The growing importance of data, in all forms, has been one of the most definitive business trends of the 21st century. For example, board rooms have learned lessons from Moneyball, Matthew McConaughey called data “the new gold’ in a Super Bowl ad, and the US Bureau of Labor Statistics considers “Data Scientist” to be the third fastest-growing job category in the US.
The value of data hasn’t fallen on deaf ears for parcel shippers. Most know the “gold” that lies in their carrier invoices. Some of these benefits are simple, such as visualizing shipping spend and auditing for reimbursements. Others are more advanced, like analyzing the impacts of rate increases, modeling contract proposals, and running simulations to determine the best location for a new distribution center.
But what are some of the other applications for shipping data? What insights can be unlocked for savings that don’t get talked about as much?
Here’s four opportunities for long-term savings hidden in your shipping and sales data that you might not know about.
- Service Type Optimization
Thanks to the “Amazon Effect,” two-day shipping has become the expectation for online consumers, leading more shippers (e-commerce businesses especially) to rely on express services when clients want their products delivered fast.
Be careful how often you use these services. It turns out that shippers use express services for a lot of packages that could have traveled their short distance in two days with a ground service.
If your invoices show frequent express shipments to zones 2 and 3, you’re guilty of this.
Luckily, your invoice data can help you build out a list of ZIP Codes that fall within those closer zones. Use this information to create rules in your TMS that doesn’t allow for shipments to these ZIP Codes to use an Express service, but instead routes them via ground. Take it a step further by eliminating two-day shipping options for these ZIP Codes in your point-of-sale system.
Opting for ground shipping over an overnight, two-day, or even three-day service can save you up to 50% in shipping costs for those packages. Plus, if sustainability is a focus for your organization, trucks produce far fewer emissions than cargo planes.
- Strategic Inventory Placement
Many shippers understand the benefits of a diversified, optimized distribution network. Placing products closer to large customer bases results in faster shipping, lower costs, and lower transportation emissions.
But most fail to take it a step further with product-specific network optimization. Many shippers and brands go for an equal-inventory strategy across their warehouses or 3PLs. This makes sense on the surface, but consider that not all products are going to be purchased equally across the country.
For example, a clothing company might find that they sell more swimwear in the warmer southern states, and more winter coats in the north. Keeping an equal amount of these items at distribution centers in Atlanta and Chicago isn’t the best strategy.
Compare SKU-based sales data with your network locations to determine the best locations for specific products. Optimized inventory placement can lower your average transit times, and similar to what was discussed in the last section, can lower your reliance on express services for time-sensitive shipments. It will also reduce your associated emissions by shortening travel distances.
- Volume Discount Tier Monitoring
Since pandemic-era capacity constraints and labor tensions, carrier diversification has been one of the hottest parcel trends of the 2020s. While more shippers understand the value of a diverse carrier mix, many are still reluctant, worried they’ll lose discounts with existing partners.
This is a valid concern - although in many cases, savings from a new carrier can outweigh dropping a discount tier. Either way, keeping a close eye on where you stand in your volume tiers is a necessity for successful multi-carrier shipping.
Carriers use a rolling 52-week average to measure volume-based discount tiers. Keeping track of how your 52-week average changes week to week can highlight when you’re at risk of dropping a tier - eliminating any surprise increases in shipping costs. On the other end, you’ll find when you can shift volume to one carrier to go up a tier, earning greater discounts.
If you notice you’re well above the minimum for your top tier, your business has outgrown your contract. This is a clear sign that it’s time to renegotiate.
- Returns Data to Uncover Manufacturing Defects
E-commerce returns are a massive headache. Consumers returned $247 billion worth of online purchases in 2023. Even worse, about 16.5% of returns are fraudulent.
Considering the extensive costs online retailers incur with returns, it’s shocking that many view them as a necessary evil. Major strides have been made in the past 20 years to optimize outbound logistics, but improving returns processes has been largely untapped.
Analyzing returns data can uncover if particular SKUs are returned at unusually high rates. This should raise the red flag that these items might suffer from a manufacturing defect. This may seem obvious, but few brands actually take advantage of these insights.
Check with your warehouse staff who handles returns inspections (this is data you should be tracking as well). If they’re reporting the same defect for a product at a high rate, then it’s time to have a conversation with the manufacturer to resolve the issue.
This pain could be self-inflicted though. If a product is frequently returned damaged, but it’s not a consistent defect, then insufficient packaging protection might be to blame.
You won’t be able to find this from invoices alone, but new returns-focused software solutions are emerging.
Data Is the Future
The era of data-driven decision-making is upon us, and there’s no going back to “gut feelings.”
Shippers need to stay on top of trends in data analysis and technologies that help them make the most of it. Those who embrace this approach will stay ahead of the curve and pave the way for a more efficient, resilient, and profitable future for their business.
As the saying goes, "data is the new gold," and those who mine it wisely will reap the rewards for years to come.
Caleb Nelson is Chief Growth Officer at Sifted, a Logistics Intelligence software company.
This article originally appeared in the May/June, 2024 issue of PARCEL.
