Navigating Through Parcel...
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Navigating Through Parcel Delivery Hikes

Feb 22, 2022
Navigating Through Parcel Delivery Hikes

Shipping costs are rising faster than they have in the past decade, causing retailers and e-commerce companies to come up with a variety of strategies to offset these increases. FedEx for one, recently announced their plans to raise their rates by an average of 5.9% across most services this year, moving away from the usual 4.9% increase. This signifies how carriers now have the pricing power and is also a sign of inflation across the global supply chain. 

With this situation in place, how can carriers better position themselves in front of retailers? How should retailers respond while still maintaining customer demands for low prices? 

In our latest episode of “Unpacking E-Commerce Logistics” series, we sat down with Nate Skiver, Founder of LPF Spend Management, to understand how to navigate through parcel delivery hikes amidst the global pandemic. Nate comes with 17 years of experience in building parcel programs for big retailers such as Gap, Stella & Dot, and Abercrombie & Fitch. The session was moderated by Logistics JournalistVishnu Rajamanickam.

Parcel Delivery Market in the Context of Demand and Capacity Availability

With regards to capacity and demand, it has been a really difficult climate for both shippers and carriers. Citing the US market as an example, Nate mentioned that there are still some capacity constraints in the present, though some seem to have abated at first glance. In Nate’s view, 2020 was really the time when operational challenges were the most severe due to the unprecedented growth in e-commerce worldwide. For starters, shippers had difficulties getting the large parcel volumes even off their dock every single day. Meanwhile, on the carriers’ side, the demand was so substantial that there was simply not enough capacity to move packages through their network and get them delivered in a prompt manner. 

Fortunately, however, things are starting to look up as far as demand and capacity are concerned. “In the holiday season of this past year, in 2021, there were capacity constraints based on demand exceeding parcel networks, but it wasn’t as severe as it was in 2020,” said Nate during the fireside chat. He believes this could be in part due to many national carriers making a concentrated effort to add capacity strategically. The rate of e-commerce growth seems to have slowed down as well, owing to the return of physical retail following the easing of lockdown restrictions.

Future-Proofing Operations in This Ever-Evolving Logistics Landscape

When asked what shippers can do to future-proof their operations, Nate suggested the use of multiple carriers to diversify risk. By having each of them serve a specific purpose, retailers can have greater operational flexibility as well as the ability to shift volume between carriers with minimal expense. Meanwhile, those relying on a single carrier for all delivery needs would be more susceptible to the dangers of single sourcing, which are more severe than ever in today’s fluctuating last-mile market. 

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