Logistics Strategy: Zone Skipping
by Simon Unicomb, 16 March 2022
Did you know that 58% of people would stop buying from a brand after 1-3 shipping delays or disruptions? These days, customers have high standards, and expect their deliveries to arrive in record time.
But how can you increase parcel shipping speeds without increasing the overall cost?
Zone skipping doesn’t just allow businesses to ship their products at an increased speed — it actually helps them cut down on expenses, especially in long-haul and international shipments.
Instead of paying hefty national zone crossing fees, a business can use zone skipping to pay local freight fees. The bonus? Their parcels arrive quicker and with lower rates of damage.
What is Zone Skipping?
Zone skipping is a logistics strategy in which parcel distributions are consolidated into full truckloads (or occasionally less than truckload, LTL, loads). The parcels are then delivered to a parcel carrier hub close to the final destination.
Carriers use geographic areas called “shipping zones” to calculate the total distance of a shipment. They also use these zones to calculate the total shipment costs. Consolidating parcels into an FTL or LTL allows businesses to introduce their shipments directly into the “last mile of delivery," or local area. Rather than send each parcel right to its final destination, brands send their FTL or LTL shipments to a local sorting facility. From there, they hire local carriers to deliver individual parcels or packages.
Whenever a shipment crosses into a new zone, businesses must pay a freight fee. Zone skipping allows businesses to circumvent these zone crossing fees by hiring local carriers. That way, businesses are able to pay less expensive local freight fees.
The best part of zone skipping is saving money. After all, the technique often amounts to lower shipping costs. Plus, it can create better prices for customers. But how does it work?
Let’s look at an example:
If you are sending 4,000 packages from Melbourne to Sydney at $10 each, the total shipping costs would amount to $40,000.
However, if you hired a truck to transport 4,000 parcels from Melbourne to a local facility near Sydney, you would pay a much lower flat rate; for example, $15,000.
Next, you would pay the costs of the local parcel delivery from the facility in New York to the final customer. If that price amounted to $5 per parcel, then your total shipping costs would be only $35,000.
In the end, you would save $5,000 on that shipment!
The best part is that your parcels would arrive at their final destination much sooner! The reason? The parcels would spend less time in processing facilities and more time on the road.
Tips For Zone Skipping The Right Way
While those savings might sound wonderful, businesses must still be careful to calculate shipment costs on a case-to-case basis. This will determine whether zone skipping or traditional shipping methods would be less expensive.
In the case of a shorter delivery, some businesses will find that paying shipment expenses by the truckful can actually increase costs. But most importantly, if a business is shipping a smaller number of packages, contracting an entire truck to deliver an LTL shipment is only sometimes worth it.
We can illustrate this with another example:
Imagine that your business is going to make that same shipment from Melbourne to Sydney at the same rates, only this time with a much smaller number of parcels. Let’s say that this time you are only shipping 2,000 packages.
Using the traditional shipping method at a price of $10 per parcel, you would pay a total of $20,000.
However, using zone skipping, you would still have to pay $15,000 for the truck contract in addition to $10,000 for the local delivery fees. In other words, your final price would be a grand total of $25,000, and you would lose $5,000 in the process.
To be certain that this doesn’t happen to you, it is important to do the maths before you choose a logistics technique for a particular shipment. This will help you maximise the amount of money you save throughout the whole process.
A Hack for Small Businesses
To take advantage of zone skipping benefits, you must maximise the number of parcels you send per shipment. Freight consolidation is a particularly useful way to make this happen.
Freight consolidation is a shipping strategy in which multiple parcels with nearby destinations are packaged together in a single truck.
If this seems like a technique that’s reserved for only the biggest businesses, think again.
It is true that some brands consolidate their shipments into a full truckload independently. However, often multiple brands will collaborate to consolidate their parcels into the same truck.
That way, these businesses can reduce their transport costs by shipping to the same destination together.
These kinds of collaborative consolidations allow smaller brands to take advantage of the benefits of zone skipping, even though they often can’t ship the same sheer number of parcels as their larger competitors do.
Is Zone Skipping Right For Your Business?
Zone skipping can not only help your business cut down on shipping costs; it can also significantly speed up delivery time.
However, you must evaluate the benefits of these shipments on a case-by-case basis.
If you want to be 100% sure that you have the best logistics and shipping plan possible, reach out to us and learn more about our TransVirtual features.