PARCEL
NOVEMBER-DECEMBER 2012 www.PARCELindustry.com
BUYERS’ WISH LIST FOR 2013 Page 28
Automation and the Art of E-Commerce
Order Fulfillment Page 18
Selecting the Right
Order Management
System for Your
Multichannel Business Page 20
HOW DO THE
CARRIERS STACK UP?
Our Survey Respondents Share Their Thoughts! Page 14
E-Commerce Is on the Rise — Are You
Ready?
Parcel
conTenTS
november-december 2012 | volume 19 | issue 5
Features
Departments 06 editor’s note
The Growth of E-Commerce By Amanda Armendariz
07 Going Global
US Export Rules and the Small Package Shipper By Tom Stanton
08 Transportation Abcs
Three Ways to Accurately Forecast the General Rate Increase By Brittany Beecroft
09 Packaging
Sustainability, Innovation, and the Packaging Industry By Jay F. Perdue
14 How do the carriers Stack Up?
Our annual survey asks our readers to rank the carriers on a variety of aspects — here are the final results.
10 Parcel Perspectives
PARCEL Forum Analysis By Peter Starvaski
By Amanda Armendariz
12 Ship right
Survey Highlights How Leaders Save By Karen D’Andrea
13 Supply chain Pivot The Calculus of Value By Rob Shirley
30 PArceL counsel
The New Highway Bill and Transportation Broker Surety Bonds By Brent Wm. Primus, JD
18 Automation and the Art of e-commerce order Fulfillment
E-commerce is fundamentally changing the nature of the retail supply chain. Here’s how you can stay ahead of the game. By Bill Leber
20 How to Select the right order management System for Your multichannel business Choosing an OMS is a big step — tread carefully. By Curt Barry
Coming in the next issue… SOLUTIONS for your Warehouse and Material Handing 4
november-december 2012 | www.PARCELindustry.com
Extras 26 PArceL Forum re-cap
It was PARCEL Forum’s last year at the Hyatt Regency O’Hare in Chicago before heading to downtown Chicago in 2013, and what a fantastic show it was!
28 buyers’ Wish List
There’s still time to create your wish list for the new year, and this will give you a head start!
PARCEL president chad griepentrog
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5
EDITOR’S NOTE AMANDA ARMENDARIZ
The Growth of E-Commerce s I was going through this issue in preparation for our upcoming print date, I was thinking how much things have changed with regards to holiday shopping in just a few short years. Of course online shopping has been around for years now, but I remember even four or five years ago, I still made the vast majority of my holiday purchases in bricks and mortar stores. Ordering online was almost a hassle — I had to pay for shipping, wait for the item to arrive (hoping that it would get there in time for Christmas, and since I must be a distrustful person at heart and often doubt the estimated arrival date for standard shipping, I’d fork out the extra money for two-day shipping and grumble about it in the process), and, more often than not, I’d miss my delivery since I was at the office, so more time was spent going to pick it up on my lunch hour the next day. So it’s no surprise that I ordered online only if it was something that I couldn’t get in a store. How things have changed! I feel like that saying, “The greatest thing since sliced bread” is now outdated, and we should change it to, “The greatest thing since online ordering with free two-day shipping.” Well, perhaps that’s taking it a bit too far, but it’s amazing how much retailers have changed the online shopping experience in just a few years. Whether it’s Amazon’s two-day shipping with my Prime membership, or Target offering free shipping with the use of their RedCard, my holiday shopping is 90% done, and it’s not even December! It’s such a relief to have the packages delivered right to my doorstep (and, since I work at home now, I don’t have to worry about missing any deliveries) and entirely skip navigating the toy aisle at Target. That might not mean much to some of you, but considering the fact that I would have a two-and-a-half year old watching my every move, saying, “Who’s that for, Mom?” and look at me expectantly while I try to come up with some plausible explanation without ruining the magic of the holiday for her, is it really any surprise that I consider online shopping the key component in a stress-free holiday season? And I’m clearly not the only one out there who feels this way. E-commerce continues to grow at an astounding rate from year to year, so if you feel like you’re struggling to keep up, never fear. We’ve got some great pieces in here to help you optimize your business for the e-commerce experience, which means you’ll make customers happy while improving your bottom line — a win/win for everyone! And don’t forget to check out our carrier survey on page 14. With all these online orders being placed every day, FedEx, UPS and the USPS are busier than ever. How did they rate in the minds of our readers when it comes to things like on-time delivery, refunds for late delivery, and more? Check it out, and if you’d like to share your thoughts on the matter, just scan the QR code at the end of the article to leave a comment! In 2013, e-commerce is certain to grow even more, so we at PARCEL will do what we do best: keep you updated on all aspects of the small shipment industry, e-commerce and otherwise. As always, thanks for reading PARCEL.
