Let’s face it. “Data” is a trendy term. Everyone wants to talk about it and prove to others that they know what it means to live in a data-driven world. It’s a wildly popular thing to bring up in any conversation, as if simply saying the word “data” will automatically make you look smarter. The word “data” has replaced prescription eyeglasses for people who want to appear intelligent. Fact: Data is worthless if you don’t know how to use it.

    As a small parcel shipper, it can be overwhelming to keep track of your shipping data. Although carriers provide some useful data in your billing invoices, it lacks a comprehensive breakdown that truly details your shipping practices. What should you do? If you don’t use a comprehensive third-party audit platform, you should at minimum utilize the carrier's online billing tools.

    Here, your carriers will provide you with data relevant to your shipping performance, costs, distribution patterns, and customer location tracing. Regardless of how you get your data, ‘getting it’ is merely the first step in appearing intelligent.

    Are you using your shipping data? If so, what is it telling you?

    Too often, when we’ve asked shippers “how are you using your data?” the response we get is, “What do you mean?” Truth is, actionable shipping data should be influencing your business decisions around pricing and operational dynamics that have major impacts on revenue targets. For example, accessorial charge data, zonal distribution, weights, DIM assessments, and many other data points should be factored when determining appropriate pricing on products as well as the shipping charges needed to reach desired margins.

    We’re not just talking about benchmarking or averaged data. Many companies incorrectly rely on averaged data, such as zone and weight averages, to calculate a one-size-fits-all cost assessment. For companies that ship nationwide, this often leads to an imbalance where margins become unnecessarily limited for longer zone shipments. In other words, the margin you lose by undercharging long-zones is not made up for by overcharging short zones.

    When analyzing costs, it’s imperative that more specifics are taken into account. This means a full understanding of your distribution model and the package-by-package details that impact your costs. After all, if you build and sell bicycles, you would determine the cost of every part used, from the handlebars to the reflectors, before setting the final price. Why, then, do many companies limit their analysis to their “average zone and weight” to determine their shipping charge (whether they build it in to their product’s price, or charge their customers for shipping), and leave out costs of surcharges such as fuel, residential, delivery area, etc. that may also apply? If you could optimize your costs (and product pricing) around your company’s shipping details and distribution model, why wouldn’t you?

    Why does this matter? Consider this: The number one reason buyers abandon their online shopping carts is unexpected shipping costs.

    One of the biggest questions surrounding the logistics industry is whether free shipping really exists, or if shipping charges are simply built into the price of a product. The answer: Yes, free shipping exists. E-commerce companies that provide free shipping afford it by knowing their data inside-and-out and how to leverage it to reduce their overall shipping costs. The three most impactful uses of shipping data are to understand it enough to make sure all costs are covered, to reconstruct your parcel program based on your data, and to build a “compelling business case” for why FedEx, UPS, et al, should add concessions to your carrier agreement. This is where your data analyses can have huge impacts on your costs. If you could chop 10% off your shipping costs, would that help you offer free shipping? What about 15%? 20%?

    Knowing your data well enough to leverage it in your operations and carrier agreements will lead to added revenue, higher margins and better customer experiences by virtue of free, or low-cost, shipping.

    Shaun Rothwell (Founder and CEO, iDrive Logistics) is the small parcel industry’s leading data and cost model expert. With 22 years of experience in the small parcel and logistics industry, Shaun has helped more than 1100 companies with supply chain optimization and shipping cost reduction. Visit iDriveLogistics.com for resources on optimizing supply chain costs, or click here to access a complimentary worksheet that will help road-map your cost reduction efforts.