2020 wrecked supply chains around the world.
There were issues with cold chain storage of vaccines. There were mass shipment delays at the Post Office. And there was of course extreme demand for vital (and some not so vital) consumer goods that retailers struggled to overcome.
That’s all before we even discuss traditional peak season: the holidays.
So what can retailers do to prevent similar challenges in 2021, now that they’re one year wiser?
1. Convert last year’s unexpected surcharges into this year’s planned savings.
Accessorial and surcharge fees are difficult to budget for since they can change often and without much advance notice. And with carriers similarly handling the surplus demand, they had leverage to pass more costs onto shippers and customers alike.
But with 2020 behind us, those additional expenses should hopefully stabilize and already be baked into 2021 budgets. This means retailers have enough foresight and historical data to correct persistent fees or otherwise reroute shipments to carriers with optimized contracts and lower fees.
2. Rate shop now.
Sourcing preliminary rate info from available carriers empowers shippers to contract with the most-efficient, least-costly carriers on terms that work for them in that moment — and for the year’s budget overall.
And getting this information populated into a transportation management system (TMS) or warehouse management system (WMS) can allow other stakeholders to evaluate rate data as well. Ahead of expected peak demand, negotiating rates now can help lock in the best delivery dates, costs and carriers.
When the pandemic first hit, research firm McKinsey noted that one of the top actions companies could take to secure their supply chains was to “assess realistic final-customer demand.”
The same approach still applies. Now that shippers have a better sense of the “realistic demand” — or even beyond-realistic demand — they faced in 2020, forecasting, budgeting and preemptive operational planning should be all the easier in 2021.
3. Over-plan for volume caps.
As 2020 showed, carriers can levy volume caps and demand pricing in reaction to unplanned upticks in deliveries. This led Supply Chain Dive to refer to 2020 as “The year of surcharges, volume caps and peak on top of peak.”
FedEx and UPS in particular reached capacity at various points last year, as residential volume soared.
Could similar issues arise in 2021?
It’s not impossible.
However, shippers and carriers are collectively more seasoned in handling peak demand this time around. So hopefully there aren’t as many bottlenecks during busier seasons. That said, plan for the worst, hope for the best.
By over-planning for volume caps, shippers can get ahead of budget crunches and shipment delays. They can also divert parcels to regional carriers, most of which don’t assess peak season surcharges.
Additionally, not relying solely on one carrier — or even a few carriers — can help defray financial risk once peak season arrives. Contracting with several regional carriers where possible can represent a serious savings opportunity — and keep customers happier.
4. Strengthen BOPIS fulfillment.
While 2020 saw companies scrambling to construct curbside pickup and click-and-collect fulfillment strategies, some fared better than others.
Recommitting and reinvesting to Buy Online Pickup In Store (BOPIS) as a primary channel will be key in 2021. Naturally, some retailers may migrate back to traditional brick-and-mortar modes, or perhaps spend more heavily on e-commerce. But BOPIS is a middle ground that consumers are now used to, and it offers the convenience and speed they now demand.
Now’s the time to further build out future iterations of BOPIS infrastructures, like portable, handheld POS systems, zoned parking at pickup points and promotions that specifically target this growing demographic of shoppers.
5. Leverage LTL when useful.
In cases where package handling charges and residential fees make it cost-prohibitive to ship via parcel, less-than-truckload (LTL) carriers might be an effective, next-best option.
So, if products are heavier, unconventionally shaped or otherwise not ideally optimized for standard parcel shipments, LTL can step in and prevent skyrocketing handling costs.
Connecting these dots earlier in the year — and negotiating strategies with LTL carriers ahead of time — might be the flexibility shippers need on certain deliveries and during specific seasons.
For more information on how to optimize your carrier network for peak demand, contact Green Mountain Technology today.
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