Surcharges in Contract negotiations

Surcharges: an integral part of carrier contract negotiations

by BlogCost Optimization

Are surcharges having a direct impact on your shipping costs? Is your company’s bottom line affected by additional fees? Then, it’s time to negotiate shipping surcharges as a part of the carrier contract negotiations. This blog will focus on the different kinds of shipping surcharges and their need to be a part of the carrier contract negotiations. Further, we will discuss the importance of third-party auditors in understanding shipping characteristics.

Surcharges

Surcharges are the additional fees applied by shipping carriers to each package. They appear on the shipping invoices along with the base shipping fee. Parcel carriers announce shipping rates and surcharges increase annually. If a business ships several packages, these surcharges will affect its profits. Moreover, as e-commerce is booming, businesses need to understand the surcharges in detail.

Surcharges are of different categories and depend on a company’s shipping characteristics. For example, a Ground package may cost 10 dollars, but an additional handling charge will cost 80 dollars extra. Shippers can opt for some services as extra charges. But, some surcharges are imposed by the shipping carriers, like fuel surcharges, due to volatile market fluctuations.

Shipping surcharges are many and may confuse many shippers. However, with the help of shipping analytics, common shipping surcharges can be predicted accurately. Shippers can use the predicting tools to manage shipments and reduce costs.

Here are some common surcharges imposed by parcel carriers

  • Demand surcharges

Demand or Peak surcharges will apply to packages shipped during the peak season. In addition, the service levels, shipping zones, and package weights are a part of the shipping invoice. Shippers can negotiate for these surcharges so they do not pay extra during the peak holiday season.

  • Additional handling surcharge

Shipping carriers such as UPS, FedEx, and USPS have additional handling charges as a part of the surcharges. They force the shipping surcharge on shippers depending on the parcel weight, dimensions, and packaging. While FedEx imposes shipping rates based on shipping zones, UPS does it based on the parcel weights. High-volume shippers can avoid this surcharge by negotiating in advance with fee reductions.

  • Address correction surcharge

This fee is applied when parcel carriers have to update the customer address for package delivery. Further, extra efforts and resources are required to amend the address and re-route the package. Shippers can avoid this surcharge by using different parcel carriers like USPS. Or, they can bargain for a surcharge discount during carrier contract negotiations.

  • Fuel surcharges

This surcharge is a variable fee that changes weekly depending on the market fuel prices. Fuel surcharges vary from carrier to carrier. Companies can negotiate for a fixed or variable fuel surcharge. In addition, shippers can choose the shipping carriers that offer discounts on fuel surcharges.

  • Residential surcharges

This fee is for Package delivery to a home or private residence. Shipping carriers charge additional fees as there are few package deliveries to residential areas. If there are several residential deliveries for some businesses, they can negotiate for a surcharge discount.

  • Delivery Area Surcharge

This surcharge is applied to packages when the package delivery is for remote locations or distant ZIP codes. Shippers have to evaluate their strategies for the delivery of packages. Negotiating with parcel carriers on discounts for this surcharge is possible with the relevant shipping data in real time.

  • Saturday or Sunday Delivery surcharge

Weekend deliveries are costly for shippers and are passed onto the customer frequently as part of the shipping costs. It may lead to customer dissatisfaction and loss of business. Shippers can opt for USPS, which does not charge for weekend shipments, and gain benefits.

The above are a few of the common surcharges. Different shipping carriers have several names for shipping surcharges. So, to understand the shipping surcharges, businesses have to ask for discounts at the negotiating table. Shippers keep their shipping data handy when asking for a surcharge discount from the parcel carriers. For reliable assistance in negotiating shipping surcharges, opt for services from Audintel.

Carrier contract negotiations made easy with Audintel.

It’s common knowledge that surcharges increase annually for all parcel carriers like FedEx and UPS. Some parcel carriers allow discounts for some shipping zones and services. But do businesses know which parcel carriers provide the best surcharge discount for their shipping characteristics? Experts like Audintel guide shippers to negotiate for the best surcharge discounts with shipping carriers. We get statistics for clients like shipping zones, Dimensional weights, and more to help them in carrier contract negotiations. Audintel keeps track of the surcharges of the parcel carriers and aids shippers in negotiating for a lower rate.

To sum it up

Shipping surcharges are part of additional fees imposed on some shipments by parcel carriers. Businesses shipping packages require to pay additional fees to shipping carriers. However, with data-driven information, shippers can negotiate surcharge discounts at the negotiating table. Audintel empowers its clients with innovative solutions to reduce shipping surcharges and boost profits. To know more about shipping surcharges and ways to minimize shipping costs, contact us at +1 (619) 354 8539 or visit our Audintel website.

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.