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going GLobAL By tom stanton
US export rules and the small package shipper mall package shippers exporting non-controlled or non-licensable commodities from the United States that are nevertheless classified EAR99 on the Commerce Control List need to be aware of the following factors: A) embargoed/restricted countries, B) “listed” consignees or shippers, C) destination-prohibited imports, and D) classification and value.
A)
Country restriCtions:
The first thing you might notice on your export order is the destination country. In most cases exports to Cuba, North Korea, Iran, and Syria are prohibited. Furthermore, you are prohibited from supporting embargoes of Israel. For example, you cannot send a certificate of origin that states the products are not products of Israel. A number of other destination country restrictions can be identified at www.bis.doc.gov/policiesandregulations/0 5forpolcontrols/chap5_embargo.htm
B)
shipper/Consignee restriCtions:
A list of those firms and individuals whose export privileges have been denied is available at denied Persons List. Some denied persons are located within the United States. So, if you believe a person whose export privileges have been denied wants to buy your product, you must not make the sale. You need to report the situation to the US Bureau of Industry and Security (BIS) Office of Export Enforcement. If
you have further questions, you can contact BIS’s Office of Enforcement Analysis at 202.482.4255. The entity List is found in Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR). This is a list of parties whose presence in a transaction can trigger a license requirement. The entity list specifies the license requirements that apply to each listed party. These license requirements are in addition to any license requirements imposed on the transaction by other provisions of the EAR. The Treasury department Specially designated nationals and blocked Persons List is maintained by the Department of Treasury’s Office of Foreign Assets Control. They administer and enforce economic and trade sanctions against targeted foreign countries, terrorism sponsoring organizations, and international narcotics traffickers. The Unverified List is composed of firms for which BIS was unable to complete a check on the end use of the commodity being exported. Firms on the unverified list present a “red flag” that exporters must inquire about before making an export to them. destination prohibited imports: Due to various national interests, local countries may restrict the products you intend to export or limit their importation with an import license requirement. The value of the order and the destination country must be reviewed in conjunction with the importer and/or a local party familiar with the import laws. For example, Mexico prohibits exportation of chocolate to their country, Switzerland prohibits importation of lottery tickets and Greece prohibits importation of playing cards. A wise
shipper double checks with the carrier, the consignee, and a local customs broker to ensure there will be no difficulty in clearing the commodity being shipped. Even though the value of your product may be small, such as $100, shipment via small package may require an import license or an import bond and duty payment prior to release to the consignee. A thorough (46 page) document regarding European Union import restrictions of all sorts is available by scanning this QR code.
C)
ClassifiCation and Value:
The Federal trade statistics regulations require that any exported item valued over $2,500 per classification be reported electronically for statistical purposes via the Automated Export System (AES). A total shipment valued at $6,000 with three different classifications valued at $2,000 each is thus exempt from electronic reporting and the language “no schedule B required, individual classifications less than $2,500 each” can be cited on the export air waybill. From a practical standpoint it is recommended that you classify all items you are exporting, add this information to the commercial invoice, and transmit the information to the agent who will be clearing the goods in the destination country. p
Tom STanTon, AFMS, LLC, International Analyst can be reached at 503.246.3521 or Tom. stanton@AFMS.com.
november-december 2012 | www.PARCELindustry.com
7
TRANSPORTATION ABCs BY BRITTANY BEECROFT
Three Ways to Accurately Forecast the General Rate Increase hile being able to mitigate the General Rate Increase is the hope of every shipper, organizations must take the opportunity to evaluate all aspects of their carrier agreement and structure it so that it more accurately reflects their shipping profile. After all, you should only pay for the service you receive — and not a penny more. Let’s look at some of the unexpected charges you may experience with UPS and FedEx so you can lessen the impact of the increases.
