Dealing with Prime Day
Does your organization have its own holiday?
For many retailers that don’t own a fleet of jets, their own 20,000+ battalion of trucks, and lockers strategically placed around cities, the prospect of next-day shipping is baffling and costly. Amazon has spent years crafting this vertically-scaled supply chain monster that now rivals all the existing carriers. The capital expenditure to make this happen is more than most countries’ GDP, but that is possible when you have led the online marketplace for decades.
For years now the phrases thrown around Supply Chain are all about “how do we deal with Amazon,” the dreaded “Amazon Effect,” to the always creative “Tyranny of Now” that really does exemplify the current customer expectations. However daunting, the question still remains: how do you compete against a company that seemingly says hang the shipping cost?
For retailers out there now, there is a race to compete with faster delivery times, increased tracking (obliterating the dreaded WISMO: Where Is My Order???), and increasing speed and efficiency within their own Supply Chain. A 2018 study found that 43% of customers will expect much faster delivery times, and 2019 has most likely seen that number increase.
To accomplish this, increased investment in a Parcel TMS has shown proven success of over 25%. This number will vary widely as many things do depend on the appetite for change and how many levers your company can pull.
Ramp up your Rate Shopping
Having access to the entire network of multiple carriers opens up your options for getting packages to your customers. The fact that you can combine delivery methods and even rate shop among couriers and LTL carriers will dramatically decrease your shipping costs and increase your same-day, next-day, 2-day, or ground shipping options that you can offer your customers.
Rate Shopping has evolved from a simple decision matrix. Now, you need a constantly updated advanced algorithm to parse through the negotiated incentivized rates, real-time conditions, and updated carrier time-in-transit to fully realize your savings.
Finding the lowest rate on both the outbound shipment and returns means you can become significantly more efficient with your spend. Your customer brand loyalty doesn’t end when they hit buy, but continues through the entire Supply Chain – and until that customer is fully satisfied with their order. If they have a tough experience returning a product, do you think they’ll order again? Look at Zappos; they invented the easy return. Combine your Parcel TMS directly into your site, integrate on the backend, or simultaneously print the labels; whatever you do you need to not neglect this key functional area. If your physical footprint allows, consider the option of avoiding return shipping costs by allowing your customers to return to a retail store. A 2017 study by JDA stated that 70% of the study respondents preferred returns to the store because of the hassle of return shipping. If your organization does not have a fully staffed Customer Service center than easing the burden of returns will save staff hours and decrease customer frustration.
Optimize your Orders
“Location, location, location” isn’t just a clever saying; you need a Parcel TMS that has the ability to look at a large number of orders, and be able to provide you with optimized routing methods that can combine the same destination shipping areas. You will find that you don’t always have to send single packages out across zones the fastest (and most expensive way) when you can sort to palletize (or throw them into a mailbag) to take advantage of zone skipping. A common mistake is spending so much time and money optimizing within a warehouse to shave labor and seconds off an order without thinking how much could be saved as soon as it leaves the dock. Increase that last mile density in your order pool and you will decrease the expensive miles a single package has to travel.
Do you have the analytics in your current solution to determine if your organization can take advantage of zone skipping? By analyzing trends in your shipping data, you could find that you could add zone skipping, or add additional carriers to increase coverage and ship points.
Provide More Options
The same 2017 study by JDA states half of customers still want to shop in stores, but more and more customers are looking buy online and pickup in store (BOPUS or BOPIS). By providing a quick pick up method, retailers can profit from all of a customer’s buying habits. Having a Parcel TMS that can Ship-to-Store (S2S) opens up the possibilities and provides customers more flexibility in their buying options.
Adding additional shipping methods doesn’t always mean more carriers; another way to decrease shipping costs is to turn your current stores or 3rd -party vendors into mini Fulfillment Centers. Material Handling companies and major chains are right now racing to build automated Micro Fulfillment Centers at their brick and mortar centers. By adding workstations hooked into your centralized Parcel TMS, you can turn your stores or 3rd-party vendors into FCs dramatically closer to the end customer. New stores can be added into the system in less than a day, and total implementation can be done in weeks. This type of Ship-From-Store (SFS) solution can provide a central system in a black-box environment in order to centralize data, allow for carrier agility, and better control carrier/ship method selection.
For those without a physical footprint to take advantage of, and/or if S2S/SFS just isn’t a reality, then your organization needs to truly master the art of direct-to-consumer shipping.
Prepare for Peaks
Strength hurts but speed kills. Even if your organization hasn’t invented a shopping holiday during the traditionally dead months, you will have one, or maybe a couple of peaks. During peak, every facet of the Supply Chain is stretched. From labor and inventory to IT systems, many retailers spend months prepping for a couple of days. Scalability needs to be paramount for a Parcel TMS that can handle the daily volumes plus the 10x of peak. And, the much-anticipated peak can be a nightmare of epic proportions if/when something goes down. Murphy’s law states that this is the exact time that something will go wrong so having the support of an established company to handle the most important periods 24x7 is crucial.
Now is the time to consider all the variables that go into your Supply Chain to reduce costs and increase efficiencies to compete against the Amazon’s of the world. It is important to take the same analytical approach that made Amazon a giant and apply it to every organization. Take time today to evaluate if you have all the tools necessary to make a plan for incremental improvement.
We realize this piece is very high-level, and if you’d like to drill down on any of our recommendations, reach out to us with questions or comments. We also welcome opportunities to deliberate or dispute our insights and recommendations. No conversation is off limits.
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