The motive behind every business is making profits. The more, the better. When a business involves shipping, it’s very important to make sure your shipping carrier does not cost you more than necessary. It’s a good practice to track the key performance indicators (KPIs) of carriers. This can help you decide if the carrier is keeping you on course to profitability. Document the KPIs with a scorecard. This is especially useful when it comes to discussing and negotiating rates with the carrier. It promotes better dialog and is a quantifiable way to measure the profitability.
What exactly do you pay your carrier for?
Contrary to common belief, it’s not just timeliness that scores high with a shipping partner. So, when you evaluate, look at the larger picture. A good start would be to establish a baseline and to compare your costs and margins with different shipping partners. Think about how different your margins are. Of course, rates aren’t the only reason you sway towards a vendor. Nevertheless, the research here would help you seal a better contract with your chosen vendor.
Shipping costs become especially important to you when you offer free shipping on your merchandise. While it is the observed norm that free shipping offers increased sales, it can dent your margins if you are not getting good deals from your freight partner.
What next?
Look into logs and find out if the vendor makes you pay for express deliveries when a normal delivery would more than suffice. A customer who orders from the same city gets his shipment delivered the same day or the next day, irrespective of whether you choose a faster delivery. So, you might be paying more for no added advantage.
Trust Factor
So, take inventory of all packages delivered by your shipping partner. What’s the word on his reliability? Does he deliver on time? Does he promise on time? Is he the kind that bolsters your reputation? Or does his sloppiness cost you your reputation? The answers to these questions will give you a fair idea on the ‘cost’ of your shipping logistics.
Reach
A great shipping partner offers great rates wherever you ship. But then, if most of your shipments are to a certain location, it changes things dramatically.
Communication
Technology is in the hands of most carriers. So, they are very good at providing electronic data interchange (EDI) exchanges, but not all are good at timeliness. So, it’s great to know if the carrier has messed up with a shipment as early as possible. So, bear in mind that this is part of what you pay for.
Capability and Scalability
Based on your shipment logs, come to a conclusion on whether your carrier has been able to match erratic volumes across lean and hectic times.
Typically, these are the factors that judge whether your shipping carrier is keeping you on favourable margins. Remember, that cost is not just in terms of currency.
