The big unknown in any question about what small parcel shippers should expect in the “new normal” is, of course, how will COVID continue to impact customer behavior and the carriers’ ability to operate in the future.
If the market recovers and business returns to something closer to normal, that would be great for all of us. But realistically, it’s possible COVID will continue to influence the marketplace in similar ways for a long time.
These are things that no one can control but are important to be prepared for nonetheless. This was a topic of discussion on a recent episode of Transportation Impact’s Let’s Talk Ship webinar series.
During the episode, guest John Howard, COO of Transportation Impact, provided several interesting perspectives in response to a question about what shippers can do to navigate the ongoing uncertainty in the marketplace.
Here is some of John’s advice.
First, small parcel shippers need to make an effort to understand how their business may have been changed by what’s happened in the past four months and to consider what the future of their shipping is going to look like. Questions shippers could ask themselves include:
- If you are a retailer, for example, do you foresee a permanent shift to more ecommerce sales?
- Has there been any type of permanent shift in the geography of your customer base? In other words, are you shipping to different locations that are more (or less) costly?
- Have the order sizes and the types of products you are shipping changed? If so, have these changes impacted the types and cost of the packaging you need?
Chances are small parcel shippers have seen the future of their business change in one or more of these ways. It’s hard to know if these changes are permanent. The point is all of these things impact cost and service, as well as your service agreements with the carriers.
Understanding and quantifying the extent of the changes and their impact is not simple. It requires shippers to do some serious analysis and reflection about their shipping operation on a granular, package-DNA level. This includes package details like weights, dimensions, and services utilized.
Remember, from a carrier perspective things have changed significantly too. They are trying to understand how their costs have changed and figure out how to protect and increase their margins at the shippers’ expense.
There are two primary things driving revenue from a package: the weight of the package and the distance it travels. But it’s also important to understand what the cost drivers are to a carrier. Those include delivery type, i.e. residential or commercial, and how much space on an asset a package will consume. Carriers assess any associated impacts in the form of surcharges, which can add 50% or more to the cost of the shipment.
So, if you as a shipper see your business is changing, it can represent an opportunity to improve your carrier agreements. You can be sure the carriers are watching and adjusting their rates and fees to maximize the “new normal” as an opportunity to improve their profitability. Despite how difficult the business environment is for everyone, the carriers are not thinking just about survival — they are looking to prosper.
Smart small parcel shippers are taking the time to evaluate what their business needs are now (not four months ago) and making a plan for the future. Are you?