Parcel shipping and delivery has become a new standard in modernity, and it is only expected to grow. In a recent report by McKinsey & Company, parcel shipping is also expected to become the “future of last-mile delivery.” So, shippers need to get a handle on today’s parcel costs. In fact, shippers should implement and use these tips to reduce parcel costs.
1. Consider USPS and Regional Carriers.
A quick, effortless way to reduce parcel costs lies in using the largest parcel shipper in the country, the United States Postal Service (USPS). In addition, shippers should consider adding regional carriers to their overall shipping strategy, reports Rob Martinez of MultiChannel Merchant.
2. Pass Along Shipping Costs to Consumers.
Consumers want free shipping, but that does not mean shippers need to foot the full bill. Instead, shippers should factor shipping costs into product price points. This will give the appearance of free shipping, while reducing parcel expenses, asserts Jane Porter of Entrepreneur.com.
3. Audit Freight Invoices.
Things go wrong in shipping systems, and carriers may overbill shipments or fail to complete shipping refunds when issues, like late deliveries, arise. The only way to recoup these erroneous costs lies in auditing freight invoices. Furthermore, look for patterns in auditing that may help reduce future inaccuracies too.
4. Use Drop Shipping From Vendor Locations.
Drop shipping is another way to reduce parcel costs by putting the shipping costs and responsibilities in the hands of vendors, not just shippers. As a result, shippers can simply pay the vendors. However, this tip only works if vendors understand a shipper’s preferences for outbound carrier selection and costs.
5. Consolidate Parcels Into Larger Shipments.
Freight consolidation reduces costs by allowing shippers to access volume discounts through carriers. This may include using consolidation to turn multiple parcels into less-than-truckload (LTL) or full-truckload (FT) shipments.
6. Review Your Carrier’s Policies for DIM Pricing.
More carriers have implemented dimensional (DIM) pricing models in recent years, which can drive your parcel shipping costs higher. While you need to understand and consider the volume of your package, it is important to remember to think about other ways to reduce its total weight as well.
For example, switching to envelop or bag packaging can reduce most of the parcel’s weight, and it effectively eliminates excess volume, explains Vincent Gulisano via LinkedIn.
7. Remember the Cost of Rounding Up.
DIM pricing implies a direct need for simpler packaging, but going smaller may not be the best or appropriate option. However, carriers may charge shipping rates based on rounding up the package’s weight to the next pound.
For example, a package weighing one pound and two ounces may result in a two-pound charge.
If your carrier does round up, it may be worth considering changing your carrier shipping strategy.
8. Negotiate Your Rates.
Shippers often forget who has the true bargaining power in parcel shipping. While carriers may set standard rates, shippers still have the power to negotiate shipping rates. In the MultiChannel Merchant survey,36 percent of shippers cited negotiations as key to reducing parcel costs. More importantly, shippers should make negotiations a recurring, company-wide process. In other words, negotiate with different carriers to ensure you are getting the best rates possible.
9. Use Flat Rate Shipping When Appropriate.
The nation’s largest parcel carriers, including FedEx, UPS and USPS, now offer flat-rate shipping boxes for free. This means zero packaging supply costs and simplification of shipping rates, reports Peter Gasca of Entrepreneur.com. Unless your negotiated carrier rates are less than flat-rate shipping costs, use flat-rate shipping whenever possible.
10. Leverage Carrier Equipment.
Some carriers may offer software, printing and packaging equipment at no cost to shippers providing a set volume of shipments. Ask your carrier about discounted equipment and packaging supplies to reduce parcel costs.
11. Consolidate Carrier Selection.
Consolidating your carrier selection is tricky. While you may be able to reduce parcel costs by decreasing the total number of carriers used, it can lead to a monopoly and result in fewer shipping options in the long term. When consolidating carriers, always retain at least two other carrier options available.
12. Use Online Shipping Tools.
Like carrier equipment, online shipping tools may be available to reduce the paperwork and labor required in processing parcels. Check with your carrier or shipping provider about online tools, and use them when available.
13. Invest in Prepaid Shipping.
Prepaid shipping can help prevent runaway costs in parcel shipping. Prepaid shipping can include limitations that prevent carriers from overbilling or using incorrect shipping options.
14. Know What Your Consumer Wants in Delivery Schedules.
Consumers have come to expect same-day or next-day delivery, but that does not mean consumers will abandon a purchase if it takes a few extra days to arrive. Conduct market research, like surveys or email blasts, to get consumer feedback on what delivery schedules are needed. If you can use three-day or four-day shipping for parcels, it can dramatically lower your shipping costs.
15. Take Advantage of 3PL Discounts and Services.
All these tips can be grouped into a final tip that can reduce your parcel shipping costs most, working with a third-party logistics provider (3PL). Explore 3PLs available in your area, and remember than 3PLs can handle the brunt of parcel shipping, including auditing, consolidation and everything else.
The Big Picture.
Parcel shipping costs do not have to be a major cost center in your company. By leveraging these 15 tips, you can reduce your parcel costs and increase your profitability. In turn, this means better prices for consumers, more product flow and growth in your company.