E-commerce is driving the demand for smaller, more frequent last-mile deliveries. As a result, parcel rates are soaring at twice the rate of inflation. At the same time, Amazon continues to reinforce consumer expectations for free shipping and more delivery options, even as it loses billions of dollars on shipping. Shippers large and small need to look more closely at parcel transportation costs and are turning to enterprise shipping software with data-driven analytics for answers.
Analytics requires an enterprise approach
Parcel spend is poorly understood because shipping data has historically been locked up in a disparate array of point shipping system silos. Multi-carrier systems, carrier-provided systems, and websites store data in a variety of different formats. Some costs, such as office and inbound shipping costs, aren’t tracked at all except in the form of weekly carrier invoices that are very difficult to reconcile.
As a result, logistics managers have only a very fragmented and superficial view of their parcel expenditures. They are unable to measure what they are responsible for managing effectively. They lack insight into opportunities that might exist for cost savings that could mitigate the impact of “free shipping.”
With the advent of SaaS-based parcel TMS platforms, data warehouses, and business analytics technology, it is easier and more affordable than ever to manage multi-carrier shipping costs. Parcel TMS platforms can capture and store shipping data from across the enterprise in a single data repository and then match it against carrier invoice data. Business intelligence tools can analyze and identify transportation cost reduction opportunities that can then be enforced by improved parcel shipping processes in order entry, purchasing, fulfillment centers, drop ship suppliers, stores, offices, mail centers, and customer service. The more data you have, the more opportunities there are to mine for nuggets of cost savings.
Parcel TMS analytics provides managers with key performance indicators at a glance
There are at least three areas logistics managers can look to reduce costs using parcel TMS analytics. Among them are:
- Carrier cost recovery: These are fees that your business can recover from carriers that include:
- Guaranteed delivery refunds: You have the right to recover shipping costs for late deliveries. Analytics can provide you with the information you need to file claims.
- Manifested, not shipped: Shipping systems can erroneously record transactions that are never picked up by carriers. You are entitled to refunds.
- Lost shipments: Analytics can track shipments that have never been delivered and for which you are entitled to a refund.
- Damaged: Most carriers automatically provide minimum insurance coverage on all shipments.
- Residential/Commercial status disputes: Is it a home or an office? Carriers disagree on status. When they do, you may be entitled to file for credit.
- Invoice errors: Some carriers (especially freight carriers) are notorious for applying the incorrect rate on invoices. You have a right to have these errors corrected.
- Potential Shipping Efficiency Savings: These are savings that could be realized by implementing better processes and controls with an enterprise parcel TMS system:
- Rogue shipping: Analytics can identify unauthorized use of corporate shipping services by employees and third parties.
- Rogue carrier selections: Parcel TMS systems can identify and enforce the most cost-effective carrier service routing decisions.
- Address corrections: Eliminate unnecessary address correction fees by validating addresses in order entry and in shipping
- Unexpected dim fees: Carriers are cracking down on shippers making poor packing decisions. Implementing parcel TMS cartonization technology can lead to substantial savings.
- Consolidation opportunities: You may be shipping too many cartons to the same destination and losing out on consolidation cost savings opportunities. Analytics enables you to pinpoint where you need to take corrective action.
- Carrier service downgrades: Shipping analytics can compare actual delivery times to zip code areas with carriers’ published delivery times. This can enable you to use a lower cost service for the same delivery result to those zip codes.
- Benchmarking: These are statistics that can help you during carrier rate negotiation time:
- Delivery performance: With customers requiring a better delivery experience, you need to measure and hold carriers accountable for on-time delivery.
- Cost/Lb.: How do your carrier rates compare by zone, weight breaks, level of services and minimums?
- Landed cost: Not many businesses can determine transportation costs by SKU. Analytics can assess historical costs associated by product type, enabling more intelligent cost of goods sold (COGS) decisions.
- Modeling: “What if” analysis capabilities can simulate cost savings and validate transportation strategies and cost impacts.
With the cost of free shipping eating into your margins, you owe it to your business to consider implementing parcel TMS analytics and start shipping like an Amazon.
For more than 25 years, Bob Malley has helped thousands of businesses reduce transportation costs and streamline fulfillment with parcel TMS. As CEO of Pierbridge, Inc., Bob has built a global organization that developed Transtream, the only parcel TMS platform that has earned both FedEx Diamond and UPS/ConnectShip Platinum level status for excellence and customer adoption.