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Parcel Market Trends

Ecommerce Shipping: Costs and Solutions

By Shipware | eCommerce, Parcel Market Trends, Shipping Knowledge | No Comments

Today, eCommerce is not a side gig for your business. In some cases, it is a driver of growth and, for many businesses, it is the only area of revenue. Many business owners, large and small, have to convert from retail and warehouse operations to consider the unique challenges of eCommerce. Ecommerce is distinctly different from brick and mortar or store distribution operations. Besides the small number of units per order, the additional customer service, and other challenges, the other major difference is the need for parcel shipping. 

With the help of our shipping consulting experts, we’ve put together a guide on how to save on your eCommerce shipping costs.

The Current State of Ecommerce Parcel Shipping

Ecommerce generates more packages, smaller in size, and higher in cost per unit than other forms of sales. Instead of pallets, you produce cartons, pouches, or envelopes. Instead of lump-sum charges covering more than one sale, you end up with one or multiple shipping charges per sale. And, instead of mutually interpreted terms, your charges often depend on the judgment of personnel multiple times in the life of the shipment.  

Parcel shipping has a few major players and new, more regional providers emerging every month. Depending on how many services you use, you may have different terms and conditions, possibly even multiple sets per shipping provider. It is important to follow those regulations to avoid any surprise shipping fee, but that is not enough.

Estimated Shipping Costs

Some shipping platforms can estimate shipping on the order based on product weights and other stored information (like oversize product dimensions). This takes a great deal of daily management as new products are introduced to your eCommerce store and updating existing products with new packaging information. The resulting shipping estimate can help you decide what to pass on to your customers and a rough budget for your shipping costs.

Discretionary Charges

Note that is a rough estimate. Why? Because some charges are dependent on the final package dimensions, terms in your contract, and even the discretion of a handler at the parcel shipping company who handles the package. Some of those charges can show up after the billing period, even months later. So, the control of your shipping costs is sloppy at best. It can be an expensive and futile exercise to improve that estimate, almost like balancing a teeter-totter on a ship underway.

How to Save On Ecommerce Shipping Costs

With the shipping industry being tricky and costs adding up due to estimated shipping and discretionary charges, what can you do to save costs? Follow these steps.

1. Estimate the Impact

Well, first, use that estimator. Even if the value is inaccurate, having a shipping cost estimate per order can help you understand trends in weight, cost, and services requested by your customers. This can help you plan how to apply free shipping, the budgets for shipping in general, and even the impact of your packaging on your costs.

But that is not enough. You need more advanced options and cost-reduction strategies. Ones that help you ensure you pay what you should, not just what you are billed. Let’s start with auditing your invoices.

2. Audit Your Invoice

First, why? Well, all of the surcharges are discretionary, depending on the supervisor or delivery driver. Even things like discounted shipping rates for bundled packages or signature options can be misapplied at either end of the shipping process. You need to check your invoices to find out if all of the charges make sense. And, depending on the shipping service each package used, you should verify if your parcel shipping carrier met their service guarantee. This is a big one if you are a smaller shipper and paying extra for overnight or even a 2-day shipping service. You have to deal with the customer service implications but you should not have to pay for the extra cost with no benefit.

The problem with auditing, though, is that you have a learning curve. Which services to which shipping zones have the most problems? Should you be looking at actual vs. dimensional cubic weights for discrepancies? Or, is the occasional address correction or handling charge something to watch instead? It can become an activity that may or may not save you money, or at least enough money to justify the effort.  

In that case, consider a professional firm like Shipware to take care of a parcel audit. Our experience helps reduce that learning curve to almost nothing.  And, as our exposure to your shipping efforts increases, we’ll help you find new ideas and strategies to help you control your existing costs

How much can this shipping solution help? Over time, you might save between 1 and 5% of your total shipping parcel cost depending on what you ship, the type of service you use, and even where your shipments are headed.  

At this point, you have tools to budget both your spending and your customer service options for shipping and a way to catch mistakes on your invoices. You have more control and maybe some appreciable savings. With that said, even more can be done to help you save costs.

3. Negotiate Your Shipping Contract Terms

Negotiating your shipping contract will give you the most desirable outcome and the best shipping options for eCommerce operations. However, this is best done with help. There are several concepts to consider when you look at a new parcel contract.  

  1. The salesman you work with is not your ally. They are a resource to work with, helping you to use their company’s services to do business. But they are paid by the parcel shipping carrier to make as much money as possible from you. Therefore, that contract? It probably benefits them more than you.  
  2. Averages are bad. Not because the math is incorrect, but because an “average increase” or “net change” often does not impact your total costs the same as the individual charges or costs in that “average”.
  3. This is a contract, not a bill. All of it can be negotiated. The nuance is knowing which areas of the contract are better to pursue than others.
  4. Given your business changes, this contract may not fit your evolving needs. International shipments, new product lines, and even new shipping locations may radically affect the contract and its impact on your expenses.

Like auditing your own invoice, you can negotiate your own contract but you have a learning curve. For every term or clause you bend to your benefit, you also have to look for other areas your shipping provider is holding onto. Which are valuable to you? Which are worth pursuing, given how you ship? And do you know how your parcel shipping company will adjust with annual GRI announcements, zone changes, or even service alterations during the contract to negate your savings?

Get A Partner to Audit and Negotiate

This is why you need an expert in your corner.  Not because you can’t do the job of negotiation, but you can’t learn fast enough to overcome the years of experience your eCommerce parcel shipping company has.  

Finding the Loopholes

So where do they focus on? What would a parcel contract negotiation company zero in on first?

They look for shipping surcharges that you shouldn’t need to pay. Additional handling, address corrections, even oversize package charges may be due to how the shipping company interprets their own terms. You might be able to avoid them with internal efforts like packaging changes or correcting your customer address database.

They look for surcharges that everyone pays, but may be possible to reduce. Fuel surcharges and the dimensional weight calculation get applied to every shipment, to every carton you ship. Knowing what other companies have negotiated for their sliding scale fuel surcharges or even the calculation of dimensional weight helps you to know where there is “fluff” to negotiate with.

They look for minimum charges that can negate savings. The trend of shipments to go into smaller packages, envelopes or pouches mean that the minimum charge applies to more shipments than you expect. Add in a new drop shipping location, shipping site, or partner company and you may be losing savings due to that minimum.

They even look for service level versus cost mismatches. Are you using a service that costs more but goes to addresses that can be served just as fast as a cheaper service? They know how to identify options for this, as well as where alternate services like hundredweight or cross-border consolidation might be beneficial to add to a contract.  

Impacting Your Bottom Line

So how does this help you? Depending on how much you ship and how much you spend to do that, you could save between 10 and 30% of your bill. While you might be able to reach those levels in a few years of experience with negotiating these contracts, a partner can help you get there much faster, saving you much more money more quickly and helping you increase profit margin at the end of the day.

Control Your Costs Now

To control your eCommerce shipping costs, get ahead of those cases. Estimate your shipping cost for each order to have a forecast for future billing. Audit your current invoices to make sure you only pay what you should. And to get real control, negotiate your contract to avoid fees, cap your maximum charges, or reduce their impact whenever you can. With these eCommerce shipping solutions, you’ll be able to cut costs significantly and improve your eCommerce shipping strategy.

The best way to do all of these is to consult experts who not only know nuances of the industry, they know how to find the savings in your data to benefit you quickly.  Shipware supplies not only the knowledge but deep industry negotiating experience to both audit and aid your negotiations. Wondering how you can improve other aspects of your eCommerce business’ supply chain? Check out our tips for cost-effective supply chain management!

chuttersnap

Parcel Shipping in a Pandemic

By Shipware | News, Parcel Market Trends

These are troubling times for everyone.  While we’re all focused on staying healthy and managing through this crisis until it passes, businesses must simultaneously be focused on doing everything that they can do put themselves in a position to come out favorably on the other side.

Parcel shippers especially are in a unique position.  Many shippers who specialize in consumer products will find volumes spiking and will be in the enviable position of trying to keep up with demand.  Other parcel shippers, however, will be faced with declining demand and, therefore, declining parcel volumes. Shippers who fall into the latter category should immediately take steps to mitigate the impact that declining volumes could potentially have on their carrier pricing and discount structure.

Most shippers, whether they ship primarily with UPS or FedEx, know that there is likely a component of their carrier pricing that is determined by volume and spend.   UPS “Portfolio Tier” discounts and FedEx “Earned Discounts” are based on spend. Rebates are based on spend. Certain surcharge and accessorial pricing can be based on spend or volume.  In addition, many shippers have made commitments to the carriers in exchange for certain pricing that are spend or volume-based commitments. As shippers experience declining volumes due to the virus outbreak, they’ll be also experience rising parcel costs unless they take some important steps.  

An important thing for shippers to remember as they prepare to have conversations with their carrier reps is the following:  Volume or spend based pricing is not designed by the carriers to be penal in nature. It is designed to ensure that the carrier is the primary carrier and that the shipper is not diverting volumes to other carriers by choice.  In fact, some carrier language related to minimum volume commitments include caveats that ease the burden on the shipper if volumes decline due to circumstances beyond the control of the shipper.  

Let’s look at some areas that shippers should be focused on in the very short term.

Portfolio Tier and Earned Discounts

These are the discounts that shippers receive from the carriers based on a certain level of spend.  As spend increases, so do the discounts and vice versa. With both carriers, these discounts are almost always based on gross, pre-discounted spend.  UPS calculates the spend on a weekly average basis, using a rolling weekly average over a period of time. That period of time could be 13, 26, 52, 156 weeks or any other number of weeks agreed upon when the agreement was negotiated.  FedEx calculates the number on an annual basis based on the number of weeks since the agreement was implemented or using the previous 52 weeks once 52 weeks have passed. Shorter time period calculations (13 weeks, for example) benefit shippers whose volumes are rapidly growing.  For most shippers in today’s environment, the longer the time period used in the calculation, the better.  

As shippers find themselves in a declining volume and spend scenario, they’ll likewise see an erosion of discounts.  Every pricing agreement is different, and every shipper will see a different level of erosion. For some shippers, dropping one tier in their agreement could result in drastic loss of discounting.  For others, it might require dropping several tiers before a significant impact is felt. Even for shippers in the latter category, the time to act is now.

This would be a great time for shippers to ask their carrier rep to extend the time period used in the spend calculation.  But there’s a potential trap in doing so: When pricing agreements are recreated to allow for a change such as this, the carriers, by default, will often begin that spend calculation from the time the new agreement goes into effect.  That could be counterproductive and even disastrous in today’s environment. Shippers should request that the carrier continue to use the rolling average number already established by recent history or they should ask for a lengthy Grace Period.

