Still amid a global pandemic and in what now feels like an evergreen peak season, the parcel shipping industry will continue to undergo a transformation in 2022. Scarred by carrier capacity strain and carrier rate increases and under pressure to meet customer demands for fast, free shipping, many companies began 2022 thinking about how they can better fortify their supply chains to withstand future disruptions. While expanding carrier networks will be one key to improving the delivery experience and is likely the easiest place for most companies to start, you can expect the following five parcel shipping trends to emerge in the coming months:
1. The market is becoming carrier-led.
With the increased demand for e-commerce deliveries, parcel shippers learned in 2021 that even the biggest carriers including FedEx, UPS, and DHL can reach capacity thresholds and turn away business. These capacity issues are not only set to persist but will also be compounded by continued driver shortages.
Brands with relatively low order volumes are likely to suffer, as carriers prioritize larger, more profitable partnerships. Even so, large enterprises could suffer as well if deliveries are delayed due to a lack of delivery drivers and supporting staff.
Companies that have chosen to tender for new carriers have been hit with staggeringly high price tags. Therefore, we expect manufacturers and retailers will stay with their existing carrier partners and instead on-board new supplemental carriers and structure multi-carrier shipping strategies to achieve greater flexibility, reduce risk, and optimize costs without compromising their customers’ experiences.
Proactive shippers have used parcel shipping systems with sophisticated business rules to quickly execute these strategies at scale and handle decisions related to capacity limitations, volume-related costs, and volume-related rate increases – continuously balancing delivery performance and price tag across multiple carriers for both inbound and outbound shipping.
2. Supply chains will migrate from ‘Just in Time’ to ‘Just in Case.’
It’s no secret that many organizations suffered from a range of supply chain difficulties and shortages throughout the pandemic. Previously reliable suppliers couldn’t meet demands, and warehouses across the globe decreased or even halted operations due to labor shortages, temporary pandemic mandates, or uncertainty about their economic futures.
For companies that operate a lean, Just in Time (JIT) supply chain, even seemingly minor shifts in the market can lead to backorders and stock issues, and when the pandemic disrupted nearly every industry in the world, many JIT supply chains screeched to a halt, leaving partners, employees, and consumers in a tough spot.
Due to the ripple effects of COVID-19 in concert with growing competition and customer demands for near-instant order fulfillment, the once-popular model of a streamlined, JIT supply chain is becoming less attractive. Brands are now keen to hold a larger buffer stock and plan for longer fulfillment lifecycles. Many are investing in more extensive storage and distribution centers to create self-mandated insurance policies that will help protect their operations — and their customers — against supply chain delays or unexpected lapses in product availability. Rather than keeping their inventory as lean as possible to minimize extra costs, manufacturers and retailers are planning for the unexpected and making upfront investments in more stock to secure their operations in the long term. This strategy reduces the probability of products selling out and simultaneously accounts for surges in demand and lapses in supply.
However, transitioning to a Just in Case (JIC) supply chain strategy doesn’t mean companies should take their best guess at inventory needs or buy out suppliers at every opportunity. On the contrary, companies should lean heavily on their data, including e-commerce data, logistics data, and inventory performance data. This data can help companies adjust their inventory management processes to optimize lead times without putting themselves at risk for backorders or supply shortages. For example, using e-commerce data and logistics data, once an order is received, it can be automatically assigned to the warehouse with the fastest time-to-service (which may or may not be the one closest to its destination), thereby improving delivery speed, potentially reducing shipping costs, and increasing customer satisfaction.
Increased data visibility will enable brands to make informed decisions and deliver optimal results for their end consumers and their bottom line while still accounting for potential disruption in the months or years ahead.
3. Gig economy carriers will stay in the spotlight.
By this time, the gig economy is a familiar transportation staple, with on-demand drivers delivering meals, groceries, and even people. During the pandemic, these courier services flourished, as retailers joined restaurants, cafes, supermarkets, and grocery stores and embraced on-demand courier and messenger services such as InstaCart, DoorDash, and UberEats to meet customer demand for home delivery. Gig economy couriers maximize flexibility, helping retailers increase order fulfillment options to meet peaks in demand without requiring them to invest in full-time staff.
In 2022, we’re likely to see this trend increase further as more retailers strive to deliver products directly from the store to the consumer, often within just a couple of hours of order placement.
As the gig economy continues to grow, we expect couriers and delivery drivers to begin servicing new markets. For example, DoorDash recently announced it will move beyond courier delivery and online storefronts to offer fulfillment services to retailers.
