All e-retailers rely on the major parcel carriers to handle critical “last mile” delivery of packages to the customer’s doorstep. While most fulfillment operations use all the big parcel carriers to some degree, most favor one specific carrier that best suits the needs of their operation. If you’re wondering how to determine the best parcel carrier for your eCommerce shipping needs, read on.
Figuring Out the Best Parcel Carrier for Your Needs
The big-name carriers dominate the parcel space – the United States Postal Service (USPS), UPS, FedEx, and DHL. Larger online sellers may also rely on a network of smaller regional carriers to supplement last-mile delivery in bigger cities. Even if you have a 3PL providing parcel shipping services on your behalf, that 3PL uses some combination of the above to get your packages into your customers’ hands.
The services of these carriers are similar, but different enough that zeroing in on the right one for your specific requirements can enhance your customer experience and reduce parcel freight costs. Consider the following when looking at the major providers.
Dimensional weight, or DIM weight, is a technique used by parcel carriers to determine the cost of shipping parcels and incentivize customers to streamline packaging size. The height, width, and length of the package are multiplied together, and the total gets divided by a set divisor to determine its DIM weight.
Parcel carriers charge for actual weight or DIM weight rounded up the nearest whole pound (whichever is higher). If you move a lot of large packages, examine the current dimensional weight pricing models of each carrier to see if a particular carrier has more affordable rates for your most common parcels.
It’s important to note that 3PLs shipping a high volume of parcels, like Amware Fulfillment, will negotiate a more favorable DIM factor (a higher divisor) – so the published rates from the carriers don’t tell the whole story. For instance, a 14-pound package by DIM weight could be charged at a 10-pound rate with a favorable DIM factor applied.
Let’s take a look at those published carrier rates by taking a package with 16x12x10 dimensions and putting it through the dimensional weight formula of each major carrier:
- USPS. The USPS uses a standard DIM divisor of 166, so 16x12x10 = 1920. 1920 ÷ 166 comes out to 11.57 pounds. With USPS, your parcel’s DIM weight is 12 lbs. If the actual weight of your package is less than 12 lbs., you will be billed for shipping a 12-lb. package. If the actual weight is higher, you get billed for the actual package weight.
- FedEx. FedEx uses 139 as its standard DIM divisor. As a result, the DIM weight for the same 16x12x10 package changes. 1920 ÷ 139 = 13.81. With FedEx, the example parcel’s DIM weight comes in at 14 lbs., so you will be billed for a 14-lb. shipment (or the actual weight, if higher).
- UPS. UPS actually uses both divisors. UPS Daily Rates use 166, while UPS Retail Rates use 139. E-commerce shippers with daily pick-ups will pay Daily Rates. UPS Retail Rates are for customers who ship through a UPS retail location.
- DHL. DHL also uses 139 as its divisor, making it comparable with FedEx for DIM weight parcels.
In terms of DIM weight, USPS and UPS offer a more cost-effective choice for shippers of large parcels with an actual weight lower than their DIM weight, but that’s only if customers set up daily pick-ups that allow them to pay Daily Rates rather than Retail Rates.
In terms of actual weight, most of the private carriers have a minimum parcel weight of one pound. Shippers moving high volumes of small packages that weigh less than a pound – for example, nutraceutical businesses – will benefit most from a relationship with USPS so they don’t get overcharged on low-weight packages.
Bottom line: DIM weight is a critical factor. Don’t ignore the huge savings potential of aligning with a 3PL that has negotiated a favorable DIM factor with one or more of the major parcel carriers.
Transit time expectations weigh heavily into parcel carrier selection. Some shippers put a lot of stock into shipping times, but others may not care if the package takes a week to arrive. When determining the best parcel shipping option, you have to carefully consider your time constraints and customer expectations to determine which carrier provides the most affordable service within that window.
- FedEx and UPS are the two biggest players in U.S. parcel shipping, and both have good on-time delivery rates. That means that they can get your packages where they need to go, on time and anywhere in the country. These two carriers also have the most effective tracking options, enabling customers to follow their packages.
- DHL has less of a presence in the U.S. compared to UPS and FedEx. DHL uses the USPS for all its final mile deliveries and can deliver 95% of packages within the published transit time expectations based on the service chosen.
- For effective and consistent last mile reach within the United States, it’s hard to beat the USPS. It’s worth noting that the company’s tracking can be inconsistent, and customer service can be poor when something goes wrong.
Total Shipping Cost
If you’re shipping a $5 product, you can’t afford a $20 shipping charge to get it to your customer in two days. Consider your service options for each carrier. For example, if your customer is within the first few shipping zones, the package will probably arrive within the two-day window even using a cheaper standard ground delivery service, versus an expedited option.
Rates vary widely depending on the carrier and specific shipping service you choose. Here are some tips about each carrier’s costs to inform your choice:
- USPS. Shippers mostly use USPS’s Priority Mail and First-Class Mail services, but it offers a wide variety of shipping options. USPS is very often not the lowest cost option, but it’s a brand shippers trust and pricing is very straightforward, with very few accessorial feels – unlike UPS and FedEx.
- UPS. UPS often gets criticized for overall higher prices, but actually it often provides the best rates for larger parcels. Thanks to its favorable DIM weight for Daily Rate shippers, UPS offers an economical choice for larger-sized packages.
- FedEx. FedEx provides discounted shipping rates for shippers who sign up for a business account, with no limits on volume. It also offers Saturday delivery without additional fees, helping e-commerce shippers to save on late-week shipments.
- DHL. Though DHL offers comparable DIM weight pricing to FedEx, its services are geared toward high-volume shippers. If you move less than 100–200 packages daily, you won’t be able to benefit from DHL’s commercial volume discounts. DHL is a good choice if your shipments are 3 pounds or less. Like USPS, pricing is straightforward with minimal accessorial charges.
Which Parcel Carrier Should I Use?
Do you remember how your parents always told you not to put all of your eggs in one basket? That advice is also true with parcel carriers. While the above info will help you identify a primary carrier for the bulk of your shipments, keeping other major carriers and convenient regional carriers in your back pocket will help with overflow or unique shipments.
At Amware Fulfillment, we can leverage our national distribution network and established relationships with the major parcel carriers to get you the most affordable parcel shipping options available. If you need help streamlining your parcel shipping processes, please contact us today.