How well do you know your parcels?

COVID-19 has driven the retail industry to embrace e-commerce for survival. According to the U.S. Census Bureau, e-commerce as a percentage of total U.S. retail sales jumped to 16.1% in the second quarter of 2020 as retailers shut down to slow the spread of COVID-19. Compared to the second quarter of 2019, total retail sales declined by 3.6%, while e-commerce sales surged 44.5%.

Meanwhile, Salesforce said it expects e-commerce as a percentage of total U.S. retail revenue to reach 30% during the holiday season, compared to 14% during the 2019 holiday season.

Did you know that the last mile is the most expensive part of the supply chain? Analysts estimate that last mile costs can represent anywhere from 25% to 40% of total supply chain costs. Add in COVID-19 and last-mile costs could be even higher.

How do your last-mile costs compare?

Here are five tips to consider when evaluating your last-mile costs.

1. There is no such thing as free shipping

Someone always has to pay for shipping, and it is usually the retailer. But before free shipping can even be offered, the retailer needs to make sure that it can actually afford to do so. A review of finances may result in tweaking this expectation by setting a minimum purchase amount or offering free delivery to alternative delivery locations. Regardless of the parameters, working with your last-mile delivery provider may be beneficial up to a point. Another alternative is using a third-party consulting firm that can provide cost-effective shipping options that do not have a negative impact on customer satisfaction.

2. Understand your peaks and valleys

Using data analytics tools that can assist in analyzing your company’s data against market and economic trends will provide valuable insight into when demand may be higher than usual and help you determine fulfillment options. Implementing such technology tools will position shippers to not only understand their parcel trends, but also react quickly to any market unknowns, such as sudden competitive or economic changes.

3. Optimize operations

Review your warehouse space. Can it handle an increase in inventory to flex with orders? If not, consider options such as leasing temporary space. If you have a physical store, utilize it as a fulfillment resource.

In addition, consider the possible differences when fulfilling online orders versus fulfilling in-store orders, and make any necessary adjustments. Regardless, it is important to take the time to do an operations audit and determine what needs to be tweaked to address high order volumes.

4. Review your invoice

Understanding your shipping invoice is very important. Did you know that besides the shipping rate, there are well over 100 accessorial fees? If you are not careful, you may find yourself paying for such additional charges as address correction, required signature or residential charges.

A third-party firm can audit a business shipping invoice and also uncover hidden charges — that is, those charges that were not agreed to per contract with the last-mile delivery provider.

5. Do not forget the returns

The last mile does not necessarily end at a consumer’s front door. Returns represent a growing percentage of small parcel volumes. For the 2019 end-of-year holiday period, for example, UPS anticipated a 26% increase in online returns. Meanwhile, real estate and invest firm CBRE estimated the holiday return rate for online orders to be 15% to 30% and 8% for stores.

There are a number of options to manage returns, such as buy online and return to store, including a shipping label with the delivered parcel for free shipping as well as partnering with a returns technology provider that can offer valuable data to help with forecasting volumes.

As businesses migrate increasingly toward online offerings, understanding their parcel characteristics will become even more important to optimize and manage supply chain costs and provide new and differentiated service offerings to customers.

View my article on Atlanta Business Chronicle here.