The opportunity is certainly there. Consumers expect near-instant access to products, whether their desire is a new set of mixing bowls from a department store or clothing from a local boutique. In the past, this meant local access to their favorite stores and marketplaces.
Now, however, customers want to receive an at-home delivery. Therefore, retailers should plan for courier-led last mile delivery and develop business plans to get products in their consumers’ hands quicker, relying on support from gig economy couriers and delivery partners. Target, Walgreens, and other large retailers have set the stage and currently offer same-day and two-hour delivery options, leveraging services like Deliv and Postmates. Essentially taxis and bike messengers, this new army of couriers helps these retailers lighten their demand for more traditional carrier services by reducing, often significantly, the number of parcels in those carriers’ queues. Fortunately, these services are growing to meet the new demand, with more of the gig economy racing to implement the right technology to accommodate heightened requirements for security, proof of delivery, signature capture, and more.
4. Reverse logistics will make headlines.
With e-commerce continually on the rise, retailers are increasing their focus on reverse logistics strategies. According to The Wall Street Journal, extended return windows for 2021 holiday shoppers combined with rate increases from parcel carriers could cut into profit margins significantly. They estimate that between $112 billion and $114 billion in goods could be returned to U.S. retailers, up from $100 billion in 2020 and $95 billion in 2019.
But how can parcel shippers manage returns costs while also making returns quick, easy, and hassle-free for customers?
Some companies will avoid returns altogether, including many luxury brands, who will continue to choose to skip the expense and improve customer service in one motion by allowing their customers to hold onto purchases that don’t work out. E-tailers (sellers with no brick-and-mortar stores) will increasingly be following suit, telling customers to keep incorrect products and avoid the cost of returns.
For those companies committed to handling returns, they will mitigate returns costs by implementing a multi-carrier strategy. Equipping fulfillment teams with multiple carrier services from which to choose and technology that facilitates rate shopping across carrier services will keep costs low and empower teams to work around any carrier service delays or disruptions.
Furthermore, the priority will be convenience and all efforts will be made to breed customer loyalty. Forward-thinking organizations who put the customer experience first will simplify returns, using dual-use labels (labels that serve the purpose of both the outbound shipment and return) or peel-off labels (where the outbound label easily peels off to expose a return label) and accepting returns of online orders in stores.
5. Business Intelligence will become a “must-have” feature of parcel shipping systems.
Considering the challenges of 2021, the ability to make the right transportation decisions has never been more important. And the best way for shippers to make the right decisions is to get visibility into their parcel shipping data and run the necessary analytics. For most shippers, this will mean analyzing parcel shipping operations across hundreds of carrier services, dimensional weight factors, accessorial charges, shipping zones, pricing structures, and SKUs – and highlighting where money is left on the table. Even better, analytics will provide a blueprint for how to increase savings.
The good news is shippers don’t have to log long hours over multiple spreadsheets to accomplish these analyses. A parcel shipping system with Business Intelligence provides shippers with an easy way to aggregate, normalize, and report transportation data and:
- Eliminate silos, connecting people, processes, data, and technology so teams can make decisions with context and tie parcel shipping operations to company strategy.
- Identify inefficiencies and empower shippers to increase on-time delivery rates, shipping velocity, and order volume.
- Demonstrate the impact of carrier capacity limitations and order demand, providing managers with the ability to pivot carriers and transportation budgets to match customer expectations.
- Surface insights, giving leaders a source of truth and telemetry to steer, predict, and report on the business of parcel shipping with confidence.
Leverage 2022 Shipping Trends and Partner with Logistyx
Continuing to take a rigid approach to parcel shipping is no longer effective for most supply chain teams. Supply chain leaders instead need to adopt a more agile approach, one that allows them to anticipate, adapt, and prioritize within shorter time frames in response to everything from changing market dynamics to carrier capacity issues. Companies that were successful in 2021 were those that could optimize order fulfillment strategies on the fly, quickly comparing order fulfillment scenarios and making smart decisions to adapt to ongoing shifts in consumer demand, mitigate on-time delivery risk, and stay ahead of the competition.
There’s no better time for supply chain leaders to prepare to thrive in a new era of strategic supply chain planning. Learn more about how your organization can effectively leverage 2022 logistics trends in this e-book: 7 Logistics Trends that will Radically Change the Shipping Landscape in 2022.