IMPACT OF INCREASES TO TRANSPORTATION AND MINIMUM CHARGES
watch the actual YOY increases on mini- Delivery Charge for UPS and FedEx is up mums and negotiate their reductions to 6.7% for 2013 ($3.20). ensure the discounts offered by our carriers are close to the discounts we are IMPACT OF ACTUAL VERSUS receiving. If your shipping profile lends DIMENSIONAL WEIGHT itself to being near the minimum charge We understand what dimensional weight more and more each year, that discount is, and how it is calculated, so let’s effectively shrinks as the minimum net look at an example of how it impacts charge grows. cost. Let’s take a FedEx International What does this mean to you? The floor Priority package, Zone D, Actual Weight is dropping in terms of packages being 5lbs, 14x12x10 Dimensions. In 2010 subject to the minimum charge — the the dim divisor was 166, so your five higher the minimum, the more pack- pounds package dimmed to 11 pounds ages affected by it. If your packages with a gross freight cost of $153.19. dim, with the reduction to the divi- Same package in 2012, after two rate sor from 194 (2008) to 166 (2013), a increases and a change in dim divisor to package moving FedEx 2 Day, 5lbs, Zone 139, now dims at 13 pounds with a gross 8 — dimming at nine pounds in 2008, freight cost of $190.92 — a 24.6% 11 pounds in 2013 — will see a 67.6% increase in freight cost. If we were to increase in freight cost. Not quite the back up to 2008 we’d see a freight cost 3.9-5.9% announced year over year. of $127.23 and an increase of 50.1%.
Stated increases aren’t always what they seem. As we see base rates increase, we IMPACT OF ACCESSORIAL CHARGES CONCLUSION know the Minimum Net Package Charge While most of us focus on increases Three key points to remember as we enter is increasing as well. From 2008-2013, in freight costs to our bottom line, the the 2013 General Rate Increase are 1) the UPS Ground Minimum Net Package pending increase to fees cannot be Rate increases are greater than they appear, Charge increased almost 40%, from overlooked, especially if your product and Minimum Charges aren’t so minimum; $4.20 in 2008 to $5.84 in 2013. In requires an Indirect Signature Label (up 2) Accessorial Charges increase at varying 2009, UPS and FedEx announced a 12.5% in 2013 to $2.25 for FedEx). rates with the GRI; and 3) Actual versus 5.9% increase for Ground; the actual Delivery Area Surcharges on Domestic Air Dim weights — with just a small adjustGround Minimum Net Package Charge will increase from 7.5% for Commercial ment you could save thousands. p increase was 8.8% ($4.20 in 2008 DAS to 8.3% for Residential to 7.7% for increased to $4.57 in 2009). Similarly Extended (FedEx; UPS is up 7.5% for in 2011, the announced net Ground Extended). Address corrections are tak- BRITTANY BEECROFT, MBA, is the Small Parcel Pricincrease, inclusive of fuel, was 4.9%; ing a heavy increase at 9.1% for both ing Manager for AFS, based in Shreveport, LA. Prior the actual increase to the Minimum Net UPS and FedEx. If you get the address to joining AFS, Brittany spent 12 years at FedEx as Package Charge was 6.8%. The mini- right with FedEx, but your account num- a Strategic Pricing Analyst, analyzing over 5,000 mum charge impacts the average ship- ber is wrong (or it’s missing entirely) plan agreements in her FedEx tenure. She consults reguper more than any other single zone to see an $11 charge on your invoice larly with some of the largest shippers in the world and weight Ground rate. We want to (10.0%). The Domestic Air Residential and is a sought after speaker and consultant. 8
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com
PackagIng By Jay F. Perdue
Sustainability, Innovation, and the Packaging Industry s consumers are Dell is already using packaging made shipping industry can do its part to be becoming more from bamboo to ship some of their mini friendly to the environment by seeking and more environ- netbooks with plans for more products out and using biodegradable, reusable, mentally conscious, to be using bamboo packaging in the recyclable, and sustainable products. entrepreneurs will be future. The reason Dell likes this product All it takes is for buyers of packaging more likely to develop is that it is very strong. It has a tensile products to be aware of what is availnew products, technolo- strength similar to that of steel, making able to them and then support the gies, and processes that it a perfect material for protecting their manufacturers of these types of items. will enhance or replace products in transit. Again, this is a bio- Innovators such as Ecovative Design ones that we have now that degradable product that is cost-effec- will continue to produce new technoloare harmful to our environment. I tive and very sustainable. According to gies that are good for the environment am excited about Ecovative Design’s new the American Bamboo Society, bamboo, because there is a demand for them. technology (see sidebar) not only because which is a member of the grass family, The future of sustainable packagit makes packaging material that replaces can grow up to 47 inches in one day in ing looks promising with all the new its synthetic counterpart, but it also can optimal conditions but generally grows advancements being made. Next time be grown in any shape in about a week. about one to two feet per day. I think you are ready to buy new packaging prodNothing needs to be harvested from the that more companies need to be look- ucts for your shipping operations, you earth for the manufacturing process. It is ing at bamboo for their packaging needs may be surprised at how many options cost-competitive, and it can be