Over the past few years, I have seen, among business leaders, a growing realization of the dramatic impact that parcel shipping operations, acumen, and performance have on overall business success. But although there is greater appreciation of the influence shippers have on the bottom line, far too few organizations and executives fully appreciate the impact they simultaneously have on top-line results and crucially important business functions that, on the surface, can appear to have nothing to do with parcel shipping costs.
That is beginning to change in organizations that are embracing a more strategic approach, one in which shipping data is being used not only to measure, monitor, and optimize shipping spend, but also to impact other operational imperatives that influence profitability. This proactive effort results in a closed-loop approach that drives continuous improvement.
The parcel shipping “ecosystem” includes front end systems, like transportation management, order management, cartonization, and multi-carrier parcel management systems, all of which work on a set of policies that are programmed into the system and promise to save on time and money. While these systems do deliver on their promise, there hasn’t been a way to close the loop and validate that what was intended to happen, actually did happen, or if the policies could be further optimized for additional improvement. Furthermore, optimizing one part of the shipping operation may have unintended consequences on the end-to-end result.
The proof is in the pudding, as they say, and in parcel spend management, the “pudding” is in the carrier invoice data. The problem is that this data can be mind-numbingly complex and requires a backend system to cleanse and normalize the data from which advanced data analytics can then be used to pull out actionable insights and measure the results. Now shippers can use these insights to close the loop, validate their frontend systems, and even optimize their policies to make those systems work even better.
Today, when platforms that feature sophisticated and powerful data science enable shippers to understand their shipping activity and data as never before, and more importantly to act on the actionable insights found within it – for example knowing when a surcharge exemption deep within the fine print of a carrier’s contract expires before the contract does – shippers can expand their impact by viewing their role as part of a closed-loop process that lowers parcel spend and improves operations and processes simultaneously.
Several real-world examples show how this closed-loop process can be applied, its potential for businesses today, and why it is crucial for shippers and operations leaders to work closely with one another to create it.
● The perfect box: Unbeknown to the shipping department, the marketing team created what it believed to be the perfect box – one that not only was sturdy and well made, but which conveyed the attributes of the company’s brand in its appearance and even the feel of the materials used. Unfortunately, it also far exceeded the dimensional weight specified in its contract, something its shipping departments learned after alerts from its platform showed an alarming increase in parcels being priced by DIM rather than actual weight.
Today, the shipping department at the same company works closely with the marketing team whenever packaging decisions are being made. Parcel spend is again closely measured and monitored, and efforts to optimize the process and costs are taken on by all departments involved through an ongoing feedback loop that keeps all informed of performance metrics.
● The e-commerce promotion that resulted in a loss: Most shippers know this story all too well. Again, it stems from a decision in the marketing function – this time to promote a particular product line with a new, aggressive sale. Unfortunately, neither the marketing team that developed the offer or the operational team that set the pricing discounts considered the shipping costs involved. With complimentary shipping still included, the entire product line sold out quickly, but shipped at a loss.
Now, the same retailer receives data-science generated alerts if a similar situation occurs and, just as importantly, the pricing, marketing, and shipping teams work together and share data to ensure that all new promotions drive the desired bottom-line and top-line results – with the resulting shipping spend being measured and monitored in order to optimize the business.
● A packaging decision that landed savings and paved the way for new business simultaneously: The operational team wanted to know what shipping costs would look like if a mailer was added to all outgoing parcels, something the company could easily measure and monitor as it relates to shipping spend. Ultimately, that question led to more fundamental ones – which boxes should the company use, how could it reduce the waste associated with them, and how could those same boxes perform better by better protecting and presenting shipped product?
Using packing simulations from one of our partners, the company was able to choose the boxes that best addressed its KPIs and saved more than 16% in transportation costs while simultaneously helping carriers meet their own goals of packing trucks more efficiently.
Just as importantly, the new boxes used significantly less corrugate, enabling the company to lower its Scope 3 emissions – an important competitive advantage as more publicly-traded companies elect to only do businesses with companies that measure their supply chain carbon emissions and make it easier to comply with evolving regulations, including Europe’s Corporate Sustainability Reporting Directive, which strengthens sustainability reporting requirements and applies to American companies that have at least one subsidiary or branch in the EU and revenues of $168 million US or more over two consecutive years.
A closed-loop approach to parcel shipping, one that continually seeks to optimize shipping spend management and performance, while simultaneously using that data to make physical, operational improvements across the business – in shipping and beyond – is yet another one of the powerful ways that parcel shippers can help their organizations. Now, more than ever before, shipping performance and expertise has the ability to move businesses forward.
Josh Dunham is the co-founder and CEO of Reveel. Founded in 2006 to help shippers level the playing field for carriers, Reveel launched its Shipping Intelligence Platform in 2021. A SaaS-based analytics, contract analysis and negotiation solution, it provides shippers with the actionable insights they need to lower shipping costs right now, on their own. Reveel can show you exactly what the GRI impact will be for your specific shipping profile at no cost to you. Click this link to get your impact analysis.
This article originally appeared in the January/February, 2024 issue of PARCEL.
