It's no secret that parcel contract optimization is necessary for both businesses and carriers what with over $2 billion in refunds and credits going unclaimed by U.S. businesses every year. In fact, according to the Washington Post, neither Amazon nor the Post Service knows for sure what the revenue from their parcel shipping contract is despite the fact that Amazon uses the Postal Service for up to 40% of its shipping.
Parcel contract optimization ensures that both parties are acting in compliance with their shipping contract and that no party is being overcharged. Parcel contract auditors will analyze contracts for service errors and to determine if any refunds or discounts are in order.
However, the parcel contract optimization market has been affected by the COVID-19 crisis like many other markets have been, and the future of the market is expected to shift. That being said, what market changes can we expect to see and what trends should people be aware of? Here we'll dive into the parcel contract optimization market pre-and-post pandemic.
Pre-Pandemic: Carriers Shifting Gears
Prior to the pandemic, the parcel industry saw significant changes. FedEx chose not to renew not one but two contracts with Amazon, UPS signed a five-year labor contract, and the US nearly departed from the Universal Postal Union.
E-commerce deliveries were growing for multiple carriers. This was especially true for FedEx, which began delivering packages on Sundays via Ground. FedEx also started allowing FedEx Express to hand off some of its deliveries to Ground when they were in the last mile. The trends that were expected to come in 2020 included General Rate Increases from carriers, expectations from consumers for faster deliveries, and increases in carrier capacity.
Current Pandemic: What Is the Market Doing?
With so many Americans staying home and social distancing to combat COVID-19, the e-commerce market has climbed 49% and retail sales have dropped significantly. Additionally, mail volumes are falling and putting greater pressure on profit for the United States Postal Service. Parcel volumes are growing and helping profitability, but the USPS isn't able to profit through types of shipment.
What Trends Are Expected in the Future?
According to Barron's, the probability of change happening for the USPS and other carriers is higher because of the COVID-19 pandemic. Issues that may have seemed small prior to the pandemic are now highly visible, and some shippers specializing in consumer products may continue to see their volumes climb while overs will see declining demand.
Shippers who have seen their volumes decline ought to be wary of their carrier pricing and discount structure. With e-commerce shipments expected to continue to rise and the USPS looking to improve its profit margins, parcel contract auditing, negotiating, and optimizing will be more important than ever. That's where AFMS comes in.
AFMS has parcel pricing experts your business needs to analyze shipping contracts and to provide parcel contract negotiations. For more information on parcel shipping contract benchmarking and contract optimization, contact AFMS today.