composted since it has so much potential. you have for sustainable products. Subaru decided in 2004 to create into your garden. Another great product on the market zero landfill waste from their plants. is the biodegradable packing peanuts They asked everyone in the company Jay F. Perdue is passionate about packaging made from industrial grade corn. It pro- to come up with ideas of how to reuse, because he handles other people’s packages all day vides the same protection capabilities recycle, and eliminate waste. It was and every day. He is a driver for UPS for 26 years and as its polystyrene peanut counterpart. and still is a success because they were is in the top four percent of drivers with 26 years of Starchtech, a Golden Valley, Minnesota determined to make it happen. The safe driving. Contact him at jperdue@austin.rr.com. company not only manufactures these biodegradable packing peanuts but also goes a step further by making available By now, most of you may have read about the agreement in late June 2012 between a cost-effective machine that allows you Sealed Air Corporation and Ecovative Design. Ecovative is the brainchild of Eben to make your own biodegradable peanuts with their special rice-sized pellets. A Bayer and Gavin McIntyre, and they make EcoCradle Mushroom Packaging. This pallet of pellets can make the equivalent innovative product is made of mushroom roots and agricultural waste. Sealed Air of 23 pallets of peanuts, allowing for a will be the exclusive licensee to expedite the production, sales, and distribution of smaller carbon footprint in the delivery Ecovative’s EcoCradle Mushroom Packaging. of the peanuts. So, one truckload of pellets is equal to 23 truckloads of peanuts, Sealed Air is a world leader in specialty materials; one of which is protective packagsaving the cost of both fuel and labor. ing. Their interest in this new Mushroom Packaging shows that the new technology One of the up and coming materials will become an important part of their portfolio of sustainable packaging options. that not very many people are using is packaging products made of bamboo.
november-december 2012 | www.PARCELindustry.com
9
parcel PersPective By Peter StarvaSki
parcel Forum analysis n this edition of Parcel Perspectives I lines: Bicycles. They were getting hit hard with the carrier’s thought I’d share some knowledge from ‘additional handling charge.’ This is currently an $8.50 fee this year’s PARCEL Forum, which was a with either UPS or FedEx that is assessed, amongst other hangreat success. My congratulations to every- dling factors (such as the shape of the packaging container), one who helped organize the event. I’m look- when the longest side exceeds 60 inches, or the second loning forward to next year’s show and I’m glad to gest side exceeds 30 inches. The operation teams of this see that it will be moving to downtown Chicago. retailer reduced a few inches off their current packaging and I presented at the show again this year, and the were saving over $100,000 a year with the change to this one topic was the use of Analytics. I had about 25 peo- product line. ple attend the presentation. I won’t bore you with This topic also received a lot of attention at the show. While I the details, but what is interesting are the questions I was not able to attend his presentation, I talked to Dean Arnold received during the presentation. There were three rea- from National Instruments at the networking event. Dean presons why the attendees in my session were interested in an sented a case study that included how NI was able to cut their analysis of their parcel data. These were: parcel spend by hundreds of thousands of dollars by focusing on reducing their dimensional charges. From an analytics view, this type of analysis is solely dependent on your shipping system’s ability to not only determine the shipping charges and fees, but to also conDimensional Weight Analysis sume information from the order entry system so that the analysis can be performed based on SKU, or product line, or some other order-based data that allows the shipping operation to provide feedback to the other stake-holders in the business. Quite often data is passed back to an ERP system Shipping Personnel Performance that has this information, but the data passed back is total freight charges, tracking number, carrier/service, etc. Flags for dimensional weight and individual surcharges may not be sent back to the ERP system. Should the amount of data Location and Stocking of being passed to that system increase? Or should you augment Distribution Centers the data being sent to the shipping software? Given the myriad carrier/service/surcharge combinations, it may be a simpler task to just pass operational and order information to the Now there are scores of other reasons to do analysis, and shipping system (especially given the dynamic nature of the the show had some very reputable firms exhibiting a variety of shipping charges.) The second topic, shipping personnel performance, surinvoice analysis services, but the attendees at this particular prised me a bit. My topic had been announced as controlling presentation were primarily interested in those three analyses. The first topic, dimensional weight analysis, can directly your operational costs. It actually makes perfect sense that a impact what you spend with the carriers. The ultimate goal is company would want to analyze the operational performance to affect the packaging you use so that you can reduce the of the warehouse through their shipping system. The system additional handling charges, large package surcharge, or the is providing a time stamp for each shipment processed. It is actual dimensional weight. Two individuals from a large retailer also capturing the workstation and the user. Individual perforwere in the audience and they discussed one of their product mance of each shipping station can be determined, as well as
