eCommerce has grown rapidly over the last twenty years, changing how freight and parcel shippers design their increasingly complex logistics systems. Rising shipping costs affect anyone shipping or receiving goods, with costs getting passed down through the shipper to customers.
Last mile shipping doesn’t have to be seen as a cost center for all — an optimal zone skipping strategy can help brands reduce transportation costs and improve on-time, in full (OTIF) rates.
But what exactly is zone skipping, and how can it reduce transportation costs and speed up transit time?
What Is Zone Skipping?
Each parcel and LTL carrier groups geographical regions into zones, and charges shippers each time the shipment changes zones. Zone skipping is a method of freight consolidation wherein brands can consolidate their parcel or freight loads, and ship them across multiple regions, injecting them into the local destination of delivery. The brand can then take advantage of the regional rate, rather than the national freight rate, and avoid the costs of directly shipping across multiple zones.
For example, a consolidated truckload of packages is heading via USPS from Las Vegas (Zone 2) to Philadelphia (Zone 8) with no stops in between. This direct shipment is an example of zone skipping, as three zones were skipped in the process of getting the truckload from Las Vegas to Philadelphia. The shipper pays the regional cost of sortation in Philadelphia.
Why Zone Skipping Eases The Burden of Last Mile Shipping Costs
Zone skipping eases the burden on less-than-truckload (LTL) freight and parcel carriers, and it boosts delivery speed by getting items as close to the final delivery location as quickly as possible. Orders are presorted at a fulfillment center based on their final destination before being handed over to the carrier. With this method, shippers can bypass the costs associated with parcel carrier sortation at every regional hub, and instead, their shipments can be delivered closer to the final shipping destination.
As an example of zone skipping, according to Parcel Industry Magazine, imagine shipping 3,000 packages from Georgia to California at $10, totaling $30,000 in shipping costs.
Compare this with one truckload of 3,000 orders shipped from Georgia to the carrier’s sorting facility in California at $3,000. Then add the cost of parcel shipping — from the carrier’s facility to the customer, all within Zone 2 — at $7 each. The total for the zone-skipped truckload comes to $24,000 (($3,000 + ($3,000 x $7), for a total savings of $6,000.
How Does Zone Skipping Save Time?
Today, thanks to brands such as Amazon and Walmart, speedy delivery has become an expectation of today’s consumer, with brands offering free two-day, one-day, and in some cases, instant delivery in order to win over customers.
Brands using zone skipping can realize savings in improved transit time — aka faster delivery for their customers. In the zone skipping example above, a truckload driven by a team can travel from Georgia to California in two days, and the package would arrive on the third day by a parcel carrier. By comparison, forcing a shipment to go through sortation in each zone would take 4-5 days to arrive.
Although transit time is faster, brands and logistics leaders who rely on FedEx or UPS MyChoice for status updates should be aware that they — and their customers — have less visibility into where shipments are. They also have less knowledge if exceptions, such as shipping delays or damaged packages, happen.
Many brands using zone skipping strategies to improve transit times while reducing costs have used Delivery Experience Management as air cover. Brands such as Bodybuilding.com use tracking pages and customized alerts to fill in these gaps, letting their customers know where their orders are, an Estimated Delivery Date (EDD) when they should expect their package, and if any exceptions occurred. Bodybuilding has reduced “Where Is My Order” calls by 27%, and it has improved customer satisfaction scores and its NPS by over 6% as a result.
Three Questions to Ask When Mapping Out Your Zone Skipping Strategy
With zone skipping, keep in mind that there is no “one size fits all” strategy. Coming up with the answer to this question involves some simple math that will help you figure out whether a zone-skipping strategy will produce cost savings. (Keep in mind that the more zones your shipments cross from Point A to Point B, the more cost and time savings you can enjoy. More Zones = More Savings)
Start by asking the following questions:
- Do you have any big opportunities for zone skipping?
Do you have many orders going to the same region from your warehouses, or do you have shipments going from coast to coast? If so, you may have enough shipments to consolidate your loads.
- Have you talked with your carrier about your plans to reduce costs through zone skipping?
While your brand’s shipment volume may be too small to benefit from zone skipping on its own, your carrier may be able to pair your load with that of another brand and help both customers. This is where cultivating a relationship with your carrier is key to getting the best service for your product and customer.
- Can you fill in the communication gaps for your customers and your team?
As mentioned above, for brands who lack last mile visibility and track and trace capabilities, the last mile may look like a black hole for customers as well as your team who will have to answer “Where Is My Order?” calls. Make sure that you have the tools to track packages accurately and communicate with your customers as they expect.
If your calculations show the expense of shipping consolidated packages through a carrier, coupled with the cost of delivering the packages at their destination, would be less than the cost of shipments in a more piecemeal fashion, then a zone-skipping strategy could make sense. If not, then you should look at other ways to lower shipping costs.