Reducing Last-Mile Costs through Regional Placement: The Power of Zone Skipping

April 29, 2024

what is zone skipping

In the competitive landscape of e-commerce logistics, businesses continually seek innovative strategies to reduce delivery times and costs, especially in the last-mile segment of the supply chain. One such strategy that has gained significant attention for its efficiency and cost-effectiveness is “zone skipping.” 

Zone skipping is a logistical approach that, when implemented correctly, can lead to substantial reductions in shipping costs and improvements in delivery speed. This strategy involves bypassing certain carrier zones to consolidate shipments and reduce the number of freight touches. By understanding and implementing zone skipping, e-commerce businesses can enhance their distribution models, leading to more satisfied customers and potentially lower operational costs. In this article, we will delve into what zone skipping entails, its benefits, how it works, and its importance in the e-commerce realm, providing a comprehensive guide on how to utilise this strategy to achieve logistical success effectively.

Table Of Contents
  1. What Is Zone Skipping?
  2. How Does Zone Skipping Work?
  3. What Are the Benefits of Zone Skipping?
  4. Critical Elements For Successful Zone Skipping
  5. Why Is Zone Skipping Important in E-Commerce?
  6. Examples of Zone Skipping
  7. Conclusion
  8. FAQs About Zone Skipping

What Is Zone Skipping?

Zone skipping is a logistics strategy used primarily in distribution and shipping processes where an intermediary step is eliminated in the delivery network. This method involves consolidating shipments destined for a similar geographic area and then shipping them directly to a more proximate sorting facility or delivery hub, skipping several carrier zones in the process. Instead of shipping individual parcels through the standard multi-zone carrier systems, businesses send larger consolidated shipments to a single point closer to the destination area, from where they are distributed locally.

This approach is particularly advantageous for businesses with high shipping volumes spread across various locations. By consolidating shipments and bypassing intermediary shipping zones, companies can significantly reduce the number of touches, handling, and the distance parcels travel individually, leading to reduced shipping costs and shorter delivery times. Zone skipping effectively shifts the focus from numerous small, multi-zone shipments to fewer, larger shipments that travel most of their journey as a bulk move, only breaking down into smaller components near their final destinations. This strategy is highly beneficial in reducing complexity, minimising potential damage or loss during transit, and optimising logistics operations to better meet customer delivery expectations.

How Does Zone Skipping Work?

Zone skipping operates by aggregating shipments that are destined for the same or nearby destinations into a single larger shipment. This process allows businesses to bypass several intermediary shipping zones, reducing the transit time and costs associated with multi-zone shipping. Here’s a step-by-step breakdown of how zone skipping typically works:

1. Consolidation

Companies collect individual orders and consolidate them into larger shipments based on their final delivery zones. This consolidation usually occurs at a central warehouse or distribution centre.

2. Transportation to a Closer Hub

Instead of sending these orders individually through a carrier’s standard multi-zone system, the consolidated shipments are transported directly to a hub or sorting facility closer to the customers’ locations. This transportation often involves less-than-truckload (LTL) or full-truckload (FTL) shipping to a hub within or near the destination zone.

3. Local Distribution

Once the consolidated shipment reaches the regional hub, it is broken down into individual orders. These orders are then distributed through local carriers or last-mile delivery services, which complete the delivery to the final customer.

4. Reduced Touch Points

By skipping zones, the shipment undergoes fewer touchpoints, reducing the risk of damage and handling errors. Fewer touch points also mean reduced labour and handling costs, contributing further to cost savings.

5. Faster Delivery Times

As the bulk of the transportation is done via direct routes to regional hubs, the overall delivery time from order placement to customer receipt is significantly decreased. This efficiency is particularly valuable in competitive e-commerce markets where delivery speed can be a critical factor in customer satisfaction.

What Are the Benefits of Zone Skipping?

Zone skipping offers a multitude of benefits for businesses looking to optimise their logistics and distribution strategies. Here are some of the key advantages:

1. Reduced Shipping Costs

One of the most significant benefits of zone skipping is the reduction in shipping costs. By bypassing multiple carrier zones, businesses can avoid the costs associated with each zone’s handling and processing fees. Consolidating shipments into fewer, larger batches also maximises the utilisation of transportation resources, such as filling trucks, which lowers the per-unit shipping cost.

2. Enhanced Speed of Delivery

Zone skipping can significantly shorten delivery times. Since shipments are sent directly to a hub near the destination, the transit time within the carrier’s network is reduced. Faster delivery times improve customer satisfaction, a critical factor in the competitive e-commerce industry.

