OUR THOUGHTS ON:

Shipping Rates Just Increased, Have You Assessed the Impact to Your Business?

Risk Advisory/Internal Audit

By Dan Desko

Every year small parcel carriers raise their base rates from 4% to7% on an average basis. On top of the base rates, there are many additional surcharges and other fees that have increased over the previous year. Has your organization considered what impact these increases in costs will do to the bottom line? Whether or not you have, here are some points to consider in 2011:

  • Analyze the exact impact of the rate increases to your business’ specific shipping profile.
    While the average price increase is 4% to 7% for the average customer, let’s say your organization primarily ships only Express Saver Packages to Zone 4. In that case, the increase in shipping costs to your business is a whopping 10.9% over the previous year.
  • When was the last time you renegotiated your carrier agreement?
    If it has been over a year, then your organization is overdue to revisit these costs. If the carrier imposes an annual rate increase, then are you entitled to an annual discount increase for staying loyal to that carrier? Being proactive in your discussions with your carrier is critical. Your organization is free to ship with whomever, whenever. The agreements in place are only binding to the carrier for the purposes of keeping the discounts they promised to your organization for the period of time specified.
  • Involve an expert who knows and understands the carrier pricing process.
    The negotiating playing field will never be equal and you will never get the best deal possible until your organization has the insight and experience into the carrier pricing and negotiating process. Having someone on your side that understands carrier costs, pricing methods, negotiating tactics and operating methods is paramount in accomplishing your cost saving goals.
  • Evaluate your organization’s volume trends, mode analysis and network optimization.
    A detailed parcel audit will allow your organization to identify shipping trends and characteristics that may be modified in such a way that your business demands will still be met while saving your organization money.

For a complimentary parcel spend analysis please contact Jim Yard, Internal Audit and Risk Advisory Services Shareholder.

Schneider Downs provides accounting, tax, wealth management , technologyand business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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