Costs, Carriers, and China: Parcel Shipping in 2025 With Nate Skiver From LPF Spend Management - Ep. 54
In This Episode
With the world of shipping and logistics constantly changing, it can be hard to keep track of every trend. In this episode, Nate Skiver, founder of LPF Spend Management, catches listeners up on the world of parcel shipping in 2025—what’s changing, what will likely stay the same, and what you can do to optimize your parcel management strategy.
Carrier changes lead to more complex pricing
Right off the bat, Nate points out a major trend that businesses should be aware of: changes to carrier pricing structures. He explains, “FedEx and UPS continue to make pricing more complex. … That continues to be something that shippers have to really stay on top of.”
It’s a similar story with USPS. According to Nate, the Postal Service’s network changes have “created some uncertainty with pricing, particularly [for] lightweight packages.”
How to make the most of carrier partnerships
When choosing carriers, Nate recommends determining your requirements for cost, transit time, and delivery reliability. After analyzing how well your current carriers are meeting those targets, “See where the gaps are. … Look for opportunities to find the right partner or partners to help close those gaps.”
He also notes, “To get the best pricing that your volume commands, [negotiations] need to happen early in the year.”
The bottom line: prioritize parcel
Nate’s final advice is simple: “Prioritize parcel.”
“Parcel gets the short end of the stick within supply chain. Even though it ends up being … a very, very large expense budget line item, it just doesn't get the priority, perhaps—and it should. … Invest in people and partners.”
Links
Transcript
Lori Boyer 00:00
Welcome back to Unboxing Logistics. I'm your host, Lori Boyer of EasyPost, and you are in for a treat today. We are going to be talking on today's show with the great Nate Skiver, all about costs, carriers, the Chinese, I got like triple C's going on here for us to be talking about all of the latest trends coming into 2025 around these topics.
And I brought in one of the, the great educators, really a great person in the space here of logistics and supply chain, Nate Skiver. Can you introduce yourself a little bit to our audience who might not know you?
Nate Skiver 00:43
Absolutely. I appreciate the amazing introduction, Lori but my name is Nate Skiver. I'm founder of LPF Spend Management, which essentially means I'm an independent consultant.
I am a 20 plus year parcel nerd that about five years ago, decided to move into consulting after 17 years in retail. So I help you package shippers ship smarter and reduce cost. I also help package carriers, not UPS and FedEx. They don't need my help. Compete in the marketplace. So I've been doing that for the past five years.
And I've really valued the opportunity to work with so many different companies and, and help them optimize their, their parcel programs.
Lori Boyer 01:30
That's fantastic. Unboxing Logistics community, you're basically getting like free consulting care today. So, from the great Nate. So get ready buckle up. It's gonna be really fun. Before we get started, one of the things we've been doing that I have just absolutely loved this season is I've been asking my guests to share a person in the industry that they really admire or even a role in the industry that they really admire. This industry is so full of connections, and the importance of relationships is huge.
And I've really been interested to hear about who people admire and who have been great mentors. So Nate, do you have somebody you can share with us?
Nate Skiver 02:12
I do. And it's, I'll say mine isn't directly parcel necessarily, but you know, a lot of people will, will, will know this one, Rick Watson. Rick is a really dynamic, presence in the ecommerce industry you know, a veteran of that industry on, with several companies.
And he's been consulting on his own for a little bit longer than I have. And so early on in my consulting career, I started to follow Rick. You know, I've chatted with Rick and so really admire the work that he does, the candor that he has, he brings to all of his content or also does, has his own podcast.
So really value the work that Rick does.
Lori Boyer 03:05
Absolutely. That's amazing. And I just want to say I've really enjoyed as I've heard people share about mentors and examples that they've had in the industry. You know it's just really reminded me for all of you out there listening there are so many opportunities, if there's a job role you're interested in, if there's you know If you're wanting to pivot in your career a little bit kind of like Nate did in becoming a consultant, look for those people that you admire and reach out to them.
So often, if all you want to do is say, I'd love to have a conversation with you about how you're making this work, or, you know, do you have tips for me? So many people in this industry are just fantastic about that. So I love that. Thank you. Shout out to Rick. That's awesome.
