Do You Have the Right Tools to Control Rising Shipping Costs?
By Paula Heikell
Recent headlines have made it crystal clear that for today’s shippers, it’s anything but “business as usual.” On one hand, shippers face the constant threat of growing competition from existing and new market entrants. Google, for example, announced plans to test same-day grocery delivery in key markets. Who saw that coming a few years ago, and what does it mean for other stores in those test markets?
On the “business as usual” side, shippers continue to battle rising shipping costs. Everyone took notice when FedEx announced its 4.9% rate increase for January 2016, a move likely to be followed by other carriers. According to a survey conducted by Logistics Management, shippers can also expect costs to rise due to a capacity crunch in the transportation sector. “The new reality for shippers is one of transportation rate increases into the foreseeable future,” the study concluded.²
Many companies are working hard to find to new ways to serve their customers while controlling operational costs. For example, when Amazon launched Amazon Flex, a same-day, same-hour delivery program in Seattle, it adopted a Uber-like framework in which independent drivers can sign up via an app to deliver packages in their own vehicles. The Wall Street Journal cited this as “the latest move by Amazon in its perpetual drive to lower shipping costs and pare delivery times as it seeks to become the central commercial hub for all shoppers.”¹ This solution may help Amazon control delivery costs, but it is also likely to add competitive pressure for many of the area’s businesses.
These announcements all underscore today’s highly dynamic business climate, where one company’s innovations can disrupt another company’s “business as usual” almost overnight.
How to Survive and Thrive
Very few companies have the deep pockets of Amazon and Google to test innovative new programs and services and even operate them at a loss until they determine their viability. But all of us can make measureable advances by investing more time in “working on our business, not in it.”
Companies that consistently study their marketplace and adopt a philosophy of continuous improvement are in the best position to succeed. Those who are willing to invest in purpose-driven technology and refresh it to respond to market changes also have an edge. Yet many companies still rely on manual processes to manage their operations. In the Logistics Management survey, which included 400 companies, 27.5%, of respondents said they’re still using manual methods, supplemented with email and spreadsheets, to manage their domestic transportation.³
Using technology to replace manual processes is critical, but it’s also important to invest in responsive technology that facilitates proactive decisionmaking to control operating costs. At a minimum, shippers should consider the following technology tools:
Cartonization Software: Optimized order packing decisions can yield a tremendous ROI in controlling shipping costs. This can be achieved by adding cartonization software to your order fulfillment workflow. Cartonization software uses sophisticated algorithms to calculate the ideal shipping carton size for the greatest packing efficiency and lowest shipping costs. Shippers have numerous choices in this area, thanks to continuous advances in technology.
Dimensioning Systems: Another option, if you’re not using cartonization software, is to automate dimension capturing. There are numerous benefits to be gained by doing this in both receiving and shipping operations. While large companies may already have sophisticated dimensioning systems in place, many small to mid-sized companies do not. Their staff is manually measuring and keying dimensions into their system. Not only does this add to labor costs and slow down the shipping line, but it opens the door to significant carrier back charges due to discrepancies in dimensional measurements.
Automatically capturing accurate package dimensions upfront, before the shipment leaves the facility, is the best practice to control these costs. This is another area of automation where the technology continues to get better while the purchase price goes down. A number of flexible and cost-effective dimensioning systems are now available to streamline the dimensioning process, with a rapid ROI. For a glimpse of a fast, cost-effective mobile dimensioning tool, watch this video.
Carrier-Agnostic Shipping Software: Let’s imagine that your biggest competitor introduces a free shipping program to woo your online customers away. Or your primary carrier announces a rate increase that will gouge your profitability. Can you quickly switch to alternative, cost-effective regional carriers who can tailor transportation plans to meet your specific needs? Yet, regional carriers such as OnTrac, LaserShip, Eastern, LSO , for example, all have strong regional delivery networks that may meet your needs. Another cost-saving option is to add national carriers whose rates do not include residential, rural and/or fuel surcharges such as USPS, DHL eCommerce, SurePost and SmartPost to your portfolio.
If you’re using “free” carrier-provided systems, adding new carriers is a challenge, but it can be fairly easy to do and yield huge savings, when you invest in flexible technology. The best solution is to implement carrier-agnostic multi-carrier shipping software to manage and compare all your carriers on a single system. The shipping software should make it easy to add national, regional, local and international carriers and rates. This ensures that all possible delivery options are objectively compared to yield the right carrier service at the lowest possible cost. The right system will streamline labor and prevent shipping errors by auto-generating carrier-compliant shipping labels and documents in seconds.
Reporting and Analysis Software: In the spirit of working “on our business and not in it,” it pays to create comprehensive shipping reports to analyze historical order and shipping data and identify areas of improvement, internally and with your carriers. If you don’t have it, add reporting and shipment analysis software to your transportation system. Some vendors provide it as part of their solution, but if not, a multitude of third party solutions are available.
Granted, these are not exactly “plug and play” technologies – they’ll need to be integrated with to exchange information with your other systems. But the payback is well worth it. Our recommendation is to start by asking your logistics technology providers for advice. If you’ve partnered with a sizable ERP, order fulfillment or shipping software vendor, the odds are good that they’re working with other companies like yours, with the same questions.
Logistyx Technologies is a provider of carrier-agnostic e-commerce fulfillment software and shipping software solutions that enable shippers to manage all their small parcel, LTL postal, regional, national and international carriers on one platform. We also help companies automate their reverse logistics process for greater efficiency and lower cost. Contact us today.
Copyright © 2017, Logistyx Technologies. All rights reserved.
¹ Greg Bensinger, “Amazon Taps ‘On-Demand’ Workers for One-Hour Deliveries,” Wall Street Journal, 9/29/15.
² Erica E. Phillips, “Shippers’ Transport Costs Rise Amid Capacity Crunch -Survey,” Wall Street Journal, 9/29/15.
³ Erica E. Phillips.