It’s estimated that during the 2021 holiday shopping season, delivery demand will exceed carrier capacity by over 5 million parcels per day.
Take a look at that statistic again: This isn’t the volume of packages delivered per day during this year’s holiday season. It’s the number of packages per day that exceed the capacity of carriers across the nation.
This means that eCommerce brands, online retailers, and direct-to-consumer (DTC) companies who rely on carriers to deliver their products to consumers efficiently and affordably already have some challenges to overcome going into the busiest shopping period of the year if they want to deliver great customer service experiences while also optimizing profit margins.
Online retailers are thriving, but this holiday season poses some questions as to how to deal with carrier capacities, high-volume surcharges, and more.
The State of Affairs: Carrier Capacity in 2021
There’s no question that the COVID-19 pandemic forever shaped the state of eCommerce. In January of 2020, it was projected that the eCommerce market would grow 2.8 percent year over year from 2019. While the onset of the pandemic caused many to believe that there would actually be a 10.5 percent decline in online sales, many retailers shifted their focus to an online marketplace and eCommerce actually grew in 2020—surpassing initial projects to gain 3.4 percent in sales.
But there’s even more growth projected for 2021. And amidst concerns about the Delta variant, carriers will likely be shipping even more holiday packages than ever before—to the tune of an excess of carrier capacity of 5 million packages per day.
To keep up with this skyrocketing demand for service from carriers, many will choose to counteract this by raising charges and setting limits for their high-volume customers, like online retailers. There are two ways carriers will offset their excess volume of packages:[Text Wrapping Break]
- Capacity Constraints: To mitigate overflowing warehouses and delayed deliveries, some carriers will likely set capacity constraints, limiting the volume of packages one retailer can ship out on any given day.
- Peak Time Surcharges: More packages require more workers to get things delivered on time, and carriers may instill surcharges (sometimes even by the package) to counteract the volume of packages and the labor needed to get them where they need to go. These surcharges may be simple and enacted for a set period, or they may be complex with no definitive end in sight.
Either way? It’s not great for eCommerce brands looking for carrier support that’s both fast and cost-effective. The good news is that there are ways for carriers to navigate these challenges.
Diversifying Your Carrier Network
One of the most important things you can do to prevent carrier capacity challenges is to diversify your carrier network instead of relying on a single-carrier solution. Working with one carrier subjects you to the capacity constraints and surcharge structure of a single carrier, with no wiggle room when your critical holiday shopping season starts.
By diversifying your carriers you can send out a certain volume of packages to separate carriers and potentially avoid high-volume surcharges. Plus? You can assign packages to specific carriers based on their strengths.
Finding a carrier is not a situation where there’s a one-size-fits-all solution, and even when it comes to individual brands, not every carrier may be able to suit every need. When diversifying your carriers, you can choose to partner with companies that specialize in what you want and need for different kinds of products, destinations, shipping times, costs, and packages.
Having multiple carriers during Peak Week and the busy holiday season means that when you run into capped volumes, you can still ship all of your orders quickly and efficiently and avoid processed orders sitting and ready to ship, piling up in your fulfillment center by sending your orders through more than one carrier. Having different carriers and different strategies provides a failsafe as different carriers throttle different carrier capacities.
Here’s why this matters: Shipping is a function of customer satisfaction, not as a function of your operation. You want to continue to offer exceptional customer service, but this is hard to achieve if your orders sit unshipped for several days while you struggle through a carrier capacity limit.
In our global economy, it’s easy to forget about regional carriers when non-regional carriers like the US Postal Service, FedEx, and UPS offer a host of options, but you could be leaving money on the table by neglecting regional carriers.
These regional carriers are an essential part of many eCommerce brands’ success stories. One of the first logical steps in coming up with a diversified carrier model is to get support from regional carriers, who serve very specific regions with fast transit times and affordable costs. You can look at the best locations for regional carriers by partnering with your 3PL to examine your data and compare it with where your fulfillment centers are located.
Examine Your Data and Your Own Processes
Another way to optimize shipping during peak times of year and carrier capacity caps is to look at your data and start with your shipping profile. Things to look for include:
- Weekly package volumes
- Mix of services used
- Average cost to ship per package
- Frequent package dimensions (actual and billed)
- Average package weight (actual and billed)
- Carrier surcharges
- Average time a package is in transit
- Customer shipping speed preferences
This information can tell you a lot about the current state of your shipping practices and help you pinpoint areas of improvement. You can work with your modern third-party logistics (3PL) partner to synthesize this data to choose carriers, packaging, and shipping rates to optimize your operations to delight your customers and appease your bottom line.
Next, your shipping operations can provide just as many answers to your questions on how to ship and navigate capacity and surcharge difficulties. You should examine:
- Your shipping costs for customers, including free shipping. Does this make financial sense?
- Where your shipments are generally going. Are your fulfillment centers located in the most cost-effective shipping zones?
- Your product mix in your network of fulfillment centers. Are you shipping the right products from the right locations?
- Your packaging materials, weight, and size. Can you avoid some surcharges by using different packaging or multiple packages?
By periodically examining these factors (especially as you approach a busy time like the holiday shopping season), you can start to tweak your operations to find ways to shop faster and more affordably than ever before. Your 3PL provider can be instrumental in this process, gathering and assessing data from your orders.
Evaluate the Size and Weight of Your Packages
Many eCommerce brands find that they can impact their shipping costs by examining the size, weight, and scale of their packages. This is because of something called dimensional weight. Dimensional weight (also called dim weight) refers to the amount of space a package takes up on a carrier’s truck in relation to its actual weight. Per shipment, you are charged based on the dimensional weight or the actual weight of the package—whichever is greater.
Other packaging considerations to factor into your processes?
- Many brands are switching to bubble mailers from boxes because they are lighter (and cheaper) to ship.
- The shipping cost per package increases dramatically if it exceeds one pound compared to packages that weigh less than one pound. Look at the weight of your products (and their packaging) as well as the weight of your most frequently placed orders.
- Use order data to pinpoint the right balance of having multiple packaging options and having too many packaging options to be truly cost-effective. You can gather datasets from your 3PL to find the perfect combination of boxes and mailers to optimize shipping rates without adding too much complexity.
Overcoming Capacity Challenges: How OceanX Can Help
Having real-time data and a guide to help you make the most of it will be essential to your success during the 2021 holiday season and beyond. OceanX is there for you with real-time data collection stored in a data lake and available for you to pull to service your internal goals at the moment you need it. In fact, our Bridge Portal was designed to do just that: Share invaluable data and insights in real-time. Track everything including:
- Inventory in real-time
- Inventory projections
- How long it takes to process orders
- Delivery time
- Service-level agreement (SLA) performance
- Success of packages across all carriers, specific to each carrier
All of this is available to help you optimize your operations and find faster, more affordable delivery methods. Our client success team will work alongside you to understand your promotions and come up with strategies in the fulfillment center and beyond to thrive during this unique holiday season. To learn more, connect with us today!