3PL Perspectives
Even the most seasoned 3PLs can use some help themselves when it comes to managing the new parcel shipping landscape.
The rise of eCommerce has resulted in more frequent and smaller shipments than ever. And it isn’t just eCommerce merchants that are shipping more parcels. Retailers, manufacturers, and distributors in just about any industry are being called on to manage the last mile. And in the case of white glove residential services, the last inch.
In fact, according to the 29th Annual Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report, parcel shipping spend in the United States topped $99 billion, a 7 percent year-over-year growth, driven in large part by eCommerce. That has created a capacity crunch affecting all industries, with prices increasing at twice the rate of inflation. The recent U.S. carrier general rate increase (GRI) averaged 4.9 percent, but costs were higher if you take into account other increases seen throughout the year in the form of accessorial fees and surcharges.
“No sector saw more change last year than motor freight, where severe capacity pressures sparked sharp rate hikes,” according to the report. “Carriers gained pricing power as demand rose and electronic logging mandates exacerbated driver shortages.”
Pitney Bowes’ Parcel Shipping Index report indicated a similar trend. It predicted that global shipping volumes will exceed 100 billion parcels in 2020. Last year, parcel volumes grew 17 percent to 74 billion. Notably, China’s parcel volume grew 28 percent last year to 40 billion parcels.
All of these factors have contributed to a “parcel tsunami,” with more domestic and cross-border volumes and processes that are challenging the capacities of all supply chain participants including shippers, customs, and carriers. The result is higher transportation costs, visibility issues, and missed consumer delivery expectations, which are at an all-time high.
And it isn’t just about parcels anymore. Increasingly, LTL carriers are looking more like parcel carriers as they ramp up to meet the demand for residential delivery. Younger generations are more comfortable buying appliances, furniture, and other heavyweight items online, sight unseen. As a result, the market is seeing many 3PLs jump into the fray to help shippers manage last-mile delivery, which is increasingly becoming the most complex segment of the supply chain. The competition for business is getting fierce. With the fight for carrier capacity, it is not enough for 3PLs to be one-dimensional in their service offerings. Their clients will simply move on.
For 3PLs, this last bullet is becoming increasingly important especially with the rapidly increasing availability and variability of carrier service types and the blurring of lines between parcel and freight. Long gone are the days when shippers were willing to lock into a single carrier for all their delivery services. Multi-carrier shipping strategies have become the norm. The risk is too high, customer delivery needs are too diverse, and the need for competition during the carrier capacity crunch is too great. But the complexity of managing multiple carriers with rates that are competitive is beyond the expertise and negotiating capabilities of many shippers and 3PLs are stepping in to help.
But even for 3PLs, managing rating (especially parcel), shipping, tracking, and invoice reconciliation across a disparate client community is a challenge. Relying on multiple carrier APIs and websites often won’t work because many carriers don’t have the IT infrastructure to keep up with the production-level performance 3PLs need to automate processing. That’s why many 3PLs are adopting parcel transportation management systems (TMS) to help their clients realize cost savings while streamlining execution to keep their client’s delivery promise.
Here are some of the plays shared in “The 3PL Parcel Shipping Playbook” that can help 3PLs or shippers with carrier rate management:
- Implement a parcel and freight TMS solution with the ability to manage and calculate buy/sell rates across multiple carrier modes and services.
- Ensure that rating can support sub-second response times. You don’t want the slowest carrier API to pace routing automation.
- Integrate and adapt SaaS-based multi-carrier shipping solutions to client-specific routing, labeling, booking, and tracking processes across their extended enterprise (including suppliers). This requires a federated TMS platform.
- Offer auditing and invoice matching to compare expected vs. actual transportation costs.
- Provide analytics to benchmark carrier rates and performance.
In today’s world, it’s “my supply chain against your supply chain.” 3PLs need to be agile enough to offer systems and services that support this new reality. Those who do will reap the benefits in the form of increased margin and lower customer attrition.
Download the 3PL Parcel Shipping Playbook today and get the rest of the plays that pay for you and your customers.