Grace Periods

When a new pricing proposal is implemented by either carrier, the Portfolio Tier and Earned Discount calculation, in most cases, will include a Grace Period.  The grace period is a period of time during which the discounts will be calculated using a pre-determined level of spend. The grace period could be as short as 4 weeks or as long as 26 weeks or longer.   Shippers who are seeking concessions based on declining volumes should seek the longest grace period that the carrier will allow and should ensure that the grace period discounts are appropriate. (Grace period discounts should be equivalent to the discount that the shipper will settle into once volumes have stabilized.)

Rebates

Shipper who have negotiated rebates with either carrier often have done so in lieu of deeper discounting.  Rebates are almost always based on achieving a certain level of spend, either on a net or gross perspective, and can be calculated quarterly, bi-annually or annually.   As volumes decline, rebates will be in jeopardy. Now might be the time for shippers to talk to their reps about moving the rebate percentage into the up-front or base discounts.  (Important that the percentage does not get moved into the portfolio tier or earned discounts for reasons outlined above.) Another approach to protect a rebate might be to seek a longer calculation period.  This quarter and next are in jeopardy. Seeking an annual rebate calculation could be a solution.

Minimum Commitment Language

As mentioned previously, some shippers have agreed to achieve a minimum of volume or spend with their carrier in exchange for certain pricing concessions.  These provisions allow the carrier to charge a financial penalty if the commitments aren’t met. But they also usually come with a caveat that says that penalties will not be charged due to volume or spend declines beyond the control of the shipper.  A global pandemic would certainly qualify. Expectations are that neither carrier would make this an issue but there’s no harm in shippers reviewing these provisions if they have them and getting out in front of a conversation with their carrier reps.  

These are crazy, uncertain times.  Shippers can make them less uncertain by taking steps in the very short term to stabilize their parcel pricing.  A very careful review of pricing agreements with shipping consulting is an essential first step. Shippers should identify those aspects of their pricing that could be negatively impacted by declining volume and spend and should begin immediately scheduling discussions with carrier reps and employing some of the strategies outlined above.

delivery drone flying in city

4 Trends to Watch in 2020 for Parcel Shippers

By Shipware | News, Parcel Market Trends

2019 has seen a number of changes in the parcel industry, such as FedEx not renewing their contract with Amazon, the new UPS 5-year labor contract, and the near departure of the US from the Universal Postal Union. What will 2020 bring? Here are 4 trends to consider in your parcel shipping planning:

1. Rates will not only go up, but affect you more than each carrier’s General Rate Increase announcement suggests.

Background

Every year, the major parcel carriers release their announcements for pricing changes in the coming year. FedEx has announced a rate increase of 4.9%, UPS 4.9%, and even USPS expects package pricing to increase 5.3% in 2020. But these rate announcements are never that simple.

Changes to zone maps, surcharges, and the contractual clauses of each shipper always change the direct impact, with many shippers taking increases greater than the 4.9% stated averages. To make it even murkier, each provider makes additional announcements throughout the year for changes to services, new services, and even changes to policies that can increase the cost of shipping indirectly.

At the same time, the dynamics of the industry are changing. The direct increase in volume across all services, the increase in volume for faster services, and the need for additional delivery methods to the consumer are all contributing factors. These trends will continue in 2020, and the resulting pressure on pricing will continue as well.

So, what can you do to mitigate this trend?

Negotiate your contract to cap increases, use custom values, or even negate whole surcharges in the billing. Know which areas of the service guide for your carriers can impact your costs. And finally, stay on top of the news from the carriers to determine how your service may change.

Ensure that you audit your parcel invoices from your carriers. Given the lag in the billing systems for international, multi-carrier, or unusual circumstances, it may take a while for all charges for shipments to be known. Auditing will not only allow you to know your true “Cost to Serve,” but also where your service needs attention. The quarterly reviews with the carrier are great for spotting trends, but actively contesting bills or catching emergent issues will aid in preventing shifts you don’t expect.

2. Consumers will expect faster and more reliable deliveries

Background

In 2019, Amazon announced their emphasis on 1-day delivery for orders to Prime members. To accommodate this, Amazon has created its own network of warehouses and delivery trucks. Given this widespread membership in Amazon’s Prime program, this fast delivery expectation will be demanded of other e-commerce – or any commercial – operations by customers even moreso in 2020 than 2019.

In response, the major carriers have added more planes and trucks to their fleets. They are adding facilities, technology, and even automation to any element that can speed processing and delivery.

This expansion allows their customers to meet the operation changes needed for more rapid shipping and new service options. You can obtain later pick up times for certain services, new delivery options for secure delivery, and more accurate delivery day commitments to the customer’s door.

This shift towards policies and networks to speed deliveries will only accelerate in 2020. The most obvious policy change will be the availability for FedEx Home shipwares for Sunday delivery beginning in January of 2020. While this is expected to shift volume from the SmartPost final mile deliveries from USPS back to FedEx, the true impact is still unknown.

3. Carriers continue to expand and increase capacity

Background

Another major impact of the split between Amazon and FedEx was the increase in capacity the FedEx Express services suddenly created. While the temporary increase in 2019 helped to handle growth, the expected 2020 growth in e-commerce and matching Amazon on order to door speed has encouraged all carriers to expand their fleets, networks, and delivery options.

FedEx announced expansions to their Memphis facility with a planned final expenditure of $450 million. UPS has announced the creation of at least 5 “superhubs” to support faster processing. These two plans, announced in 2019, will result in capacity coming online in 2020 for pure volume. Exactly when and how much remains to be seen in the coming months.

This means that 2020 pricing will reflect the need for mewly expanded offerings to contribute to margins. Like all pricing changes announced for 2020, the exact pricing of each service, zone and weight will be focused on making the shift to more packages moving faster profitable.

How to address the trend for increased capacity

More capacity in vehicles and processing capability should mean additional flexibility in handling your shipping volume. The additional cost can be addressed in the parcel contract negotiations that you should have with your carriers. These negotiations should aim to remove minimum charges for various services, discuss pricing bands for the services you use, and rationalize the selection of which services must be used. You should focus on using primarily ground services to make use of the expanding facility network and only use the air/express services as needed.

4. Changes to petroleum markets and regulations

Background

The other trend to watch closely is the shift in regulations for fuel and the surcharges they generate. This trend is more subtle than most and requires explanation. Fuel surcharges are indexed to a specific weekly US government diesel price index. Any change to the refinery capacity or output that can impact that index is then modified by each parcel carrier. So what factors can affect the refinery capacity and production?

In 2020, ocean carriers will be affected by IMO 2020 regulations. The push for ultra-low sulfur fuels for the ocean shipping fleets of the world will put pressure on refineries to find new markets for the fuel oil no longer being purchased. This shift may put pressure on the diesel market to compensate. While the ocean carriers, refineries, and parcel carriers have had time to begin the transition in 2019, the deadline is in 2020. Whether the players have adjusted to the new fuel demands sufficiently has yet to be seen, or the true impacts felt.

The other major factor on the fuel costs is the carriers’ expansions into alternative fuel options. As of 2019, most of these attempts are trial runs, designed to test the actual value of using electric, hybrid or more exotic fuels like LNG. Currently, the focus is on the final mile delivery segment of the delivery network, but even the OTR fleets are testing new ways to fuel their trucks. Expect the carriers to expand their testing in 2020 as the results of the initial tests are evaluated.

What can you do with this trend?

Once again, know where the fuel surcharges affect your shipping. FedEx and UPS both apply the fuel surcharge to the base shipping charge for each shipment. But certain surcharges may have the fuel surcharge calculated on top of them as well. It should only affect large, non-standard pacjaging, or poorly packed items. So, controlling the more “unusual” shipments in your fulfillment chain will save you more money than just the base charges.

Conclusion

The central theme for these trends is that costs will go us as the carriers expand services, options, and networks. Making use of the additional capacity, new service offerings, and expanded coverage areas will definitely help you meet your shipping expectations.

Customers expect fast fulfillment and your parcel carriers are a major part of your response. But, at the same time, your costs can increase. Knowing how you are affected and how you can address those costs pressures is key to keeping control of them.

Shipware offers parcel and LTL invoice auditing as well as parcel contract negotiation consulting to ensure that your company can keep up with the latest trends in the parcel shipping industry. This can save you money, reduce the variances in your on-time delivery performance, and help you add functionality to keep ahead of change.

what is uber freight and how does uber freight work

The Rise of Digital Freight Brokerage: How Uber Freight Works

By Shipware | Parcel Market Trends

The concept of Uber is well accepted in the United States. Using an app, a person seeking a ride inputs their ride request information. Almost instantly, a price quote pops up, sometimes with several options. The rider accepts the service with the best fit and can track the car’s arrival at their door. During the ride, they can track it to the destination via GPS in real time. Fast payments and easy payments are a hallmark and consolidated in the platform. Sounds easy? It is.

Uber liked the concept so much, it spread its wings, expanding the concept into Uber for trucks. What is Uber Freight? Uber Freight launched in May, 2017. Using the technology platform (via Uber Freight app or website), shippers can input load details into the system. Truck drivers or dispatchers provide market prices and agree to the terms, and within minutes, they can make a match. 

Uber is not the only service of this type, though it’s so well known that it’s frequently substituted for the generic term “ride-sharing service.” Just the same, Uber Freight is not the only digital freight brokerage service. Along with the Uber Freight app, digital freight brokerage companies with smartphone-enabled apps include Transfix, Loadsmart and Cargo.

 

How Digital Freight Brokerage Works

 

The technology platforms like the Uber Freight app allow shippers and truck drivers to match needs and services, to ultimately deliver the freight where it needs to go on a one-time basis. Shippers input information on the pick-up spot, the weight and number of pallets, the destination, the timing, and other pertinent details. Truckers are happy because they receive fast payments, within several days to a week.

Once the freight is picked up, shippers can monitor their shipments online in real time. And on delivery, Uber Freight provides a proof of delivery photo along with a photo of the signed bill of lading, stored on the shipper platform. This simplifies the paperwork and requires no faxing.

Digital brokerage services remove the human middle man – the broker – though the companies have customer service available and rely on that good service to stay in business. Instead of brokers on the phone playing matchmaker, the technology platforms act as the broker. Of course, the companies have freight brokerage licenses. They vet a trucking company like a traditional broker would do. 

Uber Freight’s vetting, for example, makes sure that the trucking company has the proper inspection and safety history, as well as the equipment needed for the Uber Freight requirements. As part of the Transfix onboarding process, carriers and drivers need to provide all compliance information. Once in the system, the trucking company can bid on any proposals that meet the criteria.

 

Who Needs Digital Brokerage? 

