High-volume parcel shippers have used complex and customized automation strategies to help reduce costs in their supply chain for many years. What’s new today is that many of these strategies are now cost-effective options for small and mid-sized shippers because standardized software exists for these functions. We have picked six of the most popular automation strategies to discuss with you today.
Parcel Bundling
Depending on the size and weight of the parcels being shipped, combining items together can save you money. For example, the XYZ Fan Company located in Chicago, IL has an order to ship 12 fans to a customer in Dallas, TX. Each of these fans weighs three pounds and has dimensions of 12 inches by 14 inches by four inches. What is the optimum way to ship these fans using standard UPS Ground commercial packaging rules? To save on shipping cost, should you ship these as individual packages or should you bundle some of these fans together? If bundling indeed saves you money, then what combination of bundling should be used to ship these fans?
Computing the correct answer to this question could take you a lot of time. Besides comparing all the combinations of weight-based cost, you also need to consider the dimensional rules of the carrier. For example, if this shipment were to be sent UPS Ground domestic and the cubic size of any of the bundled packages was 5,184 inches or larger, you would need to divide the cubic size by 166 to determine if the dimensional weight was greater than the actual weight. If, however, the cubic size of a bundled package was less than 5,184 inches, then the actual weight of the package would be used. Bundling software takes the individual package information, applies the correct carrier rules and runs through all of the possible bundling combinations to determine which items should be bundled together. This answer provides you with the lowest cost to ship these products and also tells you which items should be bundled together.
Containerization
Parcel bundling works well for items that come in their own containers, but what about the shipper that has multiple items that need to be packed together into a box? This is where the strategy of containerization comes into play. Containerization looks at dimensions and weight of each item on the order and then determines the number of boxes, the size of each box and which items to pack into each box so that your freight costs are optimized. Once items are assigned to a box another opportunity appears. Since you can predict the box size and weight you can now consider printing carrier shipping labels before the box is even filled. You might then choose to pre-label the box and pick directly into the container. Containerization not only saves you money on freight, it can also allow you to increase your picking efficiency and eliminate the need to weigh, rate and label your boxes at operator controlled shipping stations.
Many people believe that having the ability to accurately predict freight costs at the time the order is taken can make the customer order experience better. If making your customer order experience better is high on your list, then aligning how you charge freight to customers with actual freight costs may make sense. The problem here is that because of the complexity of calculating actual freight charges many companies adopt a freight policy that charges freight based on the dollar value of the order. Charging freight based on the dollar value of an order doesn’t always work. If a customer was to order expensive light weight items the high cost of the freight may make it appear like you are over charging them for the freight. These issues can be avoided if you can use freight quoting software that has the ability to determine how items will be packaged. Containerization software facilitates you being able to calculate freight cost so that actual freight cost can be presented to your customer. This can be easily integrated within any order management system or within a website shopping cart.
Carrier Selection
Rules for determining the best way to ship something to a customer can mean a lot of different things and it isn’t always based just upon the lowest cost. It might be transit time or the ability to predict a delivery date. It could depend on who is paying for the freight. If you are paying the freight you might select a different carrier than if your customer is paying the freight. There might be geographic considerations for selecting the right carrier. How about weight considerations? You might even want some way to assign preference or service levels to help determine the optimal carrier. As you can see, routing guides can be very complex and based upon many different scenarios. Historically, these rules are either written down and in a file somewhere or in someone’s head. I have met many shipping managers that were proud to tell me they had everything in their head. The problem is what happens when they are not around? What if they decide to leave or have to leave? Imagine the stress created by having to keep all of this information in your head. The best way to optimize carrier selection and reduce stress in your organization is through carrier selection software. Software that will not only help you reduce freight costs but will make the process of selecting carriers a much better experience for your company and your employees.
International Shipping
Expanding into international markets is often difficult for small and mid-sized companies because of the cost and the complexity of moving goods across international borders. Customs requirements for paperwork, electronic filing requirements and consolidation to reduce processing costs are often large barriers for companies trying to enter into international markets. Here is a quick gut check for you. Is your international shipping process as easy as your domestic shipping process? If not, then maybe it’s time to consider international shipping software that can produce the right documents, electronically file with customs and consolidate shipments so you can cross borders cost-effectively and efficiently.
