From order fulfillment to finding the right parcel carrier, shipping charges can add up. Sending parcels in itself is expensive, whether the customer pays for shipping or the company offers it for free. Inflation is making it more expensive for everyone. This year, the big carriers are adding 5.9% rate hikes, following 4.9% rate hikes the year before. Volumes are up, and capacity is tight. For shippers closely watching costs, it may be time to look into other expense-lowering options for parcel shipping costs. One potential, if the conditions are right, is zone skipping.
Traditionally, for smaller shipments, companies will send out individual parcels from the distribution center or point of origin. Those parcels make their way to the destination via carrier, often FedEx, UPS, or USPS. They are sorted individually at the sortation centers and are driven or flown to the closest carrier site, where they’re sent out for last-mile delivery. The package may cross over multiple zones to get to its final destination. Carriers divide the country into zones, usually charging less to deliver to locations a zone or two away, and more for delivery to farther zones. Zone skipping takes advantage of this concept, paired with bundling and freight shipping.
What is zone skipping?
Zone skipping allows a shipper to consolidate individual parcels into pallets, shipping those pallets to a central facility based on the individual (and grouped) parcels’ ultimate location. When the freight arrives in the region closest to the delivery site, the parcels are then shipped individually to the final locations. The shipper pays for full truckload (FTL) or less-than-truckload (LTL) shipping, and then pays regional rates, rather than more expensive multi-zone rates to ship an individual package directly.
An example of zone shipping is if a retailer in California needs to ship a large number of individual packages to customers in Wisconsin, New York, and Florida. Rather than sending those packages on their own, the retailer would divide the packages into three shipments, sending them as freight to the closest regional delivery facilities. Once they arrive, they are unpacked and sent individually. The retailer then only needs to pay for regional shipping costs within that zone.
How does zone skipping save money?
With zone skipping, a shipper is paying twice, once for freight and once for last mile. But ultimately it should be less expensive. That’s because it lowers the overall individual package shipping cost. Since they are not going through as many sortation facilities along the way, it is less work and less congestion on the carrier side, which means lower costs. FTL or LTL costs on a per package basis are much lower than directly shipping an item across the country. The bulk of the distance traveled is by less expensive freight cost, and only the last mile or regional delivery costs are individually borne.
The shipper also does not have to use the major carriers when the parcels arrive in their final zone or region. Perhaps the shipper has relationships with regional carriers who are more cost-effective. By getting the package closer to the final destination, the regional carriers may have been rates and terms. But even the major carriers will likely charge less since the distance is shorter.
Skipping shipping zones can save money is a less obvious way, too. With fewer touchpoints for the parcels, there is less opportunity for loss or damage. That means lower rates of claims. Items on a pallet are secured and moved across the country without anyone touching them or moving them around in between. They are not going to be dropped from the sortation equipment or by a human. They are handled by the forklift when moving the wrapped pallet onto the truck and again when the pallet arrives, rather than moving loose packages as they make their way across the country.
How does zone skipping save time?
At this point, you’re probably wondering how exactly skip zone shipping can save time for parcel shipping. In some ways, it makes no sense that combining freight shipping with parcel delivery would result in time savings. And it may not in all cases. But when done right, it is faster. Using zone skipping for USPS packages means the parcels avoid the various hubs along the way, arriving at the closest USPS terminal for the last mile delivery. If you’ve ever tracked a USPS package online, you can see the multiple destinations the parcel visits, sometimes going back and forth to different cities. Bypassing all zones but the last one means the package arrives close to where it needs to go, saving on the inefficiencies of going through any carrier’s sortation facilities along the way.
By staying on the truck as the parcels travel through each zone, they avoid the stops of routing through a facility and getting onto another truck. They go direct, and this decreases transit time.
When should a company consider zone shipping?
Zone shipping is not the answer for all shippers. There are a number of factors to consider when deciding whether zone shipping makes sense.
Visibility:
Customers will have less visibility into their shipments when using this method. The previous example of tracking a package through USPS as it goes through multiple locations can be frustrating to a customer, seeing the indirect route some packages take. But they know where the parcel is and when it is expected to arrive. With zone shipping, the customer may not have the same visibility through the freight shipping portion. They may not have information about any delay along that route, or even a tracking number at that point. The items are not being individually scanned along the way.
Volume:
A shipper must have the volume to send freight shipments to different zones or regions on a timely basis to keep products flowing and arriving within acceptable dates. The volume should be consistent, aside from seasonal changes, to optimize the practice. If the shipper does not have sufficient volume, they should use a 3PL that can consolidate parcels with its other shippers.
Sortation ability:
Companies should have the ability at the initial distribution center to sort items quickly into the regions they want for consolidation. Speed is necessary to take advantage of the time-saving element.
Questions to ask when creating a zone skipping strategy
If your company is considering a zone skipping strategy, here are some questions to ask yourself.
- Is the total price of shipping, including the freight and individual parcel price to the final location, less expensive than what you would spend shipping all the packages individually from the pick-up location? Yes? Use zone skipping. No? Look at other shipping options.
- Are you shipping across multiple zones or just one? If just one, then ship individually. To get the benefit of zone skipping, your parcels must actually cross multiple zones. And the more zones crossed, the better the cost and timing benefits.
- If you don’t have the volume for this method to work on your own, do you have a partner that can help you get there? The partner can be a carrier or a 3PL. Or you could work with other shippers to manage it yourself.
- Do you have a plan to share visibility information with your customer? If customers can’t track packages and don’t know about zone skipping, they may not appreciate what you’re doing to save money and time. There should be a plan in place to allow that visibility, tracking, and communication, which might mean using additional software programs.
- Do you have a rapid labeling system and multi-carrier technology capable of finding multiple carrier rates and labeling for national and regional carriers for the last mile? That way the items can be ready to go when the freight is delivered to the final sortation location.
There are many ways to save money on shipping
The zone skipping strategy is a good one for many carriers, but the stars must align in terms of conditions, or the shipper must be willing to work with a 3PL or other partners to account for a lower volume and the time-sensitive nature. Zone shipping is more complex than just sending out individual parcels from each shipping location.
The good news is that there are ways to save money that are lower–hanging fruit. One way is to renegotiate contracts with both 3PLs and with carriers, whether or not it involves zone shipping. It is possible to get better rates and terms with carriers through contract optimization and also to optimize 3PL contracts while continuing to work with the logistics provider or when finding a new one. Shipware has found that most businesses using 3PL companies are overpaying for the service an average of 15%. Not all shippers know what rates are reasonable, especially since shipping is not the core business. Shipware provides expert advice to help shippers through the process of evaluating and negotiating contracts for both 3PLs and carriers, to ensure the companies get the service they deserve as well as the best prices.
Shippers, including those using eCommerce shipping solutions, may use a combination of software platforms for fulfillment. SShipware’s team, with extensive logistics and freight experience, built a solution that helps businesses save 21.5% annually on shipping expenses. And that’s regardless of your chosen shipping option. Ask our consultants to audit your fulfillment operations, from DIM optimization to vendor contracts, to see how it would save your company money and improve customer service. Reach out and find out how you can find the best eCommerce shipping solutions for your business.
