April 29, 2011, 12:54 PM

May 2011 Supplement: Solving the "Free Shipping" Puzzle

(Page 5 of 5)

UPS, which delivers packages to more than 220 countries and territories, is a global leader in logistics, offering a broad range of solutions, including the transportation of packages and freight, the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business.

When it comes to fulfillment, retailers also need to be thinking about finding a partner that has experience picking and packing the kind of merchandise the retailer sells. Retailers also will want to ask how much the fulfillment house spends annually to upgrade its facilities and shipping technology.

"Outsourcing partners need to show they are making the necessary investments to deliver economies of scale and that they can execute the retailer's delivery strategy, because retailers turn to an outsourcer to spare themselves the capital cost of taking on tasks that are not a core competency," says Toner.

Retailers also must consider whether they want to give all their business to a single carrier, maximizing potential discounts, or use two or more carriers to gain a stronger bargaining position and utilize carriers based on their strengths.

The U.S.P.S., for example, is considered the most cost-effective shipper of packages weighing five pounds or less, which is why it moves more packages in that weight range than any other carrier. Retailers that have a mix of small items can give that portion of their business to the U.S.P.S. and its larger-package business to a private carrier.

"The rule of thumb is to always leverage multiple carriers in order to have a strong negotiating position," says LJM's Wood. "When a carrier knows it is competing against another for business it will be aggressive on price. Shipping can be one of the largest expenses a retailer incurs, so the more informed retailers are about how to choose a shipping partner, the better the odds they will find a partner that helps them achieve their business objectives."

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