Okay. Another cool thing we've been doing. You know, Nate, you know, I know, you can't go like even five steps in this industry without hearing about AI, hearing about tech. It's a big thing everyone's talking about everywhere. But when it comes to some things like ChatGPT it's often, you know, as we've used it more and more, it's easy to see sometimes, you know, it's so good at kind of starting a foundation.
It maybe gives you some good points, but sometimes it's a little bit missing. And sometimes it's right on. So, the best way to kind of fact check it is with our experts here. Make sure, you know, see what their take is on what it says. So, I have asked ChatGPT, what trends will we see between the big name carriers and the smaller kind of regional or more alternative carriers in the next five years?
What it anticipates seeing kind of the trends here. So I'm going to read these to you, Nate, and we'll get kind of your feedback, see if you think it's missing anything, see if you think it's on. So first, its number one thing it said was it believes we'll see collaboration between them over competition.
Okay, so you can think about that. Number two, we will see increased diversification by shippers. So increasing diversification. And three, adoption of tech and data sharing between the big carriers and the smaller carriers. Okay, so gut check reaction first. Collaboration over competition. Increased diversification.
That one seems like kind of pretty fairly is already happening. But also adoption of sharing of technology and data.
Nate Skiver 05:30
Wow. So the collaboration, if we're talking, if I understood this correctly, collaboration with each other?
Lori Boyer 05:38
Yes. It says major carriers will increasingly lean on regional players to meet their customers' expectations.
Nate Skiver 05:45
If that's within the five-year horizon, I think that is on the back end of that.
Lori Boyer 05:50
That's what I thought.
Nate Skiver 05:51
Because right now, it doesn't appear that way very much at all. There's really intense competition right now. Even if you, I mean, if you throw the USPS in there, they're a very large, you know, player in the industry. They are taking the approach of hey, we've we've got this. We're gonna do it on our own.
So which is a massive change from what they've done. So, so I don't, I don't know about that one. I think if it happens it's, it is at the end of that five years.
Lori Boyer 06:27
What about consolidation? Do you see consolidation at all? Like, you know, the purchasing of some of these smaller regional carriers by the big ones?
Nate Skiver 06:35
On a really small scale, possibly. I think that's what I would expect. Like, not necessarily a, just to make this up, you know, I'm not saying this would ever happen, FedEx acquiring OnTrac or something like that. I don't think that is what we see and we maybe can talk about a more, more organic consolidation of, you know, some providers not being in the market anymore, that I think is much more likely in the short term.
Lori Boyer 07:02
Yeah, I could see that. Okay, diversification by shippers.
Nate Skiver 07:06
That one I would agree with. It's, it's been a building trend and it's not a one size fits all. Not every shipper has to diversify or anything like that. But I think all of the things that go into that, you know, available options from just a delivery provider standpoint, technology.
And then, you know, inventory getting closer to the customer enables a lot of those things also, so I think that will continue, so I would agree with that one.
Lori Boyer 07:35
Okay, and then the last one, this is one that I was really hesitant on, that we would see more adoption of technology and data sharing between the large carriers and the small ones.
Again, I think I'm with you, like it feels very competitive right now, and everybody's protecting stuff, so it's hard to see, but.
Nate Skiver 07:54
Yeah, I'm not, I'm trying to think of a, a use case, not in a literal partnership as far as delivery services goes. I'm trying to think of how that might work. I can't think of anything right now, so I'm not sure exactly where that one's directed. But, chatGPT must think that it has great hopes that we're very collaborative and helpful in working together, more than I think we are.
Agreed. I mean, maybe that might be in, in those providers, regardless of who they are, their best interest, but I don't think it's, it's happening anytime soon.
Lori Boyer 08:32
Yeah, I agree.
Okay, so what would be your overall grade, A to F? What would you give it?
Nate Skiver 08:38
I don't know, maybe a C plus.
Lori Boyer 08:43
Yeah, I was thinking in the C range as well. Anything that you would say that it missed? That you would see as a trend coming down in the relationship there.
Nate Skiver 08:53
Of UPS and FedEx diversifying their businesses, where package delivery might still be the majority of revenue, but not what it is today.
