How Shipium can Help You Adapt to Macro-environmental Changes

As most operators know, USPS is undertaking a broad initiative called “Delivering for America” in an effort to improve both struggling financials and overall efficiency. As part of this, USPS is changing shipping partner deals with carriers like UPS, Pitney Bowes, DHL etc. to decrease last-mile shipping costs. 

USPS is set to remove parcel discounts for parcels delivered to USPS Delivery Units (DUs), with the intention of incentivizing injection further upstream at Sectional Center Facilities (SCFs), Regional Distribution Centers and the like.

This is likely to introduce complexity and necessitate changes on the part of both carriers and the retailers they support. In this blog, we’ll explore what the implications of these changes are and share how brands and LSPs using Shipium seamlessly adapt.

Impact to brands

While impacts to different retailers may vary, here’s what many can expect as a result of the proposed changes.

Network & fulfillment process changes

Based on changing cost structures, it may be necessary to make operational adjustments to where shipments are injected to avoid higher delivery fees. As mentioned, this means supporting a strategy where injection happens upstream, which may require changes to transportation routes and scheduling, shipping labels, tracking systems, inventory allocation and more (we’ll explore this in more detail in a bit). 

Increased shipping costs

Elimination of discounts for volume sent to USPS DUs means that retailers may face higher costs to absorb cost increases to carriers, eating into profit margins. With margins already thinning for many enterprise retailers due to increased demand and network complexity, this is something that you should be taking steps to avoid.

Potential for service delays and disruption of 2024 peak

With this shortened/rapid timeline comes a higher risk to delivery reliability, especially going into peak season. 

Changes will inevitably take time to implement for carriers handling this type of volume, which has raised concerns among carriers and industry observers about disrupting critical last-mile parcel delivery during peak. 

How to adapt to this

The old way

If you’re leveraging either legacy platforms like Logistyx or have built your own stack atop a carrier API platform, there are a number of things you can do to prepare for this change and avoid service disruptions while maintaining margins. 

Evaluate your network and identify the necessary order routing changes and service method adjustments needed to adapt. Some of the considerations you’d need to make are:

• Logistical adjustments: Due to the need for injection to happen further upstream within the USPS network, you may need to consider/make changes to transportation routes, scheduling, and the processes that support each. Parcels will need to be directed to different sorting and processing facilities as a result of these changes, which also means updated shipping labels, changes to tracking systems, and adjustments to automated workflows that dictate key decisions.
• Inventory management: Inventory allocation should reflect changes to origins and shipping lanes. You should also be accounting for changes in transit times created not just by changes in origins and destinations, but also by historical carrier performance and unique macro-conditions for new transportation routes.
• Updating software systems: When you make changes to your network and carrier contracts (more on this in the next section), you also need to update the technology that automates your parcel shipment workflow to reflect those changes. This can be challenging, as there are many systems that need to be updated and coordinated including your ecommerce site, OMS, WMS, and TMS.

Depending on how your carrier contracts are structured, you may also need to renegotiate — especially if you’re leveraging discounts specific to parcel injection at USPS Delivery Units. This will also require you to update contract terms in any technology that you’re leveraging to automate processes.

These are just a few areas that can lead to inaccurate orders, transportation delays, excess costs, and customer dissatisfaction if left unaddressed. So while it may be time-consuming and difficult to navigate these changes, they’re absolutely essential for those reasons.

The Shipium Way

Enterprise shippers using Shipium have built-in functionality to automate transportation decisions while accounting for these USPS changes. Let’s take a look at how this works. 

Contract virtualization and rapid carrier setup

If these changes require you to renegotiate contracts with a carrier, or even add a new carrier to better support the volume moving throughout your network, Shipium eliminates the IT burden associated with changing contract details within your software systems.

Carrier contracts can be directly uploaded and fully virtualized — once set up, our Dynamic Time-in-Transit modeling will account for changes to rates and service methods when recommending an order fulfillment plan. Once updated contracts and (if needed) adjusted business rules are in place, you can automate decisions related to network changes that need to be made.

Automated, data-driven decisions

If one or several of your carriers change their rates, surcharges or other details for the UPS, USPS or DHL injection methods in a way that increases costs, Shipium will automatically shift packages to cheaper methods without any intervention needed on your part. 

As mentioned above, all contract details are virtualized in the platform — and if you’ve customized your business rules to always optimize for cost, Shipium will recommend specific downgrades that can be made to optimize costs while meeting your desired EDDs.

Shipium’s Simulation tool can also be used for more hands-on control of process changes. You can use it to run complex scenario analysis to see how cost structures and shipping performance changes when you add or change origins, try different shipping lanes, or shift inventory allocation.

Wrapping up

The proposed changes by USPS to eliminate parcel discounts and incentivize upstream injection represent a significant shift for both carriers and retailers. These adjustments aim to streamline operations and reduce costs for USPS, but they introduce complexities and potential disruptions for businesses dependent on last-mile delivery services.

By virtualizing carrier contracts, automating key fulfillment and transportation decisions, and providing ML-based tools for advanced scenario analysis, Shipium helps you seamlessly adapt to USPS’ ever-changing landscape. This allows you to maintain service reliability and cost efficiency, ensuring your operations remain resilient during 2024 peak and beyond.

If creating more adaptable, scalable processes is a priority for your shipping ops team, feel free to book some time with our team to see if Shipium can help.