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Uncovering the Hidden Truth About Parcel Cost

October 20, 2016
5 min read
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If you’ve ever looked closely at your phone or cable bill, it wouldn’t take long to see the hidden costs. Tariffs, surcharges, USF fund charges, and hidden usage charges are ways telecom companies puff up profit. Parcel carriers are no different. In many cases, they’re worse.

The reality is that, when audited, businesses are typically overpaying the major shipping carriers every month. How is this happening? It’s happening because carriers are tricky in the way they bill, even if the client has a parcel carrier agreement. A few of the most common hidden cost areas are:

Delivery Area Surcharges

Many parcel carriers charge a fee to deliver outside of a defined delivery area. Sending an order to an address outside one of these delivery areas may incur expensive charges. This can have a severe impact on overall costs, especially for businesses that deal in high volume shipping every month.

For example, let’s pretend a business that ships 10,000 parcels a month at an average weight of 1.3 lbs. incurs a $6.00 base rate per package delivery charge. If half of those deliveries are outside the carrier’s standard delivery are, a surcharge will be applied. Pretending the surcharge is, say, $3.00 per package, the total monthly shipping charge goes from $60,000.00 to $75,000, an increase of 25%.

Package Weight

Weight classes are another area where the hidden charges can easily be concealed. Most carriers charge by weight classes that starts at one pound in weight and increases from there. If your business ships items routinely that weigh less than a pound, and your carrier’s pricing for weight classes starts at one pound, you’re being overbilled. The weight class issue is one of the primary ways that businesses overspend on shipping without ever realizing it.

Tracking and Reporting

No business should assume that all carriers have the same attitude and service regarding tracking and reporting tools for both shippers and customers. Look carefully at how transparent each step in the supply chain is, the piece-level accountability of the carrier, and how accurate their reporting is when you are invoiced.

The Solution:

Oversight – It’s a simple, yet often neglected practice that ends up costing companies millions. Why? Because it’s not easy to reconcile thousands of tracked shipments each month. It’s extremely labor intensive and still may not catch all the mistakes. How, then, does a business ensure they’re not being overbilled on hidden costs from the carrier? By utilizing the services of a third party auditing and recovery service. These experts can not only track invoicing on existing parcel carrier agreements, they can also help negotiate the best agreement for your business directly with the carriers.

In addition to utilizing an industry expert, make sure that negotiations with the major carriers are driven by actual data. When you apply data-driven intelligence to your company’s unique shipping needs and characteristics the process of negotiating parcel agreements with major carriers will be less confusing and more informed.

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