Since fulfillment companies are in the business of managing storage and shipping on behalf of other organizations, you’d think that they would spend an appropriate amount of time inspecting the details of their own freight costs in order to ensure maximum discounts and savings. And to a large extent, most fulfillment companies do spend a fair amount of time on the “high level” aspects of freight management – from negotiating the best discounts to comparing different products that would best suit the needs of their clients. However, many fulfillment firms would be shocked to find out that their bottom line might be under the attack of various freight fees that, if not audited consistently, could add up to significant amounts of money each month.
The Good News – Investing Time Equals Saving Money
Fortunately, in this case, knowledge of what to look for and time devoted to hunting down these profit killers can not only result in cost savings but also enhance the value of services provided to clients. The main intent of keeping close tabs on freight expense is to identify areas where shipping companies aren’t charging correctly (such as weight variances), uncover instances where service level agreements weren’t met, and locate alternatives that can save money. By doing these things, fulfillment companies can pass these savings and enhanced services to their clients, and in the process further entrench their relationship with clients.
What Does Freight Auditing Entail?
As mentioned previously, freight auditing entails the identification of areas where freight companies are overcharging. For instance, when shipping freight LTL (less than truckload), oftentimes the weight of the pallet is calculated incorrectly. If billable weights are higher than actual weights, then the fulfillment company is going to be overcharged. Furthermore, most freight agreements clearly spell out the services promised, including services guarantees. If the freight company doesn’t fulfill their end of the agreement, a refund will be applied to the invoice. But most freight companies don’t volunteer these service level refunds – so it’s important to have a process in place to identify when expectations weren’t met so that freight refunds can be actualized (such as in the case of an overnight package not reaching its destination on time). Finally, a warehousing company should spend some time familiarizing itself with different freight services in the marketplace. There are other products that might be available that could save money or enhance service. One example comes in the form of insurance. Most large freight carriers offer insurance on declared value of the shipment. However, there are freight insurance companies that offer significant savings over larger carriers.
What To Do When Time is Limited?
Oftentimes warehousing companies just simply don’t have the time to spend consistently auditing the freight function. In this case, there are freight auditing companies that specialize in identifying areas for cost savings and service enhancements. Typically, they charge a percentage for all savings derived, so the risk is minimal. This is a great option for companies that flat out don’t have time to devote to freight auditing.
Will Schneider is President of insightMedia, Inc. a company that helps businesses find Pick and Pack and Fulfillment Companies .