So other types of services to where they aren't dependent upon delivery as much as they are, because that, I think, over time becomes more commoditized.
Lori Boyer 09:16
Okay. Okay. Do you think that they'll focus more on some of those, like, kind of niche markets? Or how will they handle those?
Nate Skiver 09:23
Somewhat or or adjacent, whether it's kind of market segments or capabilities that maybe they already offer, but expanding those.
I mean you know, UPS is focused on, on health care. So I just think kind of areas that are adjacent, maybe even current service offerings that they build out to to diversify their revenue a bit.
Lori Boyer 09:49
Okay, perfect. Love it. Okay, so what do you see kind of as the trends as we're going into 2025? What are sort of the most significant things that you anticipate for shippers?
And for the carriers as well. As we move into kind of an uncertain year, we've got, you know, political changes, and we've got global conflict and all kinds of potential disruptions. But what are, what are your predictions? What are your thoughts?
Nate Skiver 10:16
Yeah, I mean, I think a fair amount of some of the things that have happened in 24 will either continue or maybe evolve to an extent in 25.
I mean, one of the things is, even though the market, I guess just package volume, if you want to kind of size the market, isn't really growing or changing too significantly, there's a lot of change happening in the market with different providers either entering the market, trying to expand, gain a foothold.
FedEx continues, and UPS, continues to make pricing more complex. So that's, you know, just something that the pace of change on that front also is very, very difficult to keep up with. And so I think that along with the complexity of, that comes with all of the choices in the market. So it's a good thing, but it's also a bad thing.
I think that continues to be something that shippers have to really stay on top of. And stay on top of the market you know, understand where it's headed from a pricing standpoint and do their best to prepare for it. I think uncertain, I think you mentioned that word, there is uncertainty around this group of alternative carriers.
Some of them may not exist. Some of them may persist and hopefully survive and thrive. But it's really something, again, that a shipper has to investigate, explore, to really understand and take advantage of. Last two things, if that wasn't enough, I think for two other players in the market that one has had an impact for a while, the USPS.
They've been changing their network for quite a long time. So that's still in process. And they are being much more intentional with their strategy around their package services to, you know, I guess they've also really kind of taken hold of that volume of business perhaps at the expense of some of their partners.
And so that has created some uncertainty with pricing, particularly lightweight packages. That's not, we're not done with that. That's in process right now. And so I think particularly first half of the year is where you know that might show up more in the market. Last thing, Amazon. So Amazon Shipping been kind of hanging out there for a while not really at least publicly making much of an impact. From what I'm seeing and hearing they're being more intentional as far as go to market and in trying to win some volume. So we'll see if that actually surfaces.
Lori Boyer 13:18
Interesting, so one thing you mentioned were costs. And well, I I recently had on an episode. Dr Chris Caplice of MIT, and he shared that he believes that we're going to in the next year or so switch over to being kind of it's been sort of a shippers market in terms of, you know, carriers vying for business.
And he thinks we're going to see a little bit of a shift back to carriers kind of having the upper role. Do you agree with that? Disagree with that? And if you do agree or either way, you know, how do you feel like shippers should respond?
Nate Skiver 13:54
I don't know that there's going to be a dramatic shift, say, 180 degrees, I guess that's right. But a strong shippers market, or excuse me, carriers market, rather.
Lori Boyer 14:07
Yeah.
Nate Skiver 14:07
I mean, a few things have to happen. I think both, you know, volume growth in the market, it's really not there. And one of the few sources and you kind of mentioned, alluded to this a little bit in the opening is volume from Chinese retailers.
There's not much growth outside of that. And the only way that the market really kind of swings back the other way significantly is if capacity is taken out of the market, like significant amount. And I know that that Is part of the strategy from UPS and to an extent FedEx as well. They're kind of right sizing their networks. But I just don't see it happening that quickly to where now those carriers and presumably others are in a really strong position to start commanding much higher prices.
Lori Boyer 15:08
Yeah, so probably not, you're anticipating probably not 2025, maybe at some point, but we're still probably sticking in shippers market. In doing so, what do you recommend to get, you know, to really take advantage of that? So if we're still in a shippers market, do you recommend locking in good rates for a lengthy time?
