U.S. shippers on average spent roughly 13 percent more on ground and air cargo transportation last year than they needed to, largely because of inconsistent discounting, accessorial fees and service failures, according to a freight and parcel audit firm.
The amount of volume and where freight was shipped had a near negligible impact on how much shippers overspent for transportation, according to the study by Logica. The Salt Lake City-based company analyzed more than 2,000 active freight and small parcel carrier agreements for roughly 350 global, national and middle-market shippers.
“Since the majority of the companies in our sample size ship more than $500,000 annually, a 13 percent overspend is an egregious amount of money that could be kept in-house to foster innovation, hire more resources and determine avenues for growth,” the report stated.
The report said the finding raised concern that shippers are “not getting the whole truth from” transportation providers, considering carriers complain about rising fuel costs while racking up profits since the end of the recession. As a result, shippers should be more aggressive in analyzing their shipping contracts, the report said.
Although geography didn’t play a noticeable part in transportation overspending, the report said shippers in the Pacific region, particularly California, Oregon, Washington and Nevada, paid slightly more. The authors of the report said this was because of “more erroneous fees” driving up cost.
“Retailers and manufacturers based in the Pacific states typically need to utilize different shipping modes than their other U.S. counterparts in order to still meet the same customer service expectations; unless they structure their contracts with the carriers accordingly, these companies will end up paying higher tariff rates than their peers spread out in the rest of the country,” the report said.
The report suggests shippers who used overnight air transportation overspend nearly as much as shippers that use international air carriers. This is because overnight shipper contracts include overlooked discounts and accessorial charges, and the majority of service disruptions occur in that form of air transport service.