Parcel TMS Maturity
How Mature do you need your Parcel TMS Rate Shopping System to be?
No two Parcel TMS Rate Shopping systems are alike; some come with minimal features for ease of implementation and use and others are designed for the complexity of large enterprises. “What level of maturity do I need?” and, “Is my current PTMS mature enough?” are two questions you should ask. First, we will explore the question, “What level of maturity do you need?”
Every shipper is different… period. Despite suggestions of “Best Practices,” “Benchmarks,” and “Implementation Templates,” every organization has key attributes that dictate the behavior needed within the Parcel TMS. We would like to propose that there are 22 key questions (yes 22, so get a cup of coffee before you read the rest of this) that a shipper should answer to determine the maturity required of their Parcel TMS.
In August 2019, Gartner released their bi-annual Market Guide for Multicarrier Parcel Management Solutions. Within the report, Gartner referenced a Multicarrier PTMS Maturity Model framework that we happen to agree with. In fact, ScanData has a version of the Maturity Model that is quite similar (see Figure 1). Here we will evaluate the key decisions we believe shippers should consider as they make decisions on what level of maturity they require.
Figure 1: ScanData’s PTMS Maturity Model
Question 1: Do you ship via multiple carriers?
If your volume is low enough and you have a single carrier, Stage One may be appropriate for you. However, you may want to position yourself for future growth and plans that may dictate onboarding and rating across multiple carriers. If you invest in a captive solution, you may find yourself stuck down the road when you would like to change carriers; therefore, even if you are just shipping via one primary carrier, make sure your PTMS is agile enough for carrier changes. [If you answered “Yes”, then Stage Two is the minimum option.]
Question 2: Do you need your PTMS to select your ship method based upon customer promise dates?
If you have promised your customer a delivery date, unless you have really understanding customers, you need to utilize carrier time-in-transit (TNT) data to select the ship methods that will meet the promise date. Many companies take a shortcut and ship all parcels that are due for delivery within two days via a 2-Day Ship Method. While this shortcut conceptually makes sense, it is better to utilize the power of the PTMS’ ability to rate against actual TNT. This approach will allow you to save significant money by potentially downgrading to a less expensive Ship Method that has a TNT of two days (often Ground in Zone 1 or 2). [If you answered “Yes”, then Stage Two is the minimum option.]
Question 3: Do you ship Dangerous Goods or Hazardous Materials?
If so, you need your PTMS to be able to rate appropriately, eliminate Ship Methods, create the appropriate label, and even alert the packer of the need for additional labels on the parcel. [If you answered “Yes”, then Stage Two is the minimum option.]
Question 4: Do you ship to residential and commercial customers?
If you ship to both residential and consumer addresses and want to avoid adjustment fees, a Commercial/Residential address look-up in the rating process will be required for two reasons: 1) not all Ship Methods allow for both residential and commercial deliveries on all days of the week, and 2) the rating result will vary depending upon if the address is commercial or residential. Numerous retailers ask “is this a residential address?” in the shopping cart process but it puts friction in the checkout process, and the reality is the accuracy of the selection by the customer may be questionable. [If you answered “Yes”, then Stage Two is the minimum option.]
Question 5: Do you ship international?
Many customers that selected a Stage One PTMS often find themselves having to ship international parcels through manual exception stations to get around the fact that most Stage One systems cannot handle the rating or international documentation required. While this approach may work for those with very low international volume, these manual processes can have significant labor costs that may be offset through upgrading. [If you answered “Yes”, then Stage Two is the minimum option.]
Question 6: Do you require needs-on and needs-by delivery date commitment?
In many cases, it does not matter if the shipment arrives early. However, in some businesses like flowers, pharmaceuticals, and some B2B instances an early delivery is nearly as bad as a late one. In cases when a needs-ON date is defined, the rating logic needs to handle exact delivery dates not just delivery by dates. At times the PTMS may have to handle future shipping dates when no Ship Method can deliver on an exact date. While many companies leverage logic in their OMS to handle these challenges, a more robust Stage Three PTMS may be beneficial. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 7: Do you have multiple DCs to rate shop against?
Many organizations have a zip-to-DC map that they stick with as long as the DC has the inventory available to fulfill an order. While general analysis was done to determine the “best” DC to deliver on-time at the lowest cost, these mappings are difficult to maintain and are using these rules as a proxy for actual rates. Using a Multicarrier PTMS in the DOMS routing decision making will help by using actual rates in making a selection of which DC (that has the inventory) to fulfill.
