When the pandemic hit, many businesses weren’t set up for fast order-fulfillment turnaround in the face of increased demand, causing major delays, in some cases, up to six to eight weeks.
Even Amazon was affected; soon after the initial spike in orders, the online retail giant known for two-day (or faster) shipping switched to fulfilling only essential orders.
Part of the issue for Amazon was timing. The ecommerce giant split with FedEx before the pandemic to build a carrier network of its own, leaving it in a lurch when it came to the unanticipated increase in orders. But Amazon shifted quickly in both recovery and planning mode—knowing that peak season would likely be much more ecommerce-oriented this year—and established a new contract with UPS.
Amazon also began pre-purchasing freight to ensure carrier availability for its shipments—knowing whatever it doesn’t use could be re-sold at a markup. Aue to Amazon’s volume. The tactic has already created a ripple effect on other vendors.
But not all retailers were able to adapt as quickly as Amazon. While most have finally managed to adjust systems to handle the current volume spike, reducing extended delays down to more reasonable periods like a week, the situation has raised a major red flag regarding peak season fulfillment.
Expectations for peak season
According to Adobe, online sales in 2020 will eclipse those for all of 2019 even before the holiday season takes off. Deloitte predicts ecommerce sales to increase 25% to 35% for the 2020 holiday season, reaching $182 million to $196 billion in total sales in November, December and January.
This explosive growth puts a heavy demand on carriers in a time while resources dwindle. Pre-COVID-19 driver shortages were expanding, while DMV backlogs due to COVID response make matters worse. The carrier response to these dynamics have been two-fold:
- Alerting enterprise shippers they won’t be able to handle peak season shipping fully.
- Announced surcharge increases for the holiday season.
Carriers buy more planes, trucks, and other transport vehicles to handle the increased load while increasing staff and overtime to handle the parcels end-to-end. Those costs get passed along to the shipper via surcharges. The assets get fully utilized during peak season, but those assets get used less after peak season, meaning increased overhead. Predictably, this results in permanent rate increases. The USPS joined UPS, FedEx and others in levying surcharges for peak season 2020, while FedEx recently announced 2021 rate increases.
Look to multi-carrier shipping
To reduce shipping costs, retailers need to manage flow amongst carriers via rate shopping, minimize the impact of surcharges during peak season, and choose the best-fit carrier and service for each fulfilled order. But by tying themselves to just one or two carriers, retailers have no chance to reduce costs.
For those seeking to expand carrier options, transportation marketplaces and fulfillment carrier networks offer the ability to find, source and secure trucks, drivers, and other resources. They now incorporate standard, well-known carriers, new economy delivery services and domestic and international carrier services as needed, from anywhere.
But transportation marketplaces and fulfillment carrier networks come with their own challenges. For example, using a transportation marketplace to select a new carrier puts the onus on the retailer to comply with new shippers’ labels and other requirements, creating a tangled web of compliance efforts and manual work. These demands tax already-thinned IT departments that usually suffer the first cuts for many retailers when undertaking cost-saving measures.
Technology can simplify fulfillment processes
Retailers looking to employ a multi-carrier shipping strategy to reduce shipping costs while also seeking to keep the process as simple as possible can turn to technology. SaaS-based multi-carrier shipping software ensures shippers can nimbly adjust to changing dynamics, whether pandemic-induced or merely the result of naturally growing sales.
This type of software offers an extensive choice of carriers built-in for rapid analysis and selection. If a carrier becomes unavailable, the software automatically selects another. It provides flexibility when seeking the best way to fulfill any given order, which may be especially helpful during the 2020 holiday season—slated to be unlike any before—with major carriers alerting retailers they will decline some parcels.
Multi-carrier shipping software also handles automatic rate shopping, selecting the best carrier service based on retailer-established rules and criteria and customer preferences, helping mitigate holiday surcharges.
Finally, the software helps reduce burdens placed on IT teams with rapid onboarding of as many new carriers as needed and automatic compliance with carrier regulations for labeling. That eliminates manual processes and ensuring retailers avoid delivery delays due to incorrect labels and documentation.
Are you behind the eight ball?
Whether or not a retailer chooses to turn to tech to address multi-carrier shipping, the time to scale operations for peak season has arrived. Waiting any longer to plan and scale a multi-carrier shipping approach could put them squarely behind the eight ball for a peak season that’s shaping up to be unlike any other. Ecommerce orders have exploded due to the COVID-19 pandemic and appear likely to skyrocket even further for the critical holiday season. Without a multi-carrier shipping strategy in place, retailers run the risk of missing essential delivery windows, leaving customers unhappy and potential sales stranded in ecommerce shopping carts.
Logistyx Technologies is offers a cloud-based transportation management system for parcel shipping.Favorite