Image via WikipediaIn 2010 Disney Corporation (DIS) earned $6.73 billion dollars in gross revenue, an increase in total earnings from 2009. Disney is one of the top 100 companies in the United States and the world, so its shipping costs should be well managed. Typical U.S. businesses spend between 3 and 5 percent of their gross income on freight, according to Dan Goodwill and Associates (http://blogdg.ctl.ca/2010/02/facing_the_challenges_of_freig.html). 

For companies of Disney’s size, the annual spend would fall between 200 and 330 million dollars, a sizeable sum and a large percentage of Disney’s $1.48 billion dollar operating costs.

Cutting into freight costs becomes a strategic opportunity for downsizing costs and propping up profits, which in the case of Disney represent more than the final sales cost of the Phoenix Coyotes hockey team in 2010. An age-old business adage states that if you cannot measure it, you cannot manage it. To manage freight costs, measuring all the variables is essential.

The three primary elements that hit a company’s freight cost center are cost to haul, cost of fuel and carrier charges. These costs change based on factors such as size, destination, type of carrier and so forth. It quickly becomes apparent to many business leaders that in order to manage shipping information and thereby control costs, a savings system is required along with a group of skilled analysts and decision makers who will ensure maximum profits.

Another more popular route to reduce shipping costs is a parcel audit. Staffed with skilled ex-employees of prominent carriers, a capable audit firm can save a company up to 6 percent and even better in cases where serious shipping errors exist. For a company like Disney, the total savings haul could be between $12 and $20 million.

Auditing a company’s parcel and freight costs can be straightforward and painless. There is no need to install an expensive software application that connects to multiple internal data collection sources to generate enough information to identify overcharging carriers. To facilitate quick reviews, shipping invoices are scanned and electronically reviewed. The software reads all the pertinent shipping information off the invoice and stores it in a database. Due to the expert design of the software, every carrier’s destination, rate tables and other information is pre-loaded and then validated against the scanned shipping invoice data. Then a professional shipping auditor reviews the output as a quality control measure.

In this environment, hundreds and even thousands of invoices can be reviewed and errors and overcharges identified with zero impact to the business. The guarantee of these parcel auditing firms is that they don’t get paid unless they find an error. Because a shipper must submit a refund for the overages and errors, a parcel audit review can actually generate the refund requests so that the process of saving money on freight becomes automated.

Jessica writes about a wide variety of topics.  She especially enjoys writing about ways to save money. You can learn more about a parcel audit at sourceconsulting.com