3 Ways to Lower Last-Mile Shipping Costs

As the holiday shopping season approaches, shipping is forecast to only get more expensive. An analysis of historical and projected pricing of major carriers conducted by AxleHire found that last-mile delivery costs often exceed 10% of the sale’s total value.

Continual price increases for basic ground shipping from major carriers are a big part of that problem, but they can’t shoulder all the blame. For e-commerce deliveries from regional carriers, residential and fuel surcharges can increase shipping costs by several dollars per package, and as a shipper’s volume increases during peak periods, additional demand surcharges are often imposed.

The good news is that shippers, especially in large urban markets, have more options than ever to lower their costs.

1. Read the fine print

Unexpected surcharges are one of the biggest problem areas for shippers trying to control costs. While hidden fees can be hard to see upfront, carriers often include them in the fine print of contracts. It’s essential for shippers to thoroughly vet potential carriers and understand all points of their contract.

“Twenty years ago, people usually worked with the big three and maybe a regional player, and now brands are entertaining six or eight carriers.”

While large brands often have vendor sourcing teams dedicated to this, AxleHire CEO Raj Ramanan says mid-tier brands without the resources can benefit from this the most.

“A lot of times you’ll have a low sticker price, but then a fuel surcharge, residential surcharge, peak surcharge, and on and on that can affect your cost,” says Ramanan. “Make sure you fully understand what your actual cost per box would be in a peak season like the one we’re entering.”

2. Diversify your carrier base

Contracting with a diverse set of carriers and technology providers allows you to best take advantage of the market.

“Twenty years ago, people usually worked with the big three and maybe a regional player, and now brands are entertaining six or eight carriers,” says Ramanan. “That provides so many advantages because different carriers have either regional or localized advantages in their markets. You can use the incumbents for areas where they’re the only option but get price and service benefits in the other regions.”

Ramanan adds that bearing the cost of managing a larger network is offset by the price and quality advantages you’ll receive.

“Many of our clients are expanding their carrier base, and they’re also segmenting their carrier base for purposes most often by geography,” says Ramanan. “It’s all about creating cost savings but also value to the end customer that reinforces the brand experience.”

3. Look for transparent pricing

Lastly, Ramanan advises brands to do their homework to ensure they are comparing things fairly. Red flag carriers or partners are those who don’t offer transparent pricing upfront.

“I really challenge brands to do their homework and be careful about pricing,” says Ramanan. “I don’t like the lack of transparency in the industry around surcharges and things like that. Ultimately, either that detracts from the brand’s profit or that gets passed on to the end customer. There are better ways; there are more efficient models, and that’s good for the world, good for the brand, good for the economy to continually remove friction and excess costs.”