The complexity of selecting using a rules engine that does not utilize rates becomes exponentially more difficult as your DC network grows beyond 2-3 DCs. This complexity will become more prevalent given the trend recently highlighted in the Wall Street Journal, CBRE says that increased demand in smaller warehouse space closer to population centers has driven up costs as retailers are looking to push for faster delivery in a competitive market. Your Supply Chain Network can become even more complex when you add store fulfillment and drop-ship vendor options to the equation and potentially opt out of shipping from a DC to save even more. Having an integrated PTMS in the decision-making process will increase the efficiencies of these smaller, more focused warehouses and drive down tight SLA shipping costs.
Of course, when making a decision on where to ship from requires more analysis than if the inventory is available and how much will the carrier charge you. For example, fulfillment from a store may be more expensive or a drop-ship vendor may have a longer fulfillment SLA than desired. These types of important additional variables should not be ignored. (In these cases, we suggest burdening the shipping cost in the rate shop for a Store or the expected ship date for the drop-ship vendor.) [If you answered “Yes”, then Stage Three is the minimum option.]
Question 8: Do you want to consider shipping holidays in your TNT calculations?
If you have a nonstandard DC shipping “holiday” or require precision in the TNT calculation that takes into account the complexity of what days carriers consider transit days versus delivery days, a more robust PTMS may be required. On the surface this requirement may seem simple, but as one digs into specific use cases it becomes clear that incorporating holidays and weekends into TNT calculations can become quite complex and will vary by carrier. If precision is not required then ignoring holidays in the TNT calculation may be acceptable, but if on-time delivery is important around holidays then more logic should be built into your PTMS. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 9: Do you want to consider carrier cut-times in your rate shopping?
If the last trailer for a particular carrier and ship method is scheduled to leave at 3:00 your rate shopping answer will be different prior to and after 3:00. Not only that, the time between when you can actually get the parcel packed, labeled, and loaded on the trailer needs to be taken into account. A solid PTMS will be able to not only handle cut-times, but be able to vary these cut-times by day of the week, by ship point, and even be altered for peak season. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 10: Do you want to have multiple sets of rate shopping logic?
If the answer to the question “Do you want to always ship the cheapest rate possible that meets the delivery date?” is “Well…not always,” then multiple sets of rate shopping may be required. For example, one may have one set of shipping logic for standard orders, another for backlogged orders, and another that is carrier-specific. While having multiple sets of rate shopping logic in a PTMS is not a huge technical hurdle, often PTMSs lower than Stage Three do not have the option to have more than one decision-making set. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 11: Do you want to zone-skip?
Zone skipping is quite complex and could command a significant exploration. To keep the summary short, there are two items to initially consider using the PTMS for when zone shipping. First, the PTMS should be able to create destination-inducted rated labels along with pallet/mailbag labels. Second, the linehaul TNT and unit parcel cost estimate should be accounted for in the rate shopping logic. From a TNT perspective, if the linehaul TNT is not appended to the parcel carrier’s TNT, then the parcel will not be rated appropriately and will most definitely miss delivery date promises. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 12: Do you want your material handling equipment to call your PTMS?
Even though you printed a label and placed it on the parcel, doesn’t mean to are locked into that rate and label forever (particularly when labels are printed in waves). By the time the label gets to the packer, circumstances may have changed, or, variables were unknown until that moment in time (box size or how much cold pack would be required, for example); the ability to re-rate and re-label is key.
In cases where pick/pack/ship were completed faster or slower than expected, there may be an opportunity to adjust. For example, downgrading to a slower and less expensive ship method if the delivery date is flexible, or upgrading where necessary to avoid an unhappy customer. Or there are times you either beat a carrier cut-time you didn’t expect, or missed a critical cut-time.
You may find the dimensions and/or weight changed from the estimate. You will want to update your communication to the carrier (when the variance is too high, too often, you may find your carriers are charging you) and it may affect the rate. A large variance may also restrict (or expand) the shipping options available to you.
In any of the above cases, if/when intervention is required the ability to re-rate, in real-time, at a manual/exception station is extremely valuable. In highly automated situations, re-labeling may not be feasible, but parcels can still be re-rated on their way out the door to ensure you are paying the absolute minimum. [If you answered “Yes”, then Stage Three is the minimum option.]
Question 13: Do you ship perishable products that are temperature sensitive?
When shipping perishable items, destination temperatures should be taken into account when packing and rating a parcel. In these situations, your PTMS could use the expected temperature to drive additional logic like expediting to reduce ice consumption, force a signature, or even limit delivery days (like weekends to commercial addresses). [If you answered “Yes”, then Stage Four is the minimum option.]
Question 14: Do you want to alter packaging based upon destination temperature?
In addition to influencing ship methods and options, a PTMS can use destination temperatures to influence packaging rules. While many companies have global packaging rules for certain seasons, without using the actual expected destination temperature on the date of delivery one risks overpackaging waste or underpackaging spoilage. [If you answered “Yes”, then Stage Four is the minimum option.]
