Orders by consumers from online retailers, or by businesses from distributors, typically result in small-parcel shipments. Most don’t require appointment scheduling, and the packages weigh less than 70 pounds. Dominant carriers such as UPS and FedEx are the most common choices for small parcel shipping needs. 

The growth in e-commerce in recent years has led to a surge in orders that fall into the category of small-parcel shipments. According to Pitney Bowes’ Global 2023 Parcel Shipping Index, the average household in the U.S. generated 162 parcels in 2022 — approximately 58 million parcels each day. Not surprisingly, distributors have found it increasingly difficult to ensure order accuracy and efficiency. Many are struggling to keep up with the deluge of shipments to consumers and businesses alike.

Small-parcel deliveries have taken on an entirely different meaning with the rise of e-commerce, but the road to instant gratification is not without its bumps. One of the biggest challenges is labor. What options does a distribution operation with a skeleton crew have to handle this increase in package counts? One solution might be to open more shipping lanes for faster order fulfillment. But this is surely a pipe dream, as distributors often cannot find (much less retain) enough of the skilled workers necessary to handle the increasing volumes.

For this reason, many distributors are turning to automation to address the labor shortage. Conveyor systems, robotic pickers and automated sorting machines, for example, can significantly increase efficiency and reduce the reliance on manual labor. They can easily handle the repetitive tasks of picking, packing and sorting, allowing human workers to focus on more complex and value-added tasks. What’s more, distributors equipped with warehouse management system (WMS) software can further optimize the use of labor by providing real-time visibility into inventory levels, order fulfillment and shipping processes.

Balancing Volume and Efficiency 

For distributors, managing substantial small-parcel volumes can be a challenge. This is especially true for bulk shipments, involving hundreds or even thousands of small parcels each day. The logistical headaches alone slow delivery times and can lead to service mistakes.

Consider the story of one longtime appliance parts distributor that struggled with labor and volume challenges, and faced error-prone paperwork for its e-commerce orders. Implementing a WMS with an integrated parcel-shipping system increased package throughput from 500 boxes per day at two shipping stations to 650 boxes per day from a single station. The distributor could guarantee same-day shipping on all orders received by 5 p.m. local time, a significant improvement over the previous deadline of 1 p.m. The result was a virtual elimination of packing slip errors and overtime previously caused by shipping bottlenecks.

Cost management is a third challenge of small-parcel shipments, especially as it applies to the “last-mile” of getting deliveries from a distribution center to the customer’s doorstep. Now that online retailers like Amazon.com have conditioned us to expect free next-day shipping, the process has become cost-prohibitive for distributors dealing with small-parcel orders. According to Deloitte’s 2023 Global Smart Last-Mile Logistics Outlook, last-mile logistics is the biggest cost driver in the entire logistics process. While warehousing (13%), sorting (20%) and packaging (16%) account for nearly half of those costs, last-mile logistics alone accounts for 41%.

What to Do?

There are several steps that distributors can take to address the cost challenge. First, they can leverage their buying power to negotiate better rates with carriers. By consolidating their shipping volume and partnering with carriers on long-term contracts, distributors can secure lower rates, realizing savings that can be passed on to customers. In addition, they should consider optimizing their packaging to minimize weight and size, as carriers often charge based on dimensional weight. A WMS that supports parcel dimensioning technology draws on data to streamline picking and packing. When picking a batch of orders, for example, the system’s pre-cartonization functionality will tell you exactly what size box to prepare, and how many are needed. This lets workers pick directly into the box with pre-calculated dimensions and shipping weight.

The larger cost-management issue, however, is compounded by distributors’ reliance on common carriers. This can lead to delays and other logistical challenges outside their control. Distributors are increasingly turning to WMS applications to find the cheapest shipping rates or fastest delivery options for rush orders, by identifying opportunities to consolidate shipments or reduce travel distances. By equipping carriers, couriers and drivers with end-to-end tracking and management capabilities, they can flush out wasteful mileage and improve the overall efficiency of the supply chain.

Optimizing Returns Handling

One cannot overlook the importance of efficient returns management in a time of increasing small-parcel volumes. On the one hand, consumers expect a liberal return policy. On the other, many retailers have contract language allowing them to return any inventory they did not sell or no longer want to stock, which can be overwhelming for distributors. A WMS can help sort through these returned items and determine which can be resold, reconditioned or disposed of. Additionally, distributors can implement a transparent and efficient returns process to minimize the time and effort required to process returns, boosting customer satisfaction and loyalty by providing hassle-free returns and refunds.

As the small-parcel delivery landscape becomes more complex and continues to evolve, distributors must adapt and make themselves more resilient to the challenges yet to come. Automation and technology, such as a WMS, can play a key role in addressing those challenges, by streamlining processes, maximizing efficiency and reducing cost. Automating labor-intensive processes, optimizing the use of space and resources, mitigating shipment costs, and handling returns effectively are all strategies that distributors can employ to manage small-parcel shipments. With the right strategy and approach, they can reach a successful and more profitable future.

Eric Allais is president and chief executive officer of PathGuide Technologies.