Nine Tips to Help Improve Your Outbound Parcel Shipping

Shipping and handling (S&H) complaints usually rank pretty high on the list of gripes customers have against merchants. At the same time, consumers rate parcel delivery companies as some of the best in customer service*. Is there a disconnect in the consumer’s mind, or is there more to this dichotomy than meets the eye?

Catalog Success asked Jeff Kline, a veteran of catalog fulfillment, to share his advice on how you can increase the efficiency and reduce the cost of your outbound parcel shipping services — while at the same time maintaining or even improving your customer service objectives. Kline is president of Kline Management Consulting, a Collierville, Tenn.-based direct marketing and fulfillment consulting firm. His customer list includes catalogers such as Levenger, Cabela’s and Benchmark Brands.

As a consultant, Kline specializes in operational planning and improvement, freight expense reductions and operational efficiencies. He also is a business development manager for DM Transporta-tion Management Services, which consults and provides vendor inbound management services for direct marketers. Before founding his consulting company, Kline served in management positions at merchants such as Genesis Direct, Nordstrom and Bedford Fair. Following are his suggestions:

1. Avoid free shipping manifest systems. If your customers are paying S&H, you want to be able to give them the best rates possible given the package weights and destinations. That’s why it may be best to avoid the free manifest systems offered by UPS or FedEx. Why? “Because you don’t always have the flexibility to use lower-cost carrier options,” says Kline. “You’d have to do all of your business with one carrier in order for that carrier to give you a free manifest system. Not only that, you’d have to give that carrier a guarantee of a certain amount of shipments a day.”

Instead, he recommends using a shipping system that allows you to rate shop among several carriers based on a given package’s weight and ship-to location. Your order management system (e.g., Ecometry, CommercialWare) may offer a manifest module that includes some rate-shopping functionality. Or you can select a stand-alone manifest system offered by companies such as Pitney Bowes, Kewill and Neopost.

2. Always seek competitive bids, and include your current carrier in that process. With Kline’s help, a catalog client recently saved about 9 percent on its outbound parcel costs. “We analyzed their shipping patterns and parcel characteristics, and negotiated new carrier agreements,” Kline recounts.

At the end of the RFP process, the cataloger chose to stay with its current carrier, with which it was satisfied. But just by opening the bidding process, the cataloger got discounts from that same carrier. Says Kline, “The client was happy with its vendor, but wanted to test the waters. We told the carrier, ‘If you want to keep this business, you need to be competitive.’”

Which brings up another key point: When possible, avoid adversarial relationships, Kline cautions. “You want carriers to give you their very best rates and service, but still be profitable — a win-win situation.” The keys to the negotiation process, says Kline, are to share appropriate information with your carriers and promote your company’s advantages to them.

For instance, in the case noted above, the cataloger has shipping patterns that are steady throughout the year, so the chosen carrier has a solid stream of business. “But if yours is a catalog with a lot of seasonal orders, emphasize instead your parcel weights, shipping volumes or the major markets you ship to,” says Kline.

When setting up a bidding process, consider using a consultant who can help you prepare the RFP and manage the subsequent carrier negotiations.

3. Understand your customers’ expectations. Kline joins many fulfillment experts who advise merchants to understand what your customers actually expect regarding parcel delivery before you decide on what shipping options to offer. Do most of your customers want fast delivery or low-cost shipping? The answer could surprise you — and it may redirect your thought processes when setting up parcel delivery options.

For example, you may spend an inordinate amount of time and resources setting up next-day shipping options and promoting the heck out of that service, when in reality, 95 percent of your customers don’t mind if a package arrives in five days. They’d rather pay rock-bottom S&H charges and wait for delivery.

To better discern customers’ expectations, Kline advises that you test offers, issue comment cards or customer surveys, and/or set up focus groups or customer advisory boards. Remember: If you never ask, you’ll never know.

4. Educate and inform customers about shipping. This job usually starts in your contact center. Staffers there always should be ready to help customers understand delivery times, says Kline. If this task isn’t done to your satisfaction, set up manager-moderated meetings between your distribution center and customer service employees. Require each employee to bring to the table questions and concerns about the jobs done by the other department. Staffers may come away with a new appreciation of the challenges faced “over there in that other group.” Moreover, the result may be not just a bit of consciousness raising, but some actual solutions that can help you both lower your shipping costs and improve customer satisfaction.

Another way to inform customers about shipping: Provide access to carrier tracking data via your Web site. Most major carriers now offer this service.

5. Use fact-based procedures for carrier selection. Kline defines this as “looking at all costs and services; then using carriers where they’re best for the weights and areas to which you’re shipping.” Two things in particular to watch out for are surcharges and extra costs, which include, for example, residential delivery, extra dimensions or oversized shipments, fuel, address corrections, hazardous materials, and Saturday pickup or delivery.

“UPS, for instance, has 38 so-called accessorial charges or extra costs,” Kline notes. “You need to know what they are in order to make a fair comparison between, say, UPS and USPS, which usually doesn’t levy these charges.”

6. Review packaging and dunnage. Kline offers an example of how to save real dollars in this area: A 2.1-pound package translates into 3 pounds to carriers. But if you slightly reduce dunnage, you may be able to bring that package weight to 2 pounds with no discernible impact on customer satisfaction. Multiply that by the number of packages you ship in a week, for instance, and you could see some significant cost reduction. And all of those savings drop right to your bottom line.

7. Consider consolidators. Consolidators are best used when your outbound shipping rates comprise a very high percentage of the product cost, Kline explains, citing low-cost collectibles as one example.

In general, he says, the decision to use a consolidator should depend on customer expectations (see No. 3).

“If you have customers who are especially price-sensitive, they may be willing to wait a week for a product. Then using a consolidator may save you some money. However,” he continues, “if you have customers for whom shipping charges are no big deal, but timely deliveries are important, then using a consolidator may not make much sense.”

It needn’t be an all-or-nothing decision, he notes. Consolidators can best be used to get products to certain parts of the country. Say your distribution center is on the East Coast. Utilizing a consolidator for your East Coast deliveries may save you money. But it would be better to use a parcel carrier such as UPS for your West Coast shipments, because using a consolidator for that means your West Coast delivery times could be up to seven days — which may be unacceptable to your customers. “There’s always a cost savings when using a consolidator, but not a time savings,” Kline explains.

When selecting a consolidator, “Get examples of actual shipment costs and times; don’t just look at a map on a consolidator’s promotional Web site,” Kline advises. And shop around, as there are a growing number of competitors in the market, including Parcel Direct, RR Donnelley Logistics, UPS Basic and FedEx.

8. Get creative. Several years ago while working for a catalog company, Kline struck a deal with USPS to allow Priority Mail to be floor-loaded in trailers rather than placed in rolling postal containers. This saved his employer thousands of dollars in equipment and labor cost. If you look at your own operation with a similar process-improvement focus, you may discover ways to cut costs while maintaining or even boosting customer service.

9. Treat carriers like partners. Your carriers are invaluable partners in the growth and vibrancy of your catalog business. You have a choice, says Kline. “You can rake them over the coals, or you can view them as true partners in which all parties benefit — including your customers.” The latter option, he says, is always the better policy.

To reach Jeff Kline, call (901) 850-0645 or visit his Web site at: www.jklineco.com.

* The package/express delivery industry ranked the highest is customer satisfaction in a national survey recently conducted by the University of Michigan Business School. More than 80,000 customers ranked their experiences with about 200 companies. FedEx topped the list, and UPS and USPS also ranked very highly. For more, see “U.S. Customers Happiest in 10 Years,” Washington Post, June 3, 2004.