How tech innovation has transformed parcel shipping cost control

This article was contributed by Reveel, a key ProShip partner specializing in shipping intelligence technology.

The world of logistics and parcel delivery has changed dramatically over the years, especially in how businesses track and manage their shipping costs. Gone are the days of relying solely on traditional methods and guesswork. Today, enterprise shippers are leveraging advanced technologies and data-driven strategies to gain a clearer picture of their parcel spend. This transformation is not just about saving money; it’s also about enhancing efficiency and improving overall service quality. Businesses are now more focused on making informed decisions that align with their goals, ultimately leading to better customer experiences.

To understand this transformation, we must take a look at the evolution of parcel spend, which can be broken down into two key phases: Parcel Spend Management 1.0 (PSM 1.0) and Parcel Spend Management 2.0 (PSM 2.0). Each phase represents a significant leap forward in technology, strategic thinking, and operational efficiency. The differences between these phases showcase how innovations in both technology and process management have truly transformed the way businesses handle their parcel costs.

Parcel Spend Management 1.0: The Traditional Tech-Enabled Managed Service Approach

Parcel Spend Management 1.0 represents the initial approach to managing parcel expenses and is primarily conducted by consulting firms delivering “technology enabled manged services”. PSM 1.0 is characterized by manual processes, limited visibility, and a reactive stance towards cost management.

Features of Parcel Spend Management 1.0:

• Manual Data Analysis: Businesses rely on manual efforts to track and analyze parcel spend data, leading to inefficiencies and a higher likelihood of errors. Often expensive consultants are required to perform the analysis due to the complexities of agreements and data formats.
• Employee Turnover: With such a heavy reliance on human resources, employee turnover at these firms can have a high impact on the responsiveness, level, and quality of service, as well as the overall customer experience with the provider.
• Limited Visibility: With PSM 1.0, there is a lack of real-time tracking and data analytics, making it difficult to understand spending patterns or identify areas for cost reduction in a quick and efficient manner.
• Reactive Approach: Due to lack of real-time data flow, shippers are often required to respond to cost overruns after they’ve occurred and if they were large enough to cause pain, rather than proactively managing parcel spend.
• Siloed Operations: Departments like operations, finance, procurement, and S&OP often work in isolation due to the lack of centralized real-time data, leading to disjointed efforts in managing parcel spend.

Parcel Spend Management 2.0: A New Technology-Driven Approach

Parcel Spend Management 2.0 marks a shift towards a more strategic, data-driven approach, leveraging advanced technologies like Artificial Intelligence (AI) and machine learning, modeling and simulation, and statistical analysis to optimize parcel spend. This phase is defined by customer-facing technology solutions backed by world class support teams that automate analytics and proactive cost management strategies.

• Automation and Integration: Quarterly, monthly, and weekly processes are automated for tracking, reporting, and analyzing parcel spend. Carrier invoice data is combined with Enterprise Resource Planning (ERP), multi-carrier shipping software, and other systems for closed loop reporting, seamless data flow and operational efficiency.
• Proactive Spend Management: Predictive analytic strategies and tools like contract monitoring, anomaly detection and scenario modeling enable businesses to anticipate and address potential overspend before it occurs.

Key Differences and Implications

The transition from Parcel Spend Management 1.0 to 2.0 represents a paradigm shift in how businesses approach parcel spend. The key differences lie in the adoption of technology, the move from reactive to proactive strategies, and the emphasis on data-driven decision-making that empowers the user to do what was previously in the consulting domain. This evolution has significant implications for operational efficiency, cost savings, and competitive advantage.

Businesses that embrace Parcel Spend Management 2.0 can expect to see:

• Reduced Parcel Spend through optimal carrier contracts, multi-carrier optimization, service level optimization, and packaging efficiency.
• Improved Operational Efficiency by automating manual processes and integrating systems for seamless operations.
• Enhanced Visibility and Control with real-time tracking and analytics, businesses have better control over their parcel spend and can make more informed decisions.

Order Matching Closes the loop with Parcel Spend Management 2.0

One example of how PSM 2.0 leads to direct cost savings is Order Matching. Order Matching in parcel shipping is a process that involves comparing the estimated shipping costs of an order (as calculated at the time of shipping) against the actual costs invoiced by the carrier after delivery. This comparison is essential for several reasons:

1. Accuracy in Billing: It ensures that the billed amount by the carrier aligns with the initially quoted price, safeguarding businesses against overcharges.
2. Budget Management: Accurate cost predictions provide for better budget management and forecasting.
3. Financial Transparency: It brings transparency to the shipping process, allowing businesses to track where and how their shipping budget is being utilized.

The Challenges of Order Matching

Despite its importance, order matching is not without its challenges. These include:

• Complexity of Shipping Rates: Carriers often have complex and dynamic pricing structures based on variables like weight, dimensions, distance, and service type.
• Fuel Surcharges and Additional Fees: These can vary and may not always be included in initial estimates.
• Errors in Data Entry: Manual processes can lead to mistakes in recording or calculating shipping costs.

Implementing Effective Order Matching

To overcome these challenges and implement effective Order Matching, businesses can adopt several strategies:

1. Automated Shipping Systems: Utilizing advanced shipping software that automatically compares estimated costs with actual invoices closes the loop and can significantly reduce errors and improve efficiency.
2. Regular Audits: Conducting regular audits of shipping invoices against estimated costs helps in identifying discrepancies and addressing them promptly.
3. Carrier Communication: Establishing clear communication with carriers, with detailed examples of discrepancies to understand their billing structures and any potential unexpected surcharges is crucial.

The Role of Technology

Advancements in technology play a pivotal role in streamlining the Order Matching process. Modern Shipping Intelligence software comes equipped with features like, automated invoice auditing, and advanced analytics. These tools not only facilitate accurate Order Matching, but also provide valuable insights for future cost-saving strategies.

The Bottom Line

The evolution from Parcel Spend Management 1.0 to 2.0 reflects the industry’s demand for greater efficiency, transparency, and strategic focus. As businesses continue to navigate the complexities of parcel shipping, the principles of Parcel Spend Management 2.0 will become increasingly indispensable. Embracing this modern approach not only leads to direct cost savings but also positions businesses for sustainable growth and success in a competitive landscape.

Learn more about Reveel and chat with them in-person at our upcoming Converge: User Conference in Denver on May 4-7, 2025.

About Reveel

Reveel is the leading Parcel Shipping Intelligence™ Platform that brings transparency to the parcel shipping market, leveling the playing field, and enabling shippers to optimize their parcel shipping spend. Its unique technology empowers shippers to break free of expensive parcel shipping consultants with an easy-to-use software app that brings transparency to the black box of carrier agreements. With over 17 years of parcel agreement management expertise and over $8B in parcel spend under management, Reveel brings a culture of innovation to shipping intelligence, empowering shippers to make faster, smarter decisions with confidence. Shippers enjoy peace of mind knowing they’re in full control of costs and service—without compromise. For more information, please visit the company’s website and follow it on X, LinkedIn and Facebook.