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Understanding How Parcel Cost Control Reduces Total Transportation Costs

Parcel Cost Control

Shippers face an interesting problem in the age of e-commerce. As explained by Tompkins Inc, retail business models are shifting away from the traditional business-to-business model to direct-to-consumer models. As a result, average shipment size has dwindled, driving increases in parcel freight spend. Shippers must recognize the importance of parcel in today’s age, as explained by Harold Friedman of Inbound Logistics, and enhance parcel cost control with these steps.

Understand Accessorial Charges Contribute to 20 Percent of Total Transportation Costs

Parcel cost control must underscore the importance of controlling accessorial charges, including fuel surcharges and surcharges not otherwise specified, like Saturday delivery, next-day delivery, and hazardous material handling. According to Friedman, accessorial charges may amount to 20 percent of total billed parcel charges. Knocking accessorial charges out of the equation lowers total transportation costs.

Shifting Parcels to LTL and Parcel Hundredweight Programs Lowers Freight Spend

Hundredweight programs, explains UPS Compass, total transportation costs reflect parcel spend, so any measures taken to lower parcel freight spend has the net effect of lower total transportation costs. While freight consolidation is commonly applied to the process of combining LTL shipments to create full truckload shipments, parcel hundredweight programs use the same tactic, applied to multiple parcels. However, parcel hundredweight programs may have stringent criteria for parcels, so choosing the right packaging, read the smallest possible box, and selecting the right service are key to making this shift lower total freight spend.

A 3PL Can Leverage Volume Discounts and Negotiate Lower Carrier Rates

Shippers are not stuck with paying the publicized rates for parcel freight; they can negotiate terms with carriers to land “best-in-class parcel contracts, reports Rob Martinez of MultiChannel Merchant. However, the negotiating table is intimidating, and shippers may opt to forgo their personal roles in negotiations by partnering with a 3PL that has the contracts and lower rates in place already. Furthermore, a 3PL’s nature implies an immediate surge in bargaining power, so carriers are more likely to offer rates lower than any other carrier-shipper contract.

Working with a 3PL goes further by providing value-added services to shippers with parcel needs. This may include warehousing, packaging products, freight scheduling, invoice auditing, and data-based insights through Big Data analytics.

Going Online With Parcel Shipping Payment Processing Is Standard

Parcel shipping means paying for more shipments, which can be both labor- and time-consuming, not to mention difficult to navigate with dozens of regional carriers and hundreds of potential shipper-carrier relationships. Thus, shippers should move paying for parcels to an online platform, which may be included with a dedicated transportation management system (TMS), such as the Cerasis Rater. In fact, FedEx, USPS, and UPS have taken this concept a step further, offering discounted rates to shippers who pay for shipping parcels online.

Automate Parcel Shipping Processes, and Use Data Analytics

Going online to pay for parcel shipping is only a fraction of the possibilities through an internet-connected TMS. Today’s systems automate parcel shipping processes and leverage analytics to help shippers gain insights into parcel freight spend, as well as total freight spend through other modes. Insights empower data-based decisions, like using parcel hundredweight programs versus shipping parcels over short-term and long-term periods.

Ask About Association Discounts

Association discounts, reports Jane Porter via Entrepreneurer.com, may be available to shippers for a variety of reasons, like being an AARP member, active or retired military, or affiliated with an institution of higher learning. Depending on the association, discounts are steep, which may be as high as 50-percent off parcel shipping costs when using FedEx and UPS.

Parcel Cost Control Is Key to Surviving the E-Commerce Explosion

Proactive parcel cost control opens new revenue streams and simplifies the responsibilities of shippers by holding carriers accountable and leveraging the latest technologies. When carriers know a shipper is working to reduce the workload for carriers, it makes freight more attractive. In other words, carriers are more likely to literally make room in a tight parcel space for shippers using the industry’s latest technologies and automating processes, especially as e-commerce booms. Following these steps, shippers incorporate parcel cost control as part of their overall transportation management strategy, embracing the future of e-commerce and the omnichannel supply chain, while bridging the divide between proactive total transportation costs and the need for more parcel shipments.

Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
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