Do you recommend the opposite, you know, trying to get your rates being shifting all the time. How do you recommend they best take advantage cost wise?
Nate Skiver 15:35
I mean, one thing, it's somewhat dependent upon how I mean, say in the last 12 to 18 months, what the approach has been for, you know, particular shipper. If they've been closely managing it and responding when things change either in the market or within their own business, you know, volume changes, things like that, then really it's, it's continuing to stay on top of you know, where, you know, if the volume or if the market is growing then they may start to actually need to look at it differently and potentially expect some rate increases. But if, if they haven't been negotiating, say frequently, or haven't bid their business in, you know, 18 months or longer, that is going to be my, my first recommendation, and that would be early in the year.
And, and that's just to make sure that you have the best pricing that you can obtain with the right providers that meet your needs. And while I don't expect, I guess, the, the shippers market just to fade away really, really quickly. It's not going to be here forever.
Lori Boyer 16:56
Right. It's always cyclical.
Nate Skiver 16:58
Exactly. So being able to get, you know, the, the best pricing that your volume commands really does need to happen, you know, early in the year. And then you can adjust thereafter.
Lori Boyer 17:13
How early, Nate? We're talking January, February, just Q1 is good enough?
Nate Skiver 17:17
I would, I would start as, as soon as you can.
Lori Boyer 17:21
Okay. Start now, people. Start now.
Nate Skiver 17:22
I mean, ideally, you know, you would have taken some time maybe in December to plan for January. And then, you know, get it kicked off. But that just happens to be one of the, the, you know projects, from prior experience and now consulting, that happens to get kind of pushed down the list if it doesn't get a start.
Lori Boyer 17:44
Peak season all of that, this is crazy. So let's say they haven't the you know, they forgot, they were busy.
They were killing it in December. They had so many, that's what we're gonna think, they were doing so good that they sort of forgot to plan. So do you recommend plan first and then you know, don't rush into it. How I guess what would be your strategy if they came to you and said Nate, help me, consult me.
Should I spend a few weeks planning, you know, out what I want to do and then go bid?
Nate Skiver 18:12
Short answer to some of the last part is yes. So, take, I mean, whatever time frame it takes you to really just assess the current state of your agreements, your rates, contracts. But then also just, if you know already, set some very clear objectives with with your program, be it both on cost and and service.
And since we're talking more about cost here is, is setting those objectives and then deciding how to build out the plan to source the right carriers to meet those objectives. So, so take at least whatever time you need, hopefully just maybe a few weeks at the most. And if, if not, of course, there are other partners who can help, be it consultants, if you have a parcel spend management solution or partner in place, that can help expedite the process because you have the data available. So, but don't skip that step. Just make sure you're very intentional with it and don't let it, you know, linger too long before you get into the actual say RFP.
Lori Boyer 19:28
Perfect. So a couple of things in there kind of came to mind for me.
So diversification, you mentioned at the, you know, beginning of the show that diversification of carriers might not be right for everyone. So I want you to kind of share when maybe you think it is right, or maybe on the flip side when is diversification maybe not best? And kind of walk us through maybe then rate shopping technology, those kind of things in terms of cost, what your recommendations are for shippers out there on that.
Nate Skiver 19:59
Diversification. I mean it it's something that I think, you know, I just mentioned related to an RFP specifically of setting objectives, but really just broadly with your overall parcel program is, is if you don't already have them set, you know, what cost targets you have or need to be. And also the service and transit time, delivery reliability, delivery speed.
Those should all be established. And then look at it and and see where the gaps are. If you're not meeting those objectives and can at least determine, you know. If you aren't meeting the objectives, then the current providers have to be contributing to that in some way. And so, that's where you can look for opportunities to find the right partner or partners to help close those gaps.
But it should be specific. It shouldn't just be. You know, diversifying isn't, I've been working with FedEx for 10 years and every once in a while, there's something that kind of pops up they can't handle. So I'm just going to throw a regional carrier in there and give them 1 percent of my volume, you know, done deal. Like, it's being more specific with what those objectives are.
