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A Deeper Dive into Logistics Management’s Parcel Shipping Challenges

For its March 2022 issue, Logistics Management spoke with three sources for its “2022 Parcel Express Roundtable: Challenges Persist” article, covering many of the same topics Logistyx has highlighted recently, including carrier capacity crunches, carrier price increases, the growth in e-commerce sales, and the need for multi-carrier shipping. Overall, it’s an insightful article we recommend everyone read, but as is often the case with this type of format, the article didn’t offer much deep analysis of these issues. With that in mind, we thought we’d highlight some of the published comments and offer our expanded take.

Carrier capacity constraints

Rick Watson: Today, the parcel marketplace is looking very similar to where it was in 2021. There are still numerous strains concerning the carrying capacity of networks as volumes continue to climb.

Logistyx’s take: While parcel shipment volume has grown at an unprecedented rate, carriers also enacted caps on the number of shipments they would take, leaving shippers to scramble for alternatives. Those shippers who traditionally relied on one or two carriers had to manually navigate this process and often found smaller regional carriers implementing the same caps, because the trickle-down volume overwhelmed them and exacerbated the problem. Shippers with a multi-carrier shipping solution in place quickly identified, onboarded, and utilized a robust network of carriers large and small to meet their needs and gain a leg up on those reliant on manual processes.

Carrier rate increases

John Haber: All carriers have announced increased 2022 rates. Regional carriers such as OnTrac and LSO each announced an average annual rate hike of 5.9%, while USPS announced increases to its shipping service products such as Priority Mail Service (3.1%) and Priority Mail Express (3.1%). More price increases from the USPS are expected this year. Similar to OnTrac and LSO, Pitney Bowes announced a 5.9% increase for its e-commerce services.

The Parcel rates from FedEx and UPS are among the highest on record. Even though FedEx and UPS announced an average annual rate increase of 5.9% for their services in 2022, the actual rate increase for many shippers is actually higher, around 10% depending on contract.

Logistyx’s take: Rates are rising across the board at an unprecedented rate. With shipping capacity a hot commodity, it’s a carriers’ market. Shippers have little power to influence these increases since they can no longer leverage large shipment volumes to negotiate significantly better rates. The best way to combat these alarming trends is to employ a multi-carrier shipping strategy via parcel shipping software to manage carrier capacity. Moving to a multi-carrier shipping strategy enables shippers to rate shop and select the best carrier and service for each parcel from a network of strategically sourced carriers based on point of origin, point of destination, delivery timeframe, cost, capacity availability, and shipper-established business rules. Choosing the best rate and service for each parcel can help shippers offset these common surcharges and limit the impact of rising costs on the bottom line.

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E-commerce sales boom

John Haber: The outbreak of the pandemic brought forth a massive jump in U.S. e-commerce retail as stores temporarily closed and consumers remained hesitant to physically shop in stores once reopened. At its peak, e-commerce represented 16.1% of U.S retail sales in the second quarter of 2020, but it has since leveled off to around 13% as of the third quarter of 2021.

Logistyx’s take: This is clear confirmation of what we’ve come to expect: e-commerce is not only here to stay but is firmly established as a go-to option for consumers. For shippers, dealing with increasing order volumes and rising customer expectations can be a challenge, especially with ongoing supply chain issues, carrier capacity constraints, increasing shipping costs, weather delays, and labor issues complicating everything.

Many Logistyx clients, including Home Depot, Oxford (Owner of Tommy Bahama, Lilly Pulitzer, and Southern Tide), and Walgreens have capitalized on this trend to drive growth and success. As the top provider of fulfillment software for the third consecutive year in Digital Commerce 360’s Leading Vendors to the Top 1000 report, we’re uniquely positioned to both assist our customers with their e-commerce fulfillment while also examining important questions like whether the “Buy Now” button is actually doing more harm than good.

The need for multi-carrier shipping to overcome parcel shipping challenges

Josh Taylor: … single sourcing with FedEx or UPS is becoming a thing of the past. Carrier diversification is necessary now to ensure companies always have a way to reach their clients.

John Haber: Shippers learned they need to diversify their last-mile carriers – beyond UPS, FedEx and perhaps the USPS. This way, shippers can fill their capacity requirements, gain the types of last-mile services they need, like same-day and two-day, and mitigate shipping costs.

Logistyx’s take: We couldn’t agree more. Multi-carrier parcel shipping technology can simplify many critical tasks for shippers:

  1. Adding Carriers: Given the modern-day complexity of high volume, global parcel shipping, relying on a single carrier is risky. Parcel shipping software helps ship high volumes of parcels while decreasing transportation costs by making it easier to quickly onboard new carrier services, including regional and last-mile providers.
  2. Automating Rating, Rate Shopping, and Carrier Compliance: Parcel shipping systems eliminate the need to navigate multiple carrier systems to determine the ideal carrier service for each parcel based on point of origin, point of destination, delivery timeframe, cost, and any applicable business rules. The system automatically obtains the rates for each shipment from each carrier, selects the optimal service, and automatically produces the carrier label and necessary documentation.
  3. Consolidating Parcel Shipments: Often, the same customer/recipient places multiple orders in your order management system within minutes of each other. Without adequate planning to take advantage of packing those orders into one container, shippers pay for multiple, individual parcel movements instead of one LTL movement. A parcel shipping solution can perform these
  4. Integrating Enterprise Supply Chain Systems and Carriers in the Cloud: Sophisticated parcel shipping software will be hosted – not managed – in the cloud to easily integrate with specific order fulfillment workflows, whether they include IMS, WMS, TMS, or eCommerce Systems – or any combination thereof.
  5. Managing Carrier Capacity: When parcel shipping software is integrated with a sophisticated WMS, it can measure shipment volumes against carrier capacity thresholds and automatically manage carrier capacity and optimize shipping strategies – essentially maximizing capacity utilization to minimize transportation spend.
  6. Ensuring On-Time Delivery Consistency: The right parcel shipping solution will have a Control Tower that provides customers with visibility into their parcel’s delivery journey, including the last mile. Thanks to alerts about parcel delivery issues or “exception events,” customer service teams can proactively troubleshoot and communicate delivery updates to the customer in real time.
  7. Shipping Across Borders: Due to regulations, tariffs, and documentation, cross-border commerce used to be one of the most intimidating aspects of parcel shipping. Parcel shipping technology, with an integrated process for cross-border shipping, automatically identifies and provides the appropriate documentation for any shipment.
  8. Making Sense of Parcel Shipping Data to Boost the Bottom Line: Once the parcel shipping software collects all the shipping origins, carrier data, shipping transactions, and business rules in ONE database, enterprise shipping information can be more readily accessible for Business Intelligence reporting to improve decision-making across the organization, fine tune fulfillment practices and unlock other insights.
  9. Auditing Carrier Invoices: Carriers aren’t always perfect, and neither are the numbers on their invoices. While shippers have grown to expect the inaccurate application of carrier surcharges and other fees, they’re almost impossible to catch through manual invoice auditing. Automatically uncover these discrepancies with carrier invoice audit and analytics tools to tackle parcel shipping challenges.

Contact Logistyx today to see how we can help you navigate 2022’s parcel shipping challenges.