What is Parcel Network Optimization?
Parcel Network Optimization is a heavily involved – and typically a continuous improvement – process that utilizes Big Data, Network Intelligence, and a variety of other strategies (e.g. resource efficiency, contract management, cost avoidance, etc.) to yield greater efficiency across the parcel network with the ultimate purpose of reducing costs and speeding up delivery times.
Most shippers see contract negotiation as the primary way to meet these objectives, but shippers should take note that eliminating the waste in their current networks can reduce costs and improve service within the framework of their current carrier agreements. You don’t have to wait until your contract expires to improve.
The 4 Steps of Parcel Network Optimization
Optimization means to modify and achieve maximum efficiency in capacity, time or cost. Companies that are not operating their parcel networks to achieve maximum efficiency can reduce costs, improve service levels and reduce transit time through optimization. Most large shippers do not have the technology or resources to perform the level of analysis required to identify optimization opportunities, but those that do can expect a 10-20% improvement in overall network efficiency. This optimization process begins by identifying the answers to four key optimization areas/questions:
- Understand the value of operating a single carrier vs. a multi-carrier model. You may consider and weigh the differences between which approach is best for the cost of your parcel network vs. what will affirm your ideal brand perception from your customers. Many shippers have turned to carrier diversification or alternate carriers in order to maintain the balance between network cost and brand perception. More notably, carrier diversification has become an important and focused strategy for many shippers during COVID-19 as carrier networks have become overwhelmed with limited capacity.
- Define your order management model to determine what is the customer’s expectation of service. It’s critical to remember during this step how necessary it is to ensure your brand strategy is also tied to your transportation strategy, as the right order management model for you should meet the basic requirements of both. Keep in mind that flexibility is also an important factor to consider when evaluating and selecting an order management model and system, especially during times of crisis or large change, as you will want your model/system to adapt quickly if necessary.
- Calculate the preferred contract cycle for each business segment. Sometimes the most intensive and challenging component of parcel network optimization, this step requires a great deal of future-focus and is often enhanced by a continuous improvement approach. More importantly, understanding how to calculate the impact of these decisions down-to-the-penny through network modeling can be incredibly beneficial to the long-term success of your parcel network.
- Identify future infrastructure plans, such as additional shipping locations. Taking a fresh look at your network strategy is a key enabler to true network optimization, and understanding where you want your network to grow is just as important as understanding where it is today. Any shipper operating without a clearly defined parcel strategy is treading in dangerous territory.
In short, parcel network optimization is a long-term coordinated effort to align your transportation strategy (including your parcel carrier contracts) with your brand strategy, typically driven to reduce the costs and improve the speed of your parcel network. Almost all shippers understand the importance of being able to accurately report and monitor the performance of their network; however, many companies overlook the ability to utilize this data to optimize and improve their network from the inside. More importantly, many don’t have the right metrics in place to explain variance from period to period or strategy to strategy, making the parcel network optimization process more challenging. Identifying these types of opportunities takes time, resources, and technology to execute.
The FBAP Elite - How Partnerships Create Value Beyond the Audit
Standout FBAP providers are joining shippers at the network strategy table and helping solve complicated and persistent problems.
How to Gain Leadership Buy-In and Move the Network Needle
Today, it's more important than ever that shipper operations/logistics teams gain buy-in from their internal leadership teams.
Creatively Navigating Parcel Carrier Capacity Constraints Today
Since the pandemic, pricing favor has certainly swung to the carriers, and shippers are seeking new creative ways to adapt.
How Might Micro-Fulfillment Work for Your Supply Chain?
Many companies with high delivery needs find micro-fulfillment solves many common logistics issues they face within the supply chain.
“Fast and Free” No More? How Peak Season, GRIs, and Power Dynamics Are Changing the Industry
Today's shippers face challenges that threaten their ability to uphold consumers "fast and free" expectation, and they won't simply fade away.
The Reality of Capacity Constraints
Learn what capacity constraints mean for your business, and what you can do to manage them strategically as a business.
Inventory Management Best Practices that Work
Which types of inventory management models apply to your business, and how can you optimize to reduce costs in your supply chain?
Keeping Up with the (Delivery) Jetsons: Creative Order Fulfillment Strategies from the Pandemic
Current order fulfillment trends are driven by customer satisfaction & cost savings, and we break down the most important and urgent ones.
Is Your Returns Management Process Missing These 4 Critical Components?
Strengthen your reverse supply chain by optimizing your returns management process today. Start with policy transparency and visibility.
Five Important Parcel Takeaways for 2021
Today, we’re highlighting five important lessons learned by shippers from the 2021 GMT Parcel Benchmark Report.
3 Key Takeaways from the 2021 GRIs
FedEx and UPS have announced their 2021 General Rate Increaes, and we’re highlighting three key takeaways for shippers looking to save.
Our Best Peak Season Planning Advice for Today and Next Year
With peak season upon us, there’s no better time to look back on some of the peak holiday shipping advice we’ve given over the years.
3 Parcel Strategies that Major Retailers are Leveraging to Mitigate Carrier Capacity Constraints
Carrier capacity issues abound in this new COVID-19-impacted parcel industry, but we've identified three successful and creative strategies some of the largest brands are implementing to maintain their customer commitment.
Parcel Carrier Contract Negotiation Amidst a Global Pandemic
In 2020, shippers across the world are finding that negotiating their parcel carrier contract is unlike contract negotiation during any year prior – largely impacting those wanting to diversify their carrier network through this strategic means.
2020 Guide to COVID-19 and Peak Season Surcharges and Rate Changes
Parcel carriers have implemented a number of surchares and general rate increases due to COVID-19 and peak season – don't miss them!
How to Gain RFP Success with GMT's Proven Process
Join Sam and Tim as they walk you through GMT's proven RFP and contract strategy process, refined by nearly 25 years of helping the world's largest brands and most complex shipping networks.
Leading Insights from Annual GMT Benchmark Report
An exclusive inside view of the 2022 GMT Benchmark Report. Gain insight into the latest trends that are shaping the parcel and LTL industries.
Leaders in Retail Panel: The Permanent E-Commerce Boom and the Evolution of Omnichannel Strategy
Leaders in retail for Best Buy, Crocs, and Dick's Sporting Goods discuss the e-commerce boom and changing omnichannel strategies.
Parcel Industry Review: Shipper Trends Shaping Our Future
Join GMT's own Rebecca Wyatt and Tommy Duke, as they dive into valuable industry insights like competitive environment, FOF, and more.
Parcel Market Analysis: Lessons from Shippers Navigating a Changed Marketplace
Join GMT's own Justin Guthrie and Sam Sealey, as they review parcel cost inflation and many other leading marketplace factors.