Executive Briefings

Time to Rethink Your Parcel Shipping Strategies

Jerry Hempstead, chief animator of Hempstead Consulting, shows how shippers can untangle the complex tariffs and surcharges of express and parcel carriers, and implement strategies that can save money while improving service.

Shippers are overpaying for parcel shipping. Hempstead has some suggestions for rectifying the problem.

"Commercial carriers have made it difficult for shippers to understand their book of business and discounting policies," he says. A confusing array of accessorial charges, coupled with differences in the base tariffs of the three major parcel carriers, prevent shippers from knowing exactly what they are paying for the service.

Part of the problem, Hempstead argues, is deregulation. In 1979, when restrictions on the U.S. air-cargo industry were lifted, there were approximately 350 players in the express and parcel arena. Now there are just two commercial providers and one quasi-governmental entity, the U.S. Postal Service.

January brought a number of increases in small-parcel rates. To mitigate the impact of those changes, shippers need to know their business profiles intimately. They can deploy simple tools to examine invoices and separate them into overnight, second-day and ground transactions. Having further divided up shipments by weight and zone, companies can then compare what the various providers are charging for service.

Hempstead believes that shippers tend to rely too heavily on high-priced parcel options. Shipments that are suitable for two-day delivery by air to relatively close locations (zones 2 and 3) could be handled by ground service, which often provides the same equipment and might even get there a day earlier. "Air shipments going to short-haul [destinations] are an obvious place to look for savings," he says.

For shippers, penetrating the jungle of accessorials can be a particularly daunting challenge. Fuel surcharges make up the bulk of those extra fees, but carriers are also likely to tack on charges for delivering to remote areas or correcting the address on a package. The latter means an extra $10 every time the carrier's data-entry clerk decides that an address is incorrect. Surcharges on air deliveries can go as high as 35 percent of the base tariff, says Hempstead, so shippers need to know exactly what they're paying for, and how they can reduce those fees.

To view this video in its entirety, click here.

Shippers are overpaying for parcel shipping. Hempstead has some suggestions for rectifying the problem.

"Commercial carriers have made it difficult for shippers to understand their book of business and discounting policies," he says. A confusing array of accessorial charges, coupled with differences in the base tariffs of the three major parcel carriers, prevent shippers from knowing exactly what they are paying for the service.

Part of the problem, Hempstead argues, is deregulation. In 1979, when restrictions on the U.S. air-cargo industry were lifted, there were approximately 350 players in the express and parcel arena. Now there are just two commercial providers and one quasi-governmental entity, the U.S. Postal Service.

January brought a number of increases in small-parcel rates. To mitigate the impact of those changes, shippers need to know their business profiles intimately. They can deploy simple tools to examine invoices and separate them into overnight, second-day and ground transactions. Having further divided up shipments by weight and zone, companies can then compare what the various providers are charging for service.

Hempstead believes that shippers tend to rely too heavily on high-priced parcel options. Shipments that are suitable for two-day delivery by air to relatively close locations (zones 2 and 3) could be handled by ground service, which often provides the same equipment and might even get there a day earlier. "Air shipments going to short-haul [destinations] are an obvious place to look for savings," he says.

For shippers, penetrating the jungle of accessorials can be a particularly daunting challenge. Fuel surcharges make up the bulk of those extra fees, but carriers are also likely to tack on charges for delivering to remote areas or correcting the address on a package. The latter means an extra $10 every time the carrier's data-entry clerk decides that an address is incorrect. Surcharges on air deliveries can go as high as 35 percent of the base tariff, says Hempstead, so shippers need to know exactly what they're paying for, and how they can reduce those fees.

To view this video in its entirety, click here.