Fifteen to 30%? I'm going to demonstrate a very easy way to achieve that level of savings by adding a regional parcel carrier to your carrier mix. The quickest way to realize that kind of cost reduction is through the mitigation or outright elimination of accessorial charges that dramatically inflate your shipping spend. The savings I refer to do not include the cost reduction you would gain by negotiating a more competitive basic package rate. Those are further benefits you can attain through a detailed discussion of your shipping needs with a regional carrier representative. What I'm referring to here are instant savings you can enjoy without any negotiation whatsoever.
Residential surcharge, delivery area surcharge, extended delivery area surcharge, dimensional weight charge, signature charge, they continue to pile up ad nauseum. Those charges account for half the national carriers revenue, as you can clearly see by looking at your shipping invoice. Consequently, they won't be doing away with them any time soon. And I would be remiss if I did not mention that the national carriers assess a fuel surcharge on the extra revenue generated by those accessorial charges.
Since residential shipments are fast approaching the fifty percent mark of total package volume nationwide, I will focus on the savings that would apply to e-commerce or other primarily residential shippers that are using the national carriers Ground service. While researching this article, I looked at the accessorial tariff rates of the six largest regional parcel carriers. These are companies that deliver to multiple states (35 in total) with delivery coverage areas that consist of tens of millions of consumers. These companies cover well over half the population of the US.
It was very enlightening to discover that half (HALF!) of the companies referred to above do not assess any delivery area or residential delivery surcharges. Others have surcharges that are well below the amount charged by the national carriers. These are real savings that can be instantly achieved without any volume commitments.
So let's do the math. As any experienced shipper knows, the all important rate factor is the Absolute Minimum Charge, the Zone 2, one pound Ground rate (currently $5.84). This is an especially important number for e-commerce shippers whose parcel mix typically consists of low weight (and, to the national carriers, low yield) shipments. You'll notice in the yearly rate increases that this revenue segment always gets a significantly higher rate increase than the announced average. And because they are low yield shipments, even companies with an annual shipping spend of a million dollars can still be subject to that Absolute Minimum Charge. This means that every package they ship will cost at least $5.84.
So if your company is paying that $5.84 minimum charge and you add a residential surcharge of $2.80, you're now paying $8.64. But don't forget about the 10% of shipments that typically incur a delivery area surcharge. That charge is at least $2.75, so if one in 10 of your shipments incurs that charge, it would add an average additional cost of 27 cents per package for a total average charge of $8.91. ($8.64 + $.27). And remember that a fuel surcharge is assessed on that total package charge. The current fuel surcharge is 7%. That would add 62 cents to your package price for a total average charge of $9.53 per shipment.
However, if you diverted those lightweight residential shipments to a regional carrier that does not levy residential or delivery area surcharges, you would only pay
$5.84 plus a 7% fuel surcharge of 41 cents for a total of $6.25. That's a savings of 33% over the $9.53 example just cited! Since not all regional carriers completely waive their accessorials, I chose another example of a regional carrier that charges a $1.55 residential surcharge and a $1.85 delivery area surcharge. Using the same parameters listed above, you could still reduce your shipping spend by 15%!
Now if you're a very high-volume shipper pumping out thousands of packages per day, the percentage rate of accessorial savings will not be as large. From benchmark studies conducted by this publication, you may be seeing a 25% discount off the residential and delivery area surcharge tariff rates that the national carriers charge. BUT they most certainly will not be eliminating those charges completely on Ground shipments. So when you multiply the large volume of packages you send out by the additional accessorial relief provided by the regional parcel carriers, the reduction in your shipping spend can be huge.
Mark Magill is Director of Business Development, OnTrac. Contact him at 818.482.0844 ormmagill@ontrac.com.
Residential surcharge, delivery area surcharge, extended delivery area surcharge, dimensional weight charge, signature charge, they continue to pile up ad nauseum. Those charges account for half the national carriers revenue, as you can clearly see by looking at your shipping invoice. Consequently, they won't be doing away with them any time soon. And I would be remiss if I did not mention that the national carriers assess a fuel surcharge on the extra revenue generated by those accessorial charges.
Since residential shipments are fast approaching the fifty percent mark of total package volume nationwide, I will focus on the savings that would apply to e-commerce or other primarily residential shippers that are using the national carriers Ground service. While researching this article, I looked at the accessorial tariff rates of the six largest regional parcel carriers. These are companies that deliver to multiple states (35 in total) with delivery coverage areas that consist of tens of millions of consumers. These companies cover well over half the population of the US.
It was very enlightening to discover that half (HALF!) of the companies referred to above do not assess any delivery area or residential delivery surcharges. Others have surcharges that are well below the amount charged by the national carriers. These are real savings that can be instantly achieved without any volume commitments.
So let's do the math. As any experienced shipper knows, the all important rate factor is the Absolute Minimum Charge, the Zone 2, one pound Ground rate (currently $5.84). This is an especially important number for e-commerce shippers whose parcel mix typically consists of low weight (and, to the national carriers, low yield) shipments. You'll notice in the yearly rate increases that this revenue segment always gets a significantly higher rate increase than the announced average. And because they are low yield shipments, even companies with an annual shipping spend of a million dollars can still be subject to that Absolute Minimum Charge. This means that every package they ship will cost at least $5.84.
So if your company is paying that $5.84 minimum charge and you add a residential surcharge of $2.80, you're now paying $8.64. But don't forget about the 10% of shipments that typically incur a delivery area surcharge. That charge is at least $2.75, so if one in 10 of your shipments incurs that charge, it would add an average additional cost of 27 cents per package for a total average charge of $8.91. ($8.64 + $.27). And remember that a fuel surcharge is assessed on that total package charge. The current fuel surcharge is 7%. That would add 62 cents to your package price for a total average charge of $9.53 per shipment.
However, if you diverted those lightweight residential shipments to a regional carrier that does not levy residential or delivery area surcharges, you would only pay
$5.84 plus a 7% fuel surcharge of 41 cents for a total of $6.25. That's a savings of 33% over the $9.53 example just cited! Since not all regional carriers completely waive their accessorials, I chose another example of a regional carrier that charges a $1.55 residential surcharge and a $1.85 delivery area surcharge. Using the same parameters listed above, you could still reduce your shipping spend by 15%!
Now if you're a very high-volume shipper pumping out thousands of packages per day, the percentage rate of accessorial savings will not be as large. From benchmark studies conducted by this publication, you may be seeing a 25% discount off the residential and delivery area surcharge tariff rates that the national carriers charge. BUT they most certainly will not be eliminating those charges completely on Ground shipments. So when you multiply the large volume of packages you send out by the additional accessorial relief provided by the regional parcel carriers, the reduction in your shipping spend can be huge.
Mark Magill is Director of Business Development, OnTrac. Contact him at 818.482.0844 ormmagill@ontrac.com.
