10 Ways to Trim Shipping Costs

Posted on Nov 20, 2012 2:37:00 PM

Shipping costs are one of the biggest expenses for many small businesses, but resourceful entrepreneurs are finding ways to reduce the sting.

Fred DuBois, for example, had been trying to cut the shipping costs at his Laptop Battery Express in Cleveland since he founded it in 2007. Free delivery service for about 50 battery orders a day was costing him as much as $500. He had been relying almost exclusively on FedEx Ground, but this summer, he realized that varying his carriers and using the U.S. Postal Service would cut shipping costs in half. Today, he says, he ships about half his orders with FedEx and the other half with the post office, saving about $250 a day.

OnTrac Saves Money

To achieve such savings, consider these 10 ways to trim shipping costs:

1. Negotiate with multiple carriers. All shipping companies have pricing schedules based on volume: The more you ship, the lower your rate. But small businesses often don't realize they also may have negotiating power, says Jack Mitchell, president of PANCGroup, a Boston-based parcel appraisal and negotiations consulting firm. If you ship large numbers of packages, compare prices and try to persuade carriers to offer lower rates. "If Fed Ex knows UPS is vying for your business, you've got something to negotiate," Mitchell says.

2. Get suppliers to use your shipping account number. DuBois receives inventory from 12 suppliers, including eight in China and four in the U.S. While he originally had suppliers shipping products to him and invoicing for the transport costs, he managed to persuade his domestic suppliers to ship products on his company's FedEx account number. This not only increases his business's shipping volume, which can lead to cheaper rates, but it also helps prevent suppliers from padding their shipping costs. Kevin Lathrop, president of Unishippers, a Salt Lake City-based company that buys and resells transportation services, recommends including this shipping requirement in your purchase order.

3. Use packaging provided by your carrier. If you use your own packaging, you could face additional "dimensional fees" if your box exceeds the size regulations set by UPS and FedEx. To avoid those extra charges, consider using the packaging provided by your carrier, which doesn't have dimensional fees. By putting a one-pound box into a FedEx envelope, for example, DuBois cut his shipping cost by 15 percent.

OnTrac Service Area

4. Consider a regional carrier. Such carriers often provide the same services as FedEx or UPS at a reduced cost, Mitchell says. Regional carriers include Spee-Dee Delivery Service in the Midwest, OnTrac in the West and LoneStar Delivery & Process in Texas. But keep in mind their delivery networks are limited. You also might reduce your bargaining power if you spread your business among too many carriers.


5. Use online shipping. One way to save on U.S. Postal Service costs is to pay for your shipping online. You can save up to 16 percent on priority mail orders and up to 60 percent on express mail, says Beth Fluto, manager of digital media for USPS. You also get free pick-up service, priority mail delivery confirmation and shipping supplies when you pay online with the post office.

6. Invest in prepaid shipping. To help cut FedEx and UPS costs, consider prepaid shipping, which offers a discount rate of up to 20 percent. This means you buy a quantity of shipping labels upfront and affix them to packages as needed rather than pay for each package when you send it out. Prepaid shipping works best when you know you'll be sending out the same weight packages repeatedly and can determine the shipping cost in advance.

7. Buy insurance from a third party. While carriers charge about 80 cents for every $100 of insurance, third-party companies like Parcel Insurance Plan and U-PIC Shipping Insurance charge about 45 cents. The savings can add up, Mitchell notes, if you frequently ship expensive items.

8. Factor in all shipping fees before billing customers. Carriers have more than 75 special charges, including fuel surcharges, fees when requiring a signature from the recipient, or Saturday delivery fees, Mitchell says. If your customers pay for shipping, be sure to include all these extra costs in their bills so you don't end up absorbing them yourself.

9. Consider hybrid services. While they have certain volume, weight and size restrictions, hybrid services like SurePost by UPS and SmartPost by FedEx can cost half as much as standard UPS and FedEx delivery options, Mitchell says. These services pick up packages at your business and ship them by UPS or FedEx to the post office closest to the destination. The local mailman then makes the final delivery. While the cost is less, this extra step can slow delivery time.

10. Ask about association discounts. Find out if your industry's professional association has a partnership with a carrier that offers member discounts. Depending on the size of the association, you could be eligible for discounted rates of up to 50 percent on certain services with carriers like FedEx and UPS.

By: Jane Porter, Entrepreneur

For more information on this article, click here.

