Surviving 2020 presented a unique challenge, and for many retailers, manufacturers, and 3PLs, the goal was simply to make it to 2021. But the reward for making it to 2021 wasn’t altogether sweet. With the dawn of the new year came parcel carrier rate increases:
- FedEx unveiled rate increases and late fees set to take effect in 2021. Starting in January, FedEx raised rates an average of 4.9% for its Ground, Express, and Home Delivery services. They’re also charging a 6% late fee to U.S. FedEx Express and FedEx Ground customers who do not pay invoices according to their payment terms.
- UPS announced it would raise its rates in 2021 by an average of 5%, effective December 27, 2020.
- DHL Express announced a 4.9% general average shipment price increase for U.S. account holders, effective January 1, 2021.
- Even the United States Postal Service (USPS) filed for proposed 2021 rate increases to take effect in January 2021.
And now the question is: how can shippers increase profits per parcel in this shipping landscape?
Parcel Rates Increase as E-Commerce Continues Growing
Normal fluctuations in rates hover around the 4-5% mark for the shipping industry, but 2021 is poised to be anything but an average year, which means monitoring trends in shipping rates will remain a key focus. Summarizes Transportation Insight, “Beyond the average increase on standard services, it is also important to recognize that surcharges, accessorials, new fees, and tweaks to the carriers’ terms and conditions could require you to budget a 2021 cost increase closer to 8.5%. Capacity pressures created by exponential e-commerce growth during the pandemic and uncertainty about mid-year or peak surcharges for 2021 creates an environment of unknowns.”
Shippers Need to Take a Look at Carriers’ Intricate Pricing Strategies
While understanding the impact of carriers’ general rate increases is critical for organizations with any kind of parcel volume, identifying exactly which factors may drive the most significant shipping cost changes is critical for effectively planning budgets for 2021; shippers need to take a comprehensive look at the intricacies of carriers’ pricing strategies.
To optimize parcel shipping costs in the wake of 2021 rate changes, shippers should simulate and analyze various transport factors to identify the potential impacts of rate increases. Doing so supports contract negotiations with parcel carriers, and it gives merchants a chance to prepare by adjusting business rules, repackaging goods, or taking other steps.
To pinpoint cost-effective methods for parcel shipping, shippers can run the following types of simulations:
- Assuming everything is the same as last year: running re-rate scenarios shows the impact from one year to the next and enables shippers to adjust the current carrier mix to optimize cost savings
- Changing a business’s inventory footprint: Moving products from distribution centers to brick-and-mortar stores, etc.
- Carrier network expansion: Adding new carriers to handle parcel deliveries, be it international or local
- Changing the approach to packaging parcels: Administering simulations based on dimensional weight (size/weight of package)
- Determining metrics and cost of shipment per SKU (cost per unit): Many organizations run SKU level analytics and business intelligence reports; parcel shipping data can help to illuminate even more impactful insights
- Comparing last-mile/regional services against those from major carriers: Which carriers are best suited to meet delivery and cost expectations
Carriers run their own simulations to see how they can maximize efficiency and profits; technology can help level the playing field by enabling shippers to efficiently run simulations, analyze potential fees, and determine how to mitigate them, along with monitoring cost impacts that could take them by surprise.
For instance, Logistyx’s cloud transportation management system (TMS) for parcel shipping with Business Intelligence enables shippers to glean insights on their own shipping patterns, usage, and more with the ability to filter and identify specific characteristics to better understand impact. With the ability to analyze real time shipping data, shippers can better understand how factors such as distance, speed to delivery, package size, and density affect spend within their transportation landscape. Shippers can also highlight savings opportunities across attributes such as origin-destination, carrier services, modes, accessories, and more.
Once shippers run simulations to consider potential impacts and how to counter them, they can align strategy and budget to particular scenarios. Accessing and analyzing available data can help shippers truly evaluate carrier performance, ensuring carrier selection is better informed and they’re at an advantage when it comes to carrier negotiations.
Optimize Shipping Costs with the Right Parcel TMS
Surviving 2020 was the end goal for many over the past year, but now the focus is on recovery in 2021. Retailers, manufacturers, and 3PLs need to keep a watchful eye on carrier rates so they can prepare for whatever the new year brings, and a TMS for parcel shipping with advanced Business Intelligence can help. To learn more about how you can leverage Business Intelligence to optimize parcel shipping costs in 2021, watch our webinar: Make your Shipping Data Work for You.