Peak season is fast approaching, and whether you have already created and are implementing your plan, or you are still seeking the final touches, there’s never a wrong time to review lessons learned from the past to create a future of peak season success. For a variety of reasons, peak seasons during the pandemic have eaten away at both peak season fulfillment plans and budgets for shippers of all sizes. And while GMT expects this year’s peak season won’t be quite as volatile as the recent past, it’s imperative that shippers not only prepare early and often for peak season, but also seek to continuously gain and apply lessons from their whole network to optimize for both peak season and the whole year.
Today, proper peak season planning is a mix of data science, fiscal responsibility, and behavioral intelligence, but – to truly reap the rewards – it’s important to hone where these abilities are best applied. Here are six key practices we see our customers implementing right now to prepare for the upcoming peak season.
1. Educate your executive team about expenses and factors out of your control, such as the global economy. This runs the gambit from peak season accessorial/surcharges, residential surcharges, delivery area surcharges, inflated fuel, and even the war in Ukraine. The war has only heightened the cost of fuel, but it also slows down the larger global supply chain, which will impact your network in the US. Prepare for the items that you have visibility and (some) control over, such as accessorial/surcharges, but plan and communicate as much as possible for costs associated with issues unseen, such as the global supply chain and its related economy. Setting clear expectations internally will go a long way toward creating more realistic budgets and reducing friction when a strategic pivot becomes necessary.
2. You’re (hopefully) already partnering with regional carriers to diversify and ease capacity constraints but take additional steps to create flexibility within your network should plans go awry (as they’re apt to do). In peak seasons past, national carriers implemented extremely cost impactful peak fees, which, when coupled with capacity constraints and growing consumer demand, made regionals an even more attractive option for peak season and beyond. Still, it’s important to keep in mind that regional carriers have their own limitations. They cannot serve your whole network, and some regionals have collapsed during the last two peak seasons, causing last-minute shifts to a more expensive and constrained network. Although this cannot always be avoided, it is in your best interest to have a gameplan for when a carrier partner (national or regional) falls short. Beyond engaging early with partners about peak season planning to ensure better preparation and strategy, ensure you’ve identified the metrics that matter most to your network, such as cost savings, delivery speed, reduced loss or damage, etc. Apply these metrics and network lessons to steer your carrier partner selection, and communicate openly and frequently with these partners to ensure as much visibility and as few surprises as possible.
3. Rather than apply diversification with a broad brush, identify underperforming or troublesome lanes that need immediate prioritization. A great way to highlight your critical internal lanes is by reviewing carrier performance during past peak seasons. Which area struggled the most in terms of carrier performance, customer experience, and capacity? Based on conversations with carrier partners and internal metrics, are those lanes at risk again this year? With a solid understanding of how carriers performed in previous years from region to region, or lane to lane, you have a rich amount of powerful data to guide you when it comes to segmenting your volume to the right carrier for the right cost and the right customer experience.
4. Related, consider an alternative or non-traditional delivery partner, such as Instacart. Like regional carriers, alternative partners will not be able to serve your whole network; however, they may be the best partner to help meet a niche component of the metrics mentioned above – whether that’s a same-day delivery commitment or delivery area that has become too costly for more traditional partners.
5. Prioritize the final touch point in the network. It is important for your DCs to prepare well in advance to maximize efficiency and cost-savings opportunities. DCs have never felt more strain due to lack of staffing and COVID-19 related absences than they did in 2021. Use previous years’ operational DC staff numbers, in conjunction with your previous/future peak package volumes, to provide a baseline of workforce needs. Seasonal workers in the last two to three years have been a popular but expensive option for many shippers. If the DC must resort to outside hire, forecast this labor expense to the financial team as early as possible.
6. Though few and far between, there are some trending cost-savings opportunities that creative shippers have sought out to optimize their networks throughout the whole year. Consider how these might apply to your peak season planning:
o Engage your IT/TMS departments early and often. Accurate carrier selection network-wide will not only create a more cost-effective shipment but will also drive a better customer experience. However, this often requires a heavy technological investment.
o Optimize physical packaging and packing to save space (and money). Shippers will pay the price for packages taking up valuable cubic feet. Using the most logical, compact methods for shipping to your customers will help reduce unwanted accessorial charges during a time where every dollar (and cubic foot) counts.
o Ship-from-Store (SFS) to ease your DC strain and alleviate cost associated with delivering directly to consumers (although this is another step that often requires a significant technological and inventory management investment).
o Speaking of inventory, inventory management is one of the most critical cost-savings opportunities that exists today. Not only does inventory accuracy create a more fluid and symbiotic relationship between the shipper and customer, but it is proven to increase sales when combined with other network strategies like omnichannel. Best practice inventory management also sets your network up to successfully implement a variety of creative or new order fulfillment strategies (like SFS and microfulfillment) with near immediacy – and timing is often the difference when it comes to peak season success. Key here is the ability to connect your inventory to your network goals, and then using that visibility to steer and optimize forward.
The past two peak seasons have been full of record challenges, ranging from capacity constraints, unprecedented increases in e-commerce shopping, and a winding global supply chain with a complicated economy. The overwhelming takeaway should be to leverage your network performance data to implement your network goals – be they cost efficiency, customer commitments, delivery speed, etc. Ensure you’re seeking out data that allows you to plan, monitor, and optimize those efforts, especially as they relate to the efforts that matter most during peak season: carrier partner strategy, DC optimization, and inventory management. Preparing the carrier network with multiple back-up strategies will be impactful for both cost and customer experience. Setting up DCs and stores for success will help alleviate strain on the network and the bottom dollar. Aligning parcel and LTL ecosystems through deliberate preparation can provide the best experience to the network – and, most importantly, the customer.
Cassidy Hardy is a Strategic Solutions Engineer at Green Mountain Technology (GMT), a Parcel and LTL Spend Management service provider for shippers with over 10 million parcels per year. In this role, Cassidy partners with customers to provide GMT’s strategic Spend Management solutions – Network Optimization, Spend Analytics, and Contract Management.
Scott Bounds is a Solutions Engineer II at Green Mountain Technology. Scott assists his customers with Strategic Forecast, Network Optimization, Cost Allocation, and Spend Solutions.This article originally appeared in the July/August, 2022 issue of PARCEL.