Weight Auditing
If increasing shipping accuracy is on your list of things to do, maybe you should consider weight auditing software. Weight auditing software allows you to compare the system generated weight for all items in a box with the actual weight coming in from an electronic scale. During the shipping process, if a box is out of tolerance a warning message is displayed prompting the shipper to inspect the package contents. After inspection additional information is entered into the system indicating the reason for the weight discrepancy. Was the order incorrectly picked or is there inaccurate item weight? Capturing this type of information allows you to monitor and improve the quality and efficiency of your order processing systems and generate substantial savings.
Contract Services
Parcel carriers now offer many contract services that could bring value to your company. So what is a contract service? It is a carrier service that requires an agreement to be signed in order to be utilized. In the past, many of these contract services were only being offered to large shippers but today we see carriers expanding these to the small and mid-sized shipper. A good example of this would be contract services for residential delivery. Companies that ship to residential addresses will now find most carriers have a contract service option that use the USPS for the last leg of the delivery to residential addresses. Compared to the USPS, the cost of delivery to residential addresses has always been much higher for other carriers because they don’t have delivery density into residential areas. The Postal Service, on the other hand, visits every residential address six times per week and there is very little incremental cost to add a small parcel to the normal mail delivery.
That’s why most carriers have partnered with the USPS and now offer a contract service for residential delivery that allows the Postal Service to do the final leg of delivery for them. This allows them to offer better shipping rates to their customers and still capture some profit. This new contract service that utilizes the USPS for the last leg of the delivery is most likely less profitable for your carrier than their normal ground residential service where they control the final leg of delivery. So why are carriers offering contract services that replace more profitable services they now offer? Well, if your carrier isn’t offering you a reliable and cost-competitive delivery option for shipping to residential addresses, maybe the next carrier that walks in your door will. Software to automate contract services for residential delivery is readily available and generally inexpensive. The one thing we feel sure you can count on is that carriers will continue to offer more contract services to the small and mid-sized shippers as they continue to sharpen their competitive razor.
Mike Parrilli is Vice President of Sales at Varsity Logistic, Inc. and has over 20 years experience in the parcel shipping software industry. Since his arrival at Varsity in 2001 Mike has helped Varsity's become the leading supplier of transportation management software in the IBM i, iSeries / AS/400 space. Mike can be contacted at mparrilli@varsitynet.com.
Parcel Bundling
Depending on the size and weight of the parcels being shipped, combining items together can save you money. For example, the XYZ Fan Company located in Chicago, IL has an order to ship 12 fans to a customer in Dallas, TX. Each of these fans weighs three pounds and has dimensions of 12 inches by 14 inches by four inches. What is the optimum way to ship these fans using standard UPS Ground commercial packaging rules? To save on shipping cost, should you ship these as individual packages or should you bundle some of these fans together? If bundling indeed saves you money, then what combination of bundling should be used to ship these fans?
Computing the correct answer to this question could take you a lot of time. Besides comparing all the combinations of weight-based cost, you also need to consider the dimensional rules of the carrier. For example, if this shipment were to be sent UPS Ground domestic and the cubic size of any of the bundled packages was 5,184 inches or larger, you would need to divide the cubic size by 166 to determine if the dimensional weight was greater than the actual weight. If, however, the cubic size of a bundled package was less than 5,184 inches, then the actual weight of the package would be used. Bundling software takes the individual package information, applies the correct carrier rules and runs through all of the possible bundling combinations to determine which items should be bundled together. This answer provides you with the lowest cost to ship these products and also tells you which items should be bundled together.
Containerization
Parcel bundling works well for items that come in their own containers, but what about the shipper that has multiple items that need to be packed together into a box? This is where the strategy of containerization comes into play. Containerization looks at dimensions and weight of each item on the order and then determines the number of boxes, the size of each box and which items to pack into each box so that your freight costs are optimized. Once items are assigned to a box another opportunity appears. Since you can predict the box size and weight you can now consider printing carrier shipping labels before the box is even filled. You might then choose to pre-label the box and pick directly into the container. Containerization not only saves you money on freight, it can also allow you to increase your picking efficiency and eliminate the need to weigh, rate and label your boxes at operator controlled shipping stations.
