Wisely Select Your Carrier to Reduce Parcel Delivery Costs
One of the biggest developments in parcel shipping over the past decade is the increased use of consolidators. Consolidators compete against standard UPS and FedEx ground services by using a special rate from USPS called Parcel Select. The consolidators sort and drive the parcels to USPS Bulk Mail Centers (BMCs), Sectional Centers (SCFs) and local post offices. Delivery times normally increase by a few days over UPS ground, but Parcel Select rates are very low, so even with the consolidator's fees added on, the costs can be 30 percent less than standard UPS, USPS Priority Mail and FedEx rates.
UPS has a product called Mail Innovations, FedEx has SmartPost and a number of independent companies also provide these services—Newgistics and Blue Package Delivery, for instance.
One of the best ways to manage the expectations of delivery for the consumer and achieve the best parcel rates is to decouple using a single carrier service for shipping and look toward leveraging different carriers and shipping options to achieve the same service level performance and reduce costs. From a communication perspective, you may offer the consumer the same options as normal—for instance, standard (five-10 days), rush (two-four days) and expedited (next day)—but instead of telling them the items will ship UPS, USPS or FedEx, you pick the most cost-effective way to ship based on the time it takes to leave your shipping facility and reach the consumer.
For instance, if you offer a rush, one- to two-business day shipping option on parcels, instead of automatically shipping this parcel overnight (let’s say a 10-pound overnight package in the local area would cost you $38), you can use ground service to achieve that option in the local zones at about $18. So the overnight parcel is shipped using ground service and achieves the same result—the customer received the item on time the next day. Multiply the $20 savings per shipment over 1,000 packages and the results are enormous.
Decoupling also extends advantages on ground shipping. Say, for instance, the parcel is lightweight. If the consumer asks for a two- to four-day service and the shipment is across the U.S., it’s cheaper to send the parcel Priority Mail than to use FedEx or UPS. You can reach the consumer on average in two to three business days instead of five and save money.
Of course, customers want their products immediately, so it's important that the messages communicated to consumers are in line with the actual delivery times. If you use a slower delivery method to save money, it's important that consumer expectations are in line, or you will lose your savings by paying for more inquiries on delivery times in the call center.