Parcel Management Maturity Model: The Path to Parcel Orchestration and Optimization

In the evolving eCommerce environment, parcel management has become the beating heart of retail success. With increasing consumer demand and an unquenchable thirst for swift, seamless deliveries, retailers of all sizes are seeking out innovative ways to optimize parcel operations while reducing costs. The stakes are high: effective parcel management can minimize per-package spend and elevate customer experiences to secure brand loyalty and propel revenue to new heights. But how can companies truly assess their parcel management in terms of cost control, margin, and delivery performance?

Parcel Management Maturity Model

Enter the Parcel Management Maturity Model. This framework is based on time-tested industry maturity models, which have long been applied to eCommerce, logistics, and warehousing processes to evaluate effectiveness and identify opportunities for continuous improvement. In the dynamic world of parcel shipping, there's little room for guesswork or trial and error. As the analysts from Above the Fray eCommerce Maturity Model suggest, "If you don't know where you are, then you don't know where you're going. And if you don't know where you're going, you're probably going the wrong way."

Until now, the parcel industry has been sailing uncharted waters. That’s because eCommerce has transformed supply chains and B2C parcel shipping is now in the spotlight. There haven’t been any comprehensive frameworks to guide shippers on their journey towards best parcel management processes. Our mission is to change that, providing shippers with a map to help navigate the complex terrain of parcel management. Together, we'll embark on a journey that explores the challenges of parcel shipping at different stages of growth and what to anticipate as you assess your organization’s place on the maturity model spectrum.

Buckle up, and let's hit the road toward Parcel Management Orchestration.

Navigating the Tides: eCommerce and Parcel Market Trends

The eCommerce industry witnessed tremendous volatility in recent years, reshaping the parcel industry in unprecedented ways. Let’s delve into three critical market trends that are transforming the way shippers navigate this dynamic environment.

A Whirlwind of eCommerce Market Fluctuations

The COVID-19 pandemic turned the world of eCommerce on its head, as people stuck at home created a sudden surge in B2C demand. Shippers grappled with sudden, unexpected carrier capacity constraints. They started turning to non-traditional fulfillment options like local couriers and gig economy drivers to fill the gaps in parcel delivery. Post-COVID, eCommerce demand has returned to previous growth levels. Most major carriers find themselves with excess capacity, making the future of contract negotiations much less predictable.

The Great Decentralization - The Amazon Effect

Consumer demand for free and on-time delivery, even as shipping costs soar, has triggered a shift from centralized to decentralized operations. Amazon has built out a network of micro-fulfillment centers, bringing inventory closer to its consumers and reducing shipping costs while speeding up delivery. To compete, retailers have followed suit, rolling out their own omnichannel fulfillment strategies. The decentralization and carrier diversification have added significant challenges and complexity to parcel fulfillment, requiring shippers to more strategically plan where, when, and how to use specific carrier services to protect margins.

Riding the Waves of Parcel Uncertainty

Recent volume stats reveal that shipping volumes and rates have resumed the growth trajectories of pre-pandemic years, albeit with fluctuations and uncertainty. For example, despite parcel volumes dipping by 2% in 2022, carrier revenue increased by 6.5%, according to the Pitney Bowes Parcel Shipping Index. While projections for 2023 suggest little change in parcel volumes, rates continue to be a major concern, particularly as shippers brace themselves for a potential UPS strike that would put a massive strain on parcel carriers nationwide.

While market and economic trends have created a surprising and rather unpleasant rollercoaster ride for parcel shippers, they are only a single component in the complex parcel environment.

Navigating the Labyrinth: Unraveling the Complex Parcel Shipping Environment

The parcel shipping environment is like a labyrinth, and shippers must navigate a myriad of challenges and complexities to ensure a successful outcome. The most pressing parcel shipping challenges include:

  • Making and Keeping Customer Delivery Promises – With the rise of eCommerce, consumers now expect reliable, on-time deliveries. Even the slightest hiccup can tarnish a brand's reputation, so shippers must balance customer satisfaction against the cost and efficiency of their operations.
  • Scaling Growth in a Tight Labor, Vacancy, and Borrowing Market – Shippers must devise strategies to overcome tight labor, warehousing, and lending markets to grow and remain competitive in the digital retail and parcel fulfillment space.
  • Parcel Rating Complexity – Contract commitments, increasing rates, and a plethora of new fees and surcharges complicate shipping cost calculations and add another layer of complexity to parcel shipping.
  • Economic Challenges in the Freight Market – With freight companies going out of business, major carriers shutting down services (FedEx discontinuing same-day delivery), and the looming threat of a potential UPS strike, it is vital for shippers to develop robust strategies to optimize parcel spend and maintain profitability.

The Road to Parcel Optimization: The Power of a Parcel Management Maturity Model

In the intricate world of parcel management, businesses must learn to embrace and master complexity as they progress in maturity. The Parcel Management Maturity Model provides a roadmap for organizations to achieve operational excellence, measured in terms of customer satisfaction, speed, visibility, control, healthy margins, and continuous improvement.

  • Right Place: Utilizing an omnichannel fulfillment strategy ensures orders are fulfilled and shipped from the most cost-effective origins based on inventory availability and delivery promise dates.
  • Right Time: Demonstrating the ability to make and keep delivery promises with the most efficient, cost-effective service level option for each shipment.
  • Right Carton: Optimizing packaging to prevent dim weight adjustment charges, corrugated waste, and excessive carbon emissions.
  • Right Carrier Service: Utilizing a diversified carrier network to make deliveries, recognizing that not all carriers have the same capabilities or provide the same delivery services.
  • Right Delivery Experience: Ensuring a seamless delivery experience that represents the brand, including on-time delivery, with the right product in the right carton.

