Parcel Forum takeaways: Tech provides better odds in complex shipping game

At this fall’s Parcel Forum conference, speakers highlighted the growing need for technology that supports omnichannel e-commerce parcel shipping as shipping becomes increasingly complex.

The largest carriers have long had a stranglehold on shipping, effectively using rules and tiering systems to shape and constrain the decisions made by third-party logistics providers and merchants. Now, these carriers are changing surcharges and fees more frequently than in the past, increasing complexity for shippers.

We see substantial opportunity for supply chain technology companies to help shippers with solutions that optimize shipping strategies in a tilted game. We profile several innovative companies that address shippers’ need for technologies that help them minimize costs and improve service. Many of these companies leverage AI and machine learning.

Keynote speakers highlight tech’s transformative impact

We recently attended Parcel Forum, a 23-year-old conference focused on small-shipment supply chains. The conference took place over three days and included nine networking events and over 50 sessions and workshops, and it sold out with over 125 exhibitors filling the hall at the Renaissance convention center just outside Chicago. The sessions and workshops were in-depth and insightful, designed to educate professionals in the small-package supply chain industry, and featured industry leaders.

Amazon Shipping’s director of business development, Teresa Uthurralt, and Thomas Duke, director of advisory services and strategic partnerships at Amazon partner Green Mountain, marked the opening of the exhibit hall with a keynote talk. Green Mountain is an advisory services company specializing in parcel logistics spend management solutions. Uthurralt’s and Duke’s comments about the growing need for technology that supports omnichannel e-commerce parcel shipping encapsulated our primary takeaway from the conference: The emergence of supply-chain technologies that predict and react in real time by using agentic and generative AI is transforming legacy workflows and processes.

Duke spoke about how his business is evolving and how shipping is becoming increasingly complex. Traditionally, organizations like Green Mountain have used a service-based approach to optimize shipping strategies for businesses to maximize profitability while delivering on promises and providing business support to end customers. Now, the traditional service model is no longer independently sufficient. Providers must leverage technology to be effective, and Duke explained how Green Mountain leverages its own technology internally. Uthurralt spoke about the technologies Amazon Shipping looks for in partners and emphasized that the most important technologies will be those that enable users to strategize optimally amidst complexity.

Shippers must play by carriers’ increasingly complex and fluid rules

The largest carriers, such as FedEx, UPS, USPS, DHL and Amazon have long had a stranglehold on shipping. They effectively use rules and tiering systems to shape and constrain the decisions made by third-party logistics providers and merchants. Further, our conversations at the conference indicated carriers are changing surcharges and fees more frequently than in the past, increasing complexity for shippers.

The largest carriers have long had a stranglehold on shipping, effectively using rules and tiering systems to shape and constrain the decisions made by third-party logistics providers and merchants.

Here are some examples of how the carriers limit shippers’ options broadly:

• Carriers often require shippers to ship minimum parcel volumes to qualify for discounts. These discounts are typically applied in a tiered system where higher parcel volumes translate into higher discounts. Falling short can result in the loss of negotiated rates.
• Carrier contracts with shippers often obligate shippers to increase shipping volumes by specified percentages annually. If shippers fall short of those targets, carriers can claw back discounts or apply surcharges.
• Carriers can discount shipping rates based on total spend across carrier services. Carriers use this to drive up usage of their premium, higher-margin services instead of their cheaper, lower-margin services.
• Carriers can use characteristics of shippers’ usage, such as package size or destination, as a pretext for arbitrarily applying surcharges or pushing them into a less favorable pricing tier.
• Carriers require shippers to abide by scan and label rules and can apply surcharges if they don’t.
• Carriers reserve the right to re-weigh and re-measure parcels and apply surcharges if declared data is inaccurate.

