Parcel Shipping Optimization

Parcel shipping refers to the process of delivering small to medium sized items as single shipments. In 2020, parcel shipping experienced a steep increase reaching a high of 16.4% of all retail sales. In fact, Pitney Bowes Global Shipping Index pegged the frequency of worldwide ecommerce parcel shipments at an astounding 5000 parcels per second.

As a result, parcel shipping optimization has become a critical concern for retailers as they look for ways to keep costs low and remain competitive. Technology is the driving force behind the next phase of international parcel delivery services. And here is where last mile delivery management platforms (DMP) comes into play.  

A DMP enables retailers to manage all their last mile delivery operations from one place, providing scalability along with complete end-to-end visibility, real-time communications and AI-based route optimization.

How does parcel shipping work?

Parcel shipping begins with the consumer placing an order. A textbook example is the case of an order from an online store. The goods are then located, put in appropriate packaging and auto sorted and shipped depending on the location of the recipient. It is normal for such packages to be transferred a number of times during this process as carriers make use of their networks to get parcels from A to B as efficiently and speedily as possible.

Ultimately, each package reaches a stage in which it is grouped together with other items due for final delivery in roughly the same area, and sent to the recipient’s location.

Parcel shipping trends

As demand for same and next day delivery grows, retailers are looking for storage spaces that are closer to their customers. To remain competitive, retailers and 3PL logistics providers need to focus their resources on shipping optimization, especially last mile delivery which makes up 53% of the total shipping costs. 

Looking forward, a growing number of retailers and international shipping services are already testing drones and autonomous vehicles to provide the best possible delivery experience for their customers.

7 steps to parcel shipping optimization

There are seven steps that make up the shipping process for most ecommerce companies, from online checkout through last mile delivery. A DMP can centralize each of the key steps needed to be effective. 

1. Integrate all relevant systems into a centralized platform

Ecommerce parcel shipping involves many different systems including finance, inventory, online ordering and last mile delivery. Leading retailers today are deploying DMPs that are open to partner ecosystems enabling integration of an efficient delivery process into the IT stack.

2. Optimize task dispatch and routes

When orders are reported by the system, it’s critical that the shipping process takes into account the most optimal routes based on customer drop-off locations and the geographical area that needs to be covered. With customers expecting shorter drop-off windows, retailers must offer multiple options including same and next day delivery.

3. Establish a delivery network

More than ever, it’s critical to have an effective delivery hub in place. The benefits are numerous as it connects retailers with unlimited delivery providers for accomodating changing business needs. It also cuts costs by locating drivers that can offer the best price for a particular delivery. Third party logistics companies often have local partners that handle their last mile deliveries. These items must be efficiently sorted according to special bar codes that identify which packages are being delivered using in-house drivers and which parcels are shipped using carriers. 

4. Enable last mile visibility

Having full visibility in the last mile is key. In order to optimize last mile delivery operations for parcel deliveries, all items need to be scanned prior to going on trucks. This way, a central system can track shipments at every step of the journey. This visibility should include a real-time interface that allows the customer to track their parcel from the time it leaves the warehouse to the time it reaches the recipient’s door – enhancing the full customer experience. 

5. Ensure customer engagement

In addition to tracking, retailers must establish open channels of communication with customers. Having direct communication keeps the customer in control and fosters trust with the retailer, making it more likely a customer will return. 

6. Have solid proof of delivery 

With such a high volume of deliveries, it’s important that verifiable records are kept through a proof of delivery system. That includes requiring a driver to get a signature and scanning of a bar code prior to leaving the location of the delivery. That information is then sent to a central system and logged. If at any point the customer makes a claim that the item was not delivered, the company has proof.

7. Consider returns as important as shipments

The rise in ecommerce has also resulted in a rise of product returns. Central to this is the need to transfer countless small and medium-sized parcels from consumers back to warehouses. Traditionally, customers had to take items back to the store, today more people are ordering a return collection. This requires items to come with a slip or sticker with the sender’s address, so that a carrier can arrive at the consumer’s location in order to verify, collect and prepare packages for return. Once collected, it’s often then placed in a truck alongside other items, all to be taken back to a warehouse or sorting center.

Summary

Parcel shipping optimization is a critical aspect of ecommerce retail. As the industry continues to grow, retailers are facing increased competition and pressure to offer low prices and fast delivery to customers. By adopting a DMP, retailers can reduce their shipping costs and improve delivery times, allowing them to offer competitive prices and improve customer satisfaction.

Frequently asked questions