Topics: postal consolidators, regional carriers, online shopping, fees, shipping companies, Service Area, OnTrac

When Free Shipping Is Not Enough!

Posted on Oct 9, 2012 9:25:00 AM

Regional parcel carriers give you the next-day delivery edge!

Last week our Director of Business Operations, Mark Magill, spoke at the Council of Supply Chain Management, where more than 3,000 professionals in logistics and supply chain management met at the Annual Global Conference to learn how to cut supply chain costs, network with colleagues from all over the world, and discover new and innovative supply chain ideas.

Mark MagillHis presentation included information on the online retail industry and gave shippers an idea of what to do when offering free shipping is not enough.

The online retail industry passed the $200 billion mark in the 2011 revenue estimates released last month. Projections show it will grow by another 60 percent in the next five years and cross the $300 billion threshold by 2016. These are staggering figures when you consider that e-Commerce still only comprises about seven percent of retail sales.

This has had a profound impact on the parcel delivery market. An industry once dominated by the commercial segment has been inundated by business to consumer deliveries. At last count, it had exceeded 40 percent of all shipments and it is relentlessly approaching the halfway point. The fiercely competitive e-Commerce landscape has caused free shipping to become an almost standard offering on most websites. This has caused the volume of postal consolidators to spike up sharply because they are the lowest cost shipping method. But what are your alternatives when free shipping is not enough to satisfy the demands of your customers?

The seven to ten day delivery commitment offered by postal consolidators may be a satisfactory option for inexpensive items ordered online (sometimes humorously referred to as “cheap and cheerful’). But what are the realities when your customer is ordering an expensive piece of apparel like a $700 leather jacket? Is it worth the risk of buyer’s remorse with that type of high margin item? And what about the risk of shopping cart abandonment if they need the apparel for a special occasion and balk at the high cost of the express shipping option on your website? These issues become even more critical when dealing with the Generation Y/Millennial consumers who have an expectation of overnight delivery without being willing to pay extra for it.

However, there are viable solutions to these issues in major metropolitan areas of the United States. To gain a sharper insight into these solutions, let’s first examine the term Mega-region.  A Mega-region is a geographical area where a large portion of the U.S. population is concentrated. A good example of this is California. It is home to more than thirty seven million people.  Other examples are the Phoenix Sunbelt, Cascadia (the Seattle/Portland I- 5 corridor), the Front Range of Colorado and the Boston to Washington D.C. Corridor. The population of these Mega-regions totals nearly 200 million consumers and the overwhelming majority of e-Commerce deliveries are shipped to them.

The solution to your faster time in transit requirements are the regional parcel carriers that are located in most Mega-regions. These carriers have a next-day Ground delivery footprint that is much larger than that of UPS and FedEx. They offer guaranteed next-day delivery to Zone 4 destinations as far as 800 miles from point of origin. For example, with a distribution center in Reno, NV, you could provide your customers the option of, not only overnight delivery in Nevada, but overnight shipping from Seattle to Phoenix. The best part about it is these overnight deliveries are performed at Ground rates. This makes free shipping with faster time in transit a much more cost effective advantage to offer to your customers.

OnTrac Service AreaLast year I had an in-depth conversation about online delivery needs with the vice president of a very large e-Commerce company. When I asked him his opinion about regional parcel carriers, he mentioned that the regional carriers should talk about nothing but faster time in transit because it has become such a competitive factor. He wanted me to talk about , or ground shipping in Arizona. The largest Internet retailers are continually raising the bar with faster deliveries. Not every company can afford to locate a distribution center in every state, but every company that wants to remain competitive can strategically place two distribution centers in the most effective locations to take advantage of the faster time in transit that the regional parcel carriers provide. Some of the regional parcel carriers linking those Mega Regions are OnTrac in the seven largest western states, Eastern Connection in the Northeast, Lone Star Overnight in Texas and SpeeDee Delivery in the Midwest.


To learn more about our overnight delivery service, please visit any one of our OnTrac Ground information pages.

Topics: postal consolidators, regional parcel carriers, online delivery, overnight deliveries, overnight delivery in CA, overnight delivery in NV, OnTrac Ground, next-day ground, guaranteed next-day delivery, ground shipping in Arizona, eCommerce, free shipping, faster time in transit, logistics, Time in Transit, parcel delivery, overnight shipping from Seattle to Phoenix, deliveries, lowest cost shipping, California, overnight delivery, faster