Hello everyone, Ready to embark on a journey into the world of parcel shipping? Buckle up, because we're diving into the changes happening with small parcel costs, specifically with our pals UPS and FedEx in 2024. Let's make sense of it all without getting lost in the costly shipping maze!
What's the Buzz About Small Parcel Costs?
Have you ever wondered why sending packages sometimes costs more than expected? Well, my friends, it turns out that UPS and FedEx, the shipping superheroes, are making some changes in 2024 that we need to know about.
The UPS Plot Twist:
UPS, the big brown shipping giant, is shaking things up in the pricing department. They've announced adjustments to their rates, and it's leaving some folks scratching their heads. But fear not! We're here to unravel the mystery. UPS is increasing rates by 5.9% in 2024. It looks like all of us will be paying for a new UPS labor agreement established in 2023.
FedEx's Turn in the Spotlight:
Now, let's shift our gaze to FedEx, the purple and orange wizards of shipping. They, too, are waving their magic wand over small parcel costs. Brace yourselves – there's a rate change in the air. FedEx announced, a UPS matching, rate increase of 5.9%. Watch out for higher surcharges on Additional Handling and Oversize charges. They are also reacting to inflationary pressures keeping internal margins strong.
Why the Changes?
You might be thinking, "Why are they doing this?" Well, it turns out that shipping is a complex dance of planes, trucks, and delivery wizards, and sometimes adjustments are needed to keep the dance floor running smoothly. Both UPS and FedEx are investing in their networks, technology, and, of course, their teams. These changes are like upgrading to the latest and greatest dance moves – it might take a bit of getting used to, but it's all in the name of delivering your packages better and faster.
What Does This Mean for You?
Alright, let's talk about the real deal – how do these changes affect you, the sender of packages? It's true; you might see a difference in the cost of shipping. But fear not! Here are a few tips to keep things in check:
Collect and Analyze Data
Use simple bar and pareto graphs to perform the data analysis. We are looking for the largest areas of impact to save the most money. This data analysis can be the start of Key Performance Indicators (KPI's) on your parcel shipping performance. Here are a few key metrics we look for:
Weight per destination state or zip code
Destination state or zip code
Costs - $'s/ pound
Service Type
Methods to reduce small parcel spend
Evaluate the Overpack
A consistent and methodical review of Overpack needs can help reduce small parcel shipping costs. Here are a few ways:
Right-Sizing Packaging - Choose packaging that closely fits the size of the product. Avoid using excessively large boxes for small items. Right-sizing minimizes the need for additional filler material. Add in additional box sizes to better fit your high volume SKU shipments. Add the right box size to Bill of Materials to help ensure consistency.
Custom Packaging - Invest in custom packaging solutions tailored to the size and shape of your products. Custom packaging can eliminate wasted space and reduce the need for excessive protective materials.
Utilize Packaging Software - Use packaging software that calculates the optimal box size based on the dimensions and weight of the product. This helps in selecting the most efficient packaging for each item.
Protective Inserts and Cushioning - Instead of overpacking with excessive box sizes, use protective inserts and cushioning materials like bubble wrap, air pillows, or paper to secure items within appropriately sized boxes.
Evaluate Packaging Materials - Choose lightweight but sturdy packaging materials. For example, consider using corrugated cardboard with a high strength-to-weight ratio to provide protection without unnecessary bulk. Test reduced dunnage corrugate to balance performance and costs.
Implement Standardized Packaging Guidelines - Develop and enforce packaging guidelines within your organization. Ensure that employees follow standardized procedures for selecting packaging materials and methods.
Collaborate with Suppliers - Work with your suppliers to receive products in packaging that is already optimized for size and protection. This can minimize the need for repackaging at your end. Shift to reducing or eliminating the need for overpack by direct shipment of the SKU with Supplier packaging.
Educate Employees - Provide training to employees involved in the packing process. Help them understand the importance of reducing overpacking and the impact it can have on both costs and environmental sustainability.
Implement Packaging Audits - Regularly conduct audits of your packaging processes to identify areas for improvement. Assess whether overpacking is occurring and implement corrective measures.