Carriers often assemble these limits in branded offerings based on shipper category. FedEx Advantage and UPS Connect are designed for small businesses with lower parcel volumes. These offerings impose relatively few rules but also lack the pricing and discount benefits of other tiers. USPS Commercial Plus is designed for high-volume shippers and provides USPS’s most favorable rates. DHL Preferred is designed for international shippers and requires compliance with customs data requirements. Amazon’s Seller Fulfilled Prime offering appeals to merchants willing to pay more in exchange for the delivery speed and reliability provided by Amazon network shippers, which commit to strict standards for on-time shipping, on-time delivery, valid tracking, and cancellation.

Third-party logistics providers (3PLs) face additional challenges in dealing with carriers. For example, carriers’ contracts with 3PLs commonly include a master service agreement and subaccounts for 3PLs’ merchant customers. Carriers use the subaccount mechanism to limit 3PLs’ ability to pool their customers’ parcel volumes, making it harder for them to achieve their discount tiers or volume incentives. Another example is that carriers can cap the amount 3PLs can charge their shipping customers above 3PLs’ negotiated carrier rates, reducing 3PLs’ options for generating profit in an already low-margin business. Further, carriers sometimes require 3PLs to allow the carrier to own 3PL client merchant relationships directly, which impedes 3PLs’ ability to manage their business.

Technology can help level the playing field

Parcel logistics operates on the thinnest of margins, so any tool that can optimize execution or generate additional leverage is highly prized. In this context, technologies that use AI offer substantial promise – if shippers can overcome organizational and cultural inertia and embrace those technologies.

Technologies that use AI offer substantial promise – if shippers can overcome organizational and cultural inertia and embrace those technologies.

While nearly all industry stakeholders have large data lakes, executives are hesitant to invest in technology that could help them use that data to develop cost and process optimization strategies. One technology provider we talked with at the conference described the resistance it faces in helping customers implement technology and artificial intelligence. It finds that shippers often prefer to stick to what has historically worked. As service-oriented organizations, they tend to be reluctant to embrace technology solutions that aren’t coupled with some level of consultation.

But shipping executives have begun to shift their thinking on AI when it comes to cost savings and reducing overhead. Many shippers realize they risk falling behind because they are unsure of how to incorporate AI and machine learning into their workstreams. As a result, we see substantial opportunity for supply chain technology companies to help shippers with solutions that enable them to optimize strategy in a tilted game.

In particular, we think winning supply-chain software companies will be those that offer services alongside AI-driven automation, at least in the early phases of adoption. Further, with the push for automation across manufacturing and warehouses, we think supply-chain software companies that seamlessly integrate human workflows with robotic workflows will be well-positioned to add significant value. Below, we profile several innovative companies we spoke with at the conference that address shippers’ need for technologies that help them optimize cost and service. Many of these companies leverage AI and machine learning to enhance 3PLs’ and merchants’ ability to see what is happening in their shipping operations and make and execute optimal shipping decisions.

Technology to empower shippers

Loop helps enterprise shippers manage transportation costs, improve compliance and optimize carrier performance across all modes. It ingests unstructured data like PDFs, emails and electronic data interchange files from various sources and standardizes, contextualizes and allocates costs automatically to generate real-time insights. Combining machine learning engineers and supply chain experts, Loop assists organizations launch full freight audit programs, achieving substantial return on investment, and it provides digital twins of clients’ transportation networks. Loop is based in San Francisco and is backed by JP Morgan, Index Ventures, Founders Fund, 8VC and Susa Ventures.

Onomatic is a cloud-native warehouse automation orchestration platform that connects clients’ equipment, regardless of vendor, into a seamless system. It bridges legacy hardware with modern workflows, enabling real-time control across conveyors, robots, pick walls and other warehouse components. With out-of-the-box integrations and workflows, Onomatic eliminates costly custom builds and adapts to evolving needs. It can be thought of as a universal translator for warehouse automation, turning fragmented systems into an interoperable, unified, efficient ecosystem. This reduces waste and improves processes. The platform can simulate new strategies without the need to shut down operations. Onomatic is based in Montreal and is a bootstrapped company.

