How to Prepare for Parcel General Rate Increases to Keep Total Transportation Spend in Check

Online shopping has become increasingly popular in recent years, and with this comes a heavy reliance on parcel carriers for shipping. As parcel shipping volumes continue to rise, so too do the costs associated with it. Parcel general rate increases are a reality that businesses must face, and it is crucial to prepare for these increases to keep transportation spend in check. In this article, we will discuss everything you need to know about parcel general rate increases and strategies for mitigating their impact.

Understanding Parcel General Rate Increases and Their Impact on Transportation Spend

Parcel general rate increases are fee hikes that are imposed by parcel carriers, such as FedEx and UPS, on their shipping services. These rate increases affect all customers and are typically announced annually. The exact percentage increase varies depending on the carrier and service level. For example, in 2021, FedEx announced an average increase of 4.9% on its U.S. domestic services.

The impact of parcel general rate increases on transportation spend can be significant, especially for companies that rely heavily on parcel shipping. The increased cost can eat into profit margins and limit growth opportunities. It is essential to take proactive measures to mitigate these increases and keep transportation spend in check.

One way to mitigate the impact of parcel general rate increases is to negotiate better rates with carriers. This can be done by leveraging shipping volume, optimizing package dimensions and weight, and exploring alternative shipping options. Another strategy is to implement cost-saving measures, such as consolidating shipments, reducing packaging materials, and improving order accuracy to minimize returns. By taking these proactive steps, companies can better manage their transportation spend and maintain profitability in the face of parcel general rate increases.

Strategies to Mitigate the Effects of Parcel General Rate Increases

There are various strategies that businesses can use to mitigate the effects of parcel general rate increases:

Analyze Your Current Transportation Costs and Identify Opportunities for Savings

The first step in mitigating the impact of parcel general rate increases is to understand your current transportation costs fully. Carefully review your shipping invoices and identify areas where you can cut costs. This could include negotiating better rates, consolidating shipments, re-evaluating packaging options, and optimizing shipping routes.

Utilize Technology to Optimize Transportation Routes and Reduce Costs

Technology can play a significant role in reducing transportation costs. Route optimization software can help identify the most efficient shipping routes, reduce transit times, and minimize the number of miles traveled. By streamlining the shipping process, technology can also eliminate redundancies and improve overall efficiency, reducing transportation costs.

Negotiate Rates with Parcel Carriers to Maximize Savings

Negotiating shipping rates with parcel carriers is a viable option for businesses looking to save money. Build a relationship with your carrier representative and clearly communicate your company’s shipping needs. This can be a fruitful avenue to explore for companies that ship high volumes of parcels regularly.

Explore Alternative Shipping Methods to Reduce Dependence on Parcel Carriers

Exploring alternative shipping methods can also help reduce the impact of parcel general rate increases. For example, using regional carriers or consolidators can often offer cost savings compared to the “big-name” carriers. In addition, shipping via rail or intermodal transportation can be an efficient option for businesses that ship in high volumes and over long distances.

Implement Sustainability Initiatives to Reduce Transportation Costs and Carbon Footprint

Sustainability and environmental responsibility are becoming increasingly important considerations for business operations. Implementing sustainability initiatives can help reduce transportation costs and lower the company’s carbon footprint. For example, reducing packaging materials and using environmentally friendly packaging options can reduce transportation costs while also reducing waste.

Monitor and Measure Transportation Performance to Identify Areas for Improvement

Monitoring and measuring transportation performance is crucial to identifying areas for improvement and reducing costs. Use key performance indicators (KPIs) such as delivery times, on-time deliveries, and transit times to assess transportation performance and identify areas for improvement.

Best Practices for Managing Transportation Spend in Times of Uncertainty

The current business climate is marked by uncertainty, which can make managing transportation spend even more challenging. However, businesses can adopt best practices to optimize transportation spend in these times. This could include evaluating transportation contracts regularly, monitoring fluctuations in fuel prices, and working closely with suppliers to ensure timely and efficient deliveries.

