Parcel delivery is a recurring business expense, but the lowest advertised rate doesn’t always deliver the best value.
In fact, choosing a budget carrier can easily backfire: delays, surcharges, and damaged goods can turn what appears to be a saving into greater operational costs.
To compare parcel delivery costs more effectively, procurement teams need to evaluate price and service using accurate shipment data. To secure the best rates (and keep delivery standards high), here’s a step-by-step guide to benchmarking your parcel delivery spend.
Establish your current parcel delivery baseline
Raw parcel data is the key to calculating your average cost per shipment. Build a clear picture of your existing delivery spend by gathering this information.
But don’t just look at the top line – segment your profile by separating domestic from international routes, and standard from express deliveries. It will help to identify your most common:
- Parcel weights
- Dimensions
- Destinations
You’ll also have to think of things like hidden costs, fuel surcharges, failed-delivery fees, insurance, and collection charges. Ultimately, the only way businesses can confidently judge if alternative rates offer genuine savings is by gathering their own internal data.
Compare like-for-like delivery services
Never make the mistake of comparing a basic economy service with a fully tracked express option, as the price difference won’t reflect true value.
If you’re evaluating alternative couriers, compare services offering similar delivery times and geographic coverage by drilling down into the specifics. For example, are tracking, baseline insurance, and proof of delivery included in the base rate or billed as extras?
You must also account for dimensional weight pricing and location-based surcharges. To create a reliable benchmark, businesses need to compare parcel delivery costs across equivalent service levels.
Measure service performance alongside price
Cost is only half the equation when benchmarking parcel delivery spend. Procurement teams must also keep a close eye on carrier reliability by tracking key service metrics consistently. How do you gauge everyday efficiency?
By monitoring the on-time delivery rate and the failed-delivery rate. You should also measure the damage or loss rate, customer complaints, and claims resolution time to assess the true impact on your operations.
Remember, cheaper isn’t always better. A slightly higher delivery rate may provide better overall value if it keeps customer complaints and product replacements to a minimum.
Calculate the total cost of delivery
The headline shipping price represents only one part of the true delivery cost. Businesses (and procurement teams, more specifically) should also account for:
- Packaging materials
- Warehouse labour
- Returns processing
- Redelivery attempts
- Returns processing
For example, are you seeing more delayed or damaged parcels? Instances like these can lead to additional expenses through refunds, replacement products, and, sometimes, irreversible reputational damage.
When indirect costs begin to outweigh the savings offered by a cheaper service, it’s time to look elsewhere. It’s because of this that procurement teams should distinguish between the lowest quoted rate and the lowest total cost.
A bargain carrier that regularly damages goods or misses deadlines will cost your business more in the long run.
Review carriers
Reassess carrier rates quarterly or every six months, but avoid switching providers based on a single low quote.
Instead, use your historical shipment data as leverage during carrier negotiations (this way, rather than asking for a generic discount, you can make a targeted proposition).
If you notice a good alternative, why not test their services with a limited number of parcels first? For the sake of operational resilience, it’s always wise to keep these backup carrier options in the event of sudden supply chain disruptions.
Benchmark for value (not just price)
Benchmarking means balancing cost with operational reliability and the end-customer experience. To achieve this, procurement teams must base their evaluations on real, historical shipment data (not by relying on generic best-case scenarios).
Make regular, data-driven comparisons, and your business will be able to continually optimise its logistics spend without compromising essential delivery standards.