The 2012 year was another record for e-commerce. More and more consumers are using the comforts of their homes and smart phones to do their shopping. Retailers continue to search for ways to draw in more online shoppers with free shipping, free returns, online discounts, etc. As a retailer you have 2012 behind you and are now getting back into the planning and execution stages of making 2013 even better. You are planning on shipping more, providing better service, and making better margin. 

Perhaps just as predictable as e-commerce sales increasing in 2013 seems to be the reality of the annual integrated shippers’ rate increases. January 2013 brought not just the New Year, but also new rates for shipping parcels from FedEx and UPS. As you dig into the fine print and take a close look at the new accessorial charges, you may find that the increases are more than what is advertised. Your fuel surcharge may have decreased, but most likely all other charges have gone up. At the end of the day, no matter the decrease in fuel surcharge, your rates are going up again.

The areas that tend to end up with the highest percentage increases per parcel during that yearly increase are those difficult to reach areas, such as Hawaii, Alaska, Puerto Rico and other US territories, like the Virgin Islands and Guam. These areas have additional accessorial surcharges tacked on, not only for the residential and remote locations, but will often include increased fuel surcharges due to the distances these parcels are shipped.

Finding ways to reduce the cost of shipping to these areas without sacrificing transit time is achievable. For instance, many high volume shippers these days are moving away from a single shipping partner model and implementing a diverse delivery model that supports a “best in class” service strategy at a competitive price. They are focused on not only lowering the cost of shipping, but also improving the service level. In order to move that direction and see the benefits, you will need to take a look at your technology and warehouse flexibility. But one thing is for sure, if you put the effort into understanding all the costs and service levels associated with your shipping service, you can find alternatives that will not only save your company’s hard-earned dollars, but can also improve your service and transit times to offshore locations.

Moving toward an integrated carrier postal consolidation solution for these offshore locations will lower your base rates, but be very careful as it will significantly increase the transit times by four to nine days or even more, especially when shipping to APO/FPO/DPO locations and remote villages in Alaska and US territory islands. Using a postal consolidator model from FedEx or UPS (like SmartPost or SurePost) will significantly increase transit times around service and may not be a good way to earn the loyalty and return business of those seven million customers living offshore and in US territories.

Offshore Transportation Options
There’s a lot of ocean and just as many miles of sky between your continental US shipping warehouses and Hawaii, Alaska, Puerto Rico, and the US territories. There are a few transportation options you could use to ship to these areas, but each alternative has their pros and cons. A brief look into each of these options will help you understand which may be best for your company.

Barging may seem a great option if you have big volume, but it is very slow given it only leaves from port a few times a week and 15 knots on the ocean takes you nowhere quickly.

Ground options like LTL or rail may be an option for Alaska, but still a very slow one. In order to line haul to Alaska, the vehicle would need to transverse miles and miles of nothingness and again, you will need some serious volume to take advantage of decent rates. As for Hawaii and Puerto Rico, I have yet to find a road or track that can reach those islands of paradise.

That seems to leave air as the only viable way to get your parcels to these remote (yet very beautiful) locations for your e-commerce solution. Four hundred and fifty miles an hour is much faster when compared to barging and ground transportation. (I am still holding out for that Star Trek “Transporter Energize” option, although I wonder what the cost of that shipping model would be.) Let’s face it, these days all e-commerce customers are expecting out-of-this world transit times, even those in remote locations. E-commerce providers that are able to deliver and find the sweet spot between cost and service to these locations will likely earn great loyalty and repeat business.

Diverse Delivery Models
As mentioned earlier, the ability for your warehouse, labeling and in-house technology to use carriers outside of the standard integrated carriers will enable you to use different options. Some areas like P.O. Boxes, APO/FPO/DPO require an alternative to FedEx or UPS ground and air solutions. Due to specific shipping regulations, only the United States Postal Service (USPS) is allowed to deliver to our Armed Forces and P.O. boxes. Using FedEx SmartPost or UPS SurePost will add significant transit time to these areas because USPS Parcel Select service is used — making it very likely that there will be barging involved in getting the parcels to their final location. Offshore locations like Hawaii, Alaska, Puerto Rico, and US territories also suffer from the same issues using SmartPost and SurePost. 

As you compare the options, make sure to do a detailed comparison on all the costs and services. Keep in mind that many regional carriers heavily discount or do not have any accessorial charges. You may also find that a regional carrier’s dimensional factor calculation is much higher, a good thing for you as this will help you save on your rates. Work with them on finding the right service level and cost balance to fit your goals. A good regional carrier will be anxious to show you how they can balance both the cost and service level in a way that may be a better fit for you than your current model.

That leaves you with a couple options to reduce costs and manage transit times when shipping to these difficult-to-reach locations. You can use USPS Priority Mail service to fulfill your shipping needs. The other (and less expensive) is working with an offshore regional carrier that provides a hybrid solution of using air service from the 48 states and then a last mile postal consolidation service. This provides lower costs without sacrificing the needed excellent transit times for e-commerce. 

“Already Going There” Offshore Options
Integrated carriers own many planes, trucks, and have a plethora of expensive store fronts and warehouses. They also need to pay the fuel and utility bills for all their vehicles and buildings, all while utilizing their own exclusive and expensive logistics network. It’s no wonder they needed to introduce a fuel surcharge and accessorial charges years ago.

Other types of carriers exist who don’t have all the overhead that integrated carriers do. They are able to pass those savings on to you in the form of better rates. 
Instead of owning many vehicles and building, they move parcels by using a combination of “already going there” partners and providing their own assets for technology, labeling, sorting, and destination transportation. This hybrid network of strategic partners includes trucking services, space in cargo and commercial planes, and utilizing the USPS last mile already-going-there service. One of the advantages of this type of hybrid logistics model is that the costs of each “already going there” partner is spread out over many users of their services. This lowers the regional carriers' overhead and provides an opportunity for you to save money.
Service is equally important to costs. Good regional carriers make sure that their hybrid offshore shipping solutions are built to maximize both cost and service. Look for an offshore regional carrier that meets e-commerce transit time demands with consistency, lowers costs and also provides full tracking of the parcels to the final delivery. You may be able to lower your costs, improve your transit times, and increase your 2013 e-commerce business.