Solving the Final Mile Challenge with IMS Logistics Zone Skipping Approach
We often get requests from our customers to evaluate how to reduce parcel shipping costs and still meet in-store delivery requirements. The final mile challenge is compounded by today’s ecommerce marketplace, where consumers expect that their orders arrive quickly and free of shipping charges. Regardless of consumer assumptions, there is no such thing as free freight… one way or another, the cost to move an order is built into the price of the goods or absorbed through some other combination of fees.
Traditionally, speed to market is accomplished best by processing orders in real-time, shipping a large quantity of small parcel packages same day. This approach lacks a coordinated effort and misses potential savings opportunity.
IMS’ go to market solution factors in the additional time needed upfront to provide logistics analysis for an alternative shipping method to address the final mile challenge. The technique we have perfected in known as Zone Skipping or Hub bypass.
Zone Skipping - Save Time, Reduce Cost
A quick definition for Zone Skipping or Hub bypass is a logistics technique whereby a shipper consolidates many individual packages or orders. These individual packages are held and aggregated until the quantity reaches a full truckload. These packages are sent in mass from one area (parcel zone), like the Midwest, to another area (parcel zone), like the West Coast essentially skipping over higher priced parcel zones until you reach a lower priced zone.
Upon arrival at a delivery sorting hub, the packages complete their journey to the final destination. For example, Kenosha, WI origin is in Zone 2. Los Angeles is in Zone 8. Shipping directly from Zone 2 to Zone 8 via consolidated truckload is considered Zone Skipping. IMS will target only the packages destined for the West Coast to be skipped into the Los Angeles sorting hub resulting in all higher priced zones packages to be reduced because of the lower zone origin.
It is easy to do the math and determine the potential savings and IMS will pass the benefit savings on to our customers.
Here’s a breakdown of the math for one client’s savings on a particular project: shipping 963 packages from Kenosha to California @ $57 each equal $54,891 in shipping costs. Compare this to two truckloads of 963 orders shipped from Kenosha to the carrier’s sorting facility in California @ $3,620. Then add the cost of parcel shipping (from the carrier’s facility to the customer – all within zone 2) @ $28 each. $7,240 + (963 x $28) equals $34,204. In this example, the savings equal $20,687 ($54,891 vs. $34,204).
Additionally, using full truckload service can reduce transit time. For example, a truckload driven by a team can make the trip from Kenosha to California in 2 days. Add a day for the parcel carrier to deliver and you’ve shortened the delivery time to your customer to just 3 days, down from 4.
IMS will utilize multiple shipment methods to fit best with the client infield expectations. We take a combined approach of shipping individual packages daily where total package volume to an area is small and when it is important to get the packages shipped out quickly, and using Zone Skipping when there are high volumes, which allows clients to benefit from consolidation of a large load of packages moving as one shipment versus individual package prices.
Combining Proprietary Tools to Deliver E2E Supply Chain Optimization
Merchandising logistics is not the same as product logistics. It’s harder. The timelines are faster; the efficiency needs greater; the coordination more sophisticated. World class retail execution requires merchandising-specialized fulfillment centers with transportation managed in-house and technology integrated end-to-end.
IMS works with clients to optimize their total cost of execution, helping them to save smarter, and save more by applying proven techniques like Zone Skipping, in coordination with Retail Profiling, Spend Consolidation, Demand Planning and more. Setup time to speak with an IMS logistics expert, email firstname.lastname@example.org today.
Pete Schmidt is a proven logistics executive developing organizational talent while leading continuous improvement initiatives that contribute to delivering client focused cost savings revenue growth solutions. He is a versatile leader and entrepreneur, successfully designing cost effective logistics solutions with expertise, perspective and insight as shipper, carrier and third-party lead logistics service provider.