What are controllable shipping fees?
Fees in the small parcel industry are often referred to as accessorial fees. There are literally dozens of accessorial fees. And the carriers keep coming up with new accessorial fees.
Controllable shipping fees are the ones that are avoidable. Uncontrollable fees, in contrast, are fees that are essentially unavoidable.
For example, fuel surcharges are accessorial fees that are added to every single shipment. And there's really no way to avoid paying a fuel surcharge. It is what it is. If you ship a package, there will be a transportation charge associated with that package for the service waiting zone and a fuel surcharge on top of that. At a minimum, that doesn't include any of the other accessorial fees.
Common Controllable Shipping Fees
Some of the most common fees that come to mind are late payment fees. You also have address correction fees and extra-large or heavyweight fees. Those typically would fall into the controllable fees bucket.
Shippers can eliminate late payment fees by pay bills on time or within the agreed-upon payment terms. But shippers can also negotiate those terms.
For some companies, asking for extended payment terms or modified payment terms is another way to give themselves more time before those late payment fees kick in.
UPS and FedEx are charging late payment fees now. As you can imagine, they like getting paid on time, as most businesses do. As a shipper, ensuring that you understand when those late payment fees kick in can save some money there.
Address correction fees are another common controllable shipping fee that you can mitigate, if not eliminate completely. If you’re using address verification software, that can definitely help. And if you ship to repeat customers, there are also cases where an address correction fee is applied legitimately.
If you type in the wrong ZIP code or the wrong street address, that is a legitimate situation in which an address fee would be applied. If you ship to repeat customers, incorrect addresses in your system should be corrected so that you're not hit with those again in the future.
For businesses that rarely ship to repeat customers can use address verification software to minimize address correction fees. That’s definitely something that you can — and should — control.
Heavyweight and Third-Party Billing Fees
UPS and FedEx continue to up the charges for extra large and heavyweight packages because they don't like those packages in their systems. There are ways to optimize packaging to ensure that you stay within the size and volume requirements at which those fees will apply.
At some point, however, it also makes sense to explore shipping those packages with other carriers. LTL carriers, for example, and other alternatives to move some of those larger packages are available. In some situations, if you've optimized your packaging and dimensions as much as you can and you still aren’t able to get underneath the threshold, those extra large and heavyweight fees will come into play.
Third-party billing fees are also fairly common, but those are usually uncontrollable.
Dropshippers, for example, have third-party billing fees built into their business model. They expect to see third-party billing on their invoices. That's just the nature of their business.
Third-party billing fees are just the nature of third-party shipping. There are some ways to mitigate or reduce that particular fee type, but those are largely uncontrollable.
Unavoidable vs. Controllable Shipping Fees
In addition to fuel surcharges and third-party billing fees, some other fees are basically unavoidable. These include delivery surcharges (DAS) and residential surcharges for certain ZIP codes.
If your customers order a package to a residence versus a commercial address, the residential fee is going to apply. But you can audit your invoices to make sure you're not being billed for fees when you shouldn't be.
For example, if you ship a package to a commercial address and you're charged a residential fee, that shouldn't happen. But it does happen. And if you aren’t looking for that and leveraging technology to identify incorrectly applied accessorial fees, you're probably paying for some accessorial fees when you shouldn't be.
Most other fees also fall in the uncontrollable bucket. At the end of the day, however, all accessorial fees are negotiable. One of the problems a lot of shippers run into is identifying those fees and understanding how your fees affect your shipping profile.
Accessorial Fees as a Metric
One metric that all shippers should be aware of is your accessorial fees as a percent of your total spend. There are some baselines that shippers within certain industries should fall within. And if you fall outside of those guidelines, there's an opportunity to optimize those fees.
Optimizing starts with ensuring that you're addressing controllable shipping fees, as well as embracing the mindset that every accessorial fee is negotiable. You need to understand which ones are negotiable and how the carriers view those shipment characteristics.
You can also request discounts, within reason, on certain fees. carriers don't like to discount fuel surcharges, for example, and it’s unlikely that you’ll get a big discount on that one.
You're much more likely to get movement on other types of accessorial fee concessions or discounts from the carriers, like delivery surcharge or residential. But even if a fee or surcharge isn't avoidable, it's most likely negotiable.
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