Parcel Spend Management: How to Save 20% On Shipping

Aaron Stahl / Small Parcel / February 6, 2024

Did you know that every year, billions of dollars in shipping refunds go unclaimed? In fact, out of $2 billion in parcel audit credit refunds owed by shipping carriers each year, a staggering 75% – that’s $1.5 billion – never reaches the businesses it belongs to! This startling fact underscores the dire need for businesses to proactively improve their parcel spend management.

But the scope of parcel spend management extends far beyond just reclaiming refund credits. There’s a vast landscape of additional savings opportunities within this domain. To take the first step toward tackling this issue, we’ll explore what parcel spending is, consider the importance of managing it effectively, and discuss how strategic measures like contract negotiations, invoice auditing, and leveraging technology can help businesses reclaim these lost savings and optimize their shipping processes.

What Is Parcel Spend?

Parcel spend refers to the total expenditure a business incurs shipping goods to customers via parcel delivery services. This includes costs associated with carrier rates, surcharges, and various fees involved in the process of sending packages through shipping companies like FedEx, UPS, and DHL.

Understanding your parcel spend is essential, as it directly impacts a company’s financial health and can influence strategic decisions in logistics and customer service. By comprehensively understanding what constitutes parcel spend, businesses can better prepare to optimize these costs in the future.

What Is Parcel Spend Management?

Parcel spend management is the process of systematically managing and optimizing expenses associated with shipping parcels. This multifaceted approach encompasses everything from negotiating carrier contracts and auditing shipping invoices to streamlining operational logistics.

In today’s rapidly evolving business climate, marked by the unprecedented growth of e-commerce, effective parcel spend management has become more crucial than ever. The surge in online shopping has significantly increased the volume of packages being shipped, making it imperative for businesses to manage their shipping expenses.

By focusing on these areas, businesses can not only significantly reduce their shipping expenses but also adapt to the dynamic demands of the market, ensuring timely and efficient deliveries that meet customer expectations.

Why Is Parcel Spend Management Important?

In an era where every financial decision can significantly impact a business’s bottom line, effective parcel spend management emerges as a crucial aspect of operational and financial strategy.

This approach is not just about cutting costs — it’s a comprehensive process that touches on various parts of a business’s logistics operations. From minimizing expenses to enhancing customer satisfaction, the role of parcel spend management is multifaceted and intertwined with a company’s overall financial health and success.

Let’s look at the key reasons why mastering parcel spend management is essential for businesses today.

Cost Reduction

Strategic carrier negotiations and regular invoice audits are pivotal in reducing unnecessary shipping expenses. By carefully analyzing and managing these aspects, businesses can uncover hidden cost-saving opportunities. This process involves negotiating better rates and examining invoices for overcharges and billing errors, ensuring that companies pay only for what they need and nothing more.

Enhanced Operational Efficiency

Efficient parcel management is key to streamlining operations, which plays a crucial role in minimizing delays and boosting productivity. By optimizing parcel spend, businesses can achieve faster delivery times and more reliable shipping processes. This not only enhances customer satisfaction but also improves internal workflows, leading to a more agile and responsive business operation.

Data-Driven Decisions

A comprehensive understanding of shipping costs empowers businesses to make informed logistical decisions. This data-driven approach entails selecting the most cost-effective carriers, choosing the proper shipping methods, and allocating budgets more effectively. It’s about turning data into actionable insights that drive smarter, more strategic decision-making.

Competitive Advantage

Optimizing parcel spend allows companies to offer their customers more competitive pricing. This can be a significant differentiator in a market with high price sensitivity. Lower shipping costs can translate into lower product prices or improved service offerings, giving businesses a competitive edge in an increasingly crowded marketplace.

Environmental Impact

Effective parcel spend management often leads to more efficient shipping strategies, significantly reducing a company’s environmental footprint. By optimizing routes, reducing unnecessary packaging, and choosing eco-friendly shipping options, companies can contribute to sustainability efforts. This benefits the environment and resonates with eco-conscious consumers, enhancing brand reputation.

Where Can You Find Savings With Parcel Spend Management?

Effective parcel spend management is a critical avenue for businesses to unlock potential savings and streamline shipping processes. Here are the key steps involved in maximizing these opportunities.

1. Carrier Contract Negotiation and Analysis

A critical aspect of parcel spend management is negotiating and analyzing carrier contracts. This involves a detailed assessment and negotiation of contract terms to make sure they’re aligned with your usage and goals.

