Introduction
Discover the key strategies for effectively utilizing multiple parcel carriers in your e-commerce operations. Learn from real-life examples and expert insights on how to optimize your shipping processes, reduce costs, and enhance customer satisfaction. This comprehensive guide will walk you through the benefits of diversifying your carrier portfolio, implementing shipping software, optimizing your distribution network, analyzing shipping data, proactive tracking and communication, negotiating carrier contracts, and more.
Case Study: Sustainable Seafood Ecommerce Platform
In 2010, I established the first ecommerce platform dedicated exclusively to sustainable seafood. Our platform collaborated with small-scale fishing operations in 22 U.S. ports across the East, West, and Gulf Coasts. The producers listed their fresh, live, or frozen catch on our platform, and we took care of the rest—including customer acquisition, providing the marketplace and shopping cart, and handling fulfillment logistics by sending them labels for their products and ensuring timely delivery.
Our platform boasted the largest online selection of fresh oysters, making Valentine's Day one of our busiest holidays. However, one year, we began receiving calls from customers inquiring about their package whereabouts. We discovered that an unexpected snowstorm had hit Memphis, TN—home to FedEx's global hub—causing around 60% of our packages to be delayed. As it was a Friday, the packages would remain stuck over the weekend, and the frozen gel packs would melt, rendering the oysters unsafe for delivery. The costly resolution and customer loss had a silver lining: it made us realize that relying solely on FedEx made us more susceptible to such catastrophic events.
To avoid putting all our eggs in one basket, we began using UPS and a regional carrier as well. We developed an algorithm to determine which carrier to use based on cost, delivery time, and weather. For instance, if another storm hit Memphis and a package needed to be shipped from Seattle to New York, we might opt to pay more for UPS if it meant the package would go through their hub in Louisville, where the weather was clear.
1. Diversify Your Carrier Portfolio
Relying on a single carrier can leave your business vulnerable to service disruptions, delays, and price fluctuations. By diversifying your carrier portfolio, you can minimize these risks and take advantage of the unique strengths each carrier offers. Consider partnering with national carriers like FedEx and UPS, regional carriers, and even local courier services to optimize your shipping strategy.
2. Implement a Shipping Software Solution
Shipping software is essential for managing multi-carrier shipping effectively. Nowadays, there are off-the shelf platforms allow you to compare shipping rates and transit times across multiple carriers, streamline label generation, and automate tracking and reporting. Some shipping software solutions also provide advanced features like intelligent carrier routing, which can help you make data-driven decisions when selecting the best carrier for each shipment.
3. Optimize Your Distribution Network
To get the most out of multi-carrier shipping, it's crucial to optimize your distribution network. This means strategically locating your warehouses and distribution centers to minimize transit times and shipping costs. Regularly assess your shipping data to identify opportunities for improvement and consider using third-party logistics providers (3PLs) to expand your network and improve efficiency. Lowering the price of items that were closer to the delivery zip code proved to be an effective strategy for our sustainable seafood ecommerce platform. This incentivized customers to purchase local products, subsequently lowering our shipping costs. Consider offering similar incentives to encourage your customers to buy locally, reducing both shipping costs and environmental impact.
4. Analyze Shipping Data for Continuous Improvement
Successful multi-carrier shipping relies on data-driven decision-making. In our sustainable seafood ecommerce platform example, we frequently queried the carrier's APIs and analyzed the results to predict if a package was likely to be delayed. If a parcel was more than 200 miles from the destination zip code at 6 a.m. on the scheduled delivery day, there was an 85% chance it would be a day late. Armed with this information, we could contact the carrier to expedite delivery and inform the customer about the expected delay instead of waiting for them to call us with the problem. Regularly analyze your shipping data to identify trends, opportunities for cost savings, and areas that need improvement. Look for patterns in late deliveries, shipping costs, and carrier performance to make informed decisions about your shipping strategy.
5. Be Proactive in Tracking and Customer Communication
Utilize tracking capabilities provided by your shipping software to proactively monitor the progress of your shipments. In our case study, proactive tracking played a significant role in improving customer satisfaction and reducing late deliveries. By staying ahead of potential issues, you can preemptively address delays and keep your customers informed about any changes in their delivery expectations. This proactive approach can help maintain customer satisfaction and reduce the likelihood of negative reviews or lost sales due to shipping issues.
6. Regularly Review and Negotiate Carrier Contracts
Leveraging multiple carriers also provides you with more negotiating power when it comes to carrier contracts. In our sustainable seafood ecommerce platform example, using multiple carriers allowed us to gain more leverage in negotiating better rates with each carrier since switching costs were no longer a concern. Regularly review your contracts and shipping data to identify areas where you may be able to secure better rates or service levels. Don't hesitate to renegotiate with your carriers, especially if your shipping volume has increased or you can demonstrate consistent growth.
7. Optimize Packaging
Optimizing packaging is crucial for minimizing shipping expenses. One aspect to consider is dimensional weight, which is a pricing technique that takes into account both the size and weight of a package. Carriers use dimensional weight to ensure they're adequately compensated for the space a package occupies in their vehicle, rather than solely charging based on the package's actual weight. To calculate dimensional weight, carriers use a specific formula that divides the package's volume (length x width x height) by a predetermined dimensional weight divisor. The resulting number is then compared to the actual weight, and the higher of the two is used as the billable weight.
Aggressively optimizing your packaging to reduce instances of being charged for dimensional weight can lead to significant savings on shipping costs. This can be achieved by using the smallest possible box or container that adequately protects the product, as well as utilizing lightweight and efficient packing materials. By focusing on local incentives and packaging optimization, you can further enhance the effectiveness of your multi-carrier shipping strategy. This was especially important for us as our packaging had to be large enough to fit insulation and gel packs in addition to the products.
Conclusion
Multi-carrier shipping is an essential strategy for ecommerce businesses looking to optimize their shipping operations, reduce costs, and improve customer satisfaction. By diversifying your carrier portfolio, implementing shipping software, optimizing your distribution network, and continuously analyzing your shipping data, you can unlock the full potential of multi-carrier shipping for your ecommerce business. Our sustainable seafood ecommerce platform case study is a testament to the benefits of multi-carrier shipping, as it reduced late deliveries and reships by 40%, costs by 12%, and average delivery time by four hours. Don't forget to stay proactive in tracking and customer communication, and regularly review and negotiate carrier contracts to ensure you're getting the best possible rates and service levels. Finally, always be reviewing your packaging to ensure it best fits the needs of your business.