 

The rise in digital freight brokerage comes on the heels of a growing truck driver shortage. That’s caused the trucking company prices to rise and it’s delayed some shipments in the supply chain. Shippers with smaller or less regular hauling needs are at a disadvantage, in that they need to rely more on spot market prices. Without long-term contracts locking in a price and guaranteeing capacity, these shippers are at risk of big pricing fluctuations and shipping uncertainty. 

Fortunately, in 2019, the capacity demands eased up somewhat from the previous few years. DAT Solutions tracks demand and capacity in their load-to-truck ratio, the ratio being the number of loads posted on their DAT Load Boards to the number of trucks posted. In June 2019, 3.13 loads were posted for every truck, down from 6.29 in the same month in 2018 and 4.4 in June 2017. That is good news for shippers, but the data is an average across the country, and some markets, lanes and directions have more difficulty than others.

The Uber Freight platform focuses on small and medium size shippers in the supply chain. Shippers in these markets may not have their own transportation management systems to help manage their freight. Some rely on paper, email, Excel spreadsheets, and fax service instead. The digital shipper platform can improve the company’s business practices and help bring their transportation needs into the modern age.

While the focus is on small and middle size markets (owner operators and small fleets), digital freight brokerage companies are used by some large shippers as well, who supplement their needs with additional capacity. Land O’Lakes, for example, was an early adopter with the Uber Freight platform. Anheuser-Busch works with almost all the digital freight brokerages.

The smaller start-ups are forging a new path with shipments online, citing the large traditional brokerage firms as their competition, rather than seeing each other as the main competition. Large brokers, some of whom are also carriers, are investing in the technology and jumping into the field as well. J.B. Hunt now offers a transportation management system that allows shippers and truck drivers or dispatchers to make a digital match. Even Amazon is getting into the digital freight brokerage business in the supply chain.

 

Pros and Cons of Digital Freight Brokerage

 

For shippers currently using a manual process, the digital freight brokerage service can easily streamline the booking process, saving time and effort. Some of the services, like Uber Freight and Amazon, are cutting their prices to gain a market advantage, which is good for the shippers in the short run.  

Rather than relying on a human broker, who may not be available during some less traditional business hours, the digital services offer 24/7 access for both carriers and shippers, allowing matchmaking at a time convenient to the user. Some services offer rating services as well, making it easier for both sides to see how the other is rated by peers. 

Automation can increase efficiency, eliminating the manual and clerical process that has not been traditionally efficient. Typically, the brokerage process involves phone calls, waiting, more phone calls, faxing and other paperwork. The digital matching process reduces costs for shippers, as it decreases the labor costs on both sides to find and book a carrier.

Algorithms like Convoy’s use artificial intelligence to learn a truck driver’s behaviors and preferences, so it can recommend more appropriate loads to take on. Plus, pricing is transparent for shipments online and easy to understand, without requiring a third party to fax over information or channel it. 

The downside for now is that these brokerages offer full truck load capacity only. They offer dry van, reefer or flatbed options, but may not have the specialty services required by a shipper. It’s also harder to establish a relationship with a carrier using a one-off service.

 

The Future of Digital Freight Brokerage

 

One advantage for everyone is that truck drivers can be more efficient, letting them book loads on return, so they’re not driving empty miles. The American Transportation Research Institute estimates that more than 20% of miles driven by trucks are “empty miles.” These are miles that could potentially be used to haul freight, but it’s often tough for carriers and drivers to coordinate the return loads.

Convoy announced a new feature this year called Automatic Reloads, which uses an algorithm to coordinate and book loads in multiple segments, with convenient locations. This can be done when one load is booked. Truck drivers can accrue more billable miles and minimize the time between their hauls.

This digital freight brokerage industry is in its infancy. In Uber Technology’s recent IPO filing, they cited the American Trucking Association’s statistics that the 2017 U.S. trucking market was $700 billion, of which the brokerage portion was $72 billion. Uber Freight estimated that their 2018 bookings were $359 million, only 0.1% of the total trucking market. And they expanded into Europe in 2019.

The interest is already there. Even while focusing on small to medium size businesses, 1,000 shippers signed on with them, including giants like Colgate-Palmolive, in addition to the previously mentioned Land O’Lakes and Anheuser-Busch. More than 36,000 carriers contracted with Uber Freight, representing 400,000 drivers. Transfix boasts of clients like Target and Unilever.

In a sign of acceptance of this newer booking system, SAP Logistics Business Network integrated the Uber Freight platform into their system, which is used by carriers and shippers, as well as freight forwarders and other types of logistics partners. They use it to share insights, data and to manage freight.

Digital freight brokerage is part of the transportation as a service (TaaS) industry. Frost & Sullivan predicts that TaaS will rise to $79.42 billion by 2025, with digital freight brokerage encompassing $54.2 billion of that. TaaS involves telematics used to capture and transmit driver and vehicle performance data, which can be used for monitoring driver or truck safety, and truck efficiency. Currently the TaaS market is $11.2 billion. 

 

Shipments Online and Shipware

 

Sometimes a shipper needs a full truck load delivered and sometimes they just need to send a handful of packages. Automation has many ways to save shippers money, streamline the process of choosing a carrier and service, and allow for management of the shipments online. 

Some companies help shippers choose the best shipping service based on variables like location, weight, package size, contents, shipping speed or delivery date. The right service for the right package can have a big impact on the bottom line. So can negotiating the right contracts. A shipper doesn’t need to have exclusive contracts, but they should be wise about what factors can be negotiated with each carrier. 

Shipware can help. After analyzing a shipper’s data and contract details, our experts can provide negotiation tips and coaching. While many companies have skilled negotiators, the executives might not have the experience or benchmarking information to understand what variables are open to negotiation, and by how much.

Shipware staff members have more than 200 years of combined experience as carrier executives, with an insider perspective. Contract negotiation fees are self-funded from the savings, so companies are not spending their hard-earned capital. Shipware wouldn’t provide its services via this model if it weren’t a win-win.

Carrier Contract Optimization

state-of-shipping-2019_shipware

The State of Shipping in 2019

By Shipware | News, Parcel Market Trends, Shipping Knowledge

A Look Back: 2018 in Review for UPS & FedEx

Last year was busy for the national parcel carriers, not only in terms of packages delivered, but in terms of changes to pricing and their respective service guides as well.

After warning shippers with the announcement of their 2018 General Rate Increase (GRI), UPS instituted mid-year increases to select surcharges related to size and weight.  However, if shippers expected the annual announcement to cover the scope of the carrier’s pricing plans for the year, they’d have been surprised by the multiple, additional rate changes throughout the year, outside of the GRI:

  • In April, UPS changed their fuel surcharge tables, separating the international export table from the domestic air table and effectively raising the fuel surcharge for export.
  • In June, UPS introduced a Shipping Charge Correction Audit fee and increased the Over Max Limits charge by $150.
  • In July, UPS implemented the Additional Handling fee and the Large Package Surcharge increases they had forewarned shippers about in their GRI announcement.

Of course, with the national carriers often moving in lockstep, it wasn’t long before FedEx joined UPS in changing rates midyear. In September, FedEx increased their Additional Handling fee for heavy packages, increased the Unauthorized Charge and, like UPS, changed the construct of their fuel tables by separating the import and export tables from the domestic express table and updating both the domestic ground and express tables.

As in 2017, when the busy-season pricing was first introduced to customers, both carriers instituted “peak” surcharges related to size, additional handling requirements, and other incremental increases during the peak shipping season between Thanksgiving and Christmas.  Also mirroring 2017, UPS instituted a peak surcharge for residential shipping while FedEx did not. However, shippers can expect this disparity come to an end in 2019 and for FedEx to follow suit and implement the peak residential surcharge.

Both national carriers continued to place a premium on efficiency in 2018, in terms of space utilization and network efficiency, a that trend will continue going forward.  While neither made changes to their dimensional weight pricing criteria, UPS did institute a shipping charge correction audit fee which penalizes shippers for incurring what UPS believes is an unacceptable number of shipping charge corrections in a given week, most of which are triggered by dimensional weight. In fact, UPS doubled down on the fee late in the year, making it easier for much shippers to incur the penalty.  The audit fee is now assessed when the average shipping correction during an invoice week is more than $2.00.  When they first introduced the fee, the trigger amount was $5.00.

Regarding the sheer number of total packages delivered, 2018 was a huge year for the national carriers.  There’s little doubt that volumes were at a record high.  Heading into Q4 2018, UPS indicated their expectation to deliver more than 800 million packages during the peak holiday season compared to roughly 762 million in 2017.  Likewise, FedEx expected their peak volume to surpass their previous record number of packages, 400 million, also set in 2017.  Not to be outdone, USPS predicted delivery of 900 million packages during 2018’s peak season.

season, internal Shipware data indicates that both carriers, as they have in past years, experienced delays during the critical peak holiday shipping weeks.  A more thorough evaluation will be necessary once all of the data is in.

The 2019 FedEx & UPS General Rate Increases:

An exercise in elevating complexity to drive revenue

The close of each year is marked by both national carriers announcing their general rate increases for the new year. In November, FedEx Express and FedEx Ground announced a 4.9% average general rate increase while FedEx Freight announced a 5.9% average increase, both of which went into effect January 7, 2019. UPS’s announcement came almost a month later, on December 5th. Not only was the announcement atypically late in the year, but with a declared effective date of December 26, 2018, UPS gave shippers only three weeks’ notice of their average4.9% increase to UPS Ground, Air, International services, and Air Freight rates.

Outside of the actual percentage increases, the most important takeaway from each carriers’ announcement might be use of the word, “average.” Historically, there has been very little correlation between the carriers’ announced average increase and the actual increases by service level, zone, and weight. This year’s announcements are no different.The impact to each shipper’s parcel budget will deviate significantly from the announced average increase depending on their shipper profile. The majority of small shippers are taking the full increase, while large shippers typically negotiate terms that mitigate the general rate increase year over year.

