Brent Crude is up. Way up (and West Texas Intermediate is finally closing the gap). Shipping surcharges are killing your budget -- what to do? If you are like most companies, you don't negotiate your transportation-related contracts often enough -- perhaps only once every three years. And when you do, are you making the right demands of your suppliers? Do you even have a firm spend data footing to make your case? I had a lengthy conversation with John Haber about this last week. John formerly headed up UPS' National Accounts Profitability department and in general worked with their corporate strategy and financial planning.
Since then he has been busy, founding NPI's transportation practice around six years ago. Last year he started a company of his own, Spend Management Experts (or SME for short), a firm that is completely focused on helping companies bring their transportation costs down. John's own motto is "reduce costs while maintaining service levels" and here are some of his pieces of advice:
- Pay attention to surcharges: a 'popular' line item these days that over the past 5-7 years has skyrocketed from a historic base of around 5%. Today, these fees can top 30% of all shipping fees. Small parcel shipments are among the worst affected, with as many as 120 surcharge triggers (editors note: at least a few were probably created by John at his former employer). This is closely related to the next point about spend analysis.
- Know your spend: as in so many sourcing areas, to target transportation, understanding your spend, your contracts, your T&Cs, and, especially in this area, your locations is critical. This is the starting point to assess your situation, billing accuracy, overpayments, etc. -- to the point of reassessing your network operations. For example, if you use FedEx, be aware that FedEx relies on ground services to handle 2Day deliveries that can be fulfilled via truck such as Atlanta to Chicago. These packages never see the inside of an airplane so make sure you don't unnecessarily accept air surcharges.
Stay tuned as our analysis continues.