Check costs and invoices Keep an eye on the latest updates from UPS and FedEx. Knowledge is power, and it helps you make smarter shipping decisions. A simple monthly sample of 20 or more invoices can quickly pay off. A deeper dive can be performed if the sample reveals any errors. Challenge your local sales rep with your data findings monthly. AI tools can be used for summarizing or inferring errors from shipping data sets. 3rd party companies offer this service but you will share any savings with the provider. Here are a few areas to check:
Gather Your Invoices - Collect all the invoices you received from carriers.
Check Delivery Addresses - Make sure the delivery addresses on the invoice match the actual locations where packages were sent.
Verify Package Weights and Dimensions - Check if the weights and dimensions of the packages match what you expected.
Review Service Types - Ensure that the services charged you for match the services you requested. Look at the pick up time at your facility versus the actual delivery time with the customer. Do these actual times match up with the expected service?
Examine Additional Charges - Look for any additional fees or charges. Fuel surcharges are a common source of additional costs.
Compare with Shipment Records - Compare the invoice details with your shipment records.
Check for Duplicate Charges - Look out for any duplicate charges for the same service.
Surcharges - Know the impact surcharges have on your overall costs. Peak, Fuel, Delivery Area, Residential, Additional Handling and Oversize charges add up quickly. How can you change package design or methods to eliminate these surcharges?
Online Tools - Use carrier online tools to better understand costs and performance
Shift Inventory to high cost and volume routes
Distribution networks with multiple facilities can conduct regular monthly or quarterly review on shipment lanes of high volume SKU's. Follow the data to move inventory storage locations closer to customer demand. Check our Easy Supply Chain blog post on 5 Ways to Balance Inventory in Your Supply Chain here: https://www.easysupplychain.com/post/5-ways-to-balance-inventory-in-your-supply-chain
Move from small parcel to LTL
Follow your data analysis on high volume customers or shipping lanes. Can you consolidate shipments to customers and utilize cheaper Less Than Truckload (LTL) rates? You might give up a day or two of shipping service but the cost savings can add up. Your customer also might appreciate the reduction of small parcel shipments to individually process.
Utilize Middle Mile strategy for high volume lanes
Consider adding a middle mile strategy to your shipment methods. This technique involves gathering packages at a central hub, freight is consolidated by lanes and moved via truckload (TL). The regional hubs then hand off to local delivery teams for the final mile. Use of TL rates direct to other population hubs versus traditional carrier managed moves can save significant money on high volume lanes.
Match parcel size to service strengths
Look at United States Postal Service (USPS) for small packages under certain weight points. UPS and FedEx have differences in rates based on the level of service, destination, and package characteristics. Consider DHL Express for international shipping.
Shop different service offerings
Match up high volume routes with regional shipment startups like LaserShip, SpeeDee and Lone Star. These smaller companies can provide the same service with lower overhead. Watch for Amazon to compete directly with UPS and FedEx in next few years by offering parcel shipments for other than Amazon goods.
Shift Service Types to cheaper options
Our friends at Blue Cart.com shared a summary of FedEx prices per overnight service below. https://www.bluecart.com/blog/overnight-shipping-costs
A sample from a recent client showed these service types had a range of 1.4 to 1.7 actual delivery days for these three service types. The client was able to shift service levels to FedEx Standard Overnight for a cost savings and little impact in the eyes of the customer. Is a 70% increase in shipment costs really worth a few hours of delivery time?
Review DIM's
For each shipment, your charge is based on the dimensional weight (DIM's) or actual weight of the package — whichever is greater. Look at DIM's entered into the carrier website at the time of shipment creation. If your shipment is charged by Dimension Weight, missing or inaccurate dimensions entered can result in additional charges. Review your manual dimension collection process or data accuracy of systems that are integrated with the UPS/FedEx website.
In Conclusion:
Shipping costs continue to increase annually, but with a bit of knowledge and planning, we can navigate the dance floor without missing a beat. Here's to smooth shipping and hassle-free deliveries in 2024 and beyond!
Happy shipping, everyone! 🚚💨
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