  • Comprehensive contract review: Savings are often found by thoroughly scrutinizing carrier contracts. Negotiating every detail, including tiered pricing and minimum spend requirements, is crucial to uncover potential cost reductions. This process emphasizes the importance of understanding and challenging each contract term for maximum savings. At P3 Cost Analysts, our expertise includes Contract Analysis and Negotiation, ensuring that every clause is optimized for our clients’ benefit.
  • Surcharges and DIM pricing: Parcel spend management effectively reduces costs by addressing surcharges and dimensional weight (DIM) pricing during negotiations. These often-overlooked areas can significantly impact overall shipping expenses, and minimizing them can lead to substantial savings.
  • Refund policies and flexibility clauses: Savings can be realized through carefully negotiated refund policies and flexible contract clauses. This ensures that these terms are advantageous, allowing businesses to adapt to changes and claim refunds efficiently.
  • Bundling services: Parcel spend management also explores savings through bundling services offered by carriers. Evaluating these options for cost-effectiveness ensures that any additional services result in tangible savings, aligning with the business’s overall shipping strategy.

2. Invoice Auditing

Just because you’ve successfully negotiated favorable contracts doesn’t mean the work stops there. Businesses must ensure that shipping companies are upholding their end of the agreement. This is where invoice auditing becomes a vital process.

  • Detailed invoice review: A thorough review of each invoice can uncover discrepancies such as overcharges or billing errors. Businesses are required to pinpoint these discrepancies and request refunds. Addressing these issues leads to direct cost reductions.
  • Proactive refund claims: Identifying instances where refunds are due, such as for late deliveries or service failures, is essential. It’s important to note that businesses typically have a limited time frame to request these refunds. Actively pursuing these refunds can significantly reduce overall shipping expenses.
  • Regular audit schedules: Implementing a regular schedule for auditing shipping invoices ensures continuous oversight and maximizes potential cost savings, a critical practice in effective parcel spend management. The most efficient way to do this is by working with a third-party company that specializes in Invoice Auditing, like P3.

3. Leveraging Market Insights and Technology

Utilizing market insights and advanced technology is an integral part of parcel spend management, enabling businesses to identify trends and inefficiencies that can be transformed into cost-saving opportunities.

  • Market benchmarking: Savings are often uncovered by comparing your shipping rates and services against industry benchmarks and competitors. This aspect of parcel spend management ensures that you’re not overpaying and are staying competitive. However, most businesses don’t have easy access to this kind of detailed market data, making it beneficial to work with a company like P3 Cost Analysts, who can provide industry expertise and localized insights.
  • Technology-driven efficiency: Incorporating technology like advanced analytics and tracking tools is essential in parcel spend management. This approach is pivotal for identifying areas of wasteful spending and refining shipping processes, thereby achieving considerable cost savings. For example, the team at P3 uses proprietary software for a detailed, 45-point parcel audit for each shipment. This system not only recovers any money owed but also automates the refund process.

P3’s Parcel Spend Management Process

P3 Cost Analysts has revolutionized parcel spend management by combining industry expertise with a client-centric approach. Our process is not just about finding savings — it’s about crafting a tailored strategy that aligns with each client’s unique needs and goals. This approach has consistently delivered substantial savings and operational improvements for our clients.

Save Up to 20% on Parcel Shipping

On average, P3’s clients experience significant savings in their shipping costs, typically ranging between 15% to 20%. This is achieved through our expert analysis of carrier contracts, which are often complex and filled with fine print. Our team’s deep understanding of these contracts enables us to uncover hidden opportunities for savings.

Expert Team

Our team is made up of former FedEx, UPS, and DHL pricing analysts who bring a wealth of industry knowledge. This expertise is crucial in managing parcel spend effectively, allowing us to conduct detailed market analyses and provide insights that lead to the best possible savings.

Customized Strategy

We believe that there is no one-size-fits-all solution in parcel spend management. Each client receives a customized strategy, ensuring the most efficient and cost-effective approach to managing their parcel expenditures.

No Upfront Costs

P3’s pricing model is unique in that our clients have no upfront costs. Our compensation is directly tied to the savings we generate, creating a shared success scenario. Our clients can enjoy more money in their pockets with zero additional costs.

The Bottom Line

As we’ve explored, effective parcel spend management is not just about cutting costs — it’s a strategic approach that includes negotiating favorable carrier contracts, conducting thorough invoice audits, and utilizing market insights and technology. This multifaceted process is key to ensuring businesses are not only saving money but also operating more efficiently and staying competitive in the rapidly evolving e-commerce landscape.

At P3 Cost Analysts, we understand the intricacies of parcel spend management. Our team of experts, equipped with proprietary tools and deep industry knowledge, tailors strategies to meet the unique needs of each client, ensuring efficient and cost-effective parcel management solutions.

With P3, businesses can navigate the complexities of parcel spend without upfront costs, sharing only in the savings we generate. This partnership approach to parcel spend management is what sets us apart, helping businesses like yours optimize costs and achieve operational excellence.

Reach out to one of our shipping experts today to get started.

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