3. Decreased Risk of Damage

Fewer touchpoints during transit mean there is less handling of individual packages, reducing the likelihood of damage. This is particularly important for fragile or high-value items that are susceptible to handling risks.

4. Scalability and Flexibility

For businesses experiencing growth or with fluctuating demand, zone skipping offers scalability and flexibility. It allows companies to adjust their logistics operations easily to handle increased volumes without significant disruptions or cost increases.

5. Environmental Benefits

By optimising shipment routes and reducing the number of vehicles required to transport goods, zone skipping can contribute to lower carbon emissions. This not only supports sustainability initiatives but also resonates with environmentally conscious consumers.

6. Improved Inventory Management

With zone skipping, companies can better manage inventory by distributing products regionally based on demand forecasts. This localised approach to inventory can help prevent overstocking or stockouts, optimising inventory levels and reducing storage costs.

Critical Elements For Successful Zone Skipping

To successfully implement zone skipping in your logistics strategy, several key elements must be carefully managed to ensure optimal results and efficiency. Here’s what businesses need to consider:

1. Accurate Demand Forecasting

Effective zone skipping starts with precise demand forecasting. Understanding where your customers are located and anticipating demand patterns helps in planning how to consolidate shipments best and select the most strategic regional hubs.

2. Robust Logistics Infrastructure

It is essential to have a robust logistics infrastructure, including partnerships with reliable transportation providers and access to strategically located distribution centres. This infrastructure must be capable of handling large consolidated shipments and efficiently breaking them down for local distribution.

3. Advanced Technology Systems

Implementing advanced technology systems for inventory and shipment tracking is crucial. These systems should provide real-time data on inventory levels, order status, and shipment tracking to ensure that the entire process, from consolidation to local delivery, is seamless and transparent.

4. Effective Partnerships with Carriers

Strong relationships with a network of carriers, especially those specialising in regional and last-mile delivery, are vital. These partnerships ensure that once shipments are consolidated and reach the regional hub, they can be quickly and reliably distributed to the final customers.

5. Clear Communication Channels

Clear and effective communication between all parties involved—your business, the fulfilment centres, and the transportation providers—is crucial. Regular updates and transparent communication help preempt and solve potential issues during the consolidation and distribution phases.

6. Comprehensive Training for Staff

Ensure that all staff involved in the logistics and distribution process are well-trained in the new systems and processes involved in zone skipping. Adequate training reduces errors and improves operational efficiency.

7. Continuous Improvement Process

Finally, a mindset of continuous improvement should be adopted to refine zone-skipping strategies over time. Regularly review performance data, gather feedback from partners and customers, and look for ways to improve efficiency and reduce costs further.

Why Is Zone Skipping Important in E-Commerce?

Zone skipping has become increasingly important in the e-commerce sector for several compelling reasons. As e-commerce continues to grow, with more consumers expecting faster and cheaper delivery, businesses need innovative solutions to meet these demands without compromising profitability. Here’s why zone skipping is pivotal in e-Commerce:

1. Cost Efficiency

E-commerce operates on thin margins, and shipping costs can significantly impact profitability. Zone skipping reduces the number of zones a package passes through, thereby lowering the per-package cost charged by carriers based on distance and handling. This cost-saving can be critical in competitive markets where price plays a significant role in consumer choices.

2. Faster Delivery Times

Consumers today expect quick deliveries, often as fast as same-day or next-day delivery. Zone skipping minimises the time packages spend in transit by reducing the distance they travel through the carrier’s network, thus enabling faster delivery times. This enhanced delivery capability can be a significant differentiator for e-commerce businesses.

3. Enhanced Customer Satisfaction

By providing faster deliveries and potentially lower shipping costs, businesses can significantly enhance customer satisfaction and loyalty. Happy customers are more likely to return and recommend the e-commerce store to others, driving both repeat business and new customer acquisition.

4. Scalability

As e-commerce businesses grow, they face increased order volumes and geographic spread of customers. Zone skipping offers a scalable solution that can grow with the company, handling increased volumes without proportionately increasing complexity or costs.

5. Reduced Carbon Footprint

Zone skipping often results in fewer trucks on the road and shorter travel distances, contributing to lower carbon emissions. This not only helps e-commerce businesses meet their sustainability goals but also appeals to environmentally conscious consumers.

6. Improved Inventory Management

By using regional warehouses or distribution centres, businesses can better manage inventory based on regional demand patterns. This can lead to more efficient stock use, reduced overstock, and decreased instances of stockouts, all of which contribute to a more robust bottom line.

