It’s the golden age of eCommerce and fast-and-free shipping. As both demand and customer expectations rise, however, many businesses are facing challenges when it comes to parcel operations. Carriers across the country are at full capacity and, as a result, rates and fees are unprecedented. Therefore, it will be important that businesses find ways to optimize their parcel spend moving forward.
What is parcel spend? It refers to transportation costs associated with small parcel carriers. That includes freight costs like distance (or zone), weight, and service level (ground, 2-day, next-day). There are also dozens of accessorial fees baked into parcel contracts that could hit your freight invoice unexpectedly.
When it comes to parcel spend optimization, the goal is to choose the lowest cost service that still meets your customers’ expectations. It’s all about having the right partners, technology, and strategy. Below are four tips to getting the most out of your parcel spend.
Have an Expert Guide you Through Parcel Carrier Contracts
There’s a lot that lives inside a parcel contract — and a countless number of things that can be negotiated within. Often times, shippers shopping around for parcel carriers only focus on the base rates and make their decision based on that rate. However, it’s critical when comparing and reviewing parcel contracts to look past the base rates and fully understand the sneaky surcharges with high potential to creep into your budget. There are dozens of ways carriers incorporate fees into contracts, like advance notifications fees, bill of landing correction fees, misuse charges, overweight fees, per diem fees, and many more.
Not having the right knowledge set when choosing a contract can harshly affect your bottom line. It will be important to have a clear understanding of the accessorial fees within a parcel contract, negotiate those fees down, and make them a part of the contracted line haul costs. An experienced 3PL partner can help shippers analyze the fine details of parcel contracts, making sure they are fully informed in their decisions and set up for success.
Choose Fulfillment Center Locations Strategically
When choosing where to fulfill their orders, shippers often choose locations that end up causing friction for their parcel operations. Consider these factors when it comes to establishing fulfillment centers:
- Weather: Is your fulfillment center location subject to frequent snowstorms, hurricanes, tornadoes, etc. that inhibit travel? Are there extreme temperatures that could incur extra costs in refrigerating or heating your packages?
- Traffic: Are you fulfilling orders in an area where carriers will have to endure time-consuming traffic?
- Proximity: Does your origin location make sense relative to where your parcel packages are being shipped? For example, is it on the east coast when most orders go to the west coast?
- Congestion: Have you placed your fulfillment center in a hotspot that’s densely populated with others?
There are countless other factors that go into choosing a location to fulfill orders. With the right, strategic fulfillment center, you can drastically but costs and shipping times while satisfying customers. A 3PL partner can perform analysis to help you decide the optimal origin based off your unique shipping patterns.
Invest in Smart Back-End Systems for Parcel Operations
The back-end systems driving parcel operations are often a patchwork of disparate technologies that don’t work together optimally. This is especially true for many brick-and-mortar retailers that have recently pivoted to a more eCommerce-driven business model and taken their legacy systems with them due to high costs associated with changing those systems. However, more established back-end technology can cause a hurdle for companies trying to compete with industry giants that are built around automated eCommerce platforms.
Shippers need strong systems powering their parcel operations. Kenco’s technology can integrate with any platform used by the customer (whether it be SAP, Oracle, a WMS, etc.) to offer a multitude of solutions to customers to do everything from optimizing freight to creating shipping labels.
Explore Regional Parcel Carrier Options
Amidst a strained and overwhelmed supply chain, many national carriers are experiencing capacity challenges, decreases in on-time performance, and higher rates and penalties. Enter: regional carriers. Multi-sourcing with regional carriers can be a great way to expand your transportation network and alleviate some of these challenges. The right regional partner can provide cost benefits, quality delivery service, and competitive transit times. Carrier diversification is a great way to add resilience to your logistics network.
Multi-sourcing will not be a perfect fit for all businesses. Whether or not a regional carrier is right for your operation will depend on your shipping volume, where you are shipping, what you are shipping, who your customer base is, and several other factors. Therefore, it’s important that you conduct your own research and consult an expert.
The Bottom Line in Parcel Spend
Navigating relationships with parcel carriers can be tricky and nuanced, but with the right partners, technology, and strategy, you can get feel confident that you are well-informed and set up for success in your parcel operations. Visit our Transportation Management and eCommerce and Fulfillment pages to learn more or speak with a professional to take the first step toward smarter parcel spend today.