To mature and excel in all these dimensions, businesses must thoroughly examine how their people, places, processes, and platforms are performing and whether they can scale. In doing so, they'll be better equipped to navigate the inherent complexities of the parcel management landscape.

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Now Presenting: The Parcel Management Maturity Model

The Parcel Management Maturity Model, in many ways, mirrors the evolution of eCommerce, as it is the driving force behind parcel delivery trends. This model represents a journey of continuous improvement and adaptation, characterized by steady advancements in the following areas:

  • Systems Integration
  • Automation
  • Customer Centricity
  • Scale in terms of geography, capacity, and performance
  • Decision-making intelligence and predictability
  • Cost Control
  • Ability to continuously innovate

As businesses progress through the stages of the Parcel Management Maturity Model, they'll experience growth and development in each of these aspects, enabling them to better cope with the complexities of the parcel shipping environment. Let’s dive into the Parcel Management Maturity Model and the various stages that lead to parcel optimization and orchestration.

Stage 1: Single Carrier Reliance

At the first stage of Parcel Management Maturity, businesses are primarily focused on meeting growing customer demand. They turn to a single carrier to help them embark on their journey. They face numerous problems stemming from siloed autonomous operations where departments work independently, manual processes that create inefficiencies, and disconnected systems. They rely on a carrier-provided shipping system that limits rate selections and customer delivery choices.

To overcome these challenges, companies in the Embark stage should prioritize three key areas:

  • Automation to reduce manual processes and labor costs
  • Integration to streamline workflows and improve overall efficiency
  • Developing a multi-carrier strategy to reduce costs and offer customers more delivery choices.

Stage 2: Multiple Carriers

In the Multiple Carriers stage, companies still ship from a single, centralized shipping location and invest in systems to automate various aspects of their operations. They add more carriers to their networks but typically still rely on carrier-provided shipping systems or websites to execute shipments.

Pain points in this stage include manual data handling inefficiencies, high shipping costs due to low volumes and unexpected surcharges, and poor customer delivery experiences. To address these issues, companies seek to integrate systems to eliminate duplicate manual entries and further automate workflows to create a single source of truth for parcel shipments. Replacing tribal human knowledge with standardized automation rules helps reduce costs, make predictable delivery decisions, and accommodate customer delivery preferences.

Stage 3: Connect & Automate

In this stage, businesses integrate enterprise systems and processes to perfect their operations within their own four walls. They work with multiple locations, users, and carriers while using integrated eCommerce, OMS, and WMS systems. They use multi-carrier parcel shipping systems integrated with their enterprise system to automate execution and high-speed labeling.

Despite these advancements, companies in this stage still face challenges with high system ownership costs, shipping cost control issues, and inflexible IT resources. Hard-coded scripting rules provide limited carrier service selection decision-making capabilities. To tackle these challenges, companies should work to shift control from IT to logistics managers, implementing an enterprise shipping platform with more configurable routing instructions to control carrier routing capabilities. This approach can help reduce the time required to implement new, more cost-effective delivery capabilities.

Stage 4: Collaborate & Expand

In the next stage of maturity, companies shift focus to supply chain management by pre-positioning inventory closer to customers with omnichannel fulfillment. They integrate their enterprise systems with supply chain partners to improve inventory visibility. They shift control of routing rules from hard-coded scripts managed by programmers to configurable instructions controlled by logistics managers to optimize cartonization and carrier service selections.

At this stage, businesses encounter challenges related to discrepancies between expected and actual parcel shipping costs and complex carrier invoices. To address these pain points, companies should invest in artificial intelligence and machine learning to align shipper and carrier network optimization. By leveraging advanced technologies, these companies can reduce shipping cost discrepancies and effectively control margins.

Stage 5: Optimize & Orchestrate

The final maturity stage emphasizes continuous improvement, intelligent decision-making, and parcel management optimization. Logistics and supply chain departments facilitate processes across a network of partners to capitalize on unique opportunities for process orchestration, allowing information to flow across the network in real time and enabling broader visibility and timely, fact-based decisions.

Companies in this stage focus on global fulfillment, multimodal carrier networks, dynamic planning, and modeling with machine learning to optimize carrier selection. However, they face challenges with global complexity and cross-border compliance. To thrive, businesses must continue prioritizing innovation, adopt a global customer perspective, and leverage real-time global visibility to make data-driven decisions. By embracing the complexity and mastering parcel orchestration, organizations can achieve optimization and drive sustainable growth in the increasingly competitive eCommerce landscape.

Master the Parcel Management Maturity Model with Sendflex

Sendflex is a next-generation parcel orchestration platform designed to help businesses reach the final Parcel Management Maturity Model stages, enabling them to master the complexities of parcel management.

Sendflex is built on a cloud-native microservices architecture that scales to meet the performance requirements of medium to large enterprises. Core to the platform is a high-speed, onboard routing and rating engine that is carrier API-independent, processing 1,000s of routing, time-in-transit, and rate calculations per second. This unprecedented performance opens the door for logistics managers to configure their own routing instructions, generate optimized plans, and run "what-if" simulations upstream from shipping. By doing so, businesses can continuously improve their parcel management processes and stay ahead of the competition.

By embracing Sendflex, organizations can harness the power of parcel orchestration and optimization to enhance customer satisfaction, streamline operations, and control costs more effectively. Don't miss the opportunity to take your parcel management to new heights. Request a consultation with Sendflex today and see firsthand how this innovative platform can transform your business's parcel shipping operations.

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Learn why controlling costs, capacity, carbon, and customer experiences matters in the B2C delivery economy

Shippers who are used to relying on a primary parcel carrier with unlimited capacity must now manage a broader portfolio of carriers, all with different capabilities, performance records, constraints, and rate structures.

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