Why Your Company Needs A Parcel Shipping Solution

UPS, Federal Express, and other carriers spend large sums of money advertising the fact that all your parcel shipping needs can be satisfied by one vendor (What can Brown do for you?). In return for your business, the carrier will provide (at a very low price, or even free) all of the hardware and software your company needs to automatically create shipments, assign tracking numbers, print labels, and produce the required end-of-day reports. All you need to do is pick, pack, wrap, and have it on your dock. And, by placing all your parcel requests with one carrier, it is reasonable to assume that you will be getting the best rate, given your level of volume. How can things get better then that?

For some companies, this may be the case. Companies with low volumes, and/or stable shipping patterns, might be best served by opting for such a one-carrier solution. But given the growing demand for more frequent but smaller orders, shipped directly to the end user, that scenario is becoming increasingly hard to find.

Parcel shipping, by its very nature, tends to be dynamic as to the number of the destinations required. Anyone that has had experience with having an internet portal used to enter orders quickly learns that requests can literally come from any place in the world. Even if your market is primarily domestic, you must be ready to ship anywhere in the country.

Like any other provider of transportation services, each of the parcel carriers have some routes that are more advantageous to them then others. Because of the location of their facilities, they can offer better rates in specific lanes. Conversely, there are other routes where they are not so favored, and must charge more to provide the same level of service.

This concept of level of service is critical. To truly compare one carrier to another, you have to make sure that you are keeping delivery times and shipment weights consistent. Carrier A charges 215.99 for next business day delivery of a 60 lb. package from London to Amsterdam, and carrier B will offer something close to the same rate.(1) But, you find to maintain that competitive position, carrier B will not be able to deliver the package until 3:00 PM. For delivery by 10 AM of that 60 lb. package, Company Bs rate is 261.16, or 21% higher.(2)

These disparate rate structures make it possible for an astute company to lower their shipping costs, but it requires a complex analysis of the shipments being made. When you are making a hundred shipments every day, (or the case of some of our customers, tens of thousands per day), it becomes too complex of an optimization problem for anyone to consider. Adding the concept of zone skipping raises the level of complexity by an order of magnitude.(3)

This is one way that a parcel shipping solution can save your company money by always picking the carrier with the lowest rate for that order (or group of orders) that will still provide the level of service required.

Another scenario is to pick two or three carriers and switch between them when there is a cost advantage, or to comply with your customers requests. While this may be an improvement over the single carrier model, it also means that the shipping area can become over-crowded with redundant scales and printers. Plus, it means that more systems have to be integrated and maintained in order to avoid the cost and error generation that comes with duplicate data entry.

Another alternative is to use a Parcel Shipping Solution such as the one offered by Precision Software in TRAXi3. It will allow you to ship from anywhere to anywhere, domestic or international, always picking the optimal rate for the level of service required. Like the software that is supplied by the carrier, it allows you to print carrier certified labels, assign tracking numbers, and prepare end-of-day reports. It also allows you to comply with your customers requests to use their preferred carriers, but without having to worry about redundant equipment.

The table below summarizes the advantages that can be gained from using a multi-carrier solution:

Carriers will not agree with the above because it is not in their interest to do so. But, actions speak louder then words: UPS felt compelled to offer its own version of a multi-carrier system with its ConnectShip product. ConnectShip is a direct competitor to TRAX in the parcel market, and offers some of the same features (at least for the domestic market) in that it will rate-shop shipments, and recommend other carriers. It is obvious that UPS understands that there is a market for multi-carrier selection systems and has responded to that need, even if it means cannibalizing sales from its own core business.

A multi-carrier parcel shipping solution is not for everyone. But if what you are paying for parcel shipping seems to be out of line with the value you are receiving, or if your shipping dock is overcrowded with multiple systems, it may be worth an hour of your time to get more information.

(1) Based on a 60 lb shipment from London to Amsterdam. It is in one 24" x 24" x 24" box, wrapped by the shipper, for 10:30AM delivery on the next business day. Pickup is based on a phone call to carrier and the shipment is valued at 100.

(2) Were seeing that companies are not using one contract for all parcel shipping. They are recognizing that, based on the rules each carrier has for weights and sizes, there may be indications that one carrier might be better for one region or service than another Dwight Klappich, VP Supply Chain Applications, Meta Group.

(3) Zone Skipping is the practice of bundling multiple shipments together to send them to an area, then breaking that shipment down into individual packages for local delivery.