Question 15: Do you want to rate using an expected ship date rather than the current date?
Some shippers rate parcel waves days in advance of shipping either due to warehouse backlog, preorder processing, or subscription products. In these cases, rating should be done based upon a future date rather than today. Additional complexity would include handling of future shipment ratings that are processed late, and handling situations where the future shipment date should be altered based upon rate shopping results (moving the future shipments forward/back a day.) [If you answered “Yes”, then Stage Four is the minimum option.]
Question 16: Do you want to be able to dynamically block shipping due to hurricane, wildfire, or other extreme conditions?
If one is shipping high-value, perishable, or time-sensitive parcels, then being able to block, expedite or alter parcels based upon temporary rules is often important. The types of service blocks can vary including zip, zip ranges, or state blocks for a particular duration, and may vary by carrier and ship method. [If you answered “Yes”, then Stage Four is the minimum option.]
Question 17: Do you want to alter TNT based upon actual carrier performance rather than contracted TNT?
Historically, most shippers took the TNT provided by the carrier without question. Understanding that the end customer does not really care who was at fault for their late package, shippers are often proactively altering TNTs provided by carriers when they see a carrier is not performing well in a particular area (or blocking that carrier to that region completely). While it is often debated whether the right approach is to press the carrier to deliver to commitments, many leading retailers have taken the approach of being proactive and avoiding using TNTs without analysis/adjustment. [If you answered “Yes”, then Stage Four is the minimum option.]
Question 18: Do you want to include rate shopping in your ecommerce experience?
During ecommerce check-out, you are almost certainly providing a shipping quote that you need to honor (we are jealous of any of you that have the luxury of being able to alter a quote). Quite often, retailers will use a rules engine to provide a quote based upon educated guesses or historical trends. While such an approach may be “close enough” to be acceptable to you and your customer, in many cases utilizing actual carrier rates for the quoting process should be considered. This is particularly true when the SKU count is high, shipping options may be needed, you ship to both residential and commercial addresses, and/or you are experiencing significant fuel or peak season fuel surcharges.
It is well known that shipping charges often lead to abandoned shopping carts, and one may use this fact as a rational to providing fixed shipping rates that limit abandonment. However, one could argue that having the quote based upon what you will eventually pay (even if you discount the quote for the customer) is valuable information. So why do so few companies use a rate shopping engine during the ecommerce experience? The answer is often performance. Given the importance of page loading speed in ecommerce, if you were to use a PTMS to real-time rate shop, speed and throughput are paramount. [If you answered “Yes”, then Stage Four is the minimum option.]
We are now entering the questions that will drive you to products that are under development and often use AI.
Question 19: Do you want predictive analysis in creation of blocks for extreme weather conditions?
The need to be able to manually block shipping in response to an extreme weather event was discussed. While being able to manually enter these blocks is useful, what if the system could predict what blocks would be needed based upon third-party weather forecasts? [If you answered “Yes”, then Stage Five is the minimum option.]
Question 20: Do you want predictive analysis in TNT calculations like seasonality?
Most often, any TNT alterations are handled manually or through very specific logic rules. One could argue that even with this level of improvement, one is missing the opportunity to predict TNT issues due to seasonality, weather, or other variables that have been proven to influence TNT on a regular basis. [If you answered “Yes”, then Stage Five is the minimum option.]
Question 21: Do you want predictive analysis to calculate expected ship dates?
What if your systems had the ability to predict when you would ship based upon variables like backlog, throughput rates, and volume, and then use this information to rate accordingly? [If you answered “Yes”, then Stage Five is the minimum option.]
Question 22: Do you want scenario modeling to do mode planning?
Finally, there are other ways to fully take advantage of your PTMS’ rate shopping capabilities. Since a rate shop can inform you the cost you are paying versus what you could have paid if you had been more optimized, a PTMS may be a great source of information to help you identify areas of improvement, measure success, and help you make a business case for change. You may want to do analysis to determine if you have historically selected the optimal ship-point, carrier, and ship method. If not, what did the decisions we made cost you? What was the cause of the variance? [If you answered “Yes”, then Stage Five is the minimum option.]
By now we hope you agree that not all shippers have the same needs despite what “best practices” may say. While you may not answer “Yes” to many of these questions today, think about what tomorrow might look like before selection. Just because you don’t answer “Yes” to a Stage 4 question, is there a risk that you are limiting your future by selecting a less mature system? As you become more focused on improving efficiency of your shipping spend you are certain to answer “Yes” to more of the questions.
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; you are an expert and we'd love to speak with you.
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