Following on his article in Manufacturing.Net, John Haber covers the other 2 key areas for focus on cost reductions: unjust contract terms and assessorial fees
Unjust Contract Terms
If a company were to take a closer look at their contract, they may start to see the potential penalties and extra fees. The problem is that many companies don’t understand the language of their contract, or perhaps they don’t pay close enough attention to it.
“If a company has a 3-year contract and they want to renegotiate during the second year, they could face some substantial penalties,” Haber said. “That is unfair to a company that has to deal with market fluctuations and product changes, especially if they are stuck dealing with a carrier that can’t handle those types of volume issues.”
Haber adds that shipping companies may include confusing or deceiving options, like deferred rebates, which would be a discount after the fact, or the carrier could exclude fuel surcharges from rebate calculations.
Assessorial Fees
According to Haber, some shipping companies may add high fees for fuel surcharges, or add delivery area surcharges for certain zip codes, which could add substantial charges to a company’s shipping costs without their knowledge.
And these assessorial fees are rising — fees for address corrections have gone up 40 percent in two years. Ground minimum charges are up 6 percent this year, and they rose 9 percent last year. Delivery area surcharges are up 15 percent, and returns shipments are up 16.7 percent. With just about every area of shipping costs increasing, it’s important to cutback wherever possible.
“The company’s hands are tied,” Haber said. “It’s hard to absorb cost increases and fees like that. Try adding rate caps into shipping contracts, or perhaps add an opt-out clause if the fees become overwhelming.”
When looking at shipping contracts, companies can and should try to object to certain fees that they feel are unfair, Haber adds. However, going head-to-head with a major carrier probably won’t be an easy task.
“Companies can face tough negotiations with carriers,” Haber said. “They have little recourse with only two major carriers. They need leverage to get the best pricing.”
“Companies need to consider bringing in a third party that specializes in transportation costs,” Haber says. “They can find areas for cost-savings that companies may not even be aware of. They deal with carriers and contracts often, and they know what to look out for.”
