Navigating Today’s Top Shipping ChallengesParcel Solutions Guide

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Parcel shipment volume is skyrocketing. In the United States, 640 parcels are generated every second. Pitney Bowes forecasts that U.S. parcel volume will nearly double by 2026, reaching 32 – 39 billion.

Challenging Parcel EnvironmentThe bulk of the growth in parcel volume has been spurred by ecommerce, and online retail sales are projected to continue at an aggressive rate. According to eMarketer projections, retail e-commerce sales will surpass $1 trillion in 2022 and comprise over 20% of total retail sales by 2024. Most of those online orders will be individual shipments of small packages weighing less than 50 pounds.

Shippers should anticipate a number of challenges in delivering those shipments, including increased costs, capacity limitations, consumer expectations and greater complexity.

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Rising Costs

Parcel costs continue to rise exponentially. This year, the General Rate Increase (GRI) for UPS and FedEx averaged 5.9%. However, lightweight residential service rates are increasing at a much higher rate. While the impact varies based on shipment characteristics, most parcel shippers should anticipate a net impact of 8% to 9%.

Surcharges are also escalating for fuel, residential, delivery area, and more. Since surcharges typically represent 10 to 40% of a shipper’s total parcel spend, these increases pose a significant budget challenge for shippers.

For those shipping large and/or lightweight packages, increases in dimensional (DIM) weight rates are an important consideration because they are based on package density.

Capacity Issues

Faced with increased parcel volume and a shortage of labor, carriers are struggling to keep up. Since demand exceeds capacity, they hold all the pricing power and can be selective when onboarding new volume. They’re also renegotiating contracts to drive less profitable volume out of the network.

Regional and local carriers are entering the competitive landscape, but it will likely be 2023 before we see a significant impact to the market or meaningful competition with UPS and FedEx.

Challenging Parcel Environment

DIM weight is calculated by multiplying the length, width and height of a package and then dividing by a carrier’s DIM divisor.

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Delivery expectations

While costs are rising, shippers struggle to pass them on to their customers. Online shoppers have become conditioned to expect free delivery. The vast majority (80%) expect complimentary shipping when ordering a certain dollar amount on online products, and two-thirds expect free shipping on every purchase they make online, a Jungle Scout study shows. What’s more, 84% of shoppers expect online retailers to offer a free return option, according to UPS research.

Consumers have also come to expect shipment status updates and delivery notifications, forcing many shippers to improve their reporting capabilities.

Increasing complexity

As their parcel volume increases, so does the complexity of operations. Companies must routinely evaluate numerous variables, including carrier rates, transportation options, packaging efficiency, time in transit, shipment accuracy and more.

Challenging Parcel Environment

84%OF SHOPPERSexpect online retailers to offer a free return option

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1 2Do your homework.

Study up on your average order profile and current carrier mix. Review historical shipping data to better understand patterns and trends.

Familiarize yourself with available carrier options in your region and learn about pricing considerations (i.e., point of origin, distribution/volume, transit speed, minimum rate, surcharges, DIM weight). Stay on top of rate and surcharge increases and evaluate their potential impact for your business.

Explore your options.

Develop parcel strategies that better allow you to pivot when carriers impose increases. Establish relationships with multiple carriers, including regional and niche carriers if possible.

If you routinely ship a high volume of orders to certain geographic areas, it could also be beneficial to explore the opportunity for zone-skipping. Rather than shipping individual packages via parcel or LTL, you may be able to consolidate orders into a full truckload shipment and ship them to a sortation facility in the destination area for final mile delivery. Bypassing zones enables you to take advantage of regional freight rates, often resulting in significant savings.

8 Strategies to Help Raise Your Parcel Game

What Can You Do About It?

In this challenging parcel environment, it’s more important than ever to find ways to increase efficiency and optimization.

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Challenging Parcel Environment GOOD DATA: Why You Need It, How to Get It

Going forward, parcel data management will be a priority. As carriers work to automate their operations, they need better data from shippers.

Issues related to incorrect weight and dimensions are quite common. If you supply incorrect information, carriers will capture the accurate data in their network and adjust charges accordingly (when it is in their favor to do so). They also may penalize you with fees or surcharges.

