Is Your Parcel Technology Prepared for the Future? Part I
Key elements to evaluate whether your platform is enabling or hindering your ability to respond to the ever-increasing magnitude of change [a three-part series].
There is little doubt that over the past few years, shifts in the technical ecosystem have made it difficult for companies to adapt to the speed of change in the DTC and B2B commerce industry. Most pundits spend their time laying out a structure to blame giants like Amazon for this rate of change, but in reality, it was a shift that was bound to happen. If you are prepared to address this change, you are positioned to win against the competition.
Everyone we speak with agrees that adoption speed is key. The real questions to address are:
Where should I step up my game?
What are some specific areas of our supply chain where changes can make the most impact?
In this series, we will review some of the industry’s best practices on how to increase cost savings, collect and utilize the right data, better process returns, and improve customer satisfaction. Once implemented, these tools can help your business realize greater success.
All of the recommendations likely require an investment in logistics technology systems designed to create a highly flexible supply chain. Without thoughtful planning and investment, it will be difficult to keep up. For many this may seem obvious, but it is not always the case. “Some organizations with 30,000 or 40,000 item numbers and multiple facilities are still convinced they’re better off without technology,’ McKnight says.” – Denny McKnight, partner, Tompkins Associates Inc., a supply chain integration firm headquartered in Raleigh, N.C., quoted by Leslie Hansen Harps in Best Practices in Today’s Distribution Center, InboundLogistics.com
Significant growth can be enabled when old, manual processes are performed by new system functionality, or are eliminated and replaced with a new way of working: leveraging a technology ecosystem designed around your best practices. Done right, these more efficient logistic operations allow companies to lower costs and operate with greater efficiency. Generally, these technologies allow companies to offer a higher level of customer service through better communication and issue resolution. Many find that disruptions and issues are resolved faster compared to competitors who rely on manual processes.
The bad news? This investment is a necessary evil. The good news? There is potential for huge payoffs. That said, let’s dive right in.
Part 1: Increase Cost Savings and Customer Satisfaction
It is a necessity to provide the service and support your customers are demanding, but you can realize savings along the way.
Expand Carrier Services
With each new release, carriers continue to expand options available to shippers – and your customers. Are you taking advantage of what is available? You have likely heard that 50% of customers abandoned a purchase due to unsatisfactory delivery options and 89% of customers won’t shop with a retailer again if the shipping commitment isn’t met. The best way to address this demand is to provide your customers the option to choose delivery features that best fit their lifestyles. This can be accomplished through programs like UPS My Choice® or FedEx Delivery Manager® that can improve the delivery experience and will likely result in repeat business.
Hold at Location (FedEx) and Access Point (UPS) provide many advantages not only to the shipper, but to the customer as well. This feature allows customers to choose the time and location for package pickup, which in turn means no missed deliveries or unattended packages. This option has no added costs for the recipient and can reduce cost for the shipper.
This can resulted in fewer returned shipments due to missed delivery attempts, while also allowing the shipper to avoid residential delivery fees. Due to the growth of this option, FedEx has expanded Hold at Location to make picking up shipments as easy as possible by adding new locations other than FedEx Office®, FedEx Ship Center®, and FedEx Authorized ShipCenter® locations giving their end customer the flexibility that we as consumers want.
FedEx also provides a Redirect to hold so even if a customer has finished checkout, and the product has shipped, you can provide them the option to hold a package at a retail location.
Despite many brick and mortars closing across the country, many retailers are making the most of their current footprint: Ship From Store is a cost-saving alternative, essentially turning your retail store into a mini DC/ship point thus realizing the savings of riding along with store inventory fulfilment freight. Ship To Store (allowing your customers to Buy Online, Pick Up in Store) is another shipping option that’s exploding. Not only does this turn your customer into the “last-mile” carrier, but it can result in revenue lift as 46% of those who have shipped to store indicate they have made another purchase when doing so. BOPUS is a fantastic way for retailers to drive sales with an omnichannel experience while also decreasing cost.
Understand DIM Weight
Customers want to pay as little as possible for shipping, and they want their packages delivered yesterday. According to Logistics Management, 37% of shippers are experiencing the growing pains of trying to get more packages to customers faster and cheaper. A big step in tackling this hurdle is understanding dimensional weight and package density.
UPS & FedEx rolled out DIM Weight rate increases in 2011 and 2015 and these changes are believed to be two of the most impactful increases the carriers have made in recent decades. Understanding the current DIM rules and package density can have a tremendous impact on your operations. Virtually all UPS and FedEx shipments are now subject to DIM weight.
By evaluating your DIM characteristics in relation into how and what you ship, you’ll gain a concentric view to how your operations have been impacted, and how to mitigate some of those changes.
Best practices to help minimize the effects of DIM weight include: optimizing & standardizing packaging, auditing your shipping billing for non-standard DIM charges, and negotiating a custom DIM divisor and/or a custom cubic threshold.
Given the consumer focus on sustainability, efficient packaging not only saves money, it also keeps those customers happy.
Explore Freight Consolidation
A key factor for most large volume shippers when it comes to best practices and business efficiency is the utilization of freight consolidation. This is the act of combining many parcels into a larger shipment; this is key to taking advantage of zone-skipping and keeping costs in check. Some of the most common benefits of implementing transportation consolidation programs can include:
Reduced overall shipping cost
Reduced time constraints on each shipment
Minimized emissions, which is beneficial as government regulations are continuing to grow more stringent for shippers
Lower risk in shipping, which results in lower insurance premiums
Better control over a shipment
Improved accuracy in the tracking and forecasting of shipments and delivery dates
Even if your parcel volume doesn’t put you in this category for consideration, consolidation of any sort can yield efficiency and savings (see our article on sortation options here). For example, even moderate presorting could allow you to take advantage of expanded carrier options, which brings us back to our first point.
Even if you are able to fully utilize all services within a carrier, gone are the days where one could put all their eggs in a single proverbial carrier basket. Not only do your customers like choice, being able to move volume quickly and easily from one carrier to the other provides you the opportunity to take advantage of services and recognize more savings. It also provides you more leverage. And if that wasn’t reason enough, the logistics network may not be as stable as we thought: if a major carrier goes on strike for example, does your shipping solution allow you to flip a switch? Carrier agility is essential!
Each of the items above, Carrier Service Expansion, DIM Weight Optimization, Freight Consolidation, and Carrier Agility require technologies that are robust and flexible to evolve quickly as customer, carrier, cost structures, and ship methods change. So, ask yourself, where am I change-constrained by my current technology stack, and what do I need to do about it?
Peter Drucker states, “If you can’t measure it, you can’t improve it.” So, once you have implemented a change, how do you know if it’s working? You guessed it, DATA. Stay tuned for part two where we explore data collection and utilization.
We realize this piece is very high-level, and if you’d like to drill down on any of our observations, please 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.