In the course of a given week, I speak to a handful of our clients and invariably, I find one common theme that separates exceptional shipping departments from their average counterparts. Simply put, the exceptional departments have access to concrete data that give them unique insights into their operation and — this is the key part — they act on that data to enact substantial and meaningful change. Even more impressively, when I talk to our clients who have implemented change based on the data provided, I’m amazed at how one simple report can generate such a monumental difference in the day-to-day operations of most facilities. In short, good data engenders great results.
Let me give you an example. I just returned from speaking with one of our newest clients in New York City. The company distributes generic vitamins and over-the-counter pharmaceuticals to large retailers like Walgreens, CVS, and Wal-mart among others. As I walked through the warehouse with the shipping manager, reviewing his operation, the conversation turned to their small parcel spend. I brought up the subject because after looking through their data prior to the meeting, I noticed that their packages were being billed at a relatively high weight — 38 lbs., to be precise. I asked the shipping manager about this and he said they had tried to figure out why they were being billed at such a high rate given that their commodities simply aren’t that heavy. In fact, he referenced to me that most of their shipment weights did not exceed 17 lbs.
Continuing through the warehouse, we rounded a corner and came across a few packages that were being prepared for FedEx pickup. The Shipping Manager explained that those were the packages in question. To me, they looked slightly larger than three cubic feet, yet the dimensions weren’t marked, so we pulled out a measuring tape to check. With the dimensions measuring 21”x21”x14”, the packages were measuring out at 6,174 cubic inches (beyond the 5,184 cubic inch threshold set by FedEx). So with the 166 dim factor in play, these packages were being billed at 38 lbs. — which is the dimensional weight — rather than 17 lbs., or the actual weight.
What does this mean for the client? Essentially, with a 2012 base rate of $20.48 for a zone 5, 38 lb. package versus $10.65 for a zone 5, 17 lb. package, a slight change to the packaging could reduce the transportation spend by nearly half. Sadly, this had been going on for years, simply because no one knew any differently. One look at the data changed all that and showed this client why having good data that accurately reflects the shipping operation is, quite simply, mission critical.
Improving Visibility
We depend on having visibility to the data, and not just shipment/piece count, and averages for weights and zones, but rather detailed reports that paint a holistic picture of an organization’s distribution operation. But with myriad data to sort through and ability to slice it six ways from Sunday, how is any busy shipping manager supposed to know which reports can have the biggest impact? After all — the data is great, but if it doesn’t tell you anything, it’s nothing but a bunch of numbers. To that end, I’ve detailed the four most critical reports that any organization should access regularly in order to make informed decisions:
• Detailed Zone Analysis Report: This report provides the shipment count by service level, zone and weight, in addition to a summary of the volume and cost by service level and zone. This essential report offers an organization insight into the activity for each zone and the respective costs that are associated with shipping to each zone. Why is this essential? By tracking trends by zone, you can spot areas that may help you to reduce cost. For example, if there is a package that is typically shipped air, a Zone Analysis Report will show if you if you can save costs without sacrificing service by changing that shipment to ground. Without that report, you may go on like the above example — unknowingly paying an unnecessary extra $10 per shipment.
• Charge Mix Summary: This report will provide a breakdown of all costs by service level. It will then split out all accessorial charges including common fees such as fuel, residential surcharges, delivery area surcharges, and the “surprise fees” like address correction, late fees, large package, residential adjustments, and shipping charge corrections. This helps manage overall expenses and address the cost of fees either through negotiations or internal changes.
• Dashboards for C-level Employees: Comprehensive dashboards that offer clear and precise high level summary-level information, typically focused on KPIs, can offer an “at-a-glance” strategic review of operations. In addition, dashboards help measure the overall health of an organization’s transportation spend as measured against the cost of goods sold.
• Billing Mix Summary: This report helps identify invalid and unexpected charges. This can often be for “sub-services” such as 3rd party, freight collect, returns, and inbound shipments, which may not be receiving discounts. It is common for agreements to contain pricing for some of these services, while ignoring others. Most people are often surprised by the unexpected charges that they come across in these reports which is why it’s essential to constantly monitor this area and ensure that you’re getting the appropriate refunds from the carriers.
Depending on your organization, having access to other reports such as mode-optimization, GL code summaries, consolidated shipments, and others can also be extremely beneficial. Although it’s a challenge to create and manage these reports on your own, your freight audit company should have this information available to you and should review this with you regularly. If not, finding a way to access these reports will offer an overall strategic view of the operation that most organizations can’t live without. After all, the consequences of living without good reporting could cost you thousands.
