2020 has been an all-around ground breaking year, and peak season will be no different…especially for parcel deliveries. We sat down with Brian Byrd, EVP of Operations at Transportation Impact and parcel specialist, to learn what is going on with parcel as we navigate peak season and into 2021.
Where are we?
What set the stage for a peak season unlike any other? You’re probably already aware of a little something called COVID-19. The sudden shutdowns and quarantines left consumers turning to eCommerce, causing a peak-like surge for last mile deliveries in March.
With demand high, the limited supply of capacity shifted pricing control to the large national carriers: UPS, USPS and Fedex. Much to large shippers dismay, these carriers implemented mid-year surcharges in their efforts to curb the tightening capacity.
Now with “true peak” barreling towards us, all three national traditional parcel carriers have implemented record-breaking surcharges and capacity caps for their largest customers. 2020 marks the first year ever that USPS has implemented a holiday surcharge. “It’s clear that even USPS sees the need to offset the additional capacity constraints by passing down the peak season surcharges to their shippers,” said Bryan Byrd.
The customers affected by the surcharges and caps include those shipping over 25,000 residential packages with UPS, over 35,000 with Fedex and all SmartPost customers.
Why is volume a negative?
It seems backwards — I’ll send you more orders and pay you… more money? Fedex and UPS are getting rid of their volume discounts for big customers. But why?
According to Bryan Bird, “It goes down to the revenue per piece that the carriers are looking for.” Bryan went on to provide an example: If you’re shipping over 25,000 packages per week, you probably have a strong agreement with that carrier, limiting their profit off of you. So now, the carriers are trying to influence the shippers to send less items. They would rather use any excess capacity for smaller shippers that pay better rates and higher operating margins.
How to protect yourself through peak
With all the uncertainty, moving confidently through peak season can be difficult. Here are some of the tools Bryan cited to help protect your company:
Shift buyer behavior
“Early Black Friday Sales” or “Prime Days” can help lure consumers to early shopping, shifting some capacity away from the short post-Thanksgiving, pre-Christmas weeks and giving your company a better opportunity to make their delivery on time.
“Without a doubt, smart shippers are trying to influence buyer behavior, by hoping to get them to purchase their products earlier this year.” says Bryan.
Manage customer expectations
“It’s already been forecasted that we’re going to be seeing the highest percentage of late packages during peak,” says the Transportation Impact EVP of Operations. Bryan recommends explaining the narrative to your buyers, letting them know ahead of time that there may be delays because of market conditions. Adding banners or other alerts on your company’s website and checkout pages can help let them know what to expect, before clicking “order.”
Rely on visibility to be proactive
The parcel expert explained “Savvy shippers are managing their customer experience by truly watching.” Those in the best position this peak season are relying on technology and visibility to their orders so they can proactively manage their customers’ experience and communicate as needed.
Notifying customers of order delays or other issues during delivery will be key to providing the best customer experience and ensuring they return to your business in 2021.
What is coming to parcel in 2021?
What can we expect on the other side of the 2020 peak season? More peak, of course.
“Both carriers are expecting the heaviest return season ever,” said Bryan, “UPS and FedEx extended their peak season [surcharges] up until January 17 to capture that return volume…” On top of the surcharges, the annual rate increase, called the General Rate Increase or GRI, is expected to go into effect in January, too.
“I think we are looking at a new normal and shippers in today’s market… just have to have a good pulse of those carrier announcements…These are announcements that usually come on their website, and you really have to pay attention to the fine print.
“It’s come to a point where shippers in the market have to be cognizant of an increase coming at any time,” said Bryan.
Partnering to prepare
When the big three parcel carriers hold all the cards, developing a multi-carrier network gives your company power in the last mile.
No longer will one or two national companies be able to surprise you with price increases or cut off your capacity. By adding in regional and local carriers to your network, you regain negotiating power with high volumes and improve your customers experience. With the right technology partner in place, you can easily access these carriers and maintain your complete supply chain visibility.
Learn more about utilizing a multi-carrier network by scheduling a demo here.
This conversation was originally published on The Final Mile Podcast. You can listen in here.