Parcel spend management is growing in importance, and shipper workforces are becoming more diverse, reports Marilyn Gettinger of Parcel MEDIA, which may strain existing work relationships and require use of people analytics to boost morale. Unfortunately, shippers that do not take time to consider the influence of different factors will be forced to pay higher parcel rates, but they can avoid this future by understanding five key factors affecting parcel spend management.
1. E-Commerce Will Force Increases in Parcel Spend Management and Parcel Freight Rates
The impact of e-commerce on parcel is undisputed, and according to Jean Regan of TranzAct, it helped FedEx and UPS grow 6 percent in the first half of 2016. This might not seem like much, but it was enough to spur FedEx dramatically reinvest in their companies to offer more services and keep costs competitive. In fact, this 6-percent growth rate was the first time FedEx had experienced a surge in growth since the Great Recession. Paired with tightening capacity in all over-the-road modes and the relentless buying surges of customers, shippers of all sizes will be forced to re-evaluate existing parcel spend management tactics, ensuring they offer the lowest cost shipping.
2. Audit Your Invoices
Leaving money on the table is never a good idea; unless you intend to tip the person serving you. But, what if you are tipping carriers and not even noticing it? Have you looked through the invoice line-by-line? If not, chances are good that the carrier made a mistake, and that mistake could be costing your company thousands. The money is there, and the carrier has a duty to refund it. However, the carrier is not actively looking for mistakes, so the burden falls to shippers. Shippers should begin auditing parcel invoices as part of a parcel spend management program.
Auditing identifies inaccuracies and holds the responsible party accountable. In parcel spend management, this translates into shippers spending less on parcel shipping, which should pass-through as lower cost shipping and handling to customers. However, the wrong auditing program, like a manual, in-house auditing program, can eat away at profitability, so shippers may consider outsourcing to third-party logistics providers (3PLs).
3. Carriers and 3PLs Are Expanding Services to Include Parcel Freight Management
Speaking of 3PLs, carriers are not the only supply chain entities focused on reinvest in freight management; 3PLs have turned their attention to the revenue streams possible through proactive parcel freight management. This includes upgrading systems and technologies, developing application programming interfaces (APIs) that work seamlessly with the major carriers’ online freight program, and revisiting the negotiating table to get the lowest-possible rates. Renegotiation of parcel rates with carriers can help shippers maintain control over parcel freight spend, explains Jillian Farrington of Transportation Impact.
4. Enterprisewide Visibility and Technology Are Essential in Parcel Spend Management
An effective parcel spend management program begins and ends with visibility in the supply chain, reports Green Mountain Consulting, which ranges from knowing packaging requirements to eliminating inaccuracies in addresses and labels. While these processes can be handled manually, modern technology, like handheld scanners, wearables, tablets, and smartphones, offers immediate visibility into parcel shipping and handling. For customers, this amounts to better customer service by knowing when a package will arrive, where it is located, and what’s taking so long.
5. Customers Expect Free or Low-Cost Parcel Shipping on Most Purchases
Yes. You read that correctly; customers want to know what’s taking their next-day delivery so long. What? The answer is simple; Amazon has made it virtually impossible to offer low-cost shipping without the benefits of break-neck delivery speeds. Through the e-commerce giant, next-day, if not same-day, delivery is available at no extra expense for Amazon Prime members. Consequently, shippers face the prospect of lost sales and decreased revenue for charging too much or taking too long to ship products, even by parcel. The only way to combat this problem lies in proactive parcel spend management to offer fast, free parcel shipping, but in today’s age of parcel rate hikes, it is not a small task.
Take These Considerations Into Account on All Parcel Spend Management Decisions
The rate hikes in parcel shipping will continue throughout 2018 and beyond, and they are inevitable. The market created the perfect environment for robust demand for parcel, and as a result, shippers must begin to focus more on how to approach parcel spend management. By understanding the top five influencers of parcel rates, shippers can meet customers’ expectations, prepare for higher rates in the future, and keep parcel freight spend in check.