Thomas Andersen is Director of Pricing for Logica. He and his team have helped to negotiate over 25,000 contracts with UPS, FedEx, and DHL. Often considered one of the foremost pricing experts in the industry, Thomas contributes frequently to Parcel Magazine and other industry publications. He is a sought after speaker, thought leader and writer and is considered at the forefront of helping organizations gain visibility into their logistics spend. He can be contacted at tandersen@logica.net.
Let me give you an example. I just returned from speaking with one of our newest clients in New York City. The company distributes generic vitamins and over-the-counter pharmaceuticals to large retailers like Walgreens, CVS, and Wal-mart among others. As I walked through the warehouse with the shipping manager, reviewing his operation, the conversation turned to their small parcel spend. I brought up the subject because after looking through their data prior to the meeting, I noticed that their packages were being billed at a relatively high weight — 38 lbs., to be precise. I asked the shipping manager about this and he said they had tried to figure out why they were being billed at such a high rate given that their commodities simply aren’t that heavy. In fact, he referenced to me that most of their shipment weights did not exceed 17 lbs.
Continuing through the warehouse, we rounded a corner and came across a few packages that were being prepared for FedEx pickup. The Shipping Manager explained that those were the packages in question. To me, they looked slightly larger than three cubic feet, yet the dimensions weren’t marked, so we pulled out a measuring tape to check. With the dimensions measuring 21”x21”x14”, the packages were measuring out at 6,174 cubic inches (beyond the 5,184 cubic inch threshold set by FedEx). So with the 166 dim factor in play, these packages were being billed at 38 lbs. — which is the dimensional weight — rather than 17 lbs., or the actual weight.
What does this mean for the client? Essentially, with a 2012 base rate of $20.48 for a zone 5, 38 lb. package versus $10.65 for a zone 5, 17 lb. package, a slight change to the packaging could reduce the transportation spend by nearly half. Sadly, this had been going on for years, simply because no one knew any differently. One look at the data changed all that and showed this client why having good data that accurately reflects the shipping operation is, quite simply, mission critical.
Improving Visibility
We depend on having visibility to the data, and not just shipment/piece count, and averages for weights and zones, but rather detailed reports that paint a holistic picture of an organization’s distribution operation. But with myriad data to sort through and ability to slice it six ways from Sunday, how is any busy shipping manager supposed to know which reports can have the biggest impact? After all — the data is great, but if it doesn’t tell you anything, it’s nothing but a bunch of numbers. To that end, I’ve detailed the four most critical reports that any organization should access regularly in order to make informed decisions:
• Detailed Zone Analysis Report: This report provides the shipment count by service level, zone and weight, in addition to a summary of the volume and cost by service level and zone. This essential report offers an organization insight into the activity for each zone and the respective costs that are associated with shipping to each zone. Why is this essential? By tracking trends by zone, you can spot areas that may help you to reduce cost. For example, if there is a package that is typically shipped air, a Zone Analysis Report will show if you if you can save costs without sacrificing service by changing that shipment to ground. Without that report, you may go on like the above example — unknowingly paying an unnecessary extra $10 per shipment.
• Charge Mix Summary: This report will provide a breakdown of all costs by service level. It will then split out all accessorial charges including common fees such as fuel, residential surcharges, delivery area surcharges, and the “surprise fees” like address correction, late fees, large package, residential adjustments, and shipping charge corrections. This helps manage overall expenses and address the cost of fees either through negotiations or internal changes.
• Dashboards for C-level Employees: Comprehensive dashboards that offer clear and precise high level summary-level information, typically focused on KPIs, can offer an “at-a-glance” strategic review of operations. In addition, dashboards help measure the overall health of an organization’s transportation spend as measured against the cost of goods sold.
• Billing Mix Summary: This report helps identify invalid and unexpected charges. This can often be for “sub-services” such as 3rd party, freight collect, returns, and inbound shipments, which may not be receiving discounts. It is common for agreements to contain pricing for some of these services, while ignoring others. Most people are often surprised by the unexpected charges that they come across in these reports which is why it’s essential to constantly monitor this area and ensure that you’re getting the appropriate refunds from the carriers.
Depending on your organization, having access to other reports such as mode-optimization, GL code summaries, consolidated shipments, and others can also be extremely beneficial. Although it’s a challenge to create and manage these reports on your own, your freight audit company should have this information available to you and should review this with you regularly. If not, finding a way to access these reports will offer an overall strategic view of the operation that most organizations can’t live without. After all, the consequences of living without good reporting could cost you thousands.
Thomas Andersen is Director of Pricing for Logica. He and his team have helped to negotiate over 25,000 contracts with UPS, FedEx, and DHL. Often considered one of the foremost pricing experts in the industry, Thomas contributes frequently to Parcel Magazine and other industry publications. He is a sought after speaker, thought leader and writer and is considered at the forefront of helping organizations gain visibility into their logistics spend. He can be contacted at tandersen@logica.net.