1)
2)
3)
10
november-december 2012 | www.PARCELindustry.com
how quickly a dock or bay is turned around when the carrier is manifested. This analysis could be drilled down further to determine performance for domestic versus international shipments or standard versus dangerous good shipments and provide hard data to be used to determine if the business would benefit from spending money on improving the data integration to the shipping system and reducing manual steps in the process. Or it might simply prompt an investigation into why Mary can get twice the shipments processed that Bob can. Lastly, the third area that received a lot of attention during the presentation was the use of data to provide heat maps of where shipments were being delivered to. As shippers successfully negotiate contracts, reduce their surcharges, and improve their warehouse efficiencies, one of the biggest areas left for reducing their spend is to reduce the distance required to get the goods to the consignee. An analysis of origin to destination by SKU or product line can inform the shippers where to move inventory. Another large retailer, for example, noticed a significant quantity of Mother’s Day and Father’s Day promotions were being shipped to Florida. While the retailer has a distribution center in a neighboring state, a large percentage of the shipments were not originating from the closest DC. A simple shift in that seasonal inventory has resulted in significant cost savings for them.
It actually makes perfect sense that a company would want to analyze the operational performance of the warehouse through their shipping system. The second part of this analysis is related to where they should consider opening their next distribution center. This is even more interesting when you start to consider the regional carriers (who had a large showing at this year’s PARCEL Forum). How much could you benefit if you were able to directly induct your packages to OnTrac’s Reno Nevada hub and enjoy next day delivery along the entire west coast at ground prices? While these are just three areas (from literally dozens discussed), I find it interesting how the focus changes from year to year and based on the demographics of the participants. We’ve already reserved our booth for next year, and we are looking forward to another great show, this time in downtown Chicago. p
PETER STARVASKI is Director, Product Management at Kewill.
ship right BY Karen D’anDrea
survey highlights how Leaders save asked to name the most important shipping factor, these managers and department heads ranked two areas above all others: automation and information. The need to automate outbound shipping processes was ranked at the most important factor by 35% of all companies. For many, additional automation could streamline package preparation, simplify rate comparisons, and standardize business rules across departments. The second most important concern centers on information. In this survey, 32% of responders ranked reporting and dashboards on carrier performance as the most important shipping factor. Such information could make it easier to identify waste, validate carrier charges, and gain a bigpicture view of shipping expenses. When you consider that transportation } Organizations rely on more types of costs can average six to 10% of overtransportation than ever before, and all company revenue, it’s not surprismanagers need to make sure that ing that automation and information items are shipped the right way, at the are seen as such valuable additions. Many small and mid-sized organizaright price. Methods include: tions understand the opportunity, but } Parcel Ground (71%) look at shipping management software } Parcel Express (62%) as a solution that only works for larger } Freight and LTL Carriers (58%) organizations. As a result, they don’t } Air Freight (35%) have the tools in place and must deal } Ocean Freight (23%) with fragmented processes, unexpected } Rail Carriers (10%) } With so many modes of transportation, fees, and poor compliance on a day-toit makes sense that most shippers sur- day basis. Compare that to the 27% of small and mid-sized businesses who veyed use multiple carriers. already have the software needed to } 59% use 2 – 5 carriers optimize, integrate, and automate their } 17% use 5-10 carriers shipping processes with the highest } 11% use more than 10 carriers } The number of options employed by degree of real-time visibility and control. Despite the fact that a quarter of those savvy shippers leads to the need for more in-depth rate comparisons and surveyed use a transportation management system, there is indication that additional administrative support. even with those shippers, there is an Most survey responders spend up to opportunity to better utilize technology. $500,000 a year on shipping. And when The survey uncovered that challenges n September of this year, we asked small and mid-sized shippers in the retail, wholesale trade, and e-commerce industries what their most pressing challenges and opportunities were. The findings paint a picture of what it takes to prosper in today’s environment. Many companies have already taken steps to increase efficiency and save. A full 27% report that they are already using transportation management software to help optimize shipping performance. When you look at the shipping landscape, the value of such technologies is clear.
