It seems a perpetual peak season is rapidly becoming the new norm in small package shipping.
However, unlike the seasonal Black Friday and Prime Day spikes many shippers and carriers have mastered, the current parcel climate is yielding new challenges.
Home-bound customers aren’t answering the door for signature-seeking parcel delivery couriers. How does the FedEx and UPS driver complete deliveries at closed businesses? When parcel trucks are loaded to the roof and more e-commerce orders are filling the pipeline, essential supply shipments cannot stop and impede consumers’ medical, home office and home school needs.
During this non-standard peak period, communication is critical between shippers, carriers and customers. As the novel Coronavirus (COVID-19) situation evolves across North America, an organization’s proactive efforts to monitor, validate and optimize its small package program can improve efficiencies, maintain customer service and control costs.
Parcel Volume is Filling Networks
Limitations on passenger travel across international borders isn’t slowing the movement of goods into the U.S. Air cargo flights enter the country daily, and the express market is working as usual. Essential goods – medical, protective and cleaning supplies – are getting priority over non-traditional retail shipments, but Amazon’s move to add workers illustrates that fulfillment and service providers are focused on meeting the rising online demand for vital needs.
“UPS’s network planning and operations teams are experienced with adapting to changing conditions, and are developing contingency plans to address potential sources of disruption in our air and ground networks,” UPS Chairman and CEO David Abney said in a March 18 email to the marketplace. “Our teams are working to continue to serve the supply chain needs of businesses during this time, while keeping our employees and customers safe.”
Like organizations around the globe, carriers are focused on good hygiene within facilities and among employees, but they’re also focused on maintaining their own efficient operations. Packages destined for a location that is closed under nine days, will be held at the UPS/FedEx centers. However, if the delivery location is closed more than nine days, they are returning to the shipper.
The central issue here becomes two-fold:
- Carriers don’t have storage for these packages. Many held packages are being stored in feeder units (trucks) and stay there until unloaded for scheduled delivery. If an urgent package needs delivery, shippers will likely have to resend product.
- If drivers are unable to deliver a package due to time constraints or buildings are closed, they are instructed to mark them “Emergency Conditions – COVID-19.” All of those packages will circumvent guaranteed service refunds.
Meanwhile, UPS and FedEx are easing requirements for physical signatures, and offering alternatives to customers meeting a driver at the door. For deliveries to high-density buildings closed to outside traffic, such as apartment complexes, service to lockboxes or other alternative pick-up points may become increasingly prevalent.
In this environment, it is important that shippers closely monitor and validate parcel service performance, especially within carriers’ complicated accessorial structures. Interior deliveries may not be feasible. Heavy weight packages, such as reams of paper for the home office, will generate additional costs. Be alert for carrier adjustments to rates and services during this non-standard peak period.
Nuances related to parcel delivery services can create new challenges for commercial shippers accustomed to operating in a business-to-business world. Responding to direct-to-consumer delivery demands can trigger unfamiliar shipping cost assessments. An experienced shipping provider can help implement drop-shipping programs that balance cost and service for shippers responding to home-bound consumers. That partner’s ability to monitor transportation activity also supports shippers’ proactive communication of delivery status or delays to end customers.
Monitor Fluctuations in Spend and Volume
Our team has spoken with customers experiencing a spike in online orders stemming from people staying home to reduce the risk of infection. As spread of the virus evolves, employee absence could jeopardize their ability to fulfill orders. Curtailment of non-essential shipments could further impact some organizations’ shipping volume.
It is important to actively monitor carrier spend levels to protect volume-based discount incentives. Earned discount thresholds offered in parcel carrier agreements are based on a 52-week rolling average. In the event of a slowdown, as new weeks of data are incorporated, the gross rolling average will decline and discount incentives will adjust downward.
For FedEx customers, this often results in an incremental change. The change for UPS customers could be more stark as a shipper’s spend levels diminish over time.
As the transportation environment continues to shift, it may make sense for some small package shippers to consider evaluating low-weight, multi-piece LTL shipments. Where warranted, transitioning those shipments to UPS Hundredweight or FedEx Multiweight can help drive revenue calculations.
If your company’s fluctuating parcel spend jeopardizes discount incentives, now is the time to have an honest conversation with account managers about the current situation, or consider exploring other carrier options. This can spur broader conversations that support improved cost management, including routing guides for outbound volume or billing practices that put cost control in your hands instead of your vendor partner.
Experienced parcel shippers can manage these program practices in-house. However, at a time when operational demands challenge many companies’ profitable performance, multi-modal transportation management experts using technology-enabled analysis can support parcel shipping optimization that enhances service and controls costs.
Parcel logistics leaders: Now more than ever it is important to make sure you get the best carrier rates possible. Companies pursuing peak fulfillment opportunities can leverage this non-standard peak season to their benefit while protecting customer experience.
Long-term Parcel Outlook
Don’t trust any crystal ball hype that you’re hearing in the marketplace. Nobody can predict what is happening tomorrow, next week or over the long-term. One thing is certain: there will be change.
This creates new opportunities to examine end-to-end organizational processes.
Digital transformation in recent years laid groundwork for the supply chain evolution many organizations are already embracing. Sourcing strategies, vendor locations and distribution network design are key elements in executives’ active conversations during this time of disruption. The prospect of financial incentives will drive more companies to diversify and reshore domestic production.
Transportation Insight manages supply chains for organizations of all sizes so they can focus on areas of their own expertise. Combining parcel invoice audit and payment, data management and analysis with decades of deep parcel industry experience, we help clients align their multi-modal transportation programs with carrier capabilities and customer demands.
In a dynamic, unpredictable marketplace, we’re here to lead you through efforts to adapt your current strategy, construct contingency plans for future disruptions and monitor your carriers performance. To make sure your small package shipping processes are delivering maximum value when it is needed most, schedule a parcel program assessment today.
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