Friday, April 29, 2011

Is Free Really Free?

Is Free Really Free?
All of us are aware of the free shipping software solutions provided by carriers like FedEx, UPS and USPS. They spend millions of dollars to develop these solutions for the shipping public and they all perform rather well. You may be asking yourself, how can they afford to provide free shipping software to their customers? The answer is “They can’t!”

Using the carrier supplied shipping system helps “lock” you in to that carrier, making it harder to use a different carrier. Their systems are primarily designed to help the carrier reduce its operating costs, but not necessarily yours. During rate negotiations, the carriers consider a number of factors in determining the rates that they will offer you. Things like box dimensions, claim frequency, and, not least of all, whether or not your company will use their shipping software. So, if the software really isn’t free, should you look for an alternative; one that might have an initial cost, but might save you money in the long run? We certainly know that one carrier can usually satisfy a shipper. Of course, that carrier can vary from shipper to shipper. The more important question to ask is, can a third party shipping system help even single carrier shippers?

Let’s use our CPS Shipping Software as an example. Shippers using just one carrier have praised the superior package processing times with CPS. Some single carrier shippers take advantage of the considerable savings on declared value insurance supported through the alternate insurance carriers. Still others like the safety net – “just in case” - of the multiple carrier capability of CPS. If the ability of your main carrier to pick up and deliver your packages is interrupted, the multiple-carrier safety net could be the difference in business as usual or a very real “worst case” scenario for your company.

In the world of “free” carrier software, we stay in business when your company profits on its investment in CPS. There is a yearly fee for CPS, and this should be compared to the cost of the “free” carrier software. The carrier provided systems are designed to be good for the carriers. And if you decide to use multiple carriers, each with the carrier provided software, there are definitely costs associated with using the different systems. Is shipping packages one way for one carrier and another way for another carrier the most efficient way? Using two systems, shipping system expenses double: shipping staff training; configuring the systems to work with your data; system updates, etc. These are costs that affect your bottom line.

The free systems lock you in and limit how effectively (if at all) you can make wise business decisions. CPS users and professional rate negotiators alike tell us shippers have a stronger negotiation position when using third party systems instead of free carrier software. Negotiate your best deal, and then use CPS to make the best choices for your shipping and possibly save even more by using an alternate declared value insurance company. Just a 1% or 2% edge can go straight to your bottom line. So, reward your bottom line every year and take advantage of the savings that a multi-carrier shipping system will bring to your business year after year.

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