Parcel in TMS: Important Factors to Consider

Parcel was already the fastest growing mode of transportation prior to this year, but now it’s off the charts thanks to the explosive growth of e-commerce due to the pandemic. How is parcel changing the way companies plan and optimize their transportation operations? What parcel capabilities must a transportation management system (TMS) have to be effective and provide the most benefits? Those are the key questions I discussed with JP Wiggins, Co-Founder & Vice President of Logistics at 3Gtms, during a recent episode of Talking Logistics.

Navigating the Age of Parcel

Since JP and I have spent decades in transportation, I began our discussion by asking him how the surge in parcel shipments is changing transportation management. JP says that while parcel shipping may seem simple on the surface, the deeper you go into the details you realize how complicated it can be.

“When most people think of parcel, they think of the business-to-consumer (B2C) side of it,” notes JP. “But the business-to-business (B2B) side, where you’re mixing parcel with other modes, that’s when it gets complicated. Sometimes you may ship truckload, sometimes you may ship LTL, and sometimes you may ship parcel. When you have all those considerations, that’s when you really need a TMS because the biggest bang for the buck in transportation is finding opportunities for consolidation. Parcel is still the most expensive mode of transportation by weight, so if you can find ways to consolidate orders and use other modes, that’s your biggest opportunity for savings.

“The biggest challenges are that you often don’t get good detailed information from the ERP or order management system to use in the planning process and you may not know the weight and dimensions of the shipment upfront. This is where predictive packaging capabilities becomes a key factor. Once you know or can determine the weight and dimensions of the box a shipment will go in, the rest can flow through the normal process.

“The other important factor is using real rates instead of predicted rates. Dynamic rate shopping and mode selection is an important determinant of costs and savings. This whole process can get exorbitantly complex really quick, so that’s why you need a good planning engine.”

Blurring Lines

I mentioned to JP that it seems like the lines between LTL and parcel are blurring. JP agreed and says that both modes use base tariffs to which their rate rules are applied. Like parcel, LTL is going to dimensional rating and parcel is starting to consider volume. “It’s all getting fuzzy, like everything else we do,” jokes JP.

The complexity comes from all of the myriad of permutations for modes and service levels. That’s where the value of a good rating engine comes in. “You may only save 50 cents or two dollars per shipment, but if you’re a high-volume shipper, it adds up really quickly. The savings more than cover the cost of the TMS and you can improve the service to your customers.”

Rating Engines, APIs and Regional Carriers

I asked JP about the trade-offs of inhouse rating engines that were previously the norm versus using the new API rating services. JP notes that for super high volumes, rating engines can still be cheaper and faster. But there is cost and effort to build and maintain the engines and load all of the rate data. In contrast, using APIs requires little setup and they maintain all of the latest rates. JP says the response times for rates or labels from the APIs has gotten fast enough that it is sufficient for all but the highest volume shipping operations. He adds that another advantage of the APIs is the ease with which you can incorporate regional carriers and courier services, some of which may offer last-mile and white glove services.

Parcel Freight Audit and Payment

Because of all of the complexities in rating, surcharges, and assessorials, many companies have outsourced freight audit and payment to third parties. I asked JP if this was the case for parcel shipments as well. I think his answer might surprise you. I also asked him about the top things companies should look for when evaluating parcel shipping capabilities. For his insights and advice on those topics and more, I encourage you to watch the full episode. Then keep the conversation going by posting your own thoughts and questions.