12
november-december 2012 | www.PARCELindustry.com
exist across the entire supply chain, from carrier selection to cash flow optimization. Three examples highlight the potential for waste and inefficiencies. } returns handling. Up to half (48%) of respondents process returns manually, adding cost and unnecessary errors to a function that already drags on profits. } carrier data storage. Nearly three-quarters of businesses (72%) store data related to shipping and carriers in multiple databases. In such cases, companies may not have access to all of the information they need to respond to customer inquiries or management requests in a timely, cost-efficient fashion. } expense management. Most organizations analyze carrier invoices either weekly (37%) or monthly (36%). And as noted above, this usually involves organizing, collating, and comparing statements for up to five or more different carriers. In addition to the obvious administrative cost, the lack of a single-view makes it harder to compare rates and service levels. With higher rates taking effect in a matter of weeks, this is an ideal time for managers to assess their current shipping operations. Special attention should be paid to areas that require redundant effort, steps that involve manual processes, functions that are difficult to control, and points where you may be overspending. Given the advantages of today’s leading transportation management systems, it makes sense that a full 22% plan to invest in new technologies in the year ahead. p
Karen D’anDrea is Director, Logistics Solutions and Services, Pitney Bowes.
supply Chain piVoT By RoB ShiRley
The Calculus of Value et’s assume you were able to offer customers a reduction of their cost if they invited other customers to join them on the same high-speed point to point service they were enjoying. How would you do it? Probably the same way AirNet is — by using a particular method or system of reasoning that you would remember from a calculus course. Frank DiMaria, head of marketing, explains, “AirNet now flies to 80 cities five nights a week from principle hubs
for attracting customers and speeding delivery to and from the airports.” They have a large fleet of 121 aircraft, including the world’s largest fleet of Cessnas (68), 24 Beechcraft, 13 Bombardier Learjets, 12 Piper Navajos, and four Mitsubishi Marquise. The company was founded in 1974 to serve bank customers by moving high value checks to the Federal Reserve in order to speed moving funds. Electronic checks became legal in 2004 under the Check 21 Act and AirNet adapted to the market by gaining customers with medical nuclear devices, lab specimens, and high technology products requiring speed and accuracy. They also designed and operated a Next Flight Out service in 2000 and successfully sold that division this year.
The local and regional carriers have also proven to be great partners for attracting customers and speeding delivery to and from the airports. in Burbank, Chicago, Columbus, Denver, St. Louis, and Teterboro, NJ. Customers began requesting specific flights that originated from those destinations. We introduced Scheduled Package Delivery (SPD), which is always faster than ground service and often less in cost. This service uses a fleet of Cessna 210s that are fast, reliable, consistent, and inexpensive. Once we have an anchor customer, we offer to reduce their cost if they help us attract additional customers on the same flights. The local and regional carriers have also proven to be great partners
Speed is gained by flying into smaller airports and using much less ground time since there are no large mechanized hubs because positive hand-offs are done for each package. This process allows the aircraft to take off later and land earlier than global carriers. They fly about 200 flights per night, serving over 2,500 markets. The airports they utilize are visible on their website. Airnet’s service level is well over 99% and they are certified ISO 9001. It is refreshing to see that our democratic and capitalistic marketplace is still innovating options to serve customers. p
AirNeT’s uNique sTreNgThs: } Only air carrier to allow GPS made by all three certified technology companies — Crossbow, On Asset, and GTX, allowing AirNet to leapfrog barcodes. The GPS device is placed within the package. } Package vulnerability is improved because everything is hand-sorted with no mechanization at hubs. } Package valuation can be up to $1,000,000 for anything, including jewelry, artwork, and data tapes. } Not integrated with a ground operation, therefore a strong partner with local and regional carriers. } Favored by high time/value customers: life sciences, medical devices, aerospace, security sensitive, government, banking, entertainment, hazardous materials, and high-tech.
rob shirley is President of ExpresShip, a strategic partner in the global supply chain. Contact him at rsxpship@gmail.com.