Paccurate is a highly differentiated smart cartonization engine. Cartonization is the process of determining the number and size of boxes to be used for a shipment. Optimized cartonization helps shippers pack more efficiently and ship less air. Paccurate’s algorithms optimize packaging for cost, not just volume, by factoring in negotiated rate cards, material usage and labor. Paccurate enables businesses to simulate millions of packing scenarios, monitor packing performance, and reduce waste. Paccurate is based in New York and backed by High Alpha, Grand Ventures, Hyde Park Angels, Las Olas Venture Capital, Royal Street Ventures, SpringTime Ventures, FirstMile Ventures, Cannell Capital and Tech Square Ventures.

Sendflex is a next-generation parcel transportation management system (TMS) for enterprise shippers. Sendflex helps businesses reduce shipping costs and improve delivery performance.  Its no-code platform provides fast rate quoting (over 20,000 rates per second), smart cartonization, and real-time carrier optimization. Its platform enables users to simulate what-if scenarios, automate fulfillment workflows, and monitor performance across carriers and channels. CEO Bob Malley has a strong reputation in the industry, having founded Tracer and Pierbridge prior to founding Sendflex. Pierbridge was widely considered the gold standard for TMS prior to its sale to WiseTech Global. At the conference, management demonstrated Sendflex’s rating engine with a scenario where it identified a shipping alternative through a regional carrier that would fully satisfy a client’s needs and cost less than a base-case shipping option. This happened in milliseconds and without needing to connect to carrier application programming interfaces to retrieve rates. Sendflex is based in Northborough, Massachusetts, and is a bootstrapped company.

ShipperHQ helps e-commerce merchants improve the shipping options step for online purchases. Merchants connect ShipperHQ to their e-commerce platforms and then can use ShipperHQ to customize rates, delivery options and estimated shipping and delivery dates based on product, location and carrier data. ShipperHQ handles complex product catalogs and supports more than 50 carriers, dimensional packing, multi-origin shipping, and less-than-truckload freight. It integrates with e-commerce platforms, including Shopify, Magento and BigCommerce and helps merchants reduce cart abandonment, improve margin, and scale globally. ShipperHQ is based in Austin, Texas, and is a bootstrapped company.

Sifted is a logistics intelligence platform that helps parcel shippers optimize costs. It continuously monitors shipping spend, surcharges and performance across carriers and uses this information to identify savings opportunities. It offers scenario modeling, automated accounting and predictive analytics. Sifted effectively replaces services previously provided by consultants. Sifted is based in Overland Park, Kansas, and is backed by Summit Equity.

Transportation Insight helps businesses optimize transportation for parcel, truckload, less-than-truckload, and drayage shipping. With proprietary tech like Beon Insight and Beon Commerce, it provides clients with real-time visibility into shipping operations, strategic analysis and cost-saving execution. Functions range from contract optimization to freight bill auditing. Transportation Insights acts as an extension of its clients’ teams to help them make better shipping decisions. Transportation Insight is based in Hickory, North Carolina, and is a bootstrapped company.

Two Boxes provides returns processing software for brands and 3PLs. It digitizes standard operating procedures, speeds warehouse workflows and captures granular insights on returns. Functions include fraud detection and restock prediction. Two Boxes helps its clients get inventory back faster, improve customer service and monetize returns. Two Boxes is based in Remote, Oregon, and is backed by Peterson Ventures, Assembly Ventures, Matchstick Ventures, Range Ventures, Service Provider Capital and Vinyl Capital.

Tech improves the odds for shippers in small-shipment supply chain

As carriers maintain their dominance of the shipping ecosystem and increase the complexity and pace of change in their offerings, we see substantial opportunity for supply-chain software companies that empower merchants and shippers with AI and other capabilities that cut through this complexity and quickly respond to changes. Based on the robust offerings from the supply chain software companies we profiled above, it appears the market is creating substantial value for their clients and their investors.