Zone Skipping Your Way to Increased Profits in Ecommerce Distribution
The concept of skipping is not a hard one. Skipping is something we do in one form or another every day. It’s the button on our smart phone we push when we don’t want to talk with our cousin Vern. Heck, it’s the stone we “skip” when walking down by the pond with our son or daughter. It’s the rope we skip after watching Rocky IV. You get the picture, the concept of skipping is easy.
But what is “Zone Skipping”? Zone skipping is a logistics technique where companies ship their products directly to sorting facilities close to the final ship-to destination. Zone skipping can result in a significant savings as the costs associated with multiple sort and transfer points by the carrier are eliminated. Not making complete sense yet? Here’s an example. Company XYZ distributes online orders out of its Nevada distribution center.
Prior to zone skipping, company XYZ simply had all of their packages picked up and taken to a large parcel carrier’s local consolidation center. At the large parcel carrier, the packages were sorted by zip code and then routed to secondary sort facilities. After a couple of intermediate stops, these packages arrived at sortation facility near their final destination where they would be routed for delivery. This last step is commonly referred to as the “last mile”.
To take advantage of savings associated with zone skipping, company XYZ changed their process of taking all packages to a large parcel carrier’s local consolidation center. Instead, they began internally sorting and consolidating their orders by final delivery area. They then sent these presorted packages directly to the parcel carrier’s regional hub, thus eliminating a good chunk of the internal costs incurred by the large parcel carrier.
The concept of zone skipping is really not that challenging to understand, but implementing a zone skipping strategy can be a very large endeavor. It must be carefully evaluated and planned. Here are a few things to keep in mind when considering implementing a zone skipping strategy.
Evaluate Your Data and Identify Opportunities Where Zone Skipping Could Make Sense
The first question you want to answer is “where are my orders going”? For zone skipping to be cost effective, you need to have a sufficient amount of orders going to the same area. For example if you find you have a large amount of volume going to Seattle, WA, zone skipping would more than likely make sense for this destination. Keep in mind that the overall goal of zone skipping is to eliminate as many intermediate steps in the shipping process as possible. The more steps you reduce, the greater the cost savings.
Ensure Your Internal Infrastructure Can Support Zone Skipping
The best zone skipping plan only works if your internal material handling and software systems can handle the increased capacity requirements. What a lot of companies overlook is the strain placed on their systems by having to sort to an increased number of locations. Not only does this require more sort-to destinations, but it can also effect the efficiency at which your overall system will perform. It’s vitally important that a top-to-bottom evaluation of your internal systems be part of the zone skipping evaluation. The costs associated with changes to your material handling and software systems, as well any increased labor requirements, have to be included in your evaluation so you can accurately gauge your ROI.
Talk With Parcel Carriers
One of the biggest misconceptions about zone skipping is that it will eliminate the need to partner with parcel carriers, and as a result, parcel carriers will not want to help with zone skipping. Nothing could be further from the truth. Unless you plan to start delivering your own packages that last mile, you will still need to partner with parcel carriers. Zone skipping avoids the intermediate sortation and consolidation points within the parcel carrier’s network. It is true that this reduced amount of work will result in the parcel carrier not being able to charge you as much.
However, the parcel carrier is also realizing significantly reduced costs by not having to perform all those intermediate steps. Zone skipping should be a win for both you and the parcel carrier. Most parcel companies will want to work with you to design a zone skipping strategy that makes sense for both parties. It may very well work out that some areas of the country are best suited for zone skipping and can avoid shipments to regional and hub sortation centers. It may also be determined that some areas of the country don’t have enough volume to justify zone skipping. For these areas, it may make sense to route packages through the conventional parcel network.
Consider Time to Delivery and Product Damage
A drawback to zone skipping can be time to delivery. However it can also be an advantage. It’s all dependent upon the volume you are shipping to a particular local destination. If the daily volume is lower, than you will be more likely to consolidate multiple days-worth of shipments to take advantage of a full truckload of packages. The time associated with this can still be comparable to packages routed through the traditional parcel network, but it should be closely studied.
If you have a lot of daily volume going to a particular local destination, you can actually reduce the overall time it takes for your products to reach the buyer. This can be a huge advantage and should be included in your ROI. Product damage is a big deal and is one of the highest costs for online merchants. Zone skipping can help reduce product damage as it eliminates sorting and consolidation steps performed by the parcel carrier. These steps will still need to occur within your system, so ensuring your material handling systems handle products with care will need to be a focus. Reduced product damage is also a factor that should be included when considering the overall ROI of zone skipping.
There are a lot of important criteria that must be carefully evaluated when deciding upon the implementation of zone skipping. Bastian Solutions can help your team evaluate your complete network. Through a detailed evaluation of your order data, we can help your team arrive at a zone skipping strategy that will not only save your operation money, but also help get your products in the hands of your customers sooner. To learn more or implement a zone skipping strategy in your operation, please contact us.
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