And if you go through that exercise and determine FedEx is meeting all my needs, then you don't need to diversify. But if you never go through the assessment process, then you don't reach that answer. You just assume it's good enough.
Lori Boyer 21:41
Can you give an example maybe of when it would make sense to diversify? I don't know if it's a company or just even just generic.
Nate Skiver 21:49
One example might be if something changes with your volume profile. So a lot of the packages that you usually ship are not heavy, but heavier, two, three, four, five, 10 pounds. And there's a new product line that, you know, you release and all of a sudden you've got a lot of volume that's under a pound.
And so it's less than one pound. You're shipping packages that are in poly mailers that are 8 ounces that you haven't shipped before. And your partner is FedEx. Just, FedEx doesn't offer a service they used to, but they don't offer a service that has ounce based pricing that's competitive. And so that's where it's something that you really are very well incentivized to go source another carrier specifically just for that need, and that's on a cost basis. Whether it's USPS UPS mail Innovations, DHL eCommerce. There are options, and that would be a pretty clear cut example, I think of almost. It's not forced, but somewhat forced diversification.
Lori Boyer 23:06
Yeah, and I love that that point that kind of a change occurred. I love how you said that, because so often, you know, maybe you're expanding internationally, maybe you're, you know, there are all kinds of little trigger points to watch for.
You're opening up new DCs. You've got whatever it is may mean that shifts are required, or at least probably should be looked at. So let's talk a little bit about the Chinese then. So, we have been seeing, you know, massive influx from Temu and SHEIN and, you know, all of these kind of low cost goods flowing in.
There's been a little talk about, you know, you've talked about a little bit, expanding kind of the fulfillment capabilities here in the U.S. logistics. What, I guess, what are you seeing here? What do you feel like their entrance is meaning for everyone else in the industry here in the United States?
Nate Skiver 23:59
A lot has to do with whether, from a domestic standpoint, what impacts there will be, likely, from tariffs and/or just trade regulation changes on the import side.
And I don't think either or both of those are going to just completely, you know, kill the inbound volume from from China. But it might expedite or push more of that volume into domestic fulfillment for these companies. And I believe, could be wrong, but I believe SHEIN is ahead there. They've had fulfillment in the, in the U.S. For at least a year, probably two.
And this all comes down to the volume. The volume isn't going away, whether it's shipped domestically in the U.S. or inbound from China or both. And I think that's going to continue to grow. And to an extent, I mean, it's, it's really kind of cropping up the U.S. Parcel market at this point. And it's, it's having impacts kind of across different groups, but just from a carrier side, alternative carriers, regionals, final mile carriers have really benefited from this volume.
There are some actually built their service offering almost entirely around it. There are others who, you know, have taken on a large portion of the volume and presumably have leveraged that to, you know, provide some cost unit cost benefits because of the delivery density. So even though it's low revenue, because these companies, Temu and others, command very, very low rates, it can enable, you know, the delivery density a carrier gets allows them then to maybe offer competitive pricing to other retailers, you know, still with margin. And they can take advantage of those kind of economies of scale. Then we've seen, you know, publicly at least because it comes up on earnings calls for FedEx and UPS. FedEx has at least stated they don't have, I don't know what the verbiage was they used, a significant say commitment or investment in that volume.
Lori Boyer 26:29
Okay.
Nate Skiver 26:30
UPS however I think I would still say that they do, they did have more and it kind of blew up in their face after Q2 earnings, because it was one of the reasons why the earnings weren't as strong.
I think they've since made some, some changes. And so they've pulled back from that or kind of rationalized that a little bit and aren't as deep into that volume at such a low price as they were, say, six months ago.
Lori Boyer 27:04
So Nate, for our carrier audience who's watching what, what are your recommendations for you know, working with Temu, SHEIN, these other, you know, really low rate organizations? Is it a risk? Is it, I know that, you know, de minimis is a big debate right now going on in Congress and import fees. Trying to kind of slow some of that down coming from China. I guess, yeah. So what is your recommendation to carriers? Work with them? Is it too risky? There's a lot of volume, but just what would you say?
