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Parcel Shipping Business Challenges
Many companies experience substantial cost and quality problems as a result of their parcel shipping operations. On the one hand, as companies’ shipping needs grow, they often encounter problems with scale-up and control of their manual processes and carrier-supplied systems. On the other hand, in companies with established parcel shipping systems, obsolescence can also lead to inflexible and fragile business systems and their associated cost and quality problems.
Regardless of the company’s predicament, parcel shipping cost and quality problems general arise from the same four basic groups of causes. The first group of causes involves the management of relationships with carriers, and the second group involves the error-free execution of the company’s shipping process. The third group involves the coordination of the shipping process with customer services, while the fourth group involves deployment, integration and maintenance of parcel shipping systems. To maximize the benefits of parcel shipping, improved systems and processes must address all of these business challenges.
Carrier Relationship Challenges
To secure competitive rates and services, companies must develop relationships with multiple carriers and answer three major challenges:
Discount Negotiation: Many companies lack the critical information needed to support the negotiation of their best discounts, due to poor visibility and control of their parcel shipping operations. In addition, overreliance on a specific carrier often leads to token discounts, untested by true market pressures. To negotiate “best-in-class” discounts, companies need to have identified multiple options and carriers need to know that their discount rates will impact their volumes. Poorly negotiated discounts can easily lead to 10-15% cost increases across the board.
Rate, Surcharge and Schedule Updating: Every carrier supplies rate, surcharge and schedule information, valid for different periods of time, and presented in different formats. Surcharges may include diesel and jet fuel price adjustments, insurance rates, rural and residential delivery fees, address correction fees, and much, much more. ZIP code to delivery zone maps and scheduled transit times are also made available, but require periodic updating. Incurring higher than expected or unexpected surcharges can easily raise shipping rates 10-15% on problem shipments.
Real-time Carrier and Service Selection: After negotiating discounts and accessing current rating information, companies must select the best available carrier and service level option for their outgoing shipments in real-time. Many companies base their decisions on the service level names, rather than comparing actual time-in-transit estimates, causing them to exclude many carriers and to overuse expensive express services, when less costly ground services may have performed equally well. Overuse of express services can raise shipping costs dramatically, in many cases from 300% to 500%.
Shipping Process Execution Challenges
In addition to answering carrier challenges, companies must execute their shipping processes accurately and in accordance with plans. Key execution challenges include:
Shipping Policy Governance: Even if a company negotiates volume discounts, develops shipping policies and acquires time-in-transit service information to support intelligent service selection, all of these benefits can go for naught if the company does not effectively govern their shipping policy. Companies must develop processes and systems that ensure shipping process governance.
Manifesting and Label Compliance: Parcel carriers typically require transmission of a manifest of all shipments and the use of compliant labels to receive negotiated rates without additional handling fees. Companies must develop processes and systems that ensure manifesting and label compliance.
Consignee Address Compliance: Parcel carriers typically charge address correction fees for shipments sent to a consignee with either incomplete or inaccurate address information. Each address correction may cost a shipper $10. Companies must develop processes and systems that ensure consignee address compliance, and they must automatically correct consignee addresses in their business systems when these fees are incurred to ensure that these errors do not recur.
Export Form Preparation: When shipping to a destination outside the country, export forms must be prepared. Improperly supplied export forms can lead to long delays for shipments, while clearing customs, and associated customer health issues. Reliance on manual preparation of these forms dramatically increases errors and labor costs.
Business Systems Challenges
Perhaps the greatest challenges impacting shipping processes today come in the Information Technology (IT) arena. These challenges include:
Data Integration with Other Business Systems: Shipping systems and processes depend on information contained in other business systems (e.g. consignee names and addresses) and they provide important information back to those systems (e.g. shipping costs, tracking numbers and delivery statuses). Loose, fragile or manual integration of these systems may lead to high labor costs and unnecessarily high error rates, and may inhibit business systems evolution.
Shipping History Collection and Reconciliation: As mentioned previously, shipping history information and knowledge of alternative rates is critical for the negotiation of discount rates with carriers. In addition, refunds must be requested when carriers fail to meet their delivery promises. Also, carrier invoice information must be reconciled with quotes received while rate shopping. Inadequate performance in these areas can lead to poor discount rates, lost refund opportunities and problems reconciling books at the end of the month.
Multisite Deployment, Reliability and Error Recovery: When a business grows past a certain size, perhaps to two or more locations or to high levels of utilization, many legacy systems and processes may fail to meet the company’s needs because of inadequate architecture, inadequate reliability, or inadequate error recovery. Architecturally, these systems may have been designed without the ability to be distributed across multiple sites, leading to unnecessary limitations and complexities. These systems also may have been designed without support for fault tolerant infrastructure, leading to low overall reliability and day shift outages, which can increase overtime requirements in a highly utilized facility. Finally, these systems may be difficult to repair, leading to prolonged outages, the need for IT specialists and expensive maintenance agreements.
Updates and Maintenance: Since major carriers frequently change their systems and rules and a company’s other business systems also need freedom to evolve, updating and maintaining shipping systems and processes can be a significant challenge. Clear processes for updating and maintaining shipping systems must be designed in from the start, to prevent the need for costly emergency update projects. Also, clear standards-based interfaces should be used between the shipping system and other business systems to prevent lock-in and/or undesirable dependence on a vendor or support organization.
While the many business challenges that arise from parcel shipping may seem daunting, parcel shipping system solutions offer a way to meet these challenges, and to reduce the time, effort and costs associated with a company’s parcel shipping processes.
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