THE SUPPLY CHAIN & SMALL PARCEL SHIPPING

SMALL PACKAGES, BIG CHALLENGES

What is a Small Parcel?• Small parcels are most commonly considered packages and

envelopes that weigh less than 150 pounds.

• Transporting small parcel inventory is a more critical function of the supply chain than ever due to the increasing popularity of e-commerce.

• E-commerce has shifted traditional delivery methods from FTL and LTL to small parcel to accommodate direct to consumer (D2C) delivery.

LPL Handling by LTL• Supply chain operations such as manufacturers, retailers and 3PLs

often have established relationships with their most frequented LTL transportation providers. Although these carriers are better suited for handling full pallets they do often transport small parcel or less than pallet load (LPL) shipments.

• In an article posted by TransportationInsight small parcel experts point out that LTL carriers often disassemble LPL pallets to fill their trailers to capacity. This added handling can cause unanticipated loss or damage during transit that would not occur with full pallet loads.

• This is one of the many issues supply chain operators encounterwhen fulfilling, processing and transporting small parcel shipments.

Challenges: Labor Requirements• Fulfillment centers that process e-commerce orders handle a larger

quantity of small parcel orders than other typical supply chain operations dealing in bulk and large shipments. These businesses frequently suffer from higher labor costs and lower flow through velocity.

• This is because processing small parcel shipments requires more labor per unit than consolidated shipments. In turn, these costs must either be absorbed or passed on to customers through higher unit prices or shipping fees.

Challenges: Transportation Costs• Traditional full pallet load shipping is more cost effective than that of

small parcel shipping because of the discounts available for higher volume shipments.

• This is the traditional shipping method as shippers want to take advantage of economies of scale. Spreading the total cost over more units significantly reduces the cost per unit passed on to consumers.

• When shipping small individual parcels these savings cannot be realized.

Challenges: Product Packaging• With the changes to dimensional weight shipping implemented in

2015 packaging has become a more critical supply chain issue than ever. Shippers must be more conscious of the size and bulk of packing materials used.

• Small parcels must be packaged properly to ensure safety during delivery while also conforming to transportation vendor requirements.

Challenges: Product Packaging• In the novel Parcel and Small Package Delivery Industry author

William Dennis noted that “Eliminating the need for a box is another packaging strategy. Often, padded and non-padded mailers are adequate for shipping products safely.” This change can result in significant cost savings for small parcel shippers.

• In order the combat the changes of dimensional weight price increases many shippers are implementing cartonization technology to automate the packaging selection process.

Challenges: Customer Experience• Small retailing operations with limited transportation budgets often

outsource to third-party logistics businesses such as localcouriers. While this can reduce shipping costs, in some cases it can be detrimental to the overall customer experience.

• In an article published on ParcelHub small parcel experts explained that outsourcing these small parcel shipping to couriers takes a level of control away form retailers and hands it over to potentially inexperienced and untrained courier staff.

• This can result in parcel damage, delay and a less than desirable retailer reputation. Weigh your options carefully and do an in depth analysis of all transportation vendors before building these partnerships.

Challenges: D2C Route Planning• Small parcel shipping also impacts the already complex nature of

transportation route planning. Direct-to-consumer (D2C) last mile logistics requires more frequent stops than with traditional full pallet shipping making determining the optimal route more difficult.

• Optimizing route planning can help small parcel shippers to reducetravel time, fuel costs and transportation costs. These benefits canthen be passed on to customers in the form of lower product prices.

• Many shippers are implementing transportation management solutions (TMS) to automate route planning according to a variety of business-specific criteria.

Challenges: Freight Accessorial Charges• Accessorial fees represent a large portion of shipping costs for

retailers and e-commerce businesses outsourcing transportation services.

• To keep total transport cost in check it is critical to manage these accessorial charges, many transportation service providers add on fees for services such as:

• Residential delivery• Address correction• Re-consignment• Rerouting• Weekend pickup/delivery• And much more…

• These services are most often provided for small parcel D2C delivery.

Conclusion• Small parcel delivery presents a variety of challenges for shippers

that impact the cost, complexity and overall customer experiencerelated to parcel transport.

• With the right mix of technology and a directed focus on mitigating the impact of these challenges small parcel shippers can reduce the effects of small parcel D2C delivery.

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