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Warehousing & Fulfillment

Overnight Shipping: Benefits and Savings

Warehousing & Fulfillment
July 8, 2021
8 min read
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Everything you need to know about overnight shipping from customer expectations to bottom-line implications for your business.

In today’s anything, anywhere, anytime world, overnight shipping should be part of omnichannel seller’s strategy to keep customers for life.

Since the advent of Amazon Prime in 2005, 2-day nationwide shipping has become standard in consumers’ minds to the point where it is expected from merchants of all sizes – even small-to-medium-sized businesses (SMBs).  In fact, in a recent Ware2Go merchant survey, 75% of merchants said offering 2-day shipping makes them more competitive, adding that providing faster shipping is more effective for driving conversions than offering discounts. 

This trend is especially true for younger shoppers. According to another Ware2Go study on shipping behaviors during the pandemic, Millennial and Gen-Z care more about shipping speeds than previous generations. 

This has made offering overnight shipping a pivotal differentiator with consumers, putting merchants in a profitability conundrum. While offering this premium service helps stores stand out and boosts customer lifetime value (CLV), the cost is substantially more than standard and even 2-day delivery. 

Adding to the challenge, fewer shoppers today are willing to pay for deliveries to be overnighted as they were in the past. Jungle Scout’s Consumer Trends Repot Q2 2021 says 66% of online shoppers now expect free shipping for all orders. Almost 30% of consumers even expect online orders to routinely arrive the same or the next day. 

With free overnight shipping becoming the norm, merchants must keep costs as low as possible to protect their bottom line. Below are answers to common questions relating to overnight shipping and providing it economically.  

What is overnight shipping? 

Overnight delivery can be completed literally overnight, but the term refers more to a delivery option guaranteeing that shipments will be delivered by a certain time the following business day. Accordingly, it is typically the most expensive shipping option couriers offer. 

Overnight shipping is often used interchangeably with the terms next-day shipping, 1-day shipping and express delivery (next business day). Also, it may be required to remain compliant with Amazon Seller Fulfilled Prime (SFP) requirements. 

How does one day shipping work? 

Shipments for overnighted packages are booked during the day and transported throughout the night so delivery takes place the following day. Typically, the cutoff time for guaranteed overnight shipping is between 6-7 p.m. 

What does shipping guarantee mean?

A shipping guarantee is a service offered by merchants promising that orders will be delivered by a specified date and time. If items do not arrive by the guaranteed time, customers will receive money back or another form of compensation.

This level of service increases customer satisfaction and drives consumer demand, but on the flip side, the costs of not delivering as promised in terms of refunds and angry customers can get out of control quickly. 

As such, shops must ensure they have a fully optimized eCommerce shipping network in place before putting a shipping guarantee in place. 

How much does overnight shipping cost? 

The price of overnighting packages depends on multiple factors, such as the dimensional weight (DIM Weight) and actual weight of packages. The larger and heavier a package, the more expensive it will be to ship.  

Similarly, the further a package must travel to reach its destination, the more it will cost to be overnighted. 

How do I provide the lowest priced overnight shipping and fastest delivery? 

These eight strategies, which include reducing DIM Weight and switching to poly mailers, will reduce standard, 2-day and overnight shipping costs.

Additionally, substantial savings will come from utilizing a nationwide distributed network of warehouses, where inventory is stored in facilities close enough to customers to guarantee 2-day delivery. Shipping costs less when packages travel through fewer shipping zones. 

For U.S. domestic shipments, shipping zones span from Zone 1 to Zone 8. Zone 1 is the point of origin, and zones measure the distance an order travels. The higher the zone, the higher the price to ship. 

Strategically forward stocking inventory as close to end customers as possible is key to seeing the full advantage of a nationwide warehouse network.  

What is forward stocking inventory?

Forward stocking inventory is the process of strategically storing goods near customers in warehouses, also called forward stocking locations or field stocking locations (FSLs). Items can be distributed throughout the country from these facilities faster than if all inventory was stored in one centralized warehouse or shipped from a port city. 

Subsequently, costs are reduced because freight shipping to divide inventory across many warehouses is cheaper than shipping individual orders. Plus, delivery times are quicker, creating a better customer experience that leads to more repeat business and powerful word-of-mouth referrals. 

How does forward stocking inventory meet fast delivery expectations cost effectively?

Investing in a nationwide logistics and warehousing network that rivals Amazon is impossible for most eCommerce shops. This is where third-party logistics (3PL) companies come in. Providing local FSLs, 3PLs let sellers tap into similar economies of scale to provide affordable 1-2-day shipping.    

Faster, reliable shipping leads to higher conversion rates and more revenue. Looking at the bottom line, not employing a staff of warehouse management experts saves money. Further, sharing 3PL warehouses eliminates paying for unused space, and storing inventory strategically across the network eliminates breaking the bank on expensive express air service to meet overnight delivery promises. 

How can I offer overnight shipping to customers?

SMBs work with 3PLs that provide affordable, reliable expedited shipping options, including overnight shipping. Besides strategically storing inventory in their warehouses, these partners pack shipments and ship packages. 

Essentially, they take over the fulfillment process, allowing merchants to devote more time to growing their businesses instead of worrying about resolving damaged goods and long transport time issues. 

However, keep in mind that 3PLs are not always as flexible as fast growing omnichannel businesses would prefer. Due partly to their stricter long-term contracts, merchants often are locked into allotted storage space and volume of orders that can be fulfilled. As a result, their ability to pivot and support changing business models can be limited. 

Consequently, more eCommerce shops are partnering with technology-first fourth-party logistics (4PLs) providers, which combine the roles of strategic consultant, fulfillment director, operations manager, and IT provider into a single strategic partner.

 

4PLs negotiate the best service level agreements (SLAs) and rates with 3PLs across the country to create a seamless, efficient nationwide distributed warehouse network. Also, they integrate order management systems (OMS), warehouse management systems (WMS), and transportation management systems (TMS) to provide real-time visibility into operations, inventory levels, and service levels across these facilities.  

Ware2Go is a 4PL created by UPS to help businesses in all growth phases across many industries offer affordable 1-2-day shipping. 

To learn more about how Ware2Go can help you provide overnight shipping, please reach out to one of our shipping optimization experts.

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