Consistent with more recent rate increases, the days of FedEx and UPS mirroring each other are fading. Reviewing the increase by service and weight shows that the biggest impact to FedEx customers will be the 6% to 8% increases to 31+ pound Express services. Similarly, UPS customers are facing increases between 7.5% and 8% to 31+ pound 2-day rates. However, the largest impact, and disparity from the 4.9% average, is seen in SurePost, with rate increases of 5% to 9.3%.

rate increases

Dissecting the data reveals that the announced increases are indeed an average and will vary, along with their impact on shippers, by service and zone.  With FedEx, we are seeing hikes across the board, above the average 4.9%, for all Express services while Ground Commercial, Home Delivery, and SmartPost hover between 4.7 and 5.2%. Conversely, UPS is mainly increasing its SurePost <1 lb. service by 8.9% to 9.8% while keeping SurePost 1+ lb., Ground Commercial, Residential, and 3-day shipments closer to the 4.9% marker. Like FedEx, 2-day and 3-day shipment increases vary by zone, from 5.4% to 8.1%.

service rate increases

In addition to transportation rate increases, FedEx will increase surcharges and minimums in 2019. Notable changes are seen in the following two tables which show the zone 2, 1 lb. rate for each service:

fedex minimum net charge

This list rate is reduced by a specified dollar amount predetermined by the carrier to arrive at the minimum net charge. FedEx minimums increases range from 3.56% on Ground/Home Delivery and SmartPost to 5.4% on Priority Overnight Letters while UPS increases move anywhere between the 3.7% on Ground to the 10.08% on SurePost greater than 1lb.

ups minimum net charge

The table below highlights dollar and percentage increases to some of the more common surcharges. Note the outright number of surcharge increases, the variance in their amounts and, as noted before, the continuing trends of UPS and FedEx pricing moving farther apart, year after year, and the largest increases being reserved for those surcharges related to package size and dimensions.

fedex surcharge

If you examined last year’s GRIs, you’ll recognize that many of the same surcharges increased last year are once again being increased in 2019, such as FedEx’s Print Return Label Fee which has doubled, and UPS’s Third-Party Billing Fee, up 80% from last year. Take a closer look at the Additional Handling, Large Package, and Over Maximum Limits surcharges. Both carriers increased these accessorials in their 2018 general rate increases, again between June and September, and all three are receiving further increases in 2019. Additional Handling Weight has increased over 91% in 12 months!

ups surcharge

This information not only illustrates the many facets of the 2019 general rate increase but, on the broader level, the continuing efforts of UPS and FedEx to create an increasingly complex pricing environment year after year with varying increases.

When Shipware surveyed shippers, from small to large, at the 2018 PARCEL Forum, 63% of respondents felt that it’s harder to negotiate with the carriers today than it was a few years ago.Among those, 73% felt the difficulty is owed to increased pricing and agreement complexity. It’s also not lost on shippers that the carriers are focused on revenue: keeping margins high and capturing added costs to serve. Of those who believe today’s negotiating landscape is tougher, 82% also feel it’s partly due to this revenue-focused approach that we find in reoccurrences like large packages being assessed multiple increases. With many moving parts to every rate increase; with rates, minimums, and surcharges that no longer match, today’s environment is very confusing for many shippers. It is essential they stay informed and educated if they want to remain in control of their transportation costs.

Expectations for 2019 Mid-Year Increases:

Are Once-Per-Year Increases a Thing of the Past?

If 2018 introduced the new norm, shippers could see mid-year surcharge increases being assessed by both UPS and FedEx once again. Shipware expects increases in the same areas: Large/Oversize packages and Additional Handling. Essentially, the carriers are increasing these fees as a deterrent, forcing shippers to either optimize packaging or move large packages out of the small package network.

Last year, we saw the following UPS surcharges impacted: FuelShipping Charge Corrections, Additional Handling (>70lbs),Large Package Surcharge, andOver Maximum Limits. Regarding fuel, UPS split the fuel surcharge for domestic and international air so that we currently different fuel surcharges for export, import and domestic air. In June, they introduced an audit fee for shipping charge corrections which is the greater of $1 per adjusted package or 6% of the adjusted revenue for an invoice week. As mentioned before, this is now applied when the average shipping charge correction in an invoice week is more than $5, increased from $2 within the same calendar year. Again, the key word here is, “average.” We expect this audit fee to be fair game for an annual increase, similar to the Third-Party Billing Fee which has seen a YOY increases.

In addition, UPS changes for 2019 include applying fuel surcharges to more surcharges than ever before, including: Additional Handling, Over Maximum Limits, Signature, and Adult Signature Required. They are also instituting new fees. They will also charge a processing fee when Package Level Detail (PLD) is not provided to them prior to delivery.

FedEx followed suit with their own mid-year hikes to larger packages, increasing their Additional Handling Charge Weight, Oversize Fee, and Unauthorized Package surcharges. Furthermore, the FedEx Express and FedEx Ground fuel surcharge tables were updated in September, translating into increases for most shippers and effectively eliminating the fuel cost advantage that they’ve held over UPS for years in what was a 75% addition to the Express fuel surcharge table and 1% to the Ground fuel surcharge table.  Like UPS, FedEx now has separate tables for export, import and domestic express.

The tables below illustrate the mid-year surcharge increases, ranging from 12.5% to 125%, and overall impact to shippers:

UPS

ups mid-year increase

FedEx

fedex mid-year increases

Going forward, it will be harder to pinpoint when increases will occur and how much they will demand of shippers. The days of surcharges increasing once a year as part of the general rate increase may be a thing of the past. Shippers need to be diligent and keep abreast of carrier updates regularly. Transportation spend will continue to increase year over year. The question now is: how many times per year?

When and How to Use SurePost and SmartPost in 2019:

aka Everybody Wants Free Shipping

With free shipping becoming more and more of a required checkout option for internet shoppers, companies are constantly looking to cut their transportation costs and minimize the loss incurred by making it available.  FedEx and UPS have adapted by partnering with the US Postal Service (USPS) to handle last mile deliveries on their behalf, thereby reducing their costs and allowing them to offer a less expensive service to their customers.  These services are called SmartPost and SurePost, respectively.

What are SurePost and SmartPost?

UPS defines SurePost as an economical ground service that delivers primarily to residences while FedEx defines SmartPost as efficient residential shipping for low-weight packages for both delivery and returns.

Getting a package to its final destination is the most expensive part of its journey and both services were created to help drive down the costs of this “last mile” of delivery.The USPS visits nearly every address in the United States on a daily basis. SurePost and SmartPost leverage this fact by using them for them for the final delivery, allowing UPS and FedEx to avoid delivering a package to a place already visited by the USPS.  One thing to note is that SurePost and SmartPost are contracted services, meaning they’re not available to shippers who have not addressed them in their UPS and FedEx agreements.

Services, Surcharges and Shipment Flows

With both SurePost and SmartPost calling on the USPS to execute final deliveries, both offer similar services with matching dimensional, weight and material restrictions, with SmartPost Returns being the differentiator, having no SurePost counterpart.

SurePost is broken down into four services:

  • SurePost 1 lb. or Greater (Might be referred to as Parcel Select, the USPS term)
  • SurePost less than 1 lb. (Parcel Select Lightweight)
  • SurePost Bound Printed Matter
  • SurePost Media

While SmartPost is broken down into five services:

  • SmartPost 1 lb. or Greater (Might be referred to as Parcel Select)
  • SmartPost less than 1 lb. (Parcel Select Lightweight)
  • SmartPost Bound Printed Matter
  • SmartPost Media
  • SmartPost Returns

SurePost 1 lb. or Greaterand SmartPost 1lb. or Greater are the most common services, respectively, for both UPS and FedEx. They allow packages as heavy as 70 pounds with combined length + girth (2*height + 2*width) of 130” or less as long as no dimension is longer than 60”.  SurePost less than 1 lb.and SmartPost less than 1lb. both have the same dimensional restriction as their analogous 1 lb. or Greater services, but the shipment must weigh less than 16 ounces.

SurePost Bound Printed Matter (BPM) and SmartPost BPM apply to books and other permanently-bound materials that weigh up to 15 pounds.  Both services have a 108” length + girth limit and a 60” maximum for any single dimension.  In order to use a BPM service, it must be specifically included in a SurePost or SmartPost agreement.

SurePost Mediaand SmartPost Media are for most forms of media (CDs, DVDs, etc.) and have a 70 pound maximum and a 108” length + girth limit.  Like BPM, Media is only available to shippers who specifically include it in their respective SurePost or SmartPost agreement.

As mentioned before, and noted in their definition of SmartPost, FedEx offers one additional service, SmartPost Returns. This is a solution that offers consumers a way to return packages through the USPS using the same restrictions as 1lb or Greater.  The caveat is that a shipper must have at least 20 returns per day in order to qualify for this service and it must be specifically included on an agreement. Returns packages may also be dropped off at any FedEx retail location.

When it comes to surcharges:

SurePost has a smaller set of surcharges than UPS Ground that can be added to a shipment:

  • Non-Machinable: A package with a dimension between 34” and 48”, any two dimensions between 17” and 30”, or weighing over 35 lbs.
  • Delivery Area Surcharge
  • Additional Handling: Package with its longest side greater than 48”, second-longest side greater than 30”, encased in metal or wood, or a cylindrical item not fully encased in corrugated
  • Peak Surcharge: An extra fee added to Additional Handling during UPS’s busiest time (between mid-November and Christmas)

SmartPost has a smaller set of surcharges than FedEx Home Delivery:

  • Non-Machinable: Package with a dimension between greater than 27”, any two dimensions greater than 17”, weighing over 35 lbs., or packaged in a cylindrical tube
  • Delivery Area Surcharge
  • Balloon: Item that weighs less than 20 lbs. but measures between 84” and 108” in length + girth
  • Oversize: Item measuring between 108” and 130” in length + girth
  • Package Relabel: Packages that require overlabel or hand keying will be assessed this fee
  • Third Party Billing Surcharge: Shipments billed to an account unrelated to the shipper

We know what SurePost and SmartPost are, their similar offerings, why they were created, and what surcharges can be applied. But, what does the flow of a shipment look like in practice?

A SurePost shipment typically goes as follows:

  1. UPS picks up the shipment as part of their regular pickup.
  2. UPS consolidates the SurePost shipments and delivers them via their ground network to a USPS Destination Delivery Unit (DDU).
  3. USPS then sorts the packages to their carrier routes and handle the delivery to the customer.

A SmartPost shipment typically goes as follows:

  1. FedEx picks up the shipment as part of their regular ground pickup.
  2. FedEx consolidates the SmartPost shipments and delivers them to one of their 25 SmartPost Hubs.
  3. The hubs sort the packages to the USPS destination close to the delivery point, not necessarily a DDU.
  4. USPS then sorts the packages to their carrier routes and handle the delivery to the customer.

Both SurePost and SmartPost use dimensional rating for their packages just like they do for their other services. This takes the volume of the package (L * W * H) and divides it by a DIM divisor (the standard is 139).  This dimensional weight is compared to the actual weight and the greater value is used for rating purposes.

As you can see, SurePost and SmartPost are very similar.  The package requirements are the same and the service offerings are almost identical, the distinction there being that FedEx offers a SmartPost Returns product that UPS does not.  There are a few more differences though.   FedEx uses separate SmartPost hubs instead of the regular ground network that UPS uses and, while every SmartPost package will be delivered by the USPS, UPS will deliver SurePost packages if it they are already delivering a regular ground package in the customer’s immediate area. As a result of these differences, the transit time for a SurePost shipment is generally about a day faster than SmartPost.