Examples of Zone Skipping

To better understand the practical application of zone skipping, let’s explore a few examples that illustrate how different types of businesses implement this strategy effectively:

Large Online Retailer

A national online retailer can utilise zone skipping to streamline order management. By consolidating West Coast orders in one shipment from their central Midwest warehouse to a California hub, they can distribute orders locally, reducing delivery times and shipping costs.

Subscription Box Service

Companies offering subscription boxes can use zone skipping to synchronise delivery schedules. Bulk shipments to regional distribution centres near major subscriber bases ensure timely deliveries regardless of location disparities.

Fashion e-Commerce Store

Online fashion retailers experiencing high demand in specific areas can optimise deliveries with zone skipping. For instance, consolidating shipments to a New Jersey fulfilment centre efficiently serves customers in the New York metropolitan area, reducing transit time.

Electronics Distributor

Electronic distributors can minimise product damage during transit by employing zone skipping. Shipping bulk products closer to the destination and handling them carefully near customers reduces the risk of damage during multiple handling stages.

Seasonal Goods Company

Companies specialising in seasonal products, like holiday decorations, can manage peak season orders effectively with zone skipping. Preparing bulk shipments to strategic locations ahead of peak demand ensures efficient last-mile deliveries during surges.

Conclusion

Zone skipping is a logistics strategy that benefits e-commerce businesses by optimising shipping, reducing costs, and improving customer satisfaction. By consolidating shipments based on destination, it minimises handling, lowers the risk of damage, and reduces the carbon footprint. As e-commerce evolves, zone skipping offers a competitive edge. Businesses should analyse shipping volumes and customer distribution to integrate this strategy effectively. With careful planning and implementation, zone skipping can transform fulfilment operations, driving business growth and customer loyalty.

FAQs About Zone Skipping

What are the most common zone-skipping techniques?

The most common zone-skipping techniques include bulk shipping to regional distribution centres or direct injection into carrier systems closer to the delivery point. Businesses often use third-party logistics providers to facilitate these movements, leveraging their expertise and network to optimise the routing and consolidation processes.

How can I adopt zone skipping in my e-commerce business?

To adopt zone skipping in your e-commerce business, start by analysing your shipping data to identify common delivery destinations and assess the volume of shipments to these areas. Partner with logistics providers that have strong regional networks and can manage bulk shipments. Then, test the strategy with a small set of shipments to measure improvements in cost and delivery times before scaling up.

What are the potential challenges of implementing zone skipping?

Potential challenges include the initial setup costs, the need for precise shipment coordination, potential disruptions during the transition period, and the requirement for robust technology systems to track and manage the logistics effectively. Also, finding reliable regional partners and managing inventory across multiple locations can be complex.

How does zone skipping impact customer service?

When implemented effectively, zone skipping can significantly enhance customer service by speeding up delivery times and reducing shipping costs, which can be passed on to customers. However, if not managed properly, it can lead to complications such as delays or increased errors in order fulfilment if the logistics are not well-coordinated.

Can zone skipping work for international shipments?

Yes, zone skipping can also be applied to international shipments. It involves consolidating international orders and shipping them in bulk to a hub near the target market, then using local logistics networks for last-mile delivery. This method can reduce customs clearance times and international shipping costs, making it an attractive option for global e-commerce businesses.

