The cost of shipping is a constant concern for manufacturers, retailers, and distributors who send a large volume of small packages with UPS and FedEx. Both carriers’ service agreements are complex, and their pricing is hard to understand, even for seasoned logistics pros. This makes optimizing shipping invoices extremely difficult for most companies.
What’s worse? The carriers can’t be trusted to invoice for shipments accurately. They also cannot be trusted to credit customers fairly for refunds they are owed for delivery errors like missing a guaranteed due date. In fact, the carriers make errors on an average of 5% of invoices. But since it’s so hard for shippers to audit shipping invoices, most companies either don’t notice the errors, or see this problem as just a cost of doing business.
To help recover the money they’re owed, smart small parcel shippers enlist help. Yet, the 2017 Annual Third-Party Logistics Survey from JDA reported that 68% of companies either conduct their own shipping invoice audits or are not auditing their invoices at all. And given how difficult it is to audit small parcel invoices thoroughly and well, it’s questionable if any of the companies that are conducting audits in-house are doing so effectively.
Perhaps shippers do not realize just how advantageous an audit can be, or as we’ve said, they would rather take the hit to their bottom line as a cost of doing business than spend the large amount of human resource time that’s necessary to properly audit the invoices.
Parcel invoice auditing is an integral part of confirming that carrier pricing matches the original agreement. An audit can tell a shipper if they are being overcharged for errors or late shipments, as well as find other inefficiencies in the supply chain.
The reason there are errors is that carrier rates agreements are complex and depend on a lot of variable circumstances. And since shipping by its nature often involves contingencies, costs can often end up being very different than what is estimated by a shipper when a package is handed off to a carrier.
There are several errors that occur regularly, including:
Some of the errors can be on the part of the shipper, and some by the carrier. An incorrect billing address can be easily corrected, but it comes with a hefty price tag. A mistake like this will cost at least $11 per shipment, depending on the carrier. Address errors are not always the shipper’s fault, however. But if you are not checking, how do you know?
On average, working with a parcel audit service will result in a savings of 2%–5% or more on the total spend. The average savings will vary by business and can end up being a lot more. So, is it worth it? Think about what a 5% reduction in small parcel shipping costs would mean to your company’s bottom line.
It’s clear how auditing invoices can recover a significant amount of money for many shippers. But what about other areas of your business? The data on your parcel shipping program that comes out of the auditing process can also help you tighten up your shipping operation in other ways. Parcel data can provide insights into carrier performance and your overall network efficiency, down to the package level. Armed with data, logistics managers can analyze their operation to make better business decisions.
A partnership between a small parcel shipper and its audit team provides value across the supply chain. It’s a simple way to remove cost and waste from your company, while ensuring that the terms of your carrier agreement are being met.
Contact us at info@transportationimpact.com to learn about properly auditing your shipping invoices.