Additionally, the list rates are different between FedEx and UPS.  The 2019 list rates for SurePost and SmartPost are shown below.  FedEx’s rates match their ground rates for 1 to 9 pounds in most zones (with a slight difference in the 4 thru 9 pounds rates on zone 4, and 9 pounds rate on zone 3) whereas UPS’s rates are an average of 5.9% higher than their ground rates.  Both carriers’ rates increase by almost 30% at the 10 pound mark.  Shippers of heavier packages need to calculate if these rates are still beneficial.  With the lack of a residential surcharge, they typically will be despite the rate jump, but the savings opportunity is greatly reduced.

surepost smartpost rates

Just like all other services, SurePost and SmartPost have a minimum charge.  For UPS, it is the zone 2, 1 lb. rate or the zone 2, 1 lb. ounce rate. For FedEx, it is the zone 2, 1 lb. rate less $2.00 (less $3.00 for ounces).  Shippers should factor these minimum charges into their SurePost and SmartPost rate negotiations.  UPS is at a much higher starting point than FedEx, so an aggressive concession will be needed.

Now that we’ve defined what SurePost and SmartPost are, let’s look at why shippers should use these services and what to be aware of when considering SurePost or SmartPost.

For both carriers, the advantages include:

  • No residential surcharges. This saves $3.95 with both UPS and FedEx, assuming no reductions have been negotiated.
  • Lower delivery area surcharges that save up to $2.50 with UPS and $2.75 with FedEx (see the chart below).

surcharges

  • The ability to deliver to PO Boxes, which neither UPS nor FedEx can.
  • The ability to deliver to Military APO/FPO/DPO destinations.
  • The ability to deliver to US territories.
  • Full tracking and visibility just like regular UPS and FedEx shipments.
  • Delivery Monday through Saturday everywhere. Currently, FedEx Home Delivery is Tuesday through Saturday and UPS only delivers on Saturday to some locations.

Disadvantages include:

  • Slower transit time compared to the carriers’ ground service
  • Tracking confusion owed to the package switches carriers (sometimes UPS or FedEx will show the package as “delivered” when it has been handed off to the USPS)
  • Collect on delivery is not available
  • Package value is capped at $100 and no additional declared value is possible
  • Money-back guarantee does not apply because transit times are not defined
  • Hazardous materials cannot be shipped
  • Signature proof of delivery is not available
  • Appointment deliveries are not available

Having said all of that, shippers use SurePost and SmartPost as their “Free Shipping” option most of the time. The lack of residential surcharges, the lower delivery area surcharges and the ability to deliver to just about every location in the country allow them to minimize their losses on transportation. The trade-off of a slower transit time is acceptable for most customers.

Shippers that are interested in using these services need to ensure that their UPS and/or FedEx agreements have SurePost and/or SmartPost pricing on them. Discounts can and should be negotiated as well.  Once the services are included, the packages will be picked up as part of the normal process.

The USPS Announces Significant Changes:

A Brief Overview of the 2019 GRI

The 2019 USPS General Rate increase will take effect on January 27, 2019. The reported 5.9% average increase for Priority Mailis understated, as most shippers are using “Commercial Plus” pricing (which is being effectively eliminated) and will take an additional 3% increase.  Some lanes, including flat rate envelopes will see a 9% increase.

New Priority Mail dimensional policies will be implemented on June 23rdwherein the Post is dropping the balloon surcharge and decreasing the Dim divisor to 166 from 194.

The First Class Package Service (FCPS)will no longer be a flat rate and is instead switching to zone-based pricing. Inner zones will see a smaller 6.7% increase while outer zone shippers will see a 15% increase.  Where pricing used to have just 16 levels based upon the ounce, it will now rise incrementally every 4 ounces.

Parcel Selectis the core USPS class used by consolidators like UPS SurePost and FedEx SmartPost examined in the previous section.  There are many ways consolidators use the USPS for final mile delivery, with most using the DDU entry discount.  Rates for > 1 LB are going up 10% with the new 166 Dim, while the under-a-pound is increasing an average of 11.5% and willnotbe switching to zone-based pricing like the FCPS.

This is a major rate increase that was carefully planned by the USPS to minimize loss of volume, with the greatest increases being applied to shipping lanes with the least competition.  Zone 8 lightweight shippers would be well served to consider fulfilment or adding asecond distribution center to mitigate costs, as will > 1 lb. shippers with higher cubic volume (> 1728 cubic inches) since the Post will grandfather in the Dim exemption for zones 1-4.

How to Compete with Amazon:

Contending with Free Shipping, Shopping Cart Abandonment

Regardless of how we define the “Amazon Effect,” one thing is clear: there’s no denying the digitization of the marketplace has disrupted traditional business models and consumer expectations.  Consumers expect an almost entirely frictionless buying experience with near immediate results, including delivery.  With immediate access to virtually any product or service via their smart phone, tablet or computer, consumers no longer need to set aside time to run errands at brick and mortar stores.

How can the average shipper compete in this environment?  It’s difficult but they should begin by pursuing means to lower their parcel shipping costs(which allows them, theoretically, to charge less for shipping) or decrease transit times. Ideally, both.  There are many ways for shippers to accomplish these goals, some dependent on volume and spend and therefore within reach of only the largest shippers, and some not.

Two great ways to reduce cost and shorten delivery time are to increase the number of origin points or to move the origin point as close to the end user as possible.  A shorter delivery distance carries a lower rate (usually) and enables faster transit.  The largest shippers can open new, strategically placed distribution centers while smaller shippers can consider a direct-to-consumer strategy by having the manufacturer or wholesaler handle shipping or by fulfilling from stores rather than from a primary DC.  An omnichannel strategy, which includes shipping from all of the above, can be a great option for many shippers.

Carrier diversification is another strategy that can both reduce cost and decrease transit time. Shippers should consider using multiple carriers where it makes sense.  Understanding which carriers are a good fit and which are not is critical to this strategy. Many shippers can benefit from increased usage of USPS as Priority Mail can offer lower costs and faster transit times with 2-day delivery to most of the country. It’s also very important for shippers to understand the impact this strategy will have on the pricing they receive from their primary national carrier as a result of moving volume away from them.

Regional carriers should not be overlooked when trying to hit this lower cost/shorter transit goal. They can be a great option for certain shippers. Regional carriers such as OnTrac on the west coast, LaserShip in the east, UDS in the Midwest and LSO in the southwest can help large shippers offer one- and two-day transit to most population centers in these geographic regions.  The ROI on introducing regional carriers will vary, however, from shipper to shipper.  The largest shippers, who have favorable delivery density within the footprint of a certain regional carrier, should absolutely be exploring this option.

Packaging optimization can be a key cost-reduction strategy and can help shippers avoid significant, and often unexpected, dimensional weight fees.  A shipper’s ability to “right-size” their packaging is critical to reduce the amount of air they’re shipping.

All of the above should include an aggressive rate negotiation strategy with the national carriers. Every aspect of their pricing agreements are negotiable. Discounts, minimum charges, accessorial charges, dimensional weight pricing, etc. can all be negotiated in order to help lower costs.  Even the degree of impact the carriers’ annual GRIs have on a given shipper can be mitigated through contract negotiation.  Education and data are key here.  Shippers must be intimately familiar with their own shipping and package characteristics and should know how to use that information to their advantage during carrier negotiations. Shippers who have taken action to lower the carrier’s cost to serve them, such as adding additional origin points or optimizing their packaging, shouldn’t be afraid to ask for concessions in exchange.

Some shippers have decided that, if you can’t beat them you may as well join them.  These shippers, in order to get their product in front of more consumers and offer faster delivery (and, therefore, to compete with Amazon) believe that Fulfillment by Amazon (FBA) is worth the extra cost. How does FBA work?  Retailers send their product to Amazon to store it. Orders are placed either through Amazon, directly with the retailer, or through some other eCommerce platform.  Amazon picks, packs and ships the item then provides tracking, customer service and returns management.  But, all of this comes at a cost to the shipper.

In the coming years, what we think of as the “Amazon Effect” will likely include the impact of Amazon rolling out their own national delivery network, Amazon Shipping, in effort to compete directly with the national carriers.  At the time of writing of this article, Amazon had announced a plan to eliminate many of the fees associated with residential deliveries carried out by UPS and FedEx.  Although conventional wisdom says that Amazon Shipping is, at minimum, 5 to 7 years away from competing on a large scale, the national carriers stand up and take notice when announcements like this are made, and so should shippers.  Stay tuned for more on this topic.

Shipping in 2019: The Big Picture

2018 was another huge year for UPS, FedEx and the USPS.  Package volumes continue to rise, and the carriers are racing to keep up with the increased demand. Both UPS and FedEx instituted mid-year increases to surcharges related to size and weight, making it clear that large packages are not welcome in their network without collecting significant fees in turn. Both also changed their fuel surcharge tables, separating domestic express, import, export and ground into separate tables while increasing the surcharge percentage.  Peak surcharges were once again implemented in 2018 and we expect to see them in 2019 as well. FedEx and UPS differ in their peak surcharge strategies, so any changes for 2019’s peak season merit attention.

The 2019 rate increases were announced at 4.9% by both carriers.  Further analysis reveals that FedEx stayed close to 4.9% on their ground, home delivery and SmartPost rates whereas Express saw significantly higher increases, particularly in the higher zones.  UPS’s increase was a little higher for their ground residential and SurePost services while, like FedEx, Express saw significant increases in the higher zones. Remember, that 4.9% does not include accessorials! Both carriers increased their most assessed accessorials, ranging from 5% to 12%, so that needs to be considered in any rate increase calculation.

As we move into 2019, the specter of Amazon looms over everyone. Shippers are looking for ways to lower their transportation costs as customers expect free shipping with every online order.  Carrier diversification, regional carriers, package optimization and minimizing delivery distance are different ways shippers can lower their costs to appease expectations. Amazon is building out a delivery network and has already announced a plan to eliminate many of the fees associated with residential deliveries.  It remains to be seen how long their plan will take to scale but shippers and carriers will be closely following any developments.

presidential-task-force-report-released_shipware

Presidential Task Force Report Released: A Call for Shipping to Subsidize Mailing

By Gordon | News, Parcel Market Trends, Shipping Knowledge

The shelved Presidential Commission report on the United States Postal System was on December 4, 2018, surprising many of us who thought it would never see the light of day.  The Commission was initiated by Trump to potentially privatize the USPS and dynamically change how the Post Office prices its services, specifically targeting Amazon’s alleged sweetheart deal.  Trump tweeted, calling the USPS Amazon’s “Delivery Boy” and stating it was being subsidized unfairly.