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All businesses in India with cross-border transactions must get identification from the Indian government for regulatory compliance and legal processes. It ensures that they abide by respective regulations and laws related to foreign trade. That is what Import Export Code Registration /licence is all about. It is a 10-digit unique identity number issued by the Director General of Foreign Trade (DGFT) India to authorise a business for cross-border imports and exports.  Without an IEC code, customs clearance is impossible, and foreign trade is prohibited. Therefore, it is crucial for new businesses aspiring to global markets to register for import-export codes in India. This blog post provides relevant details. Eligibility for Import Export Code Registration The IEC certificate in full form is the Import Export Code Certificate. Any business that is proprietorship, partnership, limited liability partnership, trust, limited company, hindu society or undivided families can apply for DGFT IEC code.  Businesses or individuals involved in importing or exporting goods as part of their business activities must obtain a DGFT IEC license number. In the case of services, if service providers have clients abroad and they're availing the benefits of Foreign Trade Policy, getting an IEC code is mandatory. IEC Code Exemption An IEC code is not required for imports and exports related to personal purposes. Cross-border transactions performed by Indian government departments, ministries and selected charitable institutions do not need an IEC licence. Some traders with GST registration do not need IEC. Importing gifts and samples within prescribed limits does not call for an IEC code. If the import is part of the service provision, then an import-export certificate is not necessary, e.g., for software imports. Importing from SEZ (Special Economic Zones) to DTA (Domestic Tariff Areas) within a country is exempt from IEC registration. Documents Required for IEC Code Registration PAN card of the business holding. Address proof of the applicant/business holding. Business registration/certificate number. Bank account of business entity with a Cancelled cheque. Passport-size photograph of the applicant. Identify proof of the applicant (Aadhaar/Voter ID Card/Passport). Import Export Code Registration Procedure DGFT import export code registration online can be done by submitting necessary documents. To apply for IEC code, follow the below steps. Step 1: Visit the government portal of DGFT– dgft.gov.in. Step 2: Go to “Register for your IEC” section and click on “Apply for IEC” Step 3: Select the registration tab for a fresh application. Enter the necessary details to complete registration. Already registered users can login directly. Input OTPs received by email and phone number to validate. After successful verification, a temporary password will be sent. Use that for the first time DGFT login and change it afterwards. The IEC code registration form becomes available. Start filling it out. It usually asks about the type of business (proprietor/partner/director/Karta/managing trustee), bank information, and other details. Submit the required documents as mentioned above. Fill the “ANF2A” (Aayat Niryat Form 2A) form. Pay applicable DGFT India fees. After the application form is successfully completed, it will be sent to the DGFT for verification of documents and details. Based on the verification outcome, the application for DGFT IEC code registration may be approved or rejected. In case of approval, an IEC code is issued. For online applications, the DGFT IEC code will be issued through e-IEC. An email will be sent about its availability on the registered DGFT account. Timeline The DGFT India, in association with the income tax department, completes real-time verification of the IEC application. Upon approval, an IEC code certificate is typically issued within a day. Import Export Code Registration Fees in India The fees for Import Export Code Registration in India are very nominal. The IEC code registration is complete only after the payment of fees. Applicants can make the payment through Credit/Debit cards, net banking, and UPI. Import Export Code Registration India Fees TypeFeeIEC Code Registration Fees₹500Professional Fees₹999Filing at DGFTNilAayaat Niryaat Form 2ANilTotal₹1499IEC Registration India Fees DGFT IEC Code Renewal The import-export certificate is forever valid. However, annual updates are necessary to keep the code activated.  Every year, businesses must consider their IEC code renewal between April and June. At other times, additional fees are applicable. Since 2021, the Indian government has made the renewal mandatory after import-export code registration with DGFT. Otherwise, such businesses will be classified as “Deactivated” for foreign trade. They must follow the required procedures to “reactivate.” While the procedure remains mostly the same for DGFT IEC renewal, the previous IEC Code licence number may be required. Benefits of IEC Code License The IEC license is mandatory to perform imports and exports through customs. The Indian government offers various benefits to businesses with the IEC code, such as tax benefits, incentive schemes, etc. Businesses can enter into global markets to showcase and sell their products. Increased trust from global customers, suppliers, banks, etc., due to certification. The unique IEC code allows tracking of all cross-border transactions, eliminating the room for fraud. Businesses with IEC registration automatically become compliant with various import-export regulations, including regular updates. Because of access to various opportunities, businesses with IEC will also offer a good customer experience. The Use of IEC Code in Exports The import-export certificate must be produced along with the following documents for gaining clearance for cross-border exports. Bill of Lading: A document from the shipping company to track and transfer ownership of goods. Commercial Invoice: Lists exported goods, quantity, price, and payment terms, issued by the exporter. Packing List: Info on shipment contents and quantities, issued by the exporter. Customs Declaration: Submitted to customs, declares imported/exported goods, their value, and purpose. Related Read : What is Goods Received Note (GRN) Conclusion Every business holding in India intending to perform foreign trade must get an IEC code from the DGFT. It is not only mandatory for regulatory compliance and customs clearance, but establishes them as a trustworthy business in the international markets and gains a global customer base. As discussed above, imports and exports for personal purposes do not need IEC. However, when the business purpose is involved, the import-export certificate is mandatory, irrespective of the scale of the business. Frequently Asked Questions Can I cancel DGFT IEC code for my business?IEC holders can cancel their Import-Export Code by filing an online surrender request on the DGFT website, submitting documents, and completing the application to revoke future export/import transactions.How to download an IEC certificate?To download the IEC certificate PDF, log in to the DGFT website. Navigate to Services > IEC > Manage IEC, verify details, and click 'Print IEC'.Is IEC license enough to perform exports from India?While the Import-Export Code (IEC) is a crucial document for exporting from India, it is not the only requirement. Depending on the product category, shipping mode, destination country, and other factors, exporters must obtain additional mandatory documents and licenses.Is the IEC certificate valid throughout India?The IEC (Import-Export Code) is a unique identification number applicable across India for your import-export business.

May 13, 2024