november-december 2012 | www.PARCELindustry.com
13
How Do tHE carriers stack Up? Our annual survey asks our readers to rank the carriers on a variety of aspects — here are the final results. By Amanda Armendariz
Fedex eighty-two percent of our respondents have used Fedex within the past year. Here’s how Fedex rates in the opinions of our readers: Customer Service
Claims Processing
06
%
13%
Poor
33%
Fair
Refunds for Late Delivery
04% 07%
Poor 30%
59%
Excellent
Excellent
11
31%
31% 28%
(published rates for service levels, willingness/fairness of negotiations)
53%
Poor
Fair
Fair
Good
Good
Excellent
Excellent
november-december 2012 | www.PARCELindustry.com
27%
Pricing
04%
(driver courtesy, package handling):
14
Fair Good
%
14%
Poor
Good
Poor
34%
Excellent
On-Time Service Performance
Delivery Performance
29%
Good
48%
Excellent
Fair
28%
Poor Fair
Good
09%
09% 26% 28% 37%
People love to give their opinions when it comes to companies they deal with on a regular basis, and our readers were no exception. We’d like to thank everyone who participated in this survey for giving us their insight about the major parcel carriers. From customer service, to on-time delivery, to refunds for late delivery — our readers weren’t shy about rating the carriers. Some results were impressive, like how a full 59% of respondents rated FedEx’s on-time service performance as excellent. Others, however, could use improvement. As you look through these results, do you find yourself nodding in agreement, or do you have a different view of the carriers than some of your peers? If you’d like to leave a comment on these results, scan the QR code at the end of this piece.
UPS Eighty-four percent of our respondents used UPS within the last 12 months. Here’s how they rate: Customer Service Poor
Claims Processing
08% 36%
21%
Fair
Good
Good
35%
On-Time Service Performance Fair
52% 39%
Fair Good Excellent
Poor Fair
28%
28%
Excellent
(driver courtesy, package handling):
14%
Poor
Good
Delivery Performance
34%
Refunds for Late Delivery 01%
Poor
24%
Excellent
09%
25%
Poor
Fair
Excellent
16%
30%
Pricing 15%
(published rates for service levels, willingness/fairness of negotiations)
04
%
52% 29%
12% 29% 24%
Poor Fair
36%
Good
Good
Excellent
Excellent NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com
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USPS Sixty-nine percent of our respondents used USPS within the last year. Here are their thoughts on the carrier: Customer Service
Claims Processing
15%
22%
Poor
Poor
Fair
Fair
32%
Good
31%
Excellent
14%
18%
Poor
43%
09% 14%
36%
33%
Good
42%
Excellent
Delivery Performance
15%
Fair
36%
Excellent
Pricing 07
%
(driver courtesy, package handling):
Poor
Good
Refunds for Late Delivery
Poor Good
30%
Excellent
On-Time Service Performance Fair
12%
29
%
36%
Fair
23%
21%
Poor 29%
Good
(published rates for service levels, willingness/fairness of negotiations)
Excellent
Fair
28%
28%
Good Excellent
YoUr ThoUghTS oN ThE PArcEl INdUSTrY do you think UPS’ proposed merger with TNT would be an overall positive or negative to the parcel industry?
Positive
27%
Negative Not sure/no opinion
16
UPS/FedEx 54%
19%
november-december 2012 | www.PARCELindustry.com
The lawsuit brought by AFMS in response to UPS and FedEx’s policy to prevent shippers from working with third-party negotiators (3PNs) is scheduled for trial in 2013. If you had a crystal ball, who do you believe the ruling will favor?
Third-party negotiators
46%
54%
Do you think that there is enough competition in the parcel delivery market to keep pricing reasonable and service good?
YES: 35%
Do you think that the cost of transportation will be a greater percentage of gross company revenue in 5 years than it currently is?
YES: 84%
NO: 65%
Those who said there wasn’t enough competition offered the following thoughts: Don’t know how anyone can compete with FedEx and UPS for ground parcel. DHL tried and could not make it. Only having these two really is driving costs up... year after year.
NO: 16%
Some believed it would be due to these factors: Continued growth of e-commerce business and pressure to do same day delivery Fuel
We need a third nationwide domestic carrier
Labor costs
It would be helpful if one of the regionals would consider expansion. I believe that there is a strong market for an alternative, even if the alternative offers less capability.
The dim factors and overall carrier pricing.
