Dim factors importance

DIM factor: its importance in carrier contract negotiations

by BlogCost Optimization

Did you ever pay more for a lightweight package than a heavy one?

One of the reasons for the hike in shipping prices is the DIM factor. The size and shape of packages occupy space in a shipping carrier’s vehicle. Many shipping carriers calculate the shipping rates based on the dimensional weight due to scarce spaces on their trucks. Thus, the dimensions of a package are essential during shipments. So, what are dimensional weight and DIM factor- these phrases are explained in this article. Also, we discuss the implication of the DIM factor in carrier contract negotiations.

DIM factor

It is a number set by shipping carriers for the shipment volume per unit of weight. It is the DIM divisor. The calculation of the DIM factor is on the maximum cubic inches per pound of a parcel. It is a factor in calculating the shipping price. Every shipping carrier has its DIM factor, which can change annually.

The DIM factor varies depending on the service offered by the shipping carriers. In addition, the mode of transportation affects the DIM factor value. Further, for some shipping carriers, international shipments have a different DIM factor from domestic shipments. For instance, UPS DIM factor for UPS® Air Freight Premium Direct is 139, and UPS Air Freight Direct is 166. When negotiating a contract with shipping carriers, businesses negotiate for a lower (its higher) DIM factor to reduce shipping costs.

What is Dimensional weight?

The dimensional weight of packages is vital for calculating shipping costs. The dimensions of a package occupy space when compared to its actual weight. For example, a lightweight clothes box may occupy more space than a compact steel box. A mathematical formula helps in calculating the dimensional weight.

Dimensional weight = length x width x height of the box/ DIM factor

If the DIM factor is high, the dimensional weight is low. Dimensional weight depends on the weight and size of the package. Hence, businesses must optimize their packaging options during shipping. If the dimensional weight exceeds the actual weight, shipping carriers may charge based on the dimensional weight. Further, to make better decisions, shippers should also know the difference between the Actual and billable weight to save money.

Actual Weight and Billable Weight

Actual weight is the package weight on a weighing scale. Irrespective of the size and volume, actual weight is the physical weight used by shipping carriers while calculating the shipping costs.

Billable weight is the weight that shipping carriers put on the shipping bills. Its calculation by the parcel carriers involves comparing the DIM weight and the actual weight. The parcel carriers use the higher value of the two weights. Billable weight varies for each parcel carrier and service.

Impact of the DIM factor on shipping costs

Shippers review their packaging strategies when shipping lightweight, large boxes. Different packaging designs and materials will give a better customer experience and save money with minimal changes. Customized boxes or poly mailers help companies reduce their shipping expenses. Advanced cartonization and streamlining the packaging processes can lower shipping costs.

Partnering with shipping experts allows shippers to ship their packages efficiently and lower shipping costs. 3PLs can also help negotiate lower shipping rates even for packages with higher DIM weights. Further, FedEx has packaging design consultants that help shippers to pack efficiently and prevent damage to goods.

Audintel advises its clients to negotiate on the DIM factor when signing contracts with shipping carriers.

DIM factor in Carrier contract negotiations

During carrier contract negotiations, shipping carriers have their shipping analytics to understand a company’s shipping profile. And shippers require to have detailed shipping data at their fingertips when negotiating with shipping carriers. Though shipping carriers have standard DIM factors for services, shippers can negotiate for lower DIM charges. Businesses can also ask for volume-based pricing of packages, which may be cheaper to send small parcels of less than 20 pounds. Further, shippers need to seek dimensional weight waivers or bargain for discounts on the Dimensional weight of packages.

To get the best out of the contract negotiations with FedEx or UPS, partnering with Audintel gives information about ways to negotiate the DIM charges. We help in optimizing the Dimensional weight of packages and lower shipping costs. Our team keeps track of DIM factor changes so that shippers can negotiate better with the relevant data. Audintel’s software tools help our clients bag the best deals by negotiating discounts with parcel carriers.

Finally

Companies must enter into contracts with shipping carriers to manage their shipping expenses. Understanding Dimensional weight charges and negotiating for lower rates requires shippers to have information on real-time data. Partnering with Audintel allows companies to bargain effectively on Dimensional weight charges with parcel carriers. With good negotiated contracts with parcel carriers, our clients can give the best price to customers and improve their profits. Contact us at +1 (619) 354 8539 or visit our Audintel website for further information about DIM factor and Dimensional weight.

