When my business partner Chad Beville and I left our positions with carriers nearly two decades ago to create Reveel, our vision was straightforward – to help shippers level the playing field with carriers. In that endeavor, the recommendations we shared with clients were shaped not only by experience we gained in carrier sales roles, but also by lessons learned from exceptional shippers who approached their work strategically and methodically.
At the time, most shippers had limited visibility into their shipping activity and ability to control it proactively. Not surprisingly, in our early years, like most parcel consulting firms, we focused on carrier contract analysis, shipping best practices, and helping clients negotiate better terms and conditions in their carrier contracts.
The savings secured were significant, but it also became clear that leading shippers, those who took the most aggressive steps to optimize their parcel shipping spend, looked at their operations holistically. They also eagerly sought data on anything that impacted costs.
Fast forward nearly 20 years, and the landscape for shippers and parcel shipping consultants is far different. Not only does today’s data science enable shippers to gain near real-time visibility and control over their shipping activity, but shippers can use that intelligence to automate processes that deliver savings.
More business leaders are also aware that a more strategic approach to parcel shipping does more than save money. There is a greater appreciation of shippers’ impact on business imperatives, among them customer relationships, pricing strategies – the ability to offer discounted or “free” shipping is a big differentiator in e-commerce – expansion strategies for brick-and-mortar stores, and even the ability to comply with sustainability metrics in today’s increasingly global supply chains.
Efforts to Decrease Parcel Shipping Costs Are a Priority
Parcel shipping is now a C-suite concern, a welcome development for all of us who stressed its importance for years. Efforts to decrease parcel shipping spend are also stronger than ever, undoubtedly something influenced by the 30% increase in carrier costs over the past three years.
Fortunately, in such efforts to save money, shippers are more empowered than ever. Data science enables shippers to know in real time how even subtle changes, including carriers’ new rules, surcharges, and fees, will impact their budget. Shippers now can also conduct powerful “what-if” analyses to see how actions they take will impact costs.
These efforts to lower costs and optimize parcel spend are more effective than ever. Today, shippers are seeing significant success in five key areas.
The Five Best Ways to Optimize Parcel Spending Are Broadly Applicable.
Five key areas of parcel spend optimization deliver significant savings and are broadly applicable to organizations of all kinds. This includes e-commerce companies and omnichannel retailers, and organizations that depend on the fast delivery of direct and indirect supplies such as those in healthcare and manufacturing.
Any organization that wants to bring its parcel spend under management or aggregate its shipping volume to secure savings (for example, group purchasing organizations, franchises, or venture capital firms eager to increase the profitability of portfolio companies) should look at these five ways to optimize parcel spend:
● Service level optimization: Because the majority of shipments are unique “events,” parcel shippers often err on the side of caution when determining which carrier service level to use. With next-day delivery and even same-day delivery now increasingly expected, the temptation to send items via more expensive express services is understandable; however, technology enables shippers to know if this is necessary. In many cases, a parcel (for example, an item purchased by an e-commerce customer) can be delivered by far less expensive ground services rather than via air and still arrive in plenty of time. And in situations where there is any question, brands can even ask the customer at what time they need the package, and offer them a lower shipping cost for a later time.
● Carrier optimization: The nation’s parcel carriers are some of the most advanced companies in history with highly advanced networks that make it possible to ship packages to practically any location. But there are subtle differences that make one carrier the optimal choice for a particular shipment based on a wide range of criteria, among them its weight and dimensions, the zone it is being shipped from and to, when it must arrive, and other factors. There are often significant cost differences as well. Embracing processes that ensure that each parcel is sent by the optimal carrier is a proven way to significantly lower shipping costs. A multi-carrier approach is also a viable risk management strategy that often benefits shippers in carrier contract negotiation efforts as well.
● Network optimization: Many high-volume shippers are lowering their costs not only by using their shipping data to determine when additional options, such as regional delivery companies, make sense, and also how their own networks can be optimized. This includes using shipping data to determine where new distribution centers and warehouses should be located, when it makes sense to use a 3PL in a particular region, and other factors.
● Transportation finance optimization: Businesses have numerous front-end systems, including transportation management systems, that ensure their policies are followed – and that shipping costs and data are accurately conveyed to core systems, including those for finance. Previously, it was difficult for organizations to determine if their policies delivered the savings they promised because the analysis required the review of mind-numbingly complex carrier invoice data. Data science addresses this and lets shippers effectively “close the loop” and see in real terms how policies and systems really perform, and confirm that efforts to optimize one aspect of the shipping operation don’t have an unintended impact on another, such as when a multi-carrier approach saves money, but causes a company to fall out of a volume-based discount tier.
● Carrier agreement optimization: Some things never change. One of the best ways for shippers to optimize parcel spend remains carrier contract analysis and the negotiation of better terms, prices, and conditions. Carrier contracts remain complex documents with numerous pages of fine-print details, all of which can dramatically impact costs. Shippers should be particularly mindful of the impact of new surcharges, particularly those that have different expiration dates than the contract, as well as new rules and fees, including those for specific zones. Most importantly, shippers should make a point of negotiating discounts and exceptions using the intelligence they gain from their own data. Such efforts should not only occur annually when carriers introduce their annual general rate increases, but rather on a routine basis.
Shippers that take these steps to optimize their service levels, carriers, networks, transportation finance and carrier agreements will find the process lucrative. But it is also imperative to remember that even the most basic steps can decrease parcel spend. Every spend optimization effort should begin by asking where money is being left on the table – a reality that is painfully clear when one considers that more than 75% of shippers do not claim the rebates they are owed because carriers failed to satisfy their own guarantees, usually when a delivery was late. In parcel spend optimization efforts, the details and the basics are crucially important.
Josh Dunham is the co-founder and CEO of Reveel. Founded to help shippers level the playing field for carriers, Reveel’s Shipping Intelligence Platform™ uses Parcel Spend Management 2.0 technology to provide parcel shippers with the actionable insights they need to lower their shipping costs right now, on their own.
This article originally appeared in the July/August, 2024 issue of PARCEL.
