delivery system (giving you preferred supplier status) and taking a strategic jump over your competitors.