Carrier contracts

Carrier contracts: negotiate effectively for better savings

by BlogCost Optimization

Is tracking individual contracts with multiple carriers proving to be tedious? Are you aware of the latest shipping rates that may affect your business? A carrier contract management system can give answers to these questions. Further, accessorial charges are a part of carrier contract negotiations.

Here, we will explore carrier contracts and their significance in reducing shipping costs for companies.

Carrier contracts and their significance on businesses

Shippers work with carrier companies to move goods between locations under agreed contracts. The carrier contracts work for specific customers and not the public. They are ideal for high-volume shipping operations. Further, carrier contracts give greater visibility regarding the timeline for invoice payments, shipping rate confirmation, and more. Businesses improve their bottom line regardless of dynamic markets with carrier contracts.

Examples of contract carriers are DHL, FedEx, UPS, Penske Logistics, and other large shipping carriers. These contract carriers offer specialized services to companies or organizations based on contracts. They offer customized services for a company’s specific needs. For instance, for the transport of refrigerated goods, they provide refrigerated trucks. Having a contract with the shipping carriers helps shippers reduce shipping costs and improve the visibility of the shipments.

Manage carrier contracts and increase operational efficiency

Businesses need to identify shipping data in their efforts to manage carrier contracts. Shippers can analyze their shipping data by service, weight, zone, and accessorial charges and assess contract deviations. In addition, carrier contracts are subject to changes, and updating carrier contract agreements is essential. A centralized monitoring system allows for better carrier contract management. A quick reference to multiple contracts improves the entire operational efficiency of the shipping company. Further, carrier contract negotiations are a part of good contract management.

Why do businesses require negotiations on carrier contracts?

The negotiations on the rates, services, and accessorials with the carriers are carrier contract negotiations. We have discussed carrier contract negotiations in detail in our previous blogs.

However, given the current global scenario, it is time to revisit contract negotiations with the shipping carriers.

Did you know new carrier rates affect carrier contracts?

In the latest news, FedEx has announced FedEx Express and Ground list rates and surcharges from Jan 2, 2023. You can check here for list rates. You can check here for the FedEx surcharges and fees.

These surcharges will affect the shipping rates. Added fuel costs and labor shortages are having an impact on the freight shipping rates. Further, ground transport is affected by trucking delays, labor disputes, and rising oil prices. As a result, intelligent negotiations with shipping carriers are the need of the hour. Multi-year contracts with carriers help in reducing annual rate increases. Get assistance from Audintel for negotiating with shipping carriers and saving shipping expenses.

Why is it essential to have accessorial charges as a part of carrier contracts?

Accessorial charges are fees levied by shipping carriers for any additional service provided during the transit of goods. Accessorials can impact a company’s bottom line and affect the quality of service. The most common accessorial charges for freight are

  • Detention: a fee charged by a carrier for additional time spent getting loaded or offloaded at a shipper or receiver
  • Demurrage: daily rate charge for cargo left at the terminal beyond the allotted free time
  • Storage: charges for holding containers at the intermodal terminal beyond the free time allotted
  • Per diem: a fee that a carrier charges against another shipping carrier or customer for using its trailers, containers
  • Residential delivery: surcharges for delivery of parcels in residential areas

Skilled negotiations help to avoid or eliminate accessorial charges. Shippers can schedule the docking to avoid detention charges. Similarly, keeping track of the arrival/ departure of containers and pre-clearing the cargo will eliminate the demurrage charges. Shipping carriers agree to lower prices during negotiations, provided shippers avoid accessorials.

Carrier contract agreement

An agreement between shipping carriers and companies for delivering goods, services, and fees is a carrier contract agreement. For instance, the UPS carrier contract agreement contains incentives and minimum rates as decided by UPS and the shipper. Further, it covers accessorial fee reductions and DIM weight reductions on invoices. With the correct shipping data, shippers can benefit from carrier contracts.

Audintel and carrier contracts

Carrier contract management is hard to decipher for clients having multiple contracts with multiple shipping carriers. Audintel not only manages carrier contracts for its clients but also helps in negotiating for a better price. We help in carrier contract negotiations by providing insightful data. Further, Audintel tracks shipping invoices for clients. We investigate the shipping carrier’s performance and aid clients in reworking contracts. Our experts are well-versed in negotiations and monitor the dynamic shipping rates of different shipping carriers. So, Audintel protects its clients from unwanted expenses by re-negotiating contracts with shipping carriers.

