Retail e-commerce sales skyrocketed this year in response to COVID-19. The result was parcel volumes that reached holiday season levels, along with carrier capacity crunches.
The figures are astounding. Over the first half of this year, consumers spent $347.26 billion with online retailers in the United States—30% more than they spent over the first six months of 2019. Online shopping surged across Western Europe as well. Forecasts suggest that online sales in the UK, Germany, France, Netherlands, Italy and Spain will grow 31.1% by the end of 2020. If so, online sales would represent 16.2% of all retail sales in these six markets. In the UK, 30.7% of all retail spend was with online merchants over April—a new record.
Improving Inefficient Shipping Operations with Automation
While brick-and-mortar stores have suffered first from closures, and then from low footfall, the pandemic has been a boon for many e-commerce and omni-channel retailers. However, it also highlighted an issue that many retailers have long avoided addressing—namely, that their e-commerce operations are nowhere near as efficient as they could be. This inefficiency impacts customers, carriers and the retailer’s bottom line.
One answer to this inefficiency problem is automation. Automation helps retailers improve e-commerce efficiency and, equally important, saves money.
Get the Service Levels You Need at the Lowest Cost
One of the most important steps towards a more efficient and cost-effective e-commerce operation is a multi-carrier shipping solution. It should be noted, however, that multi-carrier shipping is not the same as using one carrier for domestic shipments and another for global destinations. A true multi-carrier strategy uses automated routing to “shop” between carriers. It then automatically selects the carrier and service level that will meet the promised delivery date at the lowest possible cost.
A multi-carrier shipping solution can include both global carriers and regional players, or even city couriers, depending on the needs of the individual retailer.
The US parcel carrier market is dominated by the global players, UPS and FedEx as well as the US Postal Service. However, recent reports indicate that US retail shippers are turning to regional carriers too. Last year, just 3.8% of retail volume was handled by regional carriers; in the first seven months of 2020, this shot up to an average of 17%.
In other parts of the world, such as Europe, there are a plethora of carriers that deliver locally or regionally, along with big players like DHL, DPD, and of course, FedEx (including TNT) and UPS.
Multi-carrier shipping gives retailers greater flexibility—more routes, lanes, service levels and capacity. The secret sauce is the automated routing, which follows a company’s pre-defined business rules. The solution automatically routes the parcel depending on its characteristics—for example, its destination, size, weight, promised delivery date and customer.
A multi-carrier strategy can reduce risk to retailer operations by having multiple carriers to rely on in the event of a carrier service disruption. These disruptions can be caused by a variety of reasons such as weather, capacity issues, industrial disputes, or as we have seen this year, a pandemic.
Save with Parcel Consolidations
It is equally important that multi-carrier shipping solutions support parcel consolidations. Consolidation is financially beneficial for retailers that ship high volumes of parcels or that do a lot of international shipping. Parcels destined for the same region or country can be consolidated into a single shipment.
Ideally, the multi-carrier solution should allow for “on-the-fly” consolidation. This helps when the sequence of processing packages destined for the same destination is spread out over the course of the day.
Retailers shipping from multiple locations can also use their warehouse management systems (WMS) or order management systems (OMS) to support “merge-in-transit” consolidation for orders of two or more items. Again, following a company’s business rules, goods shipped from different sites can be consolidated at a single warehouse or another location before being shipped to the final destination. Granted, this may require a longer delivery window, which can be offset by free or less expensive shipping options.
Never Overpay Your Freight Bills
Parcel shippers who do not audit their freight bills are very likely to be overpaying. For large volume retail shippers, this can amount to a significant amount of unnecessary spend over the course of a year.
Of course, manually going through carrier invoices, line item by line item looking for discrepancies, unexpected accessorials or incorrect fuel charges is a laborious process. No wonder many companies outsource it.
Automated freight bill auditing software allows you to bring this process in-house, and means that you are not sharing proprietary information with a third party. Freight auditing solutions compare carrier invoices with estimates made at the time of shipping.
Should a discrepancy be found, the solution alerts relevant personnel to investigate. When the source of the mismatch has been identified, the retailer can accept the discrepancy or begin the process for disputing an invoice.
Best-in-class freight bill auditing solutions can process large volume invoices that are hundreds of pages long, covering tens of thousands of line items.
One thing all retailers know is this: last-mile delivery is expensive. Approximately two-fifths of overall global logistics spend is on the last mile. It is no wonder then that e-commerce behemoths like Amazon, and parcel carriers such as UPS and FedEx have been experimenting with deliveries by drone or autonomous delivery robots.
For retailers who rely on manual processes, optimizing e-commerce operations through automation may seem like a daunting task. Those that do not do so, however, risk getting left behind. Every delivery that is not fulfilled at the lowest possible rate and every unnecessary carrier charge is a squeeze on already tight margins. As we have seen repeatedly in recent years, even iconic and world-famous names can flounder if they cannot adapt to the changing retail landscape.
Anne Sexton is head of logistics with QAD Precision, a provider of adaptive, cloud-based enterprise software and services for manufacturing companies.