Rate Shopping Across the Fulfillment Lifecycle
To truly harness the power of a multicarrier rate shopping solution, consider shopping numerous times throughout the parcel fulfillment lifecycle; doing so may save over 10% in parcel spend.
Most shippers are underutilizing the power of rate shopping. How do we know? Because they are only rate shopping upon label creation (at best). Even though you saved your organization a significant amount of money by implementing a PTMS to ensure you have selected the best carrier and ship method to meet the customer promise date, have you considered utilizing the PTMS to validate you are charging your customer appropriately in the eCommerce experience? Did you select the correct ship point? Did you take advantage of downgrade opportunities? Did you verify your packaging did not alter the desired ship method? These are examples of ways that a Multicarrier PTMS may be helpful outside of rate shopping at the moment you create a label.
Shopping Cart Rating (eCommerce Integration)
During the eCommerce check-out process, 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 accessorial surcharges.
It is well known that shipping cost often leads to abandoned shopping carts, and one may use this fact as rational to provide fixed shipping rates in an attempt to limit abandonment. However, one could argue that having the quote based upon what you will eventually pay is valuable information (even if you discount the quote for the customer).
So why do so few companies use a rate shopping engine during the eCommerce experience? The answer is often performance. Given the necessity of speed and throughput in eCommerce, if you were to use a PTMS to real-time rate shop, millisecond response times are paramount.
Ship Point (OMS Integration)
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 generally 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 DOMS routing decisions will help by using actual rates in making a selection of which DC (that has the inventory) to fulfill. If your Supply Chain Network is extensive you can even add store fulfillment and drop-ship vendor options to the equation and potentially opt out of shipping from a DC to save even more cost.
It was easier when you needed to map zips to one or two DCs, but DOMS integration is even more critical now that the DC count is going up. Recently in the Wall Street Journal, CBRE stated merchants have opened dozens of online fulfillment centers across the U.S. as e-commerce sales grow. 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. Having a highly 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, 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.)
Re-rating/Updating (Material Handling Integration)
Even though you printed a label and placed it on the parcel, it 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 (for example, box size or how much cold pack would be required); 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 (if not altered 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.
Returns (Reverse Logistics Integration)
Your rate shopping engine should offer the same robust functionality for your customer returns. Whether you pre-print a return label to include with your outbound shipment, or integrate with an engine to offer on-demand return label printing on your website, you should be rate shopping to keep your costs down.
Finally, there are other ways to fully take advantage of your PTMS’ rate shopping capabilities. Since a rate shop can identify 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 made cost you? What was the cause of the variance?
Most Multicarrier PTMS solutions are integrated with the DOMS or WMS for labeling. We hope as you read this you begin to realize there are many places within the fulfillment lifecycle that you should “ask” your PTMS to do a rate shop to enable better decision making:
- What rate should I quote my customer?
- Where should I ship this from?
- How should I pack this?
- Am I packaging efficiently?
- Is the label I printed the best and final answer?
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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