Final thoughts

Technology can optimize the shipping operations of businesses and reduce shipping costs. However, understanding the complexities of shipping rates and accessorials may confuse shippers. Audintel with its unique software tools, can help negotiate contracts with shipping carriers. We offer services that will save money and improve your overall service. Let Audintel guide you through the complex maze of carrier contracts. Contact us for any information on carrier contracts and our services at +1 (619) 354 8539 or visit our Audintel website.

smartmockups_kzgrcsk1-768x512

Pragmatic details for shippers’ contract negotiation

by BlogCost Optimization

Shippers need efficient parcel contract negotiation with parcel carriers to maximally reduce their shipping charges. The shipper needs to know the shipment trends and characteristics before moving for carrier contract negotiation. There are many factors that affect the cut down in pricing which needs to be negotiated carefully. Being clear with these and also knowing where the carrier can leverage his profits, the negotiation table becomes a clear platform for the shipper.

Some factors to be aware before contract negotiation

Know your shipping volume and spend based on service and zone

The shipper has to be clear about how much volume and spend he does on an average per year. This should be further split into service-based and zone-based. This would make it easy to focus on key spend areas for negotiating discounts. The key spend areas should have flat discounts or in carrier terminology, the base discounts. Also, while negotiating, the carrier, knowing these details, generally, negotiate for less discounts to maximize their profits. The shipper has to be careful in these areas and not get carried away when the shipper offers more discounts in other areas.

Know which surcharges(accessorial charges) you incur more in volume and spend

The shipper should be aware of both volume and spend as discounts for surcharges are quite lucrative. One should be clear and discrete to ask for a specific percentage of discounts in these surcharges. Some surcharges have high pricing per package and it helps to get significant discounts on them. Also, it’s worth having discounts on all accessorial charges that have minimum threshold packages.

Know if you have Dim weight or actual weight in volume and spend

Dim factor is crucial if you are sending customized packages and more often the carrier applies dim weight than the actual weight. Negotiate dim factor, especially for the packages in the services that have this. The factor should also be significant to get close to the actual weight or less. This is an additional asset to shipping contract negotiation.

Know your weightage of Domestic versus International shipping

Carriers tend to give inclined discounts to either domestic or International packages depending on the spend. The shipper can get carried away and lose on the other side. One has to be careful to get the right balance of discounts in both areas.

Know if packages are hitting minimums in large volume

More often, the packages can hit minimum and the package discount is compromised. Knowing the volume can have the shipper negotiate for the Minimum Reduction Amount (MRA). Proper MRA value helps in getting savings for shippers.

Things to be beware on the contract negotiation table

Carriers’ focus

Carriers are for customers’ satisfaction and they are generally well advised on the package flow of the shipper. They know which discounts are crucial. They make the shipper comfortable to negotiate but ensure that these areas are not discussed much. Always be alert in negotiation with the carrier. They tend to divert focus from the necessary discounts to other areas where shippers would not fetch much.

How much discount can be fetched for the annual spend of your stature?

Generally, the other shippers’ discounts are not known and hence, the trend of how much to bargain for each category of percentage has to be known from experts. The carrier is not going to give more than what the shipper asks!

Focus on getting more of Grace/Base discount than earned/performance discount

It’s worthy to get Grace/Base discount as it’s a flat discount and guaranteed. Earned/performance discount places variation based on the spend. Unless the shipper is absolutely sure of his spend, it’s always recommended to secure the Grace/Base discount.

Fetch the necessary Grace/Base discount, dim factor, surcharge discount without fail

Do not come back from the negotiation without fetching the necessary Grace/Base discount, dim factor, surcharge discount. The shipper should be prepared before the meeting with the carrier on each specific aspect and gracefully convince the carrier on these.

Consider alternative carrier and negotiate to know the value of your shipping

Its always recommended approaching more than one carrier when one is not satisfied with the present carrier. By analyzing the past shipping details of the shipper, auditing companies will help in deciding which carriers to choose. Usually, for parcel shippers, UPS contract carrier agreement and FedEx contract carrier agreement are complementary to consider.

Be careful in negotiating minimum performance to make the discounts valid

The carrier always has a clause of minimum performance for aspects of the agreement to be valid. One should be careful to set these at the minimum for the rainy season.

How does Audintel help?

Audintel helps shipping companies analyze and identify shippers’ data. Analysis of key areas where they need to be careful to get the maximum discount and to select alternate carriers. Also, the minimum threshold in others.  Audintel reports help the shippers to analyze the new contract presented by the carrier. The savings using already shipped packages with the new contract is presented. This carrier contract optimization can be done either for complete contracts or amendments.