When you have good data, you can use it to your advantage with carriers. You can be more alert to unexpected charges and billing discrepancies on the back end.

Believe it or not, carriers make mistakes. Audit carrier invoices to check for billing errors and duplicated charges. Also, watch for unexpected charges such as USPS’ undeliverable fees, UPS’ shipping charge correction audit fees, FedEx’s new 6% late-payment fee, address-correction fees, third-party billing, brokerage fees on international shipments and more.

Good data is also necessary if you want to leverage rate-shopping software. The system selects the least-cost service based on the information you provide. If the package weight/dimensions are missing or incorrect, the shipping charge that is selected by the rate shop will be different than the actual charge from the carrier.

To capture accurate data, you need the right processes in place at the point of shipping, often as part of the pick process. Explore methods to capture, automate and audit package weight and size. The data can then be input into your OMS, WMS and/or TMS and shared with your carriers.

3 Leverage technology.

Take advantage of available systems and software to help manage and streamline the parcel shipping process.

› Parcel analytics software: Reviewing historical data can help you identify opportunities to increase efficiencies and better manage your parcel spend.

› Rate shopping: This software can help you compare rates and transit times across multiple carriers to identify the most economical solution to meet transit expectations.

› Parcel transportation management system: A strong shipping system helps handle a variety of parcel functions, including manifesting, documentation, shipment tracking, zone-skipping optimization and more.

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Challenging Parcel Environment

4 Pack wisely.

If you regularly ship large, lightweight items, be sure to consider the DIM weight of your packages. Use the smallest possible package size and pack the contents efficiently to optimize package density.

5 Increase average order value.

Consider building custom deal structures to help offset high transit costs. Bundling products together, for example, can increase average order value relative to shipping costs.

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6 Optimize distribution.

Confirm that your distribution network is strategically positioned to minimize transit time and cost. You may be surprised to discover how much your you can save by moving products closer to your customers. With DCs strategically located near your customers, you can reach more than 90% of the U.S. within two business days using ground service. Additional distribution locations can improve service levels even further. Distribution modeling, aided by parcel analytics software, can help you determine optimal origin sites.

Challenging Parcel Environment

90%+With DCs strategically located near your customers, you can reach more than 90% of the U.S. within two business days using ground service.

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7 Find the right balance.

In this era of Amazon, shoppers certainly value fast, free shipping, but it’s important to strike a balance between service and cost. You can’t afford to ship every order with expedited service – especially if your average order value skews on the low side. It’s also worth noting that, according to a recent Deloitte survey, 85% of shoppers say free shipping is more important than fast shipping.

In most cases, receiving an order when expected is just as important to consumers as speed. The key is to provide the level of service your customers expect – reliably and at the lowest possible cost to you.

8 Seek professional support.

With so many challenges, companies often seek out a third-party partner to help navigate the complex parcel shipping landscape. An experienced 3PL can provide valuable support in a number of areas, including solution optimization, carrier management, technology, parcel analytics and freight billing, reporting and auditing.

Challenging Parcel Environment

85% OF SHOPPERSsay free shipping is more important than fast shipping

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At Saddle Creek, we handle millions of parcel shipments for retailers and brands every month, helping to get their products where they need to be quickly and cost-effectively.

Our parcel experts stay on top of the current market and understand the litany of factors that can impact your parcel spend. They’ll conduct a thorough assessment of your shipping needs and recommend the optimal parcel solution to control your costs and satisfy your customers.

› Nearly 50 million parcel shipments annually

› Buying power – 50+ parcel clients shipping on SaddleCreek’s account

› Relationships with major carriers

› Top-tier parcel technology

› Nationwide network of DC locations

› Robust parcel analytics reporting suite

› Parcel transportation management system (TMS)

› Freight audit and bill pay

› Rate-shopping software

› Automated parcel sortation

Need an experienced parcel partner?

Check out our interactive map for 1- and 2-day service areas

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sales@sclogistics.com sclogistics.com

3010 Saddle Creek Road Lakeland, FL 33801

863-665-0966 Corporate888-878-1177 Toll Free

Contact us today to learn more!