Support Services: Balancing Speed and Costs Means Happier Customers, Improved Profitability1 May, 2014 By: Ayal Latz Response
The days of “allow 4-6 weeks for delivery” are gone. Unless you have been stuck on a deserted island for the past five years, you already know this. The bar of consumer expectations continues to rise until one day we will find packages on our doorsteps that we didn’t order yet — but since we really need the product, we will be happy it came! Until this day comes, we will settle for a healthy balance between speed and the cost that consumers are willing to pay.
Marketers control three critical components affecting this balance: where their product is warehoused; how quickly it is fulfilled; and by what shipping method it’s sent. Philosophies on speed of delivery still vary widely from marketer to marketer.
Not all product is created equal. From the marketer’s point of view, it’s easy to understand that the relationship between speed and cost can and should first be assessed by considering the product being sold. Consumers will have a higher tolerance to wait for a non-essential item than they will for an item of more critical importance.
Consumers are growing less patient every day. Does the consumer really understand and care that the value of the sale is low? Does this fact make them more willing to wait longer to receive their order? Likely not.
So how does the marketer satisfy the consumer by balancing acceptable speed while also keeping costs in check?
- Ship close. The easiest way to increase speed to the customer is to be as close as possible. Place your goods and fulfillment nearer to the largest number of customers. This can be done with multiple warehouses — or even just one. Cost containment is the other benefit of shipping close to the customer. Most freight is charged by a combination of weight and zone, so the closer you are to your customer, the less expensive shipping gets.
- Speedy fulfillment. Tool your operation to ship quickly — the same day if possible. If you cannot do this in-house or your fulfillment provider is not set up to accomplish this, find a partner that can.
Choose the right shipping method. Let’s start with a view from 30,000 feet. Traditional options are best summed up with the big three carriers: UPS, FedEx and USPS. These carriers offer standard, expedited and express services. The more you pay, the faster the package travels. Most of these offerings have day-definite guarantees, meaning the carrier is committing to delivering on a specific day or the shipper can file a claim (UPS and FedEx).
Not surprisingly, these services cost more than other options and also have additional surcharges associated with them, which can add up quickly. Fortunately, there are other options. The biggest rage in residential shipping is often referred to as the “economy” or “hybrid” model, such as UPS Surepost and FedEx SmartPost. With these models, the carriers pickup and transport the packages through their networks but later hand them off to the USPS for actual delivery to the residence. These economy methods are lower cost than the traditional services and also do not have nearly the same level of surcharges. But even these hybrid models are not created equal. There are differences in how they are processed that may affect speed and cost.
- Ship smart. Finally, use logic-based technology to help determine how to ship in order to accomplish your goals. Incorporate software that calculates the transit time to the customer via various shipping methods. If you want to deliver in two days, based on your location you may be able to ship via the economy/hybrid model. This is far better than simply setting your shipment method to two-day air and overpaying.
Marketers have significant control over the balance of speed and cost in shipping to their customers. Careful analysis of the options may result in significant improvements in speed and reductions in cost. Work with an experienced fulfillment center to understand the choices and make your decisions. ■