Final Remarks

Shipping companies need a lot of input on their data. The trends where other shippers fetch the discounts. The carrier gives varying discounts depending on the awareness of the shipper. All aspects where discounts can be fetched with the maximum are clearly understood. This means, critical reporting capabilities and cost model philosophy clearly presented to the shipper. All assistance is given to fetch secure new and improved carrier rates. For further advice and services, call us today at +1 (619) 354 8539 or contact us or visit our Audintel website.

smartmockups_kumf924a-768x538

Scenarios in which to negotiate a new contract with shipping carriers

by BlogCost Optimization

Are shipping companies satisfied with the services provided by shipping carriers?  Also, are shippers overspending on their parcel shipment?  Shipping contract negotiations with shipping carriers can address these queries. Shipping companies require contracts that provide quality service at the best price.  So, shippers can reduce shipping costs at each stage. This article covers the kind of improvements to existing shipping agreements. We will also discuss the scenarios for the preparation of new or renewal of shipping contracts.

Shipping contract negotiations

Shipping companies enter into shipping contracts with carriers for parcel shipping.  Shippers have to know their shipping profile when negotiating with shipping carriers. Shipping companies must understand what the fine print of the contract says. As the shipping rates change every year, shippers need to keep a tab on the shipment costs. In addition, over time, shippers may realize that some parts of the agreement need improvement.

What are the improvements to be made to existing shipping agreements?

Shipping companies view information on shipment details. The shipping reports provide them information on the number of packages, total spend, services, etc. They want to see improvement in the delivery services and costs.  As a result, they examine the shipping agreements to make any improvements. These improvements could be in Dim divisor, surcharges, earned discount and base discount, minimum, MRA, etc.

Scenarios for preparing shipping contracts

Shippers are looking for ways to renew shipping contracts that benefit them. Alternatively, they are searching for shipping carriers that offer competitive prices with quality delivery service. There are five scenarios that shippers look at based on data inputs and other parameters.

  • Optimization of existing shipping agreement

Initially, when shippers and shipping carriers sign shipping agreements, the parameters are different. These parameters include surcharges, accessorial charges, weight calculation, minimum charges, and more. Each year, these charges vary due to new regulations. Consecutively, the shipping costs on each package increase every year. So, to optimize existing shipping agreements, parameters including discounts, MRA, Minimum, Dim Divisor, Surcharges are considered. For example, shippers need to review the respective carrier’s Money-Back Guarantee regularly to receive the refunds due to them.

  • Change in existing shipping contracts for cost-effective services

Existing shipping contracts require change when the services are costly. Components such as maximum weight, zone, etc., interfere in providing cost-effective services. In the case of short-distance shipments or not urgent packages, it is wise to choose cheaper services. For instance, shippers change from one service to another service that costs less for shipments.

  • Use of alternate shipping carriers for business profitability

Shippers use multiple shipping carriers to increase their business profits. The shippers have an understanding of what the competitors are offering. While negotiating shipping contracts, shipping businesses can shortlist the shipping carriers that bring them profits. If a shipper is not happy with a particular carrier’s terms and conditions, they can opt for alternate carriers which have better terms and conditions suitable for their business.

  • Expired shipping agreement

For a shipping agreement that will expire in a year, shippers can consider a new shipping agreement or renew the old one with new terms. Shipping companies can set their timeline for the termination of the shipping agreement. They can put favorable terms and conditions in the shipping contracts that improve their bottom line.

  • Discontinuation of services of shipping carriers

Shipping contracts with shipping carriers should give prominence to quality service. But if the services are causing harm to the shippers’ profits, it is best to discontinue those services. For instance, if a shipping carrier does not provide accessorial discounts to domestic Air express services. Then it is best to shift to another shipping carrier that provides these services.

How is partnering with Audintel helping shipping businesses?

Audintel plays a vital role in empowering shippers to get the best out of their shipping contracts. Our experts analyze the data and also review and improve the shipping contracts of our clients. We point out any deficiencies in the shipping contracts. Audintel helps in improving the shipping costs for shippers. Audintel helps clients understand the intricacies of an existing shipping contract. And if necessary, we help to negotiate a new shipping contract on the clients’ terms.

Conclusion

When negotiating shipping contracts, understanding shipping rates is vital. Also, the reliability and efficiency of the shipping carriers are essential. Shipping contracts should be beneficial for both shippers and shipping carriers. Audintel helps you in cutting shipping costs and balance your bottom line. If you need help in shipping contract negotiations, contact us at [email protected]. You can also learn about our services by visiting our Audintel website or call us at +1 (619) 354 8539.