The parcel shipping formula was simple once upon a time:
It was easy. But that world is long gone. Today’s shippers are feeling squeezed without being able to name what exactly has changed.
That was the starting point for a recent Transportation Insight webinar hosted by Melanie Burns. Titled “Parcel or Freight: How Dynamic Routing Protects Your Profit,” the webinar included Jim Cook, VP of Technology & Product at Transportation Insight, and Bob Malley, CEO of Sendflex.
Here are the five takeaways every shipper should walk away from the webinar with.
For years, routing decisions ran on static rules, and the rules mostly worked. During the webinar, Jim argued that that era is over.
“It used to be I could set a rule that says, ‘Hey, if it’s under 150 pounds, automatically route parcel,’” he said. “And if it’s on a pallet over 150 pounds, we’re going to route LTL. And that’s just not the case anymore.”
Several forces broke the model:
At the same time, heavy parcel is now drifting into LTL territory, and lightweight LTL is going to parcel.
The result is a blurred line between modes, with real money riding on each routing call. As Jim put it, one inch on any dimension “can drive you into oversized,” which puts the shipment in a very different cost bracket.
Bob highlighted the three things that everyone in parcel shipping needs right now: agility, speed, and scale. To make the point, he reached back to the beginning of his career.
“When we first started implementing PC-based UPS manifest systems,” he said. “It was one carrier, and the only changes that you could anticipate were annual rate changes, where we would send out hundreds of rate change diskettes and celebrate with a pizza party.”
Today, change is constant, and shippers can no longer afford to hire consultants or system integrators every time a business rule needs updating. Modern platforms are moving control to business users, who can define carrier selection rules in minutes based on shipping costs, SKU type, carrier performance, and delivery promise and other parameters.
Speed is a second and less obvious pressure. Carrier rate APIs worked well when shipping meant rating one shipment at a time. They fall apart when rating needs to happen upstream.
“The carrier rate APIs aren’t fast enough to do rating … during checkout, order allocation, wave planning and so forth, where rate shopping really needs to be iterative,” Bob said. “So having an in-platform rating engine is increasingly important.”
That need for fast, iterative, in-platform rating is why the Sendflex platform exists. The system was designed to be cloud-native rather than simply hosting older architecture in the cloud.
Parcel TMS and freight TMS are converging. Both now demand rules, constraints, and multi-carrier decision logic. During the webinar Bob drew a sharp line between the two that explains why heavy freight TMS technology often fails to address parcel challenges.
“I always think of freight TMS as more of a back-office function, whereas parcel processing is more of a process automate, material handling function, where milliseconds really count,” he said.
It’s OK if tendering a freight shipment takes minutes. Whereas cartonizing orders, rate shopping carriers and printing/applying labels at a pack station or on a high speed conveyor is measured in milliseconds.
Both speakers converged on the same culprit for shrinking parcel margins. While many think that base rates are the problem and try to address it during annual carrier negotiations, it’s really everything that’s added on top after rate shopping.
“The growth of surcharges and the constant change in those surcharges is really having a devastating impact on 3PL and shipper margins,” Bob said. “The cost variance between what shippers expect to pay and what actually shows up as a fully loaded cost on carrier invoices is widening.”
Jim said heavy weight surcharge can drive up the cost of a shipment “$500 and more.” And because parcel and LTL providers price and describe accessorials differently, comparing options across modes is anything but apples-to-apples until that data gets normalized.
The defense, Bob argued, is applying rules aimed squarely at surcharge avoidance: cartonization rules that prevent dim-weight adjustments, address validation that catches residential-versus-commercial classification, and the ability for business users to adjust those rules as carriers change the terms.
The solution to these issues does not require a painful systems overhaul. Over time, shipping systems become ingrained in operations. And that’s OK, according to Bob.
“There are still systems out there that my company implemented 20 years ago, and they’re still working,” he said. “But no one wants to really replace them, what they want to be able to do is make them smarter.”
His recommendation is to add rather than replace: Keep the entrenched shipping system doing what it does well, and put an optimization layer on top of the stack to make decisions upstream in the fulfillment process. Sendflex takes a crawl-walk-run approach specifically for shippers who can’t afford to disrupt their live operations.
“Add the optimization component to the stack that enables that shipping system to not have to work so hard,” he said, “and still use the shipping system to print labels, which is essentially what they do well.”
The complexity that e-commerce brought to parcel isn’t going away — Bob was blunt that it’s only going to get worse. Jim’s closing advice gives shippers a two-part playbook:
Both speakers agreed that the status quo is the one thing shippers can’t afford.
Ready to see what a smart layer can do for your business? Get in touch to see Sendflex in action.
