5 Strategies to Drive Down Costs Prior to Peak Season

U.S. parcel volume will continue to rise, expected to reach between 25-40 billion by 2027. While supply chains will continue to be stretched, these five strategies will help businesses cope with disruption, focus their investment and limit unexpected cost

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The impact of supply chain disruption on businesses has been profound. One report states the issues have potentially cost businesses in the United States and Europe up to $4 trillion in lost revenue. One-third of businesses say their operational costs have increased as a direct result. While larger companies have contingencies built in to soften the blow, smaller businesses continue to feel the impact. Almost 40% of small businesses reported domestic supplier delays in the U.S. Census Bureau’s Small Business Pulse Survey.

The latest U.S. Chamber of Commerce and MetLife Small Business Index named supply chain issues and inflation costs as the biggest challenges reported by small businesses. Case in point: 47% feel their ability to respond to consumer demand is limited as supply chain disruption makes it difficult for them to keep up, and the more consumers shop online, the more pressure builds on the supply chain. Consumer pulse survey BOXpoll tracks online shopping behaviors and found that, while 58% of online shoppers say they are shopping around the same now as they did three months ago, more than one in five are shopping online more often. They’re planning on taking advantage of surplus inventory and product markdowns, with almost one in two saying they intend to buy more online over the next six months because of these trends.

Rising e-commerce figures have led to record parcel numbers, impacting how companies plan for the last mile of deliveries. In 2021, U.S. parcel volume alone reached a record high of 21.5 billion parcels – around 59 million parcels generated in the United States every day. Per capita parcel volume rose from 62 to 65. In 2021, Pitney Bowes’ Parcel Shipping Index found that carrier revenues exceeded all previous years’ figures totaling $188 billion.

In general, the carrier industry – a critical link in the supply chain – is coping. Investments in people, infrastructure, digitalization and automation are paying off. Businesses of all sizes across all industries are flexing their operations, adjusting their responses to rising parcel volumes and ongoing challenging macro conditions. The question of “when will we get back to normality?” has been replaced by acceptance that this is the new normal; that the most effective strategy for businesses to manage continued disruption is one that builds in flexibility, resilience and responsiveness, while maintaining costs. To mitigate continued supply chain disruption and manage costs, particularly when it comes to shipping, companies are adopting five key strategies.

Diversifying carriers

Too often, companies rely on their usual carrier without conducting research on options. Reliance on a single carrier restricts an organization’s access to a broader range of services and prices. Organizations successfully driving down their shipping costs and mitigating risk are “shopping around,” switching between carriers depending on the services they and their customers require. Sharing your shipping budget between different carriers guarantees value, especially with a growing number of options.

Utilizing shipping finance options

Shipping finance gives businesses vital breathing space, frees up working capital and provides transparency across the entire shipping payments process. Businesses also benefit from economies of scale and discounts on postage rates. For those companies managing different carriers with multiple billing and payment cycles, shipping payment solutions provide a clear view of expenses across all carriers and locations, eliminating the need to page through hundreds of shipping and mailing transactions.

Accelerating digital transformation

Over the past two years, businesses had to extend their digital capabilities rapidly. Nearly 97%  of executives questioned by Forbes agreed the pandemic accelerated digital transformation. Business-critical technologies within digital transformation programs include: 

·        Automation – eliminating costly, labor-intensive manual processes

·         Cloud services – providing flexibility, as businesses can scale-up at pace during seasonal fluctuations in shipments

·         Internet of Things (IoT) solutions - generating data-driven insights

Businesses that have already made progress with their digital transformation programs have built-in resilience and react faster to rapidly-changing market conditions – such as supply chain interruptions - with less negative impact on their customer experience.

Integrating supply chain risk management into business continuity planning

The turbulence of the past few years has shown businesses the importance of continuous identification and assessment of risk. It has also taught organizations the financial and reputational impact a broken supply chain can have on a business. Supply chain risk management should be brought into broader continuity planning to help companies understand the risks they are exposed to and to highlight any gaps where investments might be required. Key suppliers should be briefed, and their own risk management processes highlighted.

Driving collaboration and building ecosystems

Collaboration is key to solving issues, helping to drive down costs, manage risk, improve visibility and enable the sharing of best practice. Building an ecosystem of support can act as a buffer to impact.  Technology and digitalization make this easier, facilitating faster information exchange and ultimately, improved collaboration within and across borders – all of which help resilience and improve capacity management.

The value of partnerships in shipping and logistics industry cannot be underestimated. For carriers, partnerships remain a critical part of their ability to execute. Accepting limitations and extending capabilities by outsourcing will help fuse broken links in the supply chain and ultimately improve the service, and value, received by the customer.

Pitney Bowes’ latest forecasts suggest U.S. parcel volume will continue to rise, expected to reach between 25-40 billion by 2027. While supply chains will continue to be stretched, these five strategies will help businesses cope with disruption, focus their investment and limit unexpected costs.