The scope of the study was intensive, with virtually every major organization and stakeholder involved.  Fortunately, there was no recommendation from the Commission to privatize. In addition, there was consensus in the report advocating legislative reform to strengthen oversight by both the Board of Governors and the PRC, adjust and amortize the prefunding healthcare requirement, reform the contributions into the Federal Retirement System, and eliminate the right of collective bargaining from compensation by aligning employees’ rights with other federal employees.

Many findings were consistent with expectations, such as aligning pricing by class to cover both actual and operational costs; sustaining the monopoly on mail and package delivery, including exclusive access to the mailbox; maintaining the Universal Service Obligation (USO), opening the door for revised delivery standards (i.e. eliminate Saturday mail delivery); and to pursue new revenue streams.

Surprising was the lack of mention on the reported abuse of the Reseller programs.  While the OIG was heavily consulted, somehow, the OIG findings of $1B in annual savings from fixing this program was not covered.

The report also showed the disconnect in Washington between reason and reality.  Instead of reforms that would allow the USPS to align healthcare costs like other government agencies, the Commission recommended keeping the prefunding of the healthcare mandate in place and provide relief by restructuring the payment schedule.  No other company or Government organization has this requirement. This is, and will continue to be, a dirty money grab by Washington politicians to Tax and Spend, but in this case, the tax is hidden in the form of increased postage. Let me explain.

If you follow the money, when the PAEA was passed in 2006, the USPS could forgo future overpayments into the Federal Retirement System for employees where the USPS was their 2nd Government career.  At the time, the OIG reported the USPS had overpaid $75B and was continuing to overpay.  In return for stopping these overpayments, Congress required the prefunding of their future retiree healthcare requirements to keep the cash flowing.  For a while, it was sustainable, until the 2008 recession hit the USPS especially hard.

This position clearly shows the bias in the report, where the goal is to protect the national budget and not to do what is right for the USPS and the American public.

The other disturbing finding was the recommendation on how to pay for the estimated $4.4B cost of the USO, by crossing a line separating the Market Dominant and Competitive businesses.  They want to increase prices on Shipping to pay for USO and took a page from UPS’ playbook, and their relentless attempts to get the PRC to change the “Operational Cost Coverage” methodology to pay a larger share by raising prices for Shipping services.  

While the Commission was in favor of creating new revenue streams by licensing the right to the mailbox from 3rd party providers and selling fishing and hunting licenses, they came out against allowing an expansion into banking services, citing an unnecessary risk to the balance sheet.  Another example of the Commission being influenced by industry. Studies have shown great support for USPS banking with little risk. It would open universal services to many rural areas with limited access to banks.

The frosting on the cake was this statement: “Many of the Task Force’s proposed reforms to pricing, costing, and services are designed to create such a transfer of value from commercially oriented products to socially oriented essential services.”  

The Commission is clearly crossing a line it shouldn’t.  Competitive products are priced based upon costs and market conditions.  Adding a Social Service fee would be punitive in nature. USO changes should be limited to market dominant services and continue to fulfill the original, grand design of our Postal System as put forth by Benjamin Franklin.

While I am glad privatization is off the table, it looks like it is going to be a tough road ahead for legislative postal reform.  The biggest problems facing the Post Office were created by Congress and need to be fixed by Congress. Unfortunately, politics will likely forestall unbiased reform.   I remain hopeful that we end up with a better deal than the last one. The American public deserves to keep a viable and competitive Postal Service.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 32 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or gordon@shipware.com.

usps-board-of-governors

USPS Board of Governors Postpones New Dim Policy Implementation While Releasing FY 2018 Results

By Gordon | News, Parcel Market Trends

Background: The announced 2019 USPS rate changes included some dramatic adjustments to USPS Shipping options, including the switch to zone-based pricing for First Class Packages and the structure change relating to dimensional charges.

Currently, large packages are only “Dimmed” when their volume exceeds 1 cubic foot AND they’re destined for outer zones 5-8.  The current Dim factor is 194 (higher dim factors result in lower billed weight).  The Dim Divisor for affected packages was scheduled for a reduction from 194 to 166 for all zones on January 27, 2019. Balloon pricing for zones L-4 was also targeted for elimination.

Postponement:

The USPS Board of Governors met on November 14th and announced that USPS will postpone the implementation of dimensional weight pricing for Priority Mail, Priority Mail Express and non-Lightweight Parcel Select packages until June 23, 2019.

This gives the industry an additional five months to make the operational and software changes necessary to adjust to the new pricing regime.

All other announced price changes for Mailing Services and Shipping Services, including zoned-based pricing for First-Class Package Services (FCPS), will take effect on January 27th as originally announced.

USPS Reports Fiscal Year 2018 (October 1, 2017 – September 30, 2018) Results:

  • Overall revenue increase of $1.0 billion
  • Shipping and package revenue up $2.0 billion, 6.8% increase in volume
  • Overall volume decline of 3.2 billion pieces
  • Net loss of $3.9 billion (due to $6.9 billion in mandated prefunding of healthcare and pension)
  • Includes $1.8 billion in debt reduction
  • Renews urgent need to advance legislative and regulatory reforms, as well as aggressive postal management actions to generate new revenue and control costs

In the meantime, feel free to reach out to me with questions or to ask for help.  Wishing you great shipping success.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 32 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or gordon@shipware.com.

holiday-shipping-tips-for-parcel-shippers_shipware

Top 7 Holiday Shipping Tips for Parcel Shippers

By Shipware | News, Parcel Market Trends, Shipping Knowledge

More shoppers are “clicking their way” through holiday shopping lists, loading up carrier trucks, and getting items delivered directly to their doorsteps. UPS estimates it shipped over 750 million packages in 2017. USPS had similar volumes, noting they shipped around 850 million packages during the holiday season. As a result, retailers are under intense pressure to not only deliver, but also deliver high volumes, and do it faster. It’s a tall order to fill.

The ease of online shopping has contributed to the high number of packages delivered during the holidays. What’s more, holiday shopping estimates are growing. In fact, worldwide holiday online sales reached $108 billion last year, up from $94 billion in 2016. More shoppers are opting out of brick-and-mortar shopping experiences and instead turning to their smartphones, tablets, laptops and even voice-activated services, such as Amazon Alexa. Many retailers wonder how they can do better with this increased pressure. Check out these holiday shipping tips for parcel shippers.

1. Get a List of Shipping Deadlines Early

Customers may be shopping for that perfect gift now, but not all of them are ready to place an order. Some procrastinate for days, until finally they must make a move. The goal of retailers should be getting these last-minute shoppers to order sooner – and it starts with understanding shipping deadlines.

What carrier does your retailer use? Or do you use multiple carriers – a mix of FedEx, UPS, and USPS? Regardless, each carrier publishes a list of delivery deadlines that helps communicate expectations to customers. Find strategic places to put “order by” dates on your website, such as the home page and banners on various pages. For example, you might say, “Order by December XX to get your gift by Christmas.” Giant retailer Amazon typically informs customers at checkout if their item will arrive in time for Christmas.

Determine the correct order-by dates by understanding critical cutoffs for each carrier. Check out this list of deadlines for major carriers, including UPS, FedEx and USPS.

FedEx

December 14th – Deadline for FedEx Ground shipments.

December 17th – Deadline for FedEx Home Delivery shipments.

December 19th – Deadline for FedEx Express Saver shipments.

December 20th – Deadline for FedEx 2Day and 2Day A.M. shipments.

December 21st – Deadline for FedEx Standard Overnight, Priority Overnight and First Overnight shipments.

December 25th – Deadline for FedEx SameDay shipments.

UPS

Monday, December 17th UPS 2nd Day Air packages picked up today are scheduled for delivery on Thursday, December 20th. UPS 3 Day Select packages picked up today are scheduled for delivery on Friday, December 21st.

Tuesday, December 18th – UPS 2nd Day Air packages picked up on this date are scheduled for delivery on Friday, December 21st. UPS 3 Day Select packages are scheduled for delivery on Monday, December 24th.

Thursday, December 20th – Mark this date on your calendar because it’s the last day to ship UPS 2nd Day Air packages for delivery on Monday, December 24th.

Friday, December 21 – This is the last day to ship UPS Next Day Air packages for delivery on Monday, December 24th. UPS Next Day Air service may also be available for delivery on Saturday, December 22nd. However, these packages must be processed and labeled for Saturday delivery, which is not available in all ZIP codes.

Saturday, December 22nd – Delivery of UPS Worldwide Express, UPS Next Day Air and UPS 2nd Day Air packages are processed and labeled for Saturday delivery.

Sunday, December 23rd – No UPS Pickup or delivery service is available. However, UPS Express Critical service is available.

Monday, December 24th – Pickup service is available only for Air and International Air packages if pre-arranged by Thursday, December 20th.

Tuesday, December 25th – This is a UPS holiday, and no UPS pickup or delivery service is available.

2. Evaluate Strategies for Shipping Faster

More efficient shipping strategies should also include areas such as fulfillment. The sooner you get items on trucks, the better. The key to accomplishing this is to react to orders with greater speed. Set a goal to get orders out the door within 12 hours of when they are placed.

Ideally, retailers should look at last year’s fulfillment processes. Are there areas for improvement? Do inefficiencies exist, and if so, are there ways to improve these areas prior to the holidays? Even if you get a late start on looking at this area, there are still steps you can take to drive improvement. Minor improvements in workflow efficiency can add up and produce better results. Strike the right balance between quick fulfillment and keeping accuracy high to drive faster shipping this holiday season.

3. Ensure That Stock Issues Don’t Slow Down Shipping

One area that slows down shipping is inadequate stock during the holidays. As a result, the retailer must wait until new stock comes in, which adds to shipping cost, either for the customer or for the retailer – both of which are bad. Even worse, the customer might decide to order from a completely different retailer, resulting in lost sales.

Solve this problem by getting a jump start on estimating stocking needs for the holidays using data from the previous year and sales forecasts for 2018. Innovative tools and technology can help you evaluate the previous holiday season and forecast adequate inventories to ensure that all items are ready to ship and no rush shipping charges are incurred due to supply issues.

4. Build Promotions to Reduce the Need for Last-Minute Shipping

Late orders put stress on carriers and retailers. It’s true that you can’t make customers order early, but you can entice them to get a jump start on shopping. As a result, more time is allowed for shipping and less money is spent on rush shipping.

One strategy for accomplishing this is to carefully redesign holiday promotions. In the past, some retailers held sales the last week before Christmas. This is a good strategy for capturing last-minute sales, but a bad strategy for increasing strain on shipping at the last minute. Consider holding big promotions in the middle of December instead of the week before Christmas, to encourage shoppers to place orders early and give shippers more time to deliver.

