Risk is a constant in today’s complex supply chains and the parcel shipping operations within them. Whether from natural disasters or geopolitical events, disruptions have the potential to impact everything from the sourcing of parts and supplies to the fulfillment operations of omnichannel retailers and e-commerce companies that sell online to businesses and consumers alike.
Often, the impact of supply chain disruptions is highly variable. The pandemic, for example, made shortages commonplace and upended manufacturing in some industries even as it increased online sales, exceeded the capacity of parcel carriers’ networks, and brought shippers face-to-face with dramatic increases in volume and skyrocketing costs.
So what will the impact be of today’s increasingly volatile tariff war? More to the point, what should shippers do about it? For answers, one must first look at the tariffs themselves.
Regardless of what impact they will ultimately have on everything from nearshoring policies to sourcing strategies with China, one thing about the tariffs is already clear: they continue to fluctuate. In the months since the administration first announced tariffs for Canada, China and Mexico, supply chain leaders have faced a dizzying cadence of rapid changes. Tariffs that are 145% one day are postponed, decreased t0 10% and increased again. The changes are often swift and difficult to track.
Dramatic shifts like these create chaos. There is simply too much uncertainty for bold moves, large capital projects and the innovation that accompanies them. Instead, with uncertain trade policies we see unnatural inventory strategies as businesses stock up on supplies, scrutiny of established sourcing strategies, and a “wait and see,” approach to expansion plans.
But while no one has a crystal ball, businesses are behaving in a very predictable and measured way. Across the board, operational leaders are looking to drive expenses down, with a keen focus on the role supply chain, logistics, and transportation professionals will play in that endeavor. Fortunately, parcel shippers are uniquely qualified not only to rise to the occasion, but to battle the tariff chaos with strategies that directly address the costs and unknowns associated with it.
In fact, no other business function arguably is better positioned to make a difference. That is why now is the time for shippers to create their own tariff contingency plan.
Creating Your Own Tariff Contingency Plan
In the years since the pandemic underscored the singular impact it has not only on the bottom line – but also topline differentiators like the ability to offer the discounted or “free” shipping needed to excel in online sales – business, operational and financial leaders have increasingly looked to parcel shipping acumen as a key strength in cost containment efforts. This is for good reason. In most organizations, few business functions have the ability to save more money than shipping.
This is particularly true today, when parcel shippers can proactively view, manage and manipulate their parcel shipping strategies, activities and spend like never before. Drawing on advanced data science, machine learning, artificial intelligence and time-tested expertise and experience, shippers can implement their own tariff contingency plan – one that combats cost pressures and unknowns – by taking four steps.
1. Analyze carrier contracts: Parcel carrier contracts are purposely complex, governed by numerous fine-print details governing a litany of constantly changing, often disparate factors ranging from surcharge discounts with different end dates to a web of rules on everything from zones to package dimensions and revenue tiers. Notably, at any point in time, most parcel shipping organizations can lower their costs by 5-30% simply by analyzing existing carrier contracts for opportunities to negotiate better rates, terms and conditions. Analyze always and use data to make adjustments to contractual terms with your carrier partners often!
2. Pluck low-hanging fruit: Significant savings await shippers who tackle common parcel spend management missteps. Service level optimization is a great starting point that eliminates costly express options when less expensive means, including ground services, suffice. Make sure to track surcharge spend and identify opportunities to make operational or packaging changes that eliminate those surcharges. It is also imperative to eliminate recurring mistakes like address corrections that result in hefty fees after the fact. And just as importantly, if you are getting hit with unusual carrier charges, find out why. Is one location or shipping station entering erroneous package dimensions? Remember, a small mistake repeated often adds up to big costs. If you don’t have software that does all of this for you automatically, you’re using an outdated solution.
3. Maximize audit, claims and rebate recovery: A thorough parcel shipping audit typically uncovers savings of 1-2% of total shipping spend. In our own onboarding process we also find that more than 75% of shippers do not file claims for refunds they are entitled to because carriers failed to meet their own service-level guarantees, usually because a package was delivered late or damaged. By systematically scheduling audits and automating the process for claims and refunds – as well putting rate validation guardrails in place – shippers can rest assured they aren’t leaving money on the table. Don’t depend on carriers to tell you when they owe you money or how much.
4. Illuminate and address the unknowns: Perhaps most importantly, gain the shipping intelligence that delivers true operational and financial resiliency. For decades parcel shipping lacked business intelligence capabilities ubiquitous across other business functions. Parcel shipping intelligence and analytics changed that. Shippers today have the ability to pose powerful what-if scenarios to know how carriers’ actions, rules and rates will impact their costs, how new multi-carrier strategies will impact performance, and when problems arise – such as when a new regulation subjects existing packaging to overage charges – and even where there are opportunities to create efficiencies that benefit their carriers. With such knowledge comes peace of mind.
Today’s tariff landscape will likely continue to add uncertainty to supply chain operations, and more than a little hand-wringing among all involved, including parcel shipping departments that are ground zero in fulfillment operations and the crucial “last mile.” But with proactive action, shippers don’t have to stand by. Instead, they have an opportunity not only to proactively make a difference, but to help the organizations they serve and their carrier partners emerge stronger and more effective than ever.
Michael Falls is the chief customer officer at Reveel where he helps parcel shippers radically improve and optimize their operations by drawing on the combined capabilities of analytics, business intelligence and integrated supply chain, operations and financial systems.
