COVID-19 caused e-commerce to surge as brick-and-mortar businesses closed, workers were sent home, shopping migrated online and shipping demand pivoted to parcel. Downstream consumers expect ever faster, cheaper delivery with full end-to-end tracking and notifications, while upstream, opaque carrier zone rates and fee structures continue to drive up costs. Parcel shippers need a multi-carrier strategy that automates processes and leverages real-time shipment data to improve visibility, manage spend and boost customer satisfaction.
Here are five key obstacles they face in working to optimize parcel shipping operations.
Meeting customer expectations and margin targets. Businesses have been lured to e-commerce over the past decade with ever faster, ever cheaper, time-definite delivery options that add shipping and handling costs. Pitney Bowes forecasts that parcel volume in the U.S. will reach 32 billion to 39 billion in 2026, practically doubling the present volume.
The bullwhip effect of a sharp drop in sales at the beginning of the pandemic, followed by an even sharper overnight surge, left small e-retailers squeezed by higher advertising costs to bring customers back, and higher shipping and handling costs to retain them. Owing in large part to the drop in brick and mortar purchases, high-volume, high-frequency shippers, including 3PLs and 4PLs, have also felt cost pressures as they’ve moved freight to parcel to meet delivery commitments.
Retail consumers and B2B end users alike now expect on-time delivery, end-to-end tracking and tracing, and updated ETA confirmations. While there’s some latitude given recent supply chain issues, failure to perform can exact a steep price, from reputational damage to lost repeat business.
Finding an optimal service/price balance isn’t easy, with so many company-specific and shipment-specific variables in play. And when a pandemic or other extreme natural disaster hits, all bets are off. Even large shippers who assumed they could leverage volumes with a single carrier for basic service got caught short as carrier networks reached capacity and allocations were capped.
What’s the answer? Better shipment data, automated processes, and end-to-end, real-time shipment visibility, as part of a multi-carrier strategy. Legacy ERP and transportation management software doesn’t offer those capabilities tailored specifically to the parcel environment; adding another layer via cloud platforms and APIs raises integration issues.
'Where’s my package — and why?' Parcel shipping is all about reliability. The old FedEx slogan said it best: “When it absolutely, positively has to be there tomorrow.” Businesses shipping time-sensitive goods, from fresh seafood to medicines to electronic components, need freight to arrive on time, and to know why when it doesn’t.
E-commerce, led by Amazon and matched by major retailers like Walmart and Macy’s, has expanded delivery commitments to online shoppers with a range of time-definite options, along with home, in-store and drop-ship delivery options, and free returns — at negotiated volume rates with carrier-provided shipment tracking.
Heightened customer expectations carry a price for non-performance: Studies have suggested that a third or more of customers are likely to abandon a brand after one bad delivery experience, rising to 90% after a second. “There’s still some grace because of supply chain issues, as long as you manage the customer communication end,” says Coby Nilsson, co-founder and CEO of Provo, Utah-based shipping optimization platform Enveyo, adding that “visibility for every mile is important, with the last mile the most important.”
Visibility remains largely carrier-driven, and as last-mile delivery is increasingly handed off to smaller local and regional providers, shipment tracking is often uneven where demand is highest — at or approaching physical delivery.
Managing parcel spend. Parcel freight rates are built from mostly opaque dimensional weight (DIM) formulas that triangulate shipment size and weight across geographic origin-destination zones, weighted for key customer characteristics and capacity utilization. The result: widely varying rates among carriers for the same shipment. Shippers can leave significant money on the table when they can’t see how shipment patterns over time align with carrier routes, specializations, and pricing.
“Without a system, you can’t understand, and without understanding you can’t identify all of the areas where you might be making some very costly decisions,” Nilsson explains, offering the example of fishing rods. “You can have something that weighs half a pound, but is really long, and now you’re being billed for taking up real estate in the truck.”
Extra space in a carton can add to SKU size and push the rate into a higher tier. Over shorter distances, the distinctions between express and ground service narrow so that, with some planning, a ground shipment can, by avoiding airports at either end, arrive sooner for less money. Carriers frequently adjust DIM formulas to target specific market segments.
Understanding those nuances helps with carrier selection — and rate negotiation. An ability to factor in all of these variables and filter in seconds for specific business rules, particularly during peak or crisis periods, has become a must-have in the competitive parcel environment.
Managing the data. Parcel shipments generate many kinds of data, from paper forms and spreadsheets to computer files and emails. Valuable data can be siloed internally, within departments of large companies or among supply chain partners — suppliers, vendors, 3PLs and 4PLs, carriers and warehouses. Reconciling discrepancies in transit is risky and time-consuming.
Centralizing data in one place, in a standardized, normalized format, makes it instantly retrievable for a shared, control tower view of shipment characteristics and status from a single, trusted source. That enables systemwide monitoring of shipment status and carrier performance in transit, for early exception reporting and communication with customers.
Typically, the process involves importing and converting computer files directly, or via standard database or API software connections. Paper documents and communications need to be scanned, with relevant data re-entered in standard fields. Initial entry and conversion can be time consuming, but from that point on, the information follows the shipment electronically, minimizing errors and chances for miscommunication.
Finding the data behind the data. Layering in historic shipment data, analytics and modeling can identify important patterns in areas like carrier time in transit, package status or exceptions and charges over time, for comparison and benchmarking.
Shippers need to test alternate scenarios for cost-effectiveness, for example adjusting the mix of national, regional, and last-mile carriers, adding or moving distribution center locations, or using 3PLs versus direct service for certain zones. Data insights into SKU weight, size and volume patterns by zone can highlight areas of potential leverage in carrier rate negotiations.
For 3PLs and 4PLs, explains Ryan Howard, vice president of business development at Enveyo, the benefits increase: “They might have 13 different clients on some routes, a different deal with each client, and pickers and packers working with five different WMS systems. They can see if they’re making or losing money with a specific client and what the margin will be if they extend current rates. You can get really creative.”
Enveyo Makes Parcel Faster and Cheaper
Enveyo, launched in 2011, is a cloud-based, multi-carrier shipping optimization platform focused on the parcel market. The company’s Cloudroute transportation management system (TMS) and complementary solutions Insights, Modeling, Alerting, and Audit help manufacturers, retailers and 3PLs meet time-definite delivery commitments, ensure customer satisfaction and manage parcel spend.
Enveyo is integrated with E-commerce, ERP or WMS software to offer a control tower view of shipments and processes via customizable dashboard interfaces. It continuously monitors shipment status as reported by carriers and issues automated real-time customer notifications at key shipment milestones by SMS text or email, configurable to client messaging and branding.
Analytics track historical performance data, carrier commitments and other variables against client-generated business rules to automate carrier selection and document generation while optimizing routing, cartonization, and other processes. Drilling deeper into the data, clients can compare and benchmark carrier performance; identify areas for potential savings in carrier rate negotiations; audit carrier performance against rate and service commitments to collect applicable refunds; and model future scenarios for downstream impacts prior to execution.
Enveyo’s strongest growth segments have been in omnichannel retail, in health and personal care, and among third-party logistics providers. As an example, the company helped CooperVision, maker of contact lenses save $4.7 million in base transportation costs over four years through its Insights, Modeling and Audit solutions, even as it shifted more than half of its volume from ground to two-day residential shipping nationwide.
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