Collaborating with Suppliers and Customers to Achieve Mutual Cost Savings in Transportation

Collaborating with suppliers and customers can also be an effective way to achieve mutual cost savings in transportation. For example, consolidating shipments with suppliers can reduce transportation costs, and using drop-shipping techniques can lower the number of deliverable packages. By working collaboratively, businesses can identify cost-cutting opportunities that benefit everyone involved.

Future-Proofing Your Transportation Strategy in Anticipation of Future Rate Increases

Finally, future-proofing your transportation strategy is vital in anticipation of future parcel general rate increases. This could include exploring new shipping options, investing in technology to streamline the shipping process, and building relationships with regional carriers and consolidators. Taking these steps can help a company remain competitive and profitable, even as parcel general rate increases continue to rise in the future.

Implementing Employee Training Programs to Improve Transportation Efficiency

Implementing employee training programs can help improve transportation efficiency and reduce costs. By providing training on proper packaging techniques, loading and unloading procedures, and safe driving practices, businesses can reduce the risk of damaged goods, accidents, and delays. This can lead to fewer transportation-related expenses and improved customer satisfaction.

Investing in Warehouse Management Systems to Improve Inventory Management and Reduce Shipping Costs

Investing in warehouse management systems (WMS) can help improve inventory management and reduce shipping costs. By using WMS to track inventory levels, businesses can avoid overstocking and understocking, which can lead to unnecessary shipping expenses. In addition, WMS can help optimize order fulfillment processes, reducing the time and cost associated with shipping orders.

How ERP system can help companies manage parcel rate increases better?

An enterprise resource planning (ERP) system can play a vital role in managing transportation spend and parcel general rate increases. An ERP system can help businesses track shipments, monitor performance, and analyze transportation costs in real-time. With this information, businesses can identify areas for improvement and optimize their transportation strategy to mitigate the impact of parcel general rate increases.

Moreover, an ERP system can also help businesses negotiate better rates with carriers by providing them with accurate data on their shipping volumes and patterns. This data can be used to negotiate volume discounts or better contract terms with carriers, which can help offset the impact of parcel rate increases.

Additionally, an ERP system can help businesses automate their shipping processes, reducing the need for manual intervention and minimizing the risk of errors. This can help businesses save time and money, while also improving the accuracy and reliability of their shipping operations.

The Impact of Global Events on Parcel Shipping Rates: Lessons Learned from the Pandemic

The COVID-19 pandemic brought significant disruption to parcel shipping rates globally. With increased demand for parcel shipping due to the pandemic, carriers experienced capacity constraints, which led to a sharp increase in shipping rates. The pandemic taught us that it is critical to be flexible and adaptable in response to unexpected global events. Building strong relationships with your carriers and exploring alternative shipping methods can help ensure the sustainability of your transportation strategy in the face of changing global events.

Another lesson learned from the pandemic is the importance of having a contingency plan in place. The pandemic caused many countries to close their borders, which led to delays and cancellations in parcel shipments. Having a backup plan, such as using multiple carriers or having alternative shipping routes, can help mitigate the impact of unexpected events on your supply chain. Additionally, investing in technology and automation can help streamline your shipping processes and improve your ability to respond to changing global events.

Conclusion

Parcel general rate increases are a reality that businesses must face, and it is crucial to prepare for these increases to keep transportation spend in check. By understanding the impact of parcel general rate increases, implementing strategic measures to mitigate the impact, and future-proofing your transportation strategy, businesses can optimize transportation spend and remain competitive and profitable.

It is also important for businesses to regularly review their shipping contracts and negotiate rates with carriers to ensure they are getting the best possible pricing. Additionally, exploring alternative shipping options such as regional carriers or consolidators can also help reduce transportation costs. By staying informed and proactive, businesses can effectively manage the impact of parcel general rate increases and maintain a healthy bottom line.