This day and age, as every part of the supply chain tries to squeeze out cost savings, with the turn of 2013 into 2014, logistics in general and parcel shipping in particular are dearer to the business while it scales and tries to maximize margins. Some of the reasons, which need companies to rethink their strategy on optimizing freight/shipping costs and look for cost savings in the long run are discussed below.
The below data points not just strengthen but are proof that there’s increasing demand for parcel carriers. It is often, retailers realize how the significant part of the pie of moves through parcel service providers.
In this internet age, every company is a Retailer and Companies are acquiring new capabilities to have lean inventories and use drop ship as a fetcher of supply chain logistics efficiencies. Parcel shipping is bound to increase with lean strategy to the fore and shipping of goods direct from suppliers to the customers to benefit overall agility.
Major carriers (UPS & FedEx) have continually been increasing the rates year over year aggressively. This trend of increasing rates is not applicable to the base rates alone but also various surcharges and accessorials. Overall, we see that the costs are seeing a double digit increases in total parcel shipment.
Data points:
This trend continues to unfavorably impact Shipping companies who have neither the time nor resources to monitor and review dense and complex shipping invoices to understand the shipping profile
Omni-channel retail is fast becoming the norm (and was discussed at length in the NRF 2014 as well). It’s clear that today’s consumers are focused on convenience, and they expect their retailer of choice to provide this convenience across all channels. For example, if a product is out of stock, customers would prefer to complete the purchase in-store and have it shipped to their home rather than go through the hassle of visiting another store, but only if the retailer is prepared to ship the item for free. – (source: Forrester’s study, Jan 2014, Customer Desires Vs. Retailer Capabilities)
When buying online, if a product is available from multiple retailers at the exact same price, 75% of multi-channel shoppers stated that expedited 2 – 3 day free shipping would sway their purchase decision about the retailer. This is just to shed light on how the logistics strategy is deeply ingrained as a fundamental competence.
At the end, Retailers that don’t aggressively manage cost by pro-actively looking at ways to cut costs by understanding their needs contribute to the thinner margins and would be left behind peers with razor sharp focus on these freight costs and strategy changes. In this age of mobile commerce and omni-channel fulfillment by the Retailers, it is imperative that companies introspect their end to end logistics holistically, their overall strategy and manage costs better with expertise, internal or external by analyzing their shipment invoice data in conjunction with their contracts with the carriers.
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