Many people believe that having the ability to accurately predict freight costs at the time the order is taken can make the customer order experience better. If making your customer order experience better is high on your list, then aligning how you charge freight to customers with actual freight costs may make sense. The problem here is that because of the complexity of calculating actual freight charges many companies adopt a freight policy that charges freight based on the dollar value of the order. Charging freight based on the dollar value of an order doesn’t always work. If a customer was to order expensive light weight items the high cost of the freight may make it appear like you are over charging them for the freight. These issues can be avoided if you can use freight quoting software that has the ability to determine how items will be packaged. Containerization software facilitates you being able to calculate freight cost so that actual freight cost can be presented to your customer. This can be easily integrated within any order management system or within a website shopping cart.
Carrier Selection
Rules for determining the best way to ship something to a customer can mean a lot of different things and it isn’t always based just upon the lowest cost. It might be transit time or the ability to predict a delivery date. It could depend on who is paying for the freight. If you are paying the freight you might select a different carrier than if your customer is paying the freight. There might be geographic considerations for selecting the right carrier. How about weight considerations? You might even want some way to assign preference or service levels to help determine the optimal carrier. As you can see, routing guides can be very complex and based upon many different scenarios. Historically, these rules are either written down and in a file somewhere or in someone’s head. I have met many shipping managers that were proud to tell me they had everything in their head. The problem is what happens when they are not around? What if they decide to leave or have to leave? Imagine the stress created by having to keep all of this information in your head. The best way to optimize carrier selection and reduce stress in your organization is through carrier selection software. Software that will not only help you reduce freight costs but will make the process of selecting carriers a much better experience for your company and your employees.
International Shipping
Expanding into international markets is often difficult for small and mid-sized companies because of the cost and the complexity of moving goods across international borders. Customs requirements for paperwork, electronic filing requirements and consolidation to reduce processing costs are often large barriers for companies trying to enter into international markets. Here is a quick gut check for you. Is your international shipping process as easy as your domestic shipping process? If not, then maybe it’s time to consider international shipping software that can produce the right documents, electronically file with customs and consolidate shipments so you can cross borders cost-effectively and efficiently.
Weight Auditing
If increasing shipping accuracy is on your list of things to do, maybe you should consider weight auditing software. Weight auditing software allows you to compare the system generated weight for all items in a box with the actual weight coming in from an electronic scale. During the shipping process, if a box is out of tolerance a warning message is displayed prompting the shipper to inspect the package contents. After inspection additional information is entered into the system indicating the reason for the weight discrepancy. Was the order incorrectly picked or is there inaccurate item weight? Capturing this type of information allows you to monitor and improve the quality and efficiency of your order processing systems and generate substantial savings.
Contract Services
Parcel carriers now offer many contract services that could bring value to your company. So what is a contract service? It is a carrier service that requires an agreement to be signed in order to be utilized. In the past, many of these contract services were only being offered to large shippers but today we see carriers expanding these to the small and mid-sized shipper. A good example of this would be contract services for residential delivery. Companies that ship to residential addresses will now find most carriers have a contract service option that use the USPS for the last leg of the delivery to residential addresses. Compared to the USPS, the cost of delivery to residential addresses has always been much higher for other carriers because they don’t have delivery density into residential areas. The Postal Service, on the other hand, visits every residential address six times per week and there is very little incremental cost to add a small parcel to the normal mail delivery.
That’s why most carriers have partnered with the USPS and now offer a contract service for residential delivery that allows the Postal Service to do the final leg of delivery for them. This allows them to offer better shipping rates to their customers and still capture some profit. This new contract service that utilizes the USPS for the last leg of the delivery is most likely less profitable for your carrier than their normal ground residential service where they control the final leg of delivery. So why are carriers offering contract services that replace more profitable services they now offer? Well, if your carrier isn’t offering you a reliable and cost-competitive delivery option for shipping to residential addresses, maybe the next carrier that walks in your door will. Software to automate contract services for residential delivery is readily available and generally inexpensive. The one thing we feel sure you can count on is that carriers will continue to offer more contract services to the small and mid-sized shippers as they continue to sharpen their competitive razor.
Mike Parrilli is Vice President of Sales at Varsity Logistic, Inc. and has over 20 years experience in the parcel shipping software industry. Since his arrival at Varsity in 2001 Mike has helped Varsity's become the leading supplier of transportation management software in the IBM i, iSeries / AS/400 space. Mike can be contacted at mparrilli@varsitynet.com.