Nate Skiver 27:45
It's very situational. Just, I'll just kind of practice saying that so I can't make a blanket recommendation.
Lori Boyer 27:51
You're giving us the political answer, I love it. We gotta do it.
Nate Skiver 27:56
But because they, I'll just say, you know, carriers know their own cost structures better than, better than I do. And so this is pretty obvious, but of not being, you know, too dependent on that volume for a significant amount of percentage, I guess, of the company revenue. That, I mean, that's what I would say, because it's actually, while there's risk on the regulatory side, there's actually just as much risk or probably even more of just, from what I've been told of how some of these companies manage their volume with these providers and will flip volume from one carrier to another to save a pretty small amount, but to save on cost.
Lori Boyer 28:54
Yes. When your costs are so low, I mean, every penny is making a huge difference.
Nate Skiver 28:59
Yes. And so that's the thing where it, it's difficult to rely on that volume and revenue indefinitely, because it may change very quickly. So, I would say, you know, test and learn. So, kind of, you know, take on a certain part of it that wouldn't cause you know, issues if you lost it two months from now. And see if, if it's worth, you know, building out in areas that actually, you know, benefit your network.
Lori Boyer 29:36
Fantastic. Okay, Nate, we are already, I don't even know how, we're already at time. You have so much that you have, I just feel like I could stay here all day and learn from you. But any other final advice? We've talked costs and carriers, you know, diversification. Any final recommendation for shippers specifically, first, going into 2025 final thoughts that you recommend that they make sure they lock down great advice on, you know, getting your RFP going early on, making sure you're looking for those trigger points of change.
If anything happens, you know, to know if you need to diversify. Any other final thoughts that you have?
Nate Skiver 30:19
It's kind of a theme with some of the things we've talked about, but prioritize parcel. I'm, I'm a bit you know, biased here, but parcel kind of gets the short end of the stick within supply chain. And even though it's a, it ends up being, particularly for retailers, a very, very large, you know, expense budget line item, it, it just doesn't get the priority, perhaps, and it should.
And so I would just encourage shippers to prioritize parcel. Invest in people and partners. And so from a partner standpoint, whether that is on delivery partners shipping technology and multi-carrier shipping technology or parcel spend management, those partners that should be a very clear and intentional investment. And then people. There, there's not a lot of people who really have a lot of parcel expertise or experience, but it should be something that many shippers, I think intentionally can invest in their people. To actually devote, be it a person, start with one to, to parcel. I think I think the payback would be pretty quick.
Lori Boyer 31:40
Okay. I love that you said that in multiple reasons. There's multiple things there that you said that just related to me. First, parcel. I feel like you know, parcel has boomed recently in terms of ecommerce exploding, but it has not gotten the attention, and it has, we have not yet seen that investment from our shippers in in recognizing that. So I think you are spot on on that. You and I are so in agreement on that. And I love how you said, around people, start with one. I think so often people think it's like, okay, I'm gonna dive in and do this giant thing. Just start small and grow from there.
So that, I mean that's brilliant. Love that Nate. Thank you so much for being here today. So appreciate it. I know our audience is going to want to connect with you, reach out to you. What is the best way to connect with you? And obviously a great person if you want help is Nate Skiver. So where can people reach out and connect with you?
Nate Skiver 32:41
Well, one way, you mentioned it early on, I think, is, is LinkedIn.
So follow me on LinkedIn, DM me on LinkedIn that's, you know, I'm very, very active there. Post content every day. Also.
Lori Boyer 32:54
He'll get you thinking there. He'll get you thinking.
Nate Skiver 32:57
That's my, that's part of the reason I do it.
Lori Boyer 32:59
Yeah.
Nate Skiver 33:00
To really create some engagement. But then also, email nate@lpfspendmanagement.com. And there's more information about my consulting services at lpfspendmanagement.com.
Lori Boyer 33:12
Fantastic. Well, for all of you in the audience, wish you the best 2025. It's going to be an awesome year. Crazy. This industry is always crazy though. So expect the unexpected.
Nate, thank you so much.
Nate Skiver 33:26
Thank you, Lori.
Lori Boyer 33:27
And we'll see you next time.