Parcel shippers are caught between two of the U.S. economy’s most stalwart trends. First, end consumers are shopping online more and more, buying a wide variety of products. And second, they expect free and fast shipping for those products.
Increasing e-commerce demand means retailers and manufacturers are shipping more volume than ever, likely breaking their own records every year. But consumer desire for free or low-cost shipping means shippers can no longer cover the entire cost of all that shipping, and are looking to passing it on to consumers directly .
Neither of these trends shows any sign of slowing down. So what can shippers do to balance the demands of consumer expectations and maintain a happy customer experience within their budget realities?
1. Anticipate Digital Transformation in The Shipping and E-Commerce Sectors
Many people blame Amazon for normalizing free two-day shipping and they’re right, at least in part. But now, Amazon is upending shipping in other ways: introducing parcel lockers, drones, warehouse optimization tools and other technologies that allow it to continually increase efficiency and customer satisfaction while lowering costs.
Companies don’t have to be Amazon-sized to take advantage of some of these resources.
First, savvy shippers can choose carriers who are heavily investing in new technologies. Second, they can adopt some of these tools like software that helps warehouses run more efficiently in-house. Not every technology makes sense for every company, but those who stay on top of these changes will be better positioned to adapt when they need to and keep their customers happy too.
2. Peak Season Budget Preparation
UPS and FedEx have already announced their peak season rates. If your company has good data, you probably know roughly how much you shipped and what it cost last year. How will demand change this holiday season? How have your carrier’s rates changed? Use your company’s existing information to predict your holiday shipping spend so you don’t get taken by surprise.
3. Carrier’s GRI Budget Preparation (It’ll be More Than 4.9 Percent)
General Rate Increases for 2019 should be announced any day now. UPS and FedEx both say that they have steadily increased base rates by 4.9 percent for several years now. That’s technically true, but it doesn’t account for surcharges, which account for 35 percent of the average shipping spend and tend to rise much faster than base rates. Make sure you know which surcharges affect your company most so you can adapt your long-term goals to those specific rate changes.
4. Audit Your Invoices and Gather Good Data
Steps 2 and 3 aren’t possible if you don’t have an accurate picture of what you ship, where it goes, which surcharges apply and whether it arrives on time. All of that information is contained in the invoices your carrier sends you. Few supply chain teams have the time or resources to review each of those touch points closely.
This is essential to building an effective supply chain. First, the huge dataset contained in invoices can reveal inefficiencies you never noticed before and surface ideas for improvements like a potential location for a new fulfillment center.
Second, invoice auditing allows you to ensure that your carrier is holding up its end of your contract. Are surcharges being applied correctly? Were there late deliveries that you can file claims for? There could be a lot of money hiding in those invoices.
5. Leverage The Best Carrier Process For You
Armed with all this data, you can easily get a sense of whether another carrier (or a combination of carriers for an omni-channel strategy) would better fulfill your shipping needs or help you save money. A robust dataset allows supply chain managers to plug and play—that is, to plug in a competing carrier’s rates and surcharges and see if your shipping costs go down or up with long-range planning.
If your spending appears to go down significantly, you may want to have a conversation with your team about priorities and opening contract negotiations. That new carrier may be a better option, or your existing carrier may be willing to tweak your contract to help you get the savings you want.
6. Budgeting For Your Fixed and Variable Shipping Costs
All managers work from budgets. How do you predict what you’ll spend on shipping next year if you don’t know what you spent last year? Remember, rates don’t simply rise by 4.9 percent every year, so upping your shipping budget by 5 percent isn’t going to be very accurate.
To budget more accurately, figure out your fixed shipping costs. Does your contract include package minimums, also known as price floors? Do you have ongoing operations costs to maintain fulfillment centers or a supply chain team? How much does it cost you to ship each of your core products?
The more products you sell, the more you have to spend on shipping which will up your costs. However, increased volume may tip you into a new pricing category with modified rates or surcharges. Project your business’s growth for the year, then parse your contract to see if that growth will change your shipping rates.
7. Bring in a Third-Party Set of Eyes
Reveel, a team of former shipping industry professionals who now specialize in helping shippers save, is full of insider knowledge. We know how shippers set rates, what their likely margins are, where they make the most money and what they may be willing to negotiate. We can help you analyze your shipping data and review your contract in detail to spot potential inefficiencies.
If you’re struggling to gather reliable data, Reveel can help with that too. Our 45-point invoice auditing service will catch any money you’re owed and start generating a dataset. We can help you use data-gathering software in a way that makes sense for you.
We offer a free invoice audit. Take us up on it today to see how much you could save on shipping. Remember, despite the trends that suggest otherwise, you can save on shipping—and you should.
