Using inaccurate dimensions to requests rates from carriers will result in your 3PL getting hit with adjustments. These adjustments cause negative short term cash flow positions and result in the selection of overly expensive shipping options. In this post we discuss the implications of using inaccurate dimensional weight for rate shopping and how you can fix it!
Order fulfillment is an intricate ballet that involves balancing tons of different inputs to create a single output, a shipment. Every nuance matters — especially when it comes to maximizing shipping speed while minimizing cost. Unfortunately, to get customers their orders quickly, the specter of dimensional weight inaccuracies leads to substantial adjustments from carriers that have a massive impact on your 3PL.
There’s a multitude of negative effects this can present, let's home in on the three most crucial areas of impact — negative cash flow implications, relational damage with your customers, and inadvertent selection of pricier carrier or service options.
Cash Flow Implications and Billing Cycles
When your 3PL receives adjustments from shipping carriers due to inaccuracies in dimensional weight, it translates to unanticipated costs you have to pass on to your customers. Not only does this cost your organization a significant amount of time to tally up adjustments and bill them to the respective customer, it means you have to cover a short term position that negatively impacts your liquidity. While the latter might not be a big deal during non-peak months, it can become a huge cash position that you must front during peak season.
Reputation and Client Relations
The subsequent billing you must incorporate to cover these unexpected adjustments not only complicates the invoice process but could potentially strain client relationships. The unpredictability associated with these adjustments could lead to a dent in the reputation of your 3PL, as clients might perceive you as an unreliable partner.
Of course, we know that’s not the case. Not only are you doing your best to optimize their shipping spend, but you’re also acting as a no-interest loan service for as much as 30 days depending on your billing cycle. Basically, your customers are getting free money from you.
Inaccurate Basis for Carrier and Service Selection
Using inaccurate dimensional weight to select a carrier or service option can also result in overspending on postage. If you’re rate shopping or using automation to select a shipping label for each order, using the wrong dim weight can result in the lowest cost shipping rate you see being wrong.
For example, let’s say you get rates for a shipment and your dim weight is 3lbs. USPS Ground Advantage comes back as the cheapest option at$7.63 And UPS Ground at $8.00. You select USPS because it’s cheaper.
But it turns out the real dim weight is 4lbs. At this dim weight, your negotiated contract with UPS dictates that your rate for the shipment is still $8.00. But after receiving the package, USPS adjusts your rate to accommodate for the accurate dimensions and your shipment is re-rated to $9.93.
You’ve now overspent by nearly $2 and must cover the short-term cash position that will be billed to you in the form of an adjustment. The point here is that using accurate dimensions to requests rates is crucial if you truly want to minimize shipping costs.
How You Can Fix This
If getting the accurate dim weight for every order was easy, you’d be doing it already! The reality is, you have two options.
Option #1 is to configure every shipment manually. A packer goes into every order in ShipStation or whatever WMS you’re using to select a package size for the order based on what they used. Don’t get me wrong, this can be very accurate, but it’s also very time consuming. That alone might be preventing you from doing it. Assuming a $25/hour loaded wage and that it takes about 45seconds to pick a package and enter this information, you’ve spent $0.30 extra on this shipment in labor costs. If you’re fulfilling 1,000 orders a day, that’s$300 or $6,600 per month (assuming 22 working days). There’s also the risk that your packers are overly conservative and choose larger than necessary packages just to be safe.
Option #2 is to implement an automated package right sizing software. This option has more upfront investment in terms of integration and cost, but typically pays off for 2reasons. First, the automation is much faster than a person, so you save the added $0.30 in labor cost per shipment. Second, the right sizing software can be more accurate than a person which will frequently result in smaller packages used.
Where it Can Get Challenging
A frequent shortcoming of package right sizing software is its inability to handle deformable products. What does this mean? Take clothing for example, it can be folded or compressed to occupy a different space. While on the other hand, a Yeti water bottle can’t change shape. Almost all software tools fail in this area – save one. String.
String is software platform that integrates with WMS’s likeShipStation to automatically update every order with the smallest package and select the lowest cost carrier based on that dimensional wight. What’s particularly cool is that if you use flat rate shipping options, String can find both the smallest flat rate package and custom package to compare rates between the two.
Major benefits of 3PLs implementing String are eliminating adjustments from dimensional weight and minimizing shipping spend by always selecting the actual lowest cost carrier and service.
You can get a free savings analysis to find out what you’ll save by integrating String if you visit www.meetstring.com/shipping-test.
Good luck and happy shipping!