Article: 3 Ways to Ship More in the Age of Diminished Carrier Capacity
B2C eCommerce, accelerated by COVID, is driving last mile deliveries through the roof with more frequent, smaller shipments. As a result, there is an unprecedented capacity crunch among traditional parcel carriers who, in response to high demand, are raising prices, setting pickup limits, and cancelling less profitable contracts. The driver shortage is only adding to the capacity problem. With B2C eCommerce at less than 20% of retail sales, we could only be seeing the beginning of a longer-term challenge.
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Supply and demand. It’s a basic law of economics. One that does not lend itself to easy resolution at the negotiation table. Shippers are simply going to have to change the way they operate if they expect to find more “capacity supply” to not only support their current operations, but also plan to scale for future growth. More capacity translates into better cost control and a more resilient B2C supply chain.
There are at least three ways that shippers can alleviate their capacity problems:
1. Carrier Diversification. It almost goes without saying that the days of relying on one carrier to delivery all packages anywhere during any part of the year is over. As hard as they may try, the traditional carriers and even Amazon are not building out capacity as fast as the eCommerce juggernaut. UPS recently announced their “better not bigger” strategy, which should serve as a warning to shippers that carriers will not solve the capacity shortage problem all by themselves.
The good news is that “nature abhors a vacuum” and so does economic demand. New carrier services are moving in to offer relief. Regional carriers such as Ontrac, LSO and Lasership are increasingly in demand. Uber and other gig-economy services are starting to gain traction with retailers for local delivery. 3PLs, like Pitney Bowes, are moving in to offer alternative final mile delivery services. There are thousands of local delivery services that are being recruited into the final-mile delivery market.
But moving from a few carriers to a few hundred carriers will require new systems to optimize carrier service selections and shipping processes because not all carriers have the breadth of services the traditional parcel carriers offered.
2. Drop Shipping. Shipping out one package at a time directly to consumers is at the core of what is causing a strain on traditional carrier capacity. What made the old supply chain model work was aggregation and density: shipments moving through the “middle” mile with LTL and TL carriers. Many shippers see the opportunity to reinstate the middle mile by moving consolidated loads to local carrier hubs for deconsolidation and final mile delivery.
But drop shipping will require deferred delivery expectations on the part of the consumer. While the Amazon hype about “free and fast” delivery has some credence, there may be an opportunity to change consumer expectations. As UPS Director of Sustainability Patrick Browne recently commented, “The more time you give me, the more efficient I can be.”
Deferred delivery is less expensive. Merchants could offer coupons in the shopping cart if consumers accept a less costly delivery method. Deferred delivery is more sustainable. An appeal to eco-friendly delivery could change behavior especially among younger generations.
3. Smarter Packing. Everyone has had the experience of receiving large packages with a small item inside surrounded by excessive fill and air. Poor packing is the enemy of capacity (and sustainability). If shippers expect to alleviate their capacity issues, they need to make the most of the capacity they that is available to them.
Trying to apply negotiating leverage to obtain better DIM factors is old school. Whereas cartonization technology can ensure that order SKUs are packed in the most transportation cost-effective (and capacity-optimized) way. The result? More orders shipped in the same amount of cargo space, enabling carriers to “cube-out” their vehicles. Fewer unexpected DIM fees.
Implementing these measures adds complexity to fulfillment processes. Shippers will need new technology that can automate decisions from shopping carts to shipping. Sendflex provides a shipping optimization engine that makes your existing systems a lot smarter, resulting in lower costs and more capacity.
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