5. Look for Ways to Operate More Efficiently

The Amazon Effect has changed the way in which customers think about shipping. In the past, people expected to pay shipping costs and factored these expenses into their budgets. But with the introduction of free shipping and then Amazon Prime, expectations around shipping have changed, and this drives up costs for retailers.

Those that ship large volumes can leverage innovative technologies to manage those costs, which allow them to provide the free shipping that customers expect while managing costs internally. For example, invoice audit software allows retailers to see where they’re overspending on shipping and find more effective ways to manage those costs.

6. Package Safely

The holidays are filled with expectations, and one of those expectations is that a package will arrive on time and without damage. Carriers are moving a lot of packages, and even with their best efforts, there are times when packages get damaged. The culprit of these damages is often improper packaging materials, and if a carrier determines this was the cause, they may not replace the item. This puts increased pressure on retailers to package items for maximum protection around the holidays.

Proper packaging starts with strong boxes. Having a single crease in a box can diminish a box’s strength by as much as 70 percent. Most parcel shippers provide some level of internal packaging, even if the item isn’t delicate, but picking the right packaging is key. For example, each item should be surrounded by at least two inches of cushioning and placed two inches or more away from the walls of the box.

That way, if the box walls encounter damage, the item is still safe and undamaged inside. Using approved packing materials, such as packing peanuts and bubble cushion, is a good starting point. Make sure that a package doesn’t rattle and can’t be shifted around, to reduce risk of damage.

7. Factor in Shipping for Returns

The holiday season is a high-volume time for all retailers, but along with this spike in sales comes an increase in returns. What’s more, it’s critical to plan for the inefficiency and expenses associated with post-holiday returns. Even if you do everything right – provide great service and ship in time – the recipient may simply not like the gift, or need a different product.

Nobody is at fault, but your company still has to deal with shipping returns. The more that you can automate the process, the easier it will be. Provide pre-printed return labels and specific packing instructions to streamline the process. Select a fast and reasonably priced shipping option to minimize costs and meet demands, while keeping customers happy.

Shipping with Greater Efficiency

Shipping is a critical factor that lies between creating a positive customer experience and growing revenue in the future. Carriers are under intense pressure during the holidays, which is why it’s key to put processes in place that improve shipping speed while adding to the customer experience. This is critical because bad feelings associated with late shipments trickle down to retailers, even when they’re not at fault.

The result might be not only the loss of a customer, but also the negative reviews that customer might share about your retailer with others. In fact, 82 percent of consumers proactively seek referrals from peers before making a purchase, and when you have stories about bad holiday shipping experiences spreading within peer-to-peer comments, the outcome may be serious.

Retailers can improve relationships with customers this season by looking for weaknesses in their fulfillment and shipping process, and working to fix those inefficiencies. Do you offer free shipping? Great. Most customers demand it. But the strategies that you use to offer free shipping may kill your bottom line. Seek innovative technology that helps improve efficiency and free up valuable shipping dollars – minimizing rush orders and evolving the customer experience.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our invoice audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has more than 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent.

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How Retailers Can Compete With the Amazon Effect

By Shipware | eCommerce, News, Parcel Market Trends

Amazon started as a small, online bookseller, but it evolved to become a major disrupter in the retail space, changing the face of retail and shaking up online commerce. Customers no longer think about shopping in the same way, and their buying paths have shifted as they demand access to more channels, using the devices that they know and love.

Competing with a massive competitor such as Amazon can feel overwhelming, but when you understand the Amazon Effect and how to work with it – instead of against it – your business can make real gains. It all starts with customer experience, which is a key pillar to Amazon’s success.

Companies lose an estimated $300 billion annually due to poor customer experiences. Amazon has made millions of dollars creating personalized experiences and providing everything from suggested product recommendations to the ability to order via voice-activated personal assistants. Retailers can overcome the Amazon Effect and achieve great success, but they need to know where to start. Check out these powerful ways that retailers can compete with the Amazon effect.

Reaching Customers with Greater Impact

Customers are no longer shopping using the same old channels. They are ordering products while waiting in line for coffee, on the commuter train and at their kids’ sports practices. At times, they also still crack open that laptop and place an order. The Amazon Effect has created an environment in which customers expect a seamless omnichannel experience. In short, whether they’re shopping online from a desktop or on their smartphone at the local coffee shop, the customer wants that experience to be integrated and seamless.

Take, for example, cosmetic company Sephora. Consumers can shop, see their favorites list and past purchases, scan items in the store and see other options available online, watch tutorial videos, and find a store near them. The company’s approach to omnichannel has nurtured 11 million members who spend 15 times more money on Sephora than the average user does. Even if the niche your retailer serves is very different from this example, the message is clear: When you allow customers an integrated experience, giving them the option to view and interface with all potential channels, it increases loyalty and drives sales.

The key to creating a strong omnichannel experience is understanding customer behaviors and preferences and then creating an omnichannel experience that reflects those preferences. It’s likely that your company already collects large amounts of customer data. Having that data is the first step, but more importantly, you must gather insights to use that data and create stronger relationships with customers. The omnichannel experience can’t be clunky and disjointed, but instead must embrace digital retailing and the expectations set by customers in the wake of the Amazon Effect.

Zeroing In on Price

Planning a new purchase often begins in the same place for many shoppers: Amazon. In fact, Bloomberg reports that more than 50 percent of online shoppers start a product search with Amazon. Customers aren’t only checking for lowest prices, a category in which Amazon has built a reputation, but are also checking customer reviews, product options and more.

What are other customers saying about the products? Does it have bad reviews? Is the price competitive? Amazon is constantly updating prices several thousand times a day to stay competitive, and if your company doesn’t have some strategy in place to combat this phenomenon, it can be a problem.

Old-school methods around pricing won’t cut it in a post-Amazon Effect environment. Savvy retailers are combatting this challenge by using technology to keep pricing competitive. For example, they might use real-time analytics that allow for rapid price changes, similar to Amazon’s approach. Other retailers are using different approaches, such as allowing customers to name their price or take advantage of dynamic and personalized coupon offers.

When too many first-class seats are available, Hawaiian Airlines allows customers to name their price (with a price floor set) to get the seats. Although retail is different from an airline service, the name-your-price strategy, especially when inventories are high, can be an effective one.

Cart-level pricing is also used, where customers can take advantage of special offers and products at the cart level to drive additional sales. The bottom line around pricing and the Amazon effect is that customers expect retailers to be competitive. When loyalty is weak, they will quickly pick another retailer if pricing is more competitive or the experience is superior. The name of the game is being reactive and making moves fast. Create strategies to make this possible and stay one step ahead of competitors – and your customers’ demands.

Targeting the Demand for Ease

One of the major symptoms of the Amazon effect is expectations around simplicity during the purchase process. A few decades ago, the shopping process was labor-intensive. A customer would have an item in mind, pick a store or two, and start shopping, which was time-consuming, especially if the item was not found. Since online shopping wasn’t available, the customer might compare sale ads, but comparison shopping was difficult. What’s more, free shipping wasn’t common and the customer didn’t balk at paying shipping costs; shipping costs were expected.

Shopping is now a process that includes expectations of near-instant gratification. Amazon has one-click shopping, making it possible to complete transactions in a matter of seconds. Customers can shop multiple stores from a variety of devices – smartphones, tablets and laptops – faster and easier. The result of the Amazon Effect is that ease is now expected across all experiences. Customers expect to run into fewer barriers during the process, and if those barriers do occur, the tolerance is minimal, which can result in lost sales.

One way to compete against the Amazon Effect is to create experiences that eliminate friction in the buying process, as the Amazon one-click purchase process has done. For example, a mobile-first experience, responsive design and a variety of payment options, including digital options such as Apple Pay, leverage the critical factor of speed.

Magnifying the Transformation of Shipping

Amazon has transformed expectations around shipping, and the majority of retailers have felt the effects. Nearly 90 percent of respondents in a recent survey “somewhat agree” or “strongly agree” that Amazon has changed consumers’ expectations for order delivery.

It all began when Amazon started offering free shipping on orders that cost more than $25. Many retailers, such as Target and Walmart, have since created similar shipping offers. But what took shipping expectations up a notch was the introduction of Prime shipping, which offers unlimited two-day shipping free to customers with membership. In fact, Amazon “Prime Day” in 2017 produced sales of more than $1 billion, showing that not only do customers enjoy fast shipping, but it drives them to spend more.

In fact, more than 90 percent of respondents say that shoppers are “significantly less likely” or “somewhat less likely” to purchase without free shipping. Furthermore, 45 percent of customers – nearly half of all shoppers – admit to abandoning their carts due to shipping costs that are tacked on at the end of the transaction.

As a result, many retailers are being forced to offer free shipping to customers in order to compete in the marketplace, and that trickles down directly to their bottom line. Retailers are using a variety of strategies to handle the pressure of changing shipping expectations. One such strategy is “backing in” shipping costs to the product price. And while this offers a straightforward solution, it doesn’t always help retailers compete under pricing pressure. Higher pricing makes it difficult to stand out in a fiercely competitive environment.

Another alternative that retailers use is opting for shipping options that are less expensive. Major carriers, such as UPS and FedEx, developed shipping options that target the “last mile” of shipping, which is the most expensive part of the route. The U.S. Postal Service was already visiting most addresses in the United States, and partnering with the USPS to complete the last leg of delivery achieves savings that are passed on to the retailer.

There is a tradeoff, however, and that’s speed. These options are typically slower than what a more traditional service affords, but if expectations are set upfront and the customer accepts the tradeoff, it’s a worthwhile savings option.

Competing Through Products and Personalization

Technology has advanced, and retailers have gotten better at personalization – to the point where customers demand it. For example, Amazon does this through personalized recommendations based on previous purchases and on what others with similar interests buy. What’s more, customers who receive personalization from retailers spend more. In fact, 75 percent of consumers are more likely to purchase from a retailer that recognizes them by name, recommends options based on past purchases, or knows their purchase history. Additionally 59 percent of customers say that personalization influences their shopping decisions.

This demand for personalization is only expected to amplify in the future. Over the next five years, it’s said that $800 billion will shift in the retail, financial services, and health care markets from those that can’t deliver good experiences to the 15 percent that get personalization right.

As a result, retailers that want to compete with the Amazon Effect must provide experiences that are personalized and make customers feel special. Customers want to receive relevant offers and information at the precise moment of relevance. In fact, more than 78 percent of consumers will engage with offers only if those offers have been personalized to their previous engagement with the retailer.

