Can zone skipping give you a competitive advantage this year? We asked fulfillment, e-commerce, and 3PL experts for their perspectives.
For awhile, contracted warehousing was quite popular, with zone skipping and load pooling seeming to dive. However, with the new surge of online retail, there are not as many warehouses around anymore. 3PLs, who usually have only one warehouse, are being contracted more, and it seems zone skipping and pooling is making a comeback.
We reached out to industry experts to learn more.
As shippers, and certainly, as consumers, we are all well aware of the sharp increase in online retail over the past year. Red Stag Fulfillment's Jake Rheude offers his insight:
"We're seeing an increase in zone skipping for a few reasons. 1) The sheer volume of e-Commerce orders has skyrocketed since COVID forced people to shop online. This made it more profitable for warehousing 3PLs to expand to multiple locations and markets to meet increased volume. Where it may not have been profitable to run a warehouse in a location where there were only 1,000 outbound packages per day before COVID, at 3-4,000 outbound packages the math works.
2) Every major North American carrier raised their rates and added fees and surcharges for delivery to certain high demand areas. Zone skipping is one of the most effective methods at reducing shipping costs (as it) counteracts the price increases we're seeing across the board from FedEx, UPS, and USPS."
Retail and E-commerce Expert Meaghan Brophy offered her thoughts as well on the online retail boom:
"Many retailers are seeing a greater percentage of total sales coming from e-commerce. Protecting profit margins from online sales is more important than ever. By bypassing multiple zone hubs, and their sorting, shippers can save on fees and time. This is especially true for businesses that ship particularly large or heavy goods - shipping across multiple zones are pricier for a furniture retailer than a clothing retailer, for example."
Some interesting stats came out of a recent benchmark report by 3PL Central, showing that 79% of 3PLs increased their warehouse capacity in 2020. And those who saw the most growth, were 200% more likely to have invested in system integrations and infrastructure to keep up.
According to a representative at Rakuten Super Logistics, a leading e-commerce and fulfillment center:
"In regards to shipping out clients' packages to their prospective customers, we have noticed a surge in clients signing on with RSL and other 3PL providers in the past year. The biggest feat they are trying to overcome is reaching their US customers more quickly by partnering with a shipping company that has multiple warehouses. The increased customer demand for e-commerce has forced them to find alternative solutions for delivering orders more quickly and efficiently."
Meaghan Brophy also provided us her thoughts on the competitive advantage of zone skipping:
“Zone skipping is an important competitive advantage for mid-large size retailers, especially now for two distinct reasons: It allows for faster shipping and greater on-time deliveries. And, zone skipping can save shippers a lot of money. Because carriers are operating at close to capacity, delays and longer shipping times are more common. Using a contracted service to shipments closer to their final destination before handing them off to carriers can save a lot of time that might otherwise be lost in transit."
As we covered in our recent post Zone Skipping 101: Strategically Avoid Carrier Costs Now, when weighing the ROI of zone skipping, you must determine if you have enough volume, are crossing enough zones, and that your internal systems can keep up with an increase in internal capacity. It may not be an option that yields you significant value.
Matt Satell, CEO of online retailer Prime Mailboxes, told us:
"E-commerce owners often dive into zone skipping without thinking if it is for them. Those who are not sure should first consider whether their cost of the truckload (TL) is less than the cost of the entire number of packages shipped from origin to parcel offices. They should also take into account the number of zones that their packages will be crossing as the more zones crossed, the better savings."
At FreightPOP, we help shippers leverage their existing carrier connections to consolidate shipments to deliver via one FTL or LTL to a central hub. We enable shippers to cut costs by pooling shipments delivered from the point of origin to a specific region for last-mile delivery.
We encourage 3PLs and shippers to consult with our experts to learn more. Request a demo today.