Small parcel shipping is getting costlier by the minute. And still with so few viable carrier options, this is not a trend that will be changing anytime soon. According to a survey conducted by Parcel, many small parcel shippers are particularly concerned with the accessorial charges on their invoices. This makes sense given the amount of additional cost surcharges can add to any given invoice. It’s no surprise that over a third of respondents said that accessorial charges were their biggest concern with their primary domestic parcel carrier.
The Most Common Accessorials
Accessorial charges are additional services that a carrier provides outside of the standard shipping scope. These value-added service charges, or penalties in some cases, can add up quickly if you are not paying attention. They are often applied after the shipment has been made, making for a nice surprise on the invoice, and a substantial increase in transportation costs. This makes it difficult for a logistics manager to factor these costs into the supply chain budget.
But with over 100 different potential accessorial charges, how can a shipper be expected to keep track of all of them? The most common culprits for a higher invoice from your carrier include Dimensional Weight Pricing, Residential Surcharge, Lift Gate Service, Fuel Surcharge, and Additional Handling Surcharge.
Reducing the Impact of Accessorials
Accessorial charges make up more than half of carriers’ total annual revenue, which makes them very lucrative for the carrier and very costly for the shipper. Assessing freight costs, especially hidden ones, and how to control how often they occur is one way to reduce LTL freight costs.
- Accuracy: Carriers are hoping that you will be careless, so they can hit you with a surcharge. Measure boxes and weigh all shipments and record them before you send the package off. That way, if there is a question about an accessorial, you will have backup.
- Automation: Scanning equipment can be used to automate data entry with specifics such as weight, dimension, res indicator, etc. If your shipments cannot be read by a scanner, you’ll likely pay a fee.
- Measurement: Figuring out the total cost of each package is a KPI (key performance indicator) that should be measured each week. The percentage that accessorials make up of the total cost per package is important.
- Information: There are many reasons for an accessorial fee on a shipment, but giving your carrier updated information about your shipping needs and habits will cut down on the number of surprises on your invoice. This starts at the point of negotiation with the carrier so that what makes your shipping patterns unique is factored into the pricing agreements you operate under. This is the best way to prevent surprises down the road.
- Auditing: Auditing every freight invoice to ensure accuracy takes time but is worth doing. A third-party logistics provider can intervene on your behalf to correct invoices if you are unable to do it.
A key point is that carriers assume that most companies do not plan for accessorial-related charges but optimizing processes and being accurate will cut down on your accessorials that are affecting your budget. An analysis of your shipping history and characteristics will identify the areas that should be focused on for improvement. Keep in mind that accessorial charges are negotiable so make sure you are not being over-charged for those instances when you are at fault. If you give them the frequency of occurrence as a percentage of your total shipping volume, they will be more willing to negotiate.
Contact us at TransImpact.