Data is critical in this equation, as retailers need to have a variety of products that more closely match a customer’s needs at that relevant moment in time. Doing this correctly can create brand loyalty that gives you an advantage over the competition.

Creating Greater Synergy with the Amazon Effect

While it’s impossible to reverse the Amazon Effect and the consequences it’s had on the retail space, it is possible to use this trend to your advantage. Working against the current of this effect is more difficult than working with it. If you examine what it has uncovered, you’ll learn important details about how to best reach your customers and drive greater results.

For example, Amazon taught retailers not only that free shipping is a major hot button for customers, but also that when you combine free shipping with fast delivery (i.e., Prime shipping), it drives massive amounts of revenue.

A key piece of the puzzle in managing the Amazon Effect in the future is having the right technology in place that empowers quick decisions. Speed is the secret ingredient to meeting your customers’ demands at the exact moment of relevance, yet many retailers aren’t capitalizing on this yet. Furthermore, although 89 percent of respondents reported that Amazon has changed customers’ expectations for order delivery, more than half of those respondents have not adjusted their technology spending on order fulfillment and delivery. Only 40 percent of retailers have either somewhat or significantly increased investment in this area, which means that many have an opportunity for improvement.

Create a seamless omnichannel experience, maximize shipping efficiency, minimize related costs and look for ways to create more personalized experiences, and your company will be equipped to compete with the Amazon Effect and thrive in the future.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, the USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption in current operations. Our team of experts has more than 200 years combined of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent.

2018-holiday-shipping-deadlines

2018 Holiday Shipping Deadlines: A Guide

By Shipware | News, Parcel Market Trends, Shipping Knowledge

Last year was a record-breaking holiday season for retailers, as they posted their best holiday season since 2011. Total retail sales in the U.S. climbed 5.5 percent in November and December, aided by a 17.8 percent increase in retail e-commerce sales. What’s more, customer confidence in the U.S. economy is at its highest since 2000. Customers are shopping more and spending more at brick-and-mortar locations and online. Fueled by growth in mobile shopping and the advent of voice-activated assistants such as Alexa, customers are experiencing an unprecedented ease in the holiday shopping experience.

The stakes during the holidays have never been higher for retailers. This season accounts for as much as 30 percent of annual sales. The time frame for achieving these maximum profits spans only several weeks, leaving retailers to constantly look for better and more powerful strategies to capture a greater piece of the revenue pie. A key strategy for accomplishing these goals is mastering shipping.

Unlike other times of the year, shoppers are under intense deadlines during the holidays. Not having that perfect gift in time to give a friend or family member creates bad feelings toward the retailer – feelings that are difficult to repair. So what are the 2018 holiday shipping deadlines, and how can you be better prepared this season?

FedEx Holiday Shipping Dates

FedEx is a popular carrier choice during the holiday season, especially when retailers need packages to arrive fast. Shipping deadlines will depend largely on what service is selected and how urgently that parcel needs to be delivered.

See below for general guidelines to help select the best option for getting packages to their destination on time:

  • December 14 – Deadline for FedEx Ground shipments.
  • December 17 – Deadline for FedEx Home Delivery shipments.
  • December 19 – Deadline for FedEx Express Saver shipments.
  • December 20 – Deadline for FedEx 2Day and 2Day A.M. shipments.
  • December 21 – Deadline for FedEx Standard Overnight, Priority Overnight and First Overnight shipments.
  • December 25 – Deadline for FedEx SameDay shipments.

One unique option that FedEx offers is same-day shipping on Christmas Day. The FedEx SameDay option is available 24 hours a day, 365 days a year for urgent, last-minute requests. The expense is high, so this option is good for special situations.

For example, let’s say you shipped an item and for some reason the customer didn’t receive it. The details on why can be sorted out later, but in the meantime, the customer doesn’t have the product. And if it doesn’t arrive before Christmas, the mistake will be unfixable in the mind of the customer. Same-day shipments are good for this type of urgent situation.

It’s important to note that FedEx doesn’t charge holiday surcharges on shipping; however, other surcharges may apply. For example, if extra handling is required, the shipping cost may increase by $3.20. See the full list of additional surcharges here.

Additionally, certain FedEx guarantees, such as those that apply to FedEx Ground, Express, and Freight, may not be available during peak holiday season. Check with your local FedEx carrier if you’re concerned about guarantees during this busy time of year.

UPS Holiday Shipping Dates

UPS is another common choice of retailers who want reliability and good tracking features. This carrier provides a variety of service options during the holidays, and by knowing shipping deadlines, retailers can better manage costs and expectations. Be sure to mark the following dates on your calendar. Even better, include “order by” dates on your website to encourage customers to order early and set expectations.

  • Monday, December 17 – UPS 2nd Day Air packages picked up today are scheduled for delivery on Thursday, December 20. UPS 3 Day Select packages picked up today are scheduled for delivery on Friday, December 21.
  • Tuesday, December 18 – UPS 2nd Day Air packages picked up on this date are scheduled for delivery on Friday, December 21. UPS 3 Day Select packages are scheduled for delivery on Monday, December 24.
  • Thursday, December 20 – Mark this date on your calendar because it’s the last day to ship UPS 2nd Day Air packages for delivery on Monday, December 24.
  • Friday, December 21 – This is the last day to ship UPS Next Day Air packages for delivery on Monday, December 24. UPS Next Day Air service may also be available for delivery on Saturday, December 22. However, packages must be processed and labeled for Saturday delivery, which is not available for all zip codes.
  • Saturday, December 22 – Delivery of UPS Worldwide Express, UPS Next Day Air and UPS 2nd Day Air packages are processed and labeled for Saturday delivery.
  • Sunday, December 23 – No UPS pickup or delivery service is available. However, UPS Express Critical service is available.
  • Monday, December 24 – Pickup service is available only for air and international air packages if pre-arranged by Thursday, December 20.
  • Tuesday, December 25 – UPS is closed for the holiday, and no UPS pickup or delivery service is available.

If you want to better understand timing and costs, you can also refer to this UPS tool, which helps to determine exact turnaround times based on specific shipping details. It’s also important to note that, unlike the other carriers, UPS charges peak season surcharges during the holidays. These fees are in effect from November 19 to December 28.

You can find the exact surcharges based on geographic locations and shipping details here. On a per-package basis, the charge is minimal. However, for large-volume shippers, these costs may quickly add up, especially in cases of “free shipping” offers. Consider potential costs to determine which shipping option is best for your customer and your bottom line.

USPS Holiday Shipping Dates

The United States Postal Service has gotten much better in terms of services offered and reliability in recent years. What’s more, it’s very cost effective for smaller packages. In an age when “the Amazon Effect” is driving up the cost of shipping for retailers, low-cost and efficient shipping methods are key to staying competitive.

  • December 14: USPS Retail Ground 2018 Cutoff
  • December 20: First-Class Mail Cutoff (including Alaska and Hawaii)
  • December 20: Priority Mail Cutoff (including Alaska and Hawaii)
  • December 22: Priority Mail Express Cutoff (including Alaska and Hawaii)

USPS does not currently charge holiday surcharges. Additionally, the carrier does not use dimensional weight pricing for packages, which is a common pricing model with other carriers. As a result, costs may be lower because there are no extra fees for residential delivery or fuel, which creates a cost-effective solution for the holidays.

Tying It All Together: Which Shipping Option Is Best?

The first step to a successful holiday season is marking those shipping deadlines on your calendar and informing your customers about them. Doing so lets them know that they must order soon to get packages delivered on time, and receiving orders early helps your business prevent the last-minute rush that’s common with the holidays.

In addition to knowing your shipping dates, it’s also important to weigh the pros and cons of each carrier. Many retailers don’t use one single shipper; instead, they rely on a couple of them, depending on the shipping situation. See below for a quick summary of the pros and cons of each to select the right one for your shipping needs during the holiday seasons.

USPS

The major benefit of shipping with USPS is that it’s a low-cost option for small packages. USPS charges for weight only, which is beneficial if a customer’s package is small. If you’re shipping packages that weigh less than 13 ounces, USPS is often the best option. It’s reliable and ships to P.O. boxes, which other carriers do not. However, some retailers complain about the tracking system, finding that it has flaws.

UPS

The benefit of UPS is that it delivers secure and fast delivery with a high level of reliability. For example, it offers guaranteed express shipping, which is good for those last-minute packages that need delivery ASAP. USPS is often the best choice for smaller packages, but UPS is often a good choice for large shipments. Additionally, UPS is known for its user-friendly tracking options.

UPS, however, does not deliver to P.O. boxes and does not provide Saturday delivery as part of its basic services. If you need weekend delivery, there is an extra fee for that service. In contrast, USPS provides Saturday delivery at no extra cost.

FedEx

FedEx and UPS are pretty similar; however, there are some differences. Similar to UPS, FedEx is known for its fast delivery and user-friendly tracking system. FedEx Delivery Manager can hold packages at a FedEx office or schedule delivery for a specific time. The carrier also offers Saturday delivery as part of its basic service. This is an important feature when every day counts, and on a weekend, it can get packages to customers much sooner. For example, an item might ship midweek and arrive on Monday with UPS, but with FedEx, it could arrive the Saturday before.

The drawback to FedEx is that shipping costs may be higher, depending on the specific details of the shipment. Additionally, there is no free package pickup service. FedEx also has fewer offices worldwide than UPS – 1,900 FedEx offices compared with over 5,000 UPS stores.

Finding the right shipping solution, whether it’s UPS, USPS or FedEx, isn’t a straightforward choice and depends on many variables. During the holiday season, delivery time is one of the largest variables. How quickly does the customer need the package? Are you footing the bill, or is the customer paying extra for expedited delivery? Understanding shipping deadlines and the pros and cons of each carrier option assists with making the decision that keeps your customers happy.

Additionally, innovative technology is helping retailers to minimize costs while maximizing efficiency. For example, invoice audit software identifies where you’re overspending and helps create efficiencies and savings in shipping. The software uses all the data that you collect and turns it into actionable insights – empowering you to make critical cost-saving decisions during the holidays.

Planning for a More Successful Holiday Season

The holidays are coming fast, and customers are working their way through holiday shopping lists right now. Finding the perfect gift is no easy task, and once a customer places an order, the stakes of delivering that item on time are high.

Amplifying this challenge is the fact that retailers are under intense pressure from the Amazon Effect, where the bar is set higher and free shipping is the norm. Customers want items fast, but they also demand free shipping. Retailers are rushing to fulfill order requests, get them to destinations faster, and do it all while managing shipping costs.

Understanding deadlines, knowing costs and constantly looking for ways to improve those costs, such as by using innovative technology, allows you to take control of the process and overdeliver at a time when the reward for doing so is very high.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our invoice audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has more than 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent.