In our benchmarking studies with omnichannel and ecommerce businesses, we find the cost of shipping is by far the number-one fulfillment expense, often exceeding the sum of wages, benefits, facilities, utilities and supplies.
According to a recent analysis by Gartner, parcel shipping growth will continue to rise by 17%-28% through 2021, and by 2020 same-day delivery will drive up logistics costs as a percentage of revenue by 50%.
In a recent blog we discussed critical factors to consider when weighing an enterprise shipping system investment. Some benefits include rate shopping, preparation of international documentation, analysis of shipping data and enterprise-wide control from multiple locations including DCs, stores and suppliers. In our consulting we have found these systems help control the acceleration shipping costs.
Many WMS providers don’t have plans to develop and support their own shipping system functionality but choose instead to integrate with standalone providers. Multi-carrier parcel management is becoming critical as a standalone system or integrated with a Transportation Management System (TMS).
For manufacturers and wholesalers entering the direct-to-customer marketplace, small parcel shipping is dramatically different from shipping solutions they use in their core businesses, and enterprise shipping systems can provide great benefits.
11 Areas of Savings
Your freight carrier’s invoices will give you information that can help identify costs and estimate savings. Based on these 11 areas, we believe many companies can achieve an attractive return on investment (ROI) with an enterprise shipping system.
It can select the most cost-effective parcel carrier from among those you contract with, based on order characteristics (weight, dimension, etc.), delivery rules (service levels, delivery time and delivery zone). How will this function decrease your freight costs? Will it make some service plans and zones more profitable?
Faster Package Throughput
It can increase the throughput of packages per hour by eliminating manual input, streamlining process steps and automatically generating labels and documents including for international shipping. This can result in reduced labor costs and fewer shipping stations.
Parcel Consolidation and Zone Skipping
You can also combine multiple parcel shipments into one LTL shipment to lower your total cost. Zone skipping is an example. This involves combining a large number of parcel shipments and moving them to a cheaper zone (such as U.S. Postal Service bulk mail centers) where last-mile parcel delivery is completed.
Cartonization of the parcel is typically estimated in the TMS but is not finalized until all rating, manifesting and labeling is determined by the WMS. This can reduce your shipping costs by eliminating dunnage and unused carton space.
Accurate DIM Weight Calculation
Shipping systems can reduce unexpected costs that occur when your system calculates dimensional weight differently from a carrier’s system. An audit of your DIM weight calculation should give you enough data to create an estimate.
In conjunction with address correction software, enterprise shipping systems can reduce costs from incorrect addresses, non-deliverables and residences incorrectly identified as commercial.
Identify the costs to your business for vendor compliance and maintenance. Systems which are vendor certified by all major carriers can reduce costs. Consider compliance for label and document formats; updates to ZIP code and zone charges and country regulations; and international documentation for commercial invoices, shipper export declaration and certificates of origin.
An enterprise shipping system can also reduce documentation errors and incorrect rates which delay deliveries and increase costs.
Customer Package Tracking
Enterprise shipping systems can decrease contact center support “WISMO” calls (“Where is my order?”), reducing labor and telephone costs. Integration with customer’s mobile devices provides a self-serve function.
Reduced IT Costs
You can reduce the IT costs of developing and maintaining shipping and manifesting applications including customized integrations; carrier rate changes by service level and country; system upgrades; and functionality upgrades and 24/7/365 vendor support, if needed.
You can add shipping locations without impeding growth. Bring all freight under one system control, including all shipping points (warehouses, stores, office locations, factory or distributor sites for inbound and drop shipping). This gives you best-way shipping functions, improved freight costs and better discounts.
Smarter Ongoing Freight Analysis
You can gain access to all package characteristics and shipping data, allowing you to understand location shipping profiles and product shipping characteristics and costs. This information also gives you greater leverage in carrier negotiations.
An enterprise shipping system is a major way to reduce costs today and control them in the future, providing an attractive ROI for many companies, depending on the complexity of your operations.
Brian Barry is President of F. Curtis Barry & Company