Parcel delivery is more than shipping packages on time. There are elements of auditing and contract negotiation that when applied diligently can recover hidden savings.
“Say you ship a package through one of the major carriers using next day air so it arrives at 10 a.m. If it gets there at 10:01 a.m., it’s late, which is not uncommon, and you could be due a refund. However, if no one at the company is auditing shipments, there’s no way to know a refund is due. Companies that make hundreds of thousands of shipments are leaving a lot of unclaimed money out there,” says George W. Reyes, executive vice president at AMWARE Companies.
Companies can also find savings through contract engineering, which is a process of comparing rates to identify discounts that can be applied to pricing agreements.
Fortunately, in both cases, that work can be done through time-saving software. Unfortunately, most companies don’t realize that such software exists.
Smart Business spoke with Reyes about how parcel auditing and contract engineering software can be deployed to save money on shipping.
What challenges come with parcel audits?
Companies often skip parcel audits because the manual process is time-consuming and laborious. Carriers send shipping invoices weekly, each of which can be hundreds of pages.
Most companies don’t have parcel auditing software in house. Instead, someone in the accounting department spends a considerable amount of time thumbing through shipping invoices to find any incorrect charges. And there’s a lot to look at.
Among the issues to review are shipping times, which should be checked against the guaranteed delivery times to see if a refund is due for late delivery. Also, the major carriers assume a package’s weight through its dimensions. There are enough instances of incorrect weight assumptions that companies that don’t catch the error will overpay for a shipment.
Why scrutinize pricing agreements?
Pricing agreements for parcel shipping are designed to be confusing. To untangle the language, companies use contract engineering, which is another method of ensuring parcel shipping costs are kept as low as possible. Many companies are unaware of what can be negotiated in an agreement.
Much like parcel auditing, contract engineering is done through software, instantly comparing levels of service with thousands of other shippers to find appropriate discounts and improve pricing agreements with carriers.
How is parcel auditing and contract engineering software implemented?
Adopting the auditing software is easy. Not much about companies’ shipping processes change — they will still get invoices from their carriers and still pay them directly. Companies just set up an online account and the software automatically does the rest.
Contract engineering is a little more involved. It uses data captured though the auditing software to analyze better pricing agreements. The process typically takes one month, largely because the new agreement needs to be negotiated with and changed by the carrier.
What does the software cost?
Typically there are no costs. Whatever savings are found through an audit — companies typically save 5 to 6 percent on shipping — is split evenly between the software provider and the company. That means the software doesn’t have to be a budgeted line item because it’s paid for exclusively through found money. That money was already spent on shipping, and now some of it is coming back just by uncovering errors.
It’s the same with contract engineering — it’s paid for entirely through found money. If a discount can be found on shipping, part of that savings comes back to the company, offsetting its shipping costs, while the other part pays for the software.
Don’t be taken advantage of by the only two major parcel carriers in the market. Find a partner that has the technology and software to ease the pain of auditing and negotiating parcel agreements. ●
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