By Dominic Potter, General Manager, International, Logistyx Technologies
With the e-commerce boom prioritising retailers’ ability to ship parcels to customers efficiently and in good time, it’s essential for retailers to review and re-negotiate contracts with delivery partners more regularly.
If you’re a retailer, this means the emphasis should not just be on ensuring rates are competitive, but also on reviewing service levels and verifying your wider delivery and carrier partner strategy is in line with evolving business and market needs.
Ideally, you should be reviewing carrier performance and contracts at least on a quarterly basis. And you should aim to go into negotiations with a strategy that empowers you to:
- Expand capacity where required
- Reduce surcharges and fees
- Improve fulfilment performance
For this, you need the ability to gather comprehensive data and Business Intelligence on the performance of your carriers, including the rates they charge as well as key performance indicators such as increases/decreases in the volume of deliveries, the percentage of on-time deliveries, shipments damaged in transit, and so on.
Don’t rely on reporting services from carriers
You can ask the carrier to produce certain types of reports for you, but it may not be in your best interest to rely on them to provide detailed reporting services. And if you are using multiple carriers, then using separate reports from different providers makes it difficult to compare.
Obviously, without the necessary data to truly evaluate carrier performance, it’s hard to make informed carrier selection decisions. You will also be at a significant disadvantage when it comes to reviewing performance and renegotiating contracts.
The importance of monitoring and evaluating carrier performance is one of the reasons why it is becoming more important to have Business Intelligence (BI) and data analytics capabilities within your Transportation Management System (TMS) for parcel shipping, especially when working with more than one carrier.
Use technology to level the playing field
Remember that the carriers themselves have their own BI tools to run simulations to try to maximise efficiency and profits; so, it makes sense for shippers to level the playing field by using technology to monitor costs, run simulations, and analyse how to mitigate fees and create efficiency in their fulfilment strategy.
Take this simple example. A large share of carrier contracts includes a form of financial compensation in case the service level agreement is not met. Without a tool that allows for tracking the actual service delivered versus the promise, there is no way to know how good (or bad) the service has been. This kind of tracking is important for recovering costs in case of deviations. Without the ability to monitor your carriers’ on-time delivery rates, you run the risk of increasing transportation spend.
In addition, BI tools and data can help ecommerce shippers negotiate carrier discounts from a position of strength by using their own fulfilment data.
Use data visualisations to identify negotiating priorities
With the right data and BI tools, you can visualise transportation spend impacts across significant data sets and analyse the effects across variables such as weight breaks, zones, regions, service levels, etc.
This kind of visualisation can help identify areas that are ripe for further negotiation and make cost-savvy supply chain decisions that align with the wider business strategy.
For example, by leveraging data and building transportation models, you are in a position to execute stronger carrier negotiations by:
- Understanding the terms and conditions of the contract
- Analysing omnichannel capabilities to better understand whether stores can actually ship based on carrier capacity and inventory in stock at a store-by-store level
- Determining where it is optimal to offer click-and-collect
- Distinguishing rates for services among various types of carriers (last-mile, regional, national, international, etc.)
- Considering which last-mile carriers have relationships with other regional carriers that enable the movement of shipments through a broader network, especially when shipping internationally
Understand the true impact of carrier rate increases
In 2020 and 2021, we’ve seen frequent rate increases as carriers adjust to meet the increase in demand from ecommerce. Carriers tend to release generalisations about the percent increase in rates, but these are just an average of the increases levied to various portions of the calculation. The devil is in the detail. BI and analytics tools help you more easily understand how that average, which may encompass differences for speed, weight, distance, and package count, overlays with your unique requirements to give a ‘true’ rate increase for your company and ensure you aren’t caught off guard by higher-than-expected charges.
But rather than entering carrier discussions with a focus simply on lower rates, merchants should use analytics to consider wider questions such as:
- What business problems are causing the biggest pain points in the delivery network today?
- What are the top three things to improve related to the business’s carrier services?
- What customer service issues are top of mind for customers, and how do they affect the business?
- Can delivery services be identified and added that attract and retain new customers?
We know the new normal means ecommerce deliveries are going to account for a significantly bigger proportion of most retailers’ business going forward. This ups the ante on ensuring the performance reviews and negotiations you have with your delivery partners work in your favour. With the right data and BI tools on hand to understand transportation activity and by accounting for different variables through simulations, you can more confidently approach important negotiations.
Dominic Potter is the General Manager, International for Logistyx Technologies, overseeing the company’s parcel shipping technology innovation throughout Europe and APAC.
Logistyx Technologies is the leader in Transportation Management for parcel shipping, providing an unmatched global multi-carrier network, predictive analytics and full visibility into customer deliveries. Its software boosts parcel shipping efficiencies and other business KPIs for many of the world’s top manufacturers, retailers and logistics providers.
Logistyx’s flagship software, TME, is the world’s first single engine specifically designed for parcel shipping. With more than 8,500 carrier service integrations globally, TME provides carrier compliance, predictive analytics and tracking on shipping from start to finish.
Headquartered in Chicago, Logistyx Technologies also has U.S. offices in St. Louis and Tulsa, Okla. and international offices in Canada, the Netherlands, the U.K. and Singapore. For more information, visit www.Logistyx.com