Two Truths and A Lie About Parcel Savings (The Blog That Parcel Carriers Really Don’t Want You to Read)

Right arrow pointing to truth and left arrow pointing to lie

Are you familiar with the game “Two Truths and A Lie”?

It’s an entertaining activity that requires each player to make three statements about themselves – two that are true and one that’s a deliberate falsehood – and then seeing if people can figure out which is which.

Here at AFS, we’ve taken the liberty of creating our own version. Except the things we’re sharing during each round of play aren’t about us. They’re about effective ways to mitigate high parcel costs.

We hope you’ll enjoy playing it as much as we’ve enjoyed putting it together because it will be the start of truly meaningful parcel savings for you and your company in the months ahead.

Round One: Which one of the following statements doesn’t ring true?

1) Now that parcel volumes are down, FedEx and UPS have begun to reduce many of their rates and surcharges.

2) UPS has announced record General Rate Increases (GRIs) and other cost increases for several years in a row. 

3) FedEx has announced record GRIs and other cost increases for several years in a row. 

Answer: 1

We wish that statements 2 and 3 were lies. However, the truth is both carriers have been steadily ramping up their rates and surcharges for years. And unlike their LTL and truckload counterparts, it doesn’t look like they’re inclined to change that practice anytime soon. In other words, they’re not going to actively help you reduce your parcel spend; you’ll have to find ways to do that on your own.

Round Two: Can you tell which of these statements is falser than it appears?

1) UPS’ published rates, dimensional weight (DIM) factors and surcharges are negotiable.

2) FedEx’s published rates, DIM factors and surcharges are negotiable.

3) Both carriers’ sticker prices are set in stone. 

Answer: 3

Happily for you and your bottom line, the deceptive answer is 3. While the numbers you see on UPS’ and FedEx’s rate sheets and web site may seem indelible, there’s usually a fair amount of wiggle room in at least one (if not more) of the many areas that contribute to your total parcel spend – but only if you’re proactive enough to ask for it.

Round Three: Which one of these general cost-cutting pieces of advice wouldn’t pass a polygraph?

1) Accepting a Guaranteed Service Refund (GSR) waiver is one of your best bets for achieving meaningful parcel cost savings. 

2) One of the smartest ways to lower your parcel expenses is to audit your carrier invoices more consistently.

3) Conducting a service level optimization analysis could help you find significant opportunities to reduce parcel expenses by switching to less costly parcel services.

Answer: 1

Although the reduced rates offered by a GSR waiver may seem like a great deal, the fact that you have to waive your right to ask for carrier service refunds in order to get those rates is highly unlikely to work out in your financial favor. In fact, most shippers who sign GSR waivers usually wind up with less – rather than more – money in their pockets. Thankfully the other two recommended tactics are completely legit.

Round Four: One of these three invoicing observations doesn’t add up. Which one is it?

1) It’s not uncommon for delivery drivers to accidentally mark a commercial delivery as residential instead, which means that some of the residential delivery surcharges on your invoices could be erroneous.

2) Carrier invoices don’t always reflect all of the favorable terms and discounts that a company has negotiated for (like base rates, tiered discounts, waived surcharges or allowable accessorial fees), a fact that could result in higher-than-merited parcel expenses for your company.

3) As a rule, parcel carriers’ invoices are highly accurate.

Answer: 3

Anecdotal evidence suggests that as many as 20% of carrier invoices contain some sort of billing error like the ones mentioned above – and we’re not talking about errors that are in your company’s favor. That’s why auditing every carrier invoice – or having it done by a 3PL – is always well worth your company’s time.

Round Five: Find the statement that offers deceptive dimensional advice.

1) It’s a good idea to periodically bring in a package engineer to help examine the possibilities for making your packages smaller, especially now that new right-sizing technologies and services exist.

2) Only UPS and FedEx use dimensional pricing, so if your dimensional costs are getting out of hand, just switch to the U.S. Postal Service or a regional carrier instead.

3) “Small” things like labels or pieces of tape that are extra-thick dangling off your packages’ sides, could be increasing your dimensional charges more than you might think.

Answer: 2

Dimensional pricing is standard operating practice for most large carriers, including FedEx, UPS, the USPS and many regional carriers. As a result, anything you can do to carve even a little size off of your packages (like the two true tactics mentioned above) could yield big payoffs. This is particularly true if your company has a low DIM factor.

Round Six: Choose which of these DIM facts is actually DIM fiction.

1) It’s possible for two very similar companies to have two very different DIM factors.

2) Sometimes it’s better to have a higher DIM factor than it is to have a lower base rate, especially if you have lightweight but large-sized packages.

3) DIM factors are highly consistent from shipper to shipper, so it probably isn’t worth your time to try to negotiate a better one.

Answer: 3

When it comes to lowering your overall parcel spend, a higher DIM factor can be a game-changer. And even though UPS and FedEx aren’t agreeing to as many of these higher factors as they used to, it’s definitely worth your while to at least ask – especially if you’ve got the type of parcels they particularly like to handle or the kind of steady, high-volume business they want to keep.

Round Seven: One of these three general pieces of contractual guidance is highly exaggerated. Can you tell which one it is?

1) When deciding which contractual discounts to aim for, the best choice is usually a straight rate reduction. 

2) Be wary of any special amendments or addendums to your contract that seem to offer extra rate reductions or eliminated surcharges with no strings attached. You may be committing yourself to a contract extension that delays your ability to negotiate lower rates or switch to a lower-priced carrier later down the line. 

3) Get to know your parcel carrier account rep. He or she usually has more authority to find your discounts, offer you financial incentives or waive certain fees than you might think.

Answer: 1

Contrary to how it might appear, there is no one-size-fits-all, “best” discount to aim for when negotiating with your parcel carriers. A lot of it depends on your parcel characteristics, the location of your fulfillment centers and the special rates or concessions you’ve already negotiated. That’s why it’s necessary to do all of your parcel math homework – or to align yourself with a provider that has strong analytical skills and a deep knowledge of the parcel market.

There’s far more to this story of course – including statements we could make about everything from taking care of your own address corrections to training your fulfillment professionals to be more parcel savvy.

But for now, we’ll leave you with this. If you’d like more information about any of the legitimate parcel cost-cutting pieces of advice we’ve mentioned above, give us a call. We’re proud to have helped numerous companies like yours find significant and varied opportunities for parcel savings and would love to do the same for you. And that’s no lie.

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