Josh Dunham is the cofounder and CEO of shipping data and analytics company Reveel.
In my recent article, I noted how much shipping costs U.S. businesses in 2022. I explained how, according to my company’s research, the carriers’ own quarterly results, other sources and statistics for Revenue-per-Package (RPP), both FedEx and UPS increased their general rates for the current year by 5.9% and neither company included the many new surcharges, fees and rules they introduced in 2021 in that pricing. This is notable because these additional variables significantly impact what it costs businesses to ship a package.
On the most basic level, this is crucially important because businesses, and the C-suite executives who run them, often take published shipping rates at face value. This simple mistake can have a huge impact because lesser-known variables can dramatically influence shipping costs and consequently impact a company’s bottom line.
For that reason, it’s never been more important for C-level executives to understand and appreciate the importance of the shipping function—not just on a rudimentary level, but as part of their strategic decisions that drive both top and bottom-line results. Shipping can no longer be ignored.
This was underscored recently by another new development. On August 5, 2022, FedEx introduced new handling charges for the peak season. Additional costs associated with holiday shopping, most notably timed with Black Friday and Cyber Monday, are of course not new and arguably are justified. This year is, however, different not only for the extent of the increases, but also because FedEx announced it will begin charging them on September 5, 2022.
In essence, the peak season is now no longer the crucial holiday shopping period. It is, from the point of view of shippers, now the entire fourth quarter. Obviously, this will have a dramatic impact on companies of all kinds, not just those that see their shipping volume increase because of gift giving. The costs involved are also simply too great to ignore.
Clearly, with prices changing on short time frames, companies will need to be much more agile when forecasting shipping costs and in terms of making alternative plans. But there are steps all business leaders can, and absolutely must, take to prepare for these situations in the future:
• Reserve a seat for shipping at the executive table. As we have seen with the addition of CIOs, chief customer officers and other roles, the executive table must evolve to ensure that mission-critical business functions are included in high-level strategic plans. It can no longer be ignored that shipping best practices, and alternatively shipping-related shortfalls, now have the potential to dramatically impact profit and loss. Shipping leaders should inform the senior executive team up to and including the CEO.
• Map the impact of shipping on core business strategies and processes. The impact of shipping is not confined to the bottom line. It also impacts other important business functions. For example, Amazon made free next-day and even same-day shipping synonymous with e-commerce success, but clearly there is no such thing as free shipping. How much of total shipping costs an organization is willing to absorb, or alternatively pass on to customers but still remain competitive, should be an important topic for marketing departments and play a role in imperatives like product pricing strategies. Even seemingly unrelated areas are impacted. For example, product design and packaging decisions should be made with relevant dimensions in mind to avoid unnecessary, but costly fees, like FedEx’s $68.75 “oversize” surcharge from October 3, 2022, to January 15, 2023, as outlined in the company’s August announcement.
• Gain visibility and control over shipping data. Business intelligence tools are ubiquitous across industries and enable organizations to organize and visualize vast amounts of information to make informed decisions; however, general purpose BI tools are not equipped to handle the complexity of shipping data as there are no industry standard data formats. As a result, data normalization is highly complex. By its very nature, shipping intelligence—with innumerable variables at play—requires technology and data science to enable sound decision support and uncover actionable insights. The largest carriers utilize these same technologies in their own operations, sales and account management efforts. Businesses absolutely must do the same.
• Constantly consider your options. Armed with data, businesses should constantly be vigilant of opportunities to renegotiate existing terms and conditions with their carrier and make in-the-moment operational changes to lower shipping costs. This can include using different shipping products for different zones or more fundamentally changing carriers altogether. All businesses should strive to create a shipping system that is carrier-agnostic.
Shipping acumen has long played a role in business success, but today the stakes are clearly higher than ever. Business leaders cannot afford to not take note and take action.