Shippers who compete against big box retailers and e-commerce giant Amazon need to determine what they are doing right and apply these standards to develop a parcel shipping strategy, logistics providers said.
In a recent white paper by third-party logistics provider Cerasis and Pierbridge, a transportation management software company, the logistics companies showed how shippers can compete against large retailers.
Amazon offers free two-day and next-day or same-day delivery, making it difficult for traditional shippers to compete. If shippers charge to ship parcel, customers will shop at Amazon. Customers want to click a button and receive fast, free delivery, and it’s a mindset that’s impacted traditional brick-and-mortar retailers, such as Toys R Us, Foot Locker and Best Buy mobile, that have closed hundreds of stores unable to keep up with changing consumer demands.
In 2017, retail sales increased 3.8% to $3.5 trillion, from 2016, according to the U.S. Commerce Department. E-commerce accounted for 13% of the sales, up from 11.6% in 2016. Amazon accounted for 53% of all e-commerce growth and 43% of all e-commerce sales.
“It seems that every online retailer is chasing Amazon, or rather, is being chased by Amazon,” according to the Cerasis white paper. “Whether you are a retailer, carrier, cloud services provider or e-commerce merchant, Amazon not only effected the landscape of e-tail but the landscape of shipping and logistics as a whole.”
Amazon lost $7 billion in shipping costs, or 12% of revenue in 2016, but is building 140 fulfillment centers to get closer to customers to reduce shipping costs and increase shipping speed. The company also plans to use its Whole Foods parking lots as distribution centers and invest in trucks and planes while outsourcing logistics to reduce shipping costs. The e-commerce company’s Prime membership program has contributed to a 10% increase in parcel shipping, while all other freight modes have risen at 1%. In China, the amount spent on parcel shipping has risen 45% year-over-year.
The average cost to fulfill an online order is $10, which includes the shipping and fulfillment costs, according to U.S. retailer survey the State of Retailing Online.
But online retailers can control costs and maintain good customer service by offering multiple shipping modes, improving how they pack their shipments and using predictive and prescriptive analytics to track what went wrong and how to prevent a similar issue from happening again.
INBOUND PARCEL FREIGHT
As e-commerce sales have risen globally, so has the complexity of managing inbound parcel freight. Small and mid-sized shippers have struggled to keep up with Amazon on managing this freight, but doing so has become a top priority for shippers.
In 2018, the rise in e-commerce sales is expected to contribute to a 20% increase in parcel shipping globally, according to the Pitney Bowes Parcel Shipping Index. Meanwhile, regulatory compliance is expected to impact the management of inbound parcel freight as medical and legal shipments will be required to meet more compliance standards this year.
Technology will allow shippers to increase shipment accuracy and transparency to customers. Handheld scanners, signature pads, barcode and label printers, smartphones and tablets offer shippers the ability to provide increased visibility of inbound shipments. As a result, shippers can handle more inbound orders and process more outbound orders. The technology will allow for automation and the ability to produce automatic alerts in the event of inbound freight issues.
Software platforms are available to manage both inbound and outbound freight. Cerasis offers a transportation management system that can handle inbound parcel freight and over-the-road shipments. A poor management system for inbound parcel freight can increase the risk of damaged and lost products. Up to 3% of inbound parcel shipments are lost in multi-site organizations, and 2% of inbound parcels are lost in single-site organizations, according to Pitney Bowes. Vendors often use an inbound vendor routing guide when delivering truckload or less-than-truckload freight, and it should include rules for properly handling inbound freight.
A vendor routing guide is effective when vendors and carriers are held accountable. Shippers can track inbound freight metrics, including inbound parcel shipments. Important metrics to track include average shipping time, cost, delays, instances of incorrect billing and compliance with the guide.
A heightened awareness in chain of custody is important to manage inbound parcel freight. Temperature-controlled shipments for medications and fresh meats require shippers to ensure shipment safety. Shippers might consider purchasing freight insurance for inbound shipments, especially those that are high value or risk.
OUTBOUND PARCEL FREIGHT
Shipping costs for shippers rise between 3% and 10% annually, and parcel shipping costs are rising at a faster pace, said Adam Lewenberg, president of Postal Advocate Inc. As parcel shipping demand rises, shippers are paying more but receiving fewer services at the same time. However, shippers have some opportunities to increase savings.
Up to 37% of shippers are struggling to deliver more packages to customers at a faster rate; however, the important things are to track shipments and streamline the packaging, labeling and shipping processes. Shippers shouldn’t focus on charging more to ship parcel but redevelop their processes to streamline shipping and decrease delays along with the amount they spend on freight. This will allow companies to reduce shipping costs while meeting customer demands of lower-cost, faster delivery of items.
Shippers might consider offering a multi-carrier parcel shipping system rather than building shipping costs into product prices. These systems will allow shippers to improve visibility of all shipments, including those at risk of overbilling or incorrect freight classification. The Cerasis transportation management system provides shippers with more information on multi-carrier parcel management in the company’s partnership with Pierbridge.
Following are some things shippers can do to improve control of outbound shipments: understand shipping data, negotiate and compare rates, purchase insurance, know dock restrictions, use international symbols for labels, ship truckload or less-than-truckload when possible and partner with a third-party logistics provider.
Most shippers overpay carriers up to 3%, and should look to recapture overpayments on late shipments, which account for up to 80% of the amount that can be recovered in overpayments, according to Jared Fisher, co-founder and executive vice president of Lojistic.
Parcel shipping in reverse logistics plays a key role in meeting customer demands for low-cost, easy returns. It’s important to carriers like FedEx, which spent $1.4 billion to purchase GENCO Distribution System Inc. For UPS, parcel shipping accounts for the majority of reverse logistics in e-commerce as returns for online purchases rise to as high as 30%. Returns are often shipped parcel because customers usually return items as a single transaction. Items such as furniture, however, might require a different shipment method. But inbound reverse logistics are almost exclusively parcel shipments.
Shippers must determine how to re-integrate returned products into warehouses and limit restocking costs, according to Tony Sciarrotta of the Reverse Logistics Association. Damaged parcel shipments are an added cost to shippers, and this might include the cost to destroy the product when it arrives. It’s less expensive to provide a refund for items that cannot be repaired than paying for return shipping and tracking the product as it moves through the supply chain. But shippers should look to separate instances of defects from fraud, and can do so by using analytics to determine whether there are multiple accounts of a defect. Analytics also can be used to determine the step in the manufacturing process or shipment that resulted in the defect.
When an item is returned, shippers can track the parcel in reserve logistics, if the returned shipment includes a tracking number allowing the shipper to follow it through the supply chain. A transportation management system could simplify the reverse logistics process as it would ensure the right type of return mode, insurance and monitor the chain of custody.
A good customer returns process is significant to the overall customer experience. A customer who returns an item that gets rejected because it contained hazardous materials and the package was labeled properly likely will blame the original shipper for the rejection. This might lead to a negative review on social media or a lost customer.