Cut Shipping Costs by Using Zone Skipping and Freight Consolidation
Zone Skipping and Freight Consolidation Keep Shipping Costs Down
As costs soar and consumers continue to demand fast, low-cost shipping and delivery of online orders, the transportation and logistics industry has been challenged to produce effective strategies to cut shipping costs.
What is Zone Skipping?
Over the years, the logistics industry has used a variety of methods to cut down on shipment travel time and cost. One such shipping process is zone skipping, a consolidated freight concept.
Zone skipping makes single package and less-than-full truckload delivery easier by combining items into a full truckload bound for a single delivery point. A parcel carrier network then picks up and delivers individual packages directly to customers. This method of shipping and delivery has proven to be cost-effective for businesses and consumers by shortening wait times and decreasing shipping costs.
The pandemic forced the logistics industry to cope with the rapid acceleration of online shopping before it was ready to do so. With shipping costs and shipping volume increasing annually, zone-skipping has become more widely used. The pandemic demonstrated that shopping from home is a valuable choice for consumers. Stuck at home, consumers proved that they were willing to pay for same-day and next-day shipping options.
The Basics of Shipping Zones
The United States is divided into unspecified geographical areas that mark the distance that a domestic shipment travels to the end customer as follows:
Zone 1 (Point of Origin)-Local Delivery
TRAVEL RADIUS FROM ORIGIN IN MILES
Within a 50 mile radius
51-150 mile radius
151-300 mile radius
301-600 mile radius
601-1000 mile radius
1001-1400 mile radius
1401-1800 mile radius
1801+ mile radius
Freely Associated States
The concept of shipping zones is used to measure the distance that each package travels from its point of origin to its final destination to the customer. When an order is shipped, the location from which the shipment was first located is considered to be its point of origin. The point of origin is always Zone 1.
The address to which the package will be shipped is the destination zone. The number of the respective destination zone will depend upon the distance that the package needs to travel from its original location, Zone 1.
The United States Postal Service (USPS) is one of the most common shipping carriers in the U.S. This is due to its low cost, reliability and government mandate which requires it to provide mail services to everyone for at least one mail product. Exclusions are not made based on where residents live. The USPS website includes an easy-to-use shipping zone calculator on its website.
Example of a Zone 8 shipment:
- A truck shipping packages from New York, City to San Diego, California.
Example of a Zone 5 shipment:
- A truck shipping packages from Portland, Oregon to Albuquerque, New Mexico.
Steps in Zone Skipping
- Shippers consolidate individual packages.
- Less than freight truckloads (LTL) are combined into full freight truckloads (FTL) in a process called freight consolidation.
- Freight is shipped by truck from one region to another, such as from California to a delivery or fulfillment center in Massachusetts.
- When freight arrives at the fulfillment center, the packages are sorted and picked up by parcel carrier networks to be delivered to their final destinations.
Reducing costs and shipping times are crucial elements of zone skipping. Consolidating freight into one truck load and shipping it to a distribution center increases efficiency by saving time and reducing cost. The cost per package is reduced and the product gets to customers faster. This can add up to millions of dollars in costs saved for companies and consumers.
Advantages of Zone Skipping
In 2018, 25% of package delivery service activity involved a residential address. This escalated in 2020, to 70% of all package delivery service activity involving a residential address. This is a clear indication of the tremendous, rapid popularity of online shopping and home delivery. The influx in e-commerce orders strained supply chains that were not prepared or ready for the rampant escalation in volume. This resulted in higher shipping costs and corresponding pricing increases for customers. Additionally, in recent years, each major parcel carrier network such as UPS and FedEx initiated peak season charges to cover the adding shipping volume and costs.
The efficiencies gained by employing the zone skipping strategy benefits both business customers and consumers. Instead of shipping packages other transportation modes, companies use trucks to transport goods through multiple zones to a distribution center at a bulk rate. As a result, companies pay a lower per-package shipping price and get items to their destinations faster, saving time.
A regional and local carrier network can deliver packages to customers the same day or next day. This reduces the need for multi-facility stops and increased freight rates, which is often the case with LTL freight and air freight. Consolidated shipping allows fewer trucks to be on the road and improves the transportation management capabilities of logistics providers.
Zone skipping is a highly efficient and useful consolidated shipping technique. In its operation however, companies should be keen on employing certain standards and procedures to ensure that shipping costs are decreased.
Processes and business practices that should be in place include:
- Effective freight consolidation and sorting practices
- Proper, standardized, and efficient labeling for national and regional carriers
- Dedicated dock and conveyor to streamline sorting and package pickup
- Multi-carrier logistics knowledge to find the best shipping service rate
How does freight consolidation work? The process of freight consolidation occurs when a shipper combines multiple individual shipments bound for a specific geographic region into one large shipment.
The consolidated shipment goes to a facility where it is separated into individual parcels by address. Parcel carriers deliver packages to their final destinations. Freight consolidation enables shippers and carriers to collaborate and use fewer trucks for their freight or packages, improving the shipper to carrier relationship.
Example of How Zone Skipping Lowers Shipping Costs:
Benefits of Freight Consolidation
- Minimized shipping costs
– FTL freight pricing at ltl freight package volume
- Lowered labor costs
– One carrier is responsible for freight, fewer trucks
- Increased efficiency
Company A needs to ship 1,000 packages a day from Charlotte, North Carolina to Las Vegas, Nevada. The freight quote for shipping via air or LTL freight is $10 per package. By comparison, a freight consolidated shipment to a sorting facility costs only $4 per package. Once unloaded to the sorting facility, regional and local carriers deliver packages to consumers at $3 per package.
Total shipping cost per year for 5,000 packages per day
Via air freight or LTL freight -$18,250,000
Via zone skipping – $12,775,000
Total shipping cost per year for 1,000 packages per day
Via air freight or LTL freight – $3,650,000
Via zone skipping – $2,555,000
COVID-19 affected the global supply chain in ways so severe that the world is still recovering. Logistics providers have been pushed to utilize innovative logistics strategies to survive and rebalance. Zone skipping and freight consolidation are not unique logistics management responses to the pandemic. However, shipping cost increases and the continued impact of the Amazon effect have increased the use of the zone skipping strategy.
The age of e-commerce has made zone skipping and freight consolidation more important and a potent technique for businesses that have a high volume of smaller deliveries.
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