There is always room in any market for competition. I don’t think the answer is with regional shippers. Smaller size companies can’t afford to divide up their parcel shipments among several shippers. I think the answer is to find a way to bring back DHL. The regional carriers need to band together in some fashion to provide an alternative. Short of more carriers entering the market to create more competition, nothing.
For those that modified their primary carrier in 2012, here were some reasons why:
There seems to be no tangible realtionship to the annual increases which are seemingly controlled by UPS & FedEx. If the increases were more in line with CPI, it would be more understandable. Of course, they are private (non-government) enterprises and they can do as they please. Shippers have to pass this expense along if we are going to remain competitive on price. Lack of competitive forces to mitigate UPS / FedEx continual upward pricing strategy. All the additional fees that the carriers keep adding.
The top three biggest complaints about the respondents’ primary parcel carrier were:
50%
Needed to achieve better pricing
44.0%
Accessorial charges
18%
Dissatisfied with service
12.2%
Fuel Surcharges
Changed our level of service
12.2%
Pricing
03%
(i.e., air to ground)
13%
Diversified to use more carriers
05%
Reduced the number of carriers used
11%
Rebid transportation and a different carrier(s) won
Do you agree or disagree with your peers’ assessments? Scan the QR code to leave a comment! november-december 2012 | www.PARCELindustry.com
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By Bill Leber
Automation and the
Art of E-Commerce Order Fulfillment Historically, the majority of the world’s consumer products have been distributed to retail stores in bulk, and the most efficient method for handling this merchandise has predominantly been pallet movement and full case selection. But now, e-commerce is fundamentally changing the nature of the retail supply chain. As online shopping continues to compete with and, in many instances, overtake bricks-and-mortar retail, traditional retailers are looking for more and more ways to expand their multichannel operations. According to Datamonitor’s Global Online Retail 2011, the global online retail sector had total revenues of $434.6 billion (USD) in 2010, representing a compound annual growth rate (CAGR) of 16.3% for 2006 to 2010. 2010 alone had a growth rate of 17.8%. Due to this increase in online sales, many brick and mortar retailers are outgrowing this traditional supply chain infrastructure. In addition to scheduled weekly store deliveries of pallets and cases, retailers must now factor in split-case picking, item-level touches and multi-line item sortation to fulfill fluctuating volumes of online orders that frequently require delivery to consumers within 24 hours. Now take these challenges and compound them with the emergence of mobile commerce, or “smartphone shopping.” The instant gratification culture that has taken over with the growth of mobile has put even more onus on the retail sup18
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ply chain to deliver more products faster, literally from mobile device to doorstep in a matter of hours, not days.
Strain on Supply Chain From the moment a customer places his or her online order to when that order gets picked, packed, and shipped, every step in the process must be handled efficiently, consistently, and costeffectively. In e-commerce, it is the distribution center that provides most of the customer experience. The DC is the store. Simply delivering goods is no longer an adequate mission for the fulfillment center, and customer satisfaction must be a leading priority. Take, for example, relentless SKU proliferation. Internet retailers need to support an ever-increasing selection of merchandise that typically includes fast moving items along with an ever-growing assortment of many very slow moving items. How these SKUs are picked and handled presents two very different operations. The ‘new breed’ of retail e-commerce consumer expects a lot more in addition to competitive prices: cross-channel services such as “click-and-collect” and “order-to-deliver;” wider online SKU offerings; in-store kiosks; consistent brand experience across the brick and mortar and online storefronts; order accuracy; fast and free delivery; free returns through any channel; and a mobile retail site.
Of these expectations, the consumer demand for free and fast delivery is causing supply chain managers the biggest challenge, which retailers need to closely assess to remain competitive. Factoring in also is the threat of under-stocking, influenced by unknown or seasonal demand. An online retailer cannot be caught flatfooted, unable to meet a shopper’s request and risking loss of sales and goodwill.
Data interchange
As brick and mortar retailers integrate e-commerce and transform into multi-channel organizations, they increasingly are forced to separate the inventory in their supply chains. The challenge with this process relates to having the right systems in place to dynamically process orders for e-commerce channels versus historical store re-stocking fulfillment. Within e-commerce, where unpredictability is a constant factor, flexibility in the supply chain becomes critical. Flexibility can be derived from implementing the right system, one that can support the fluidity that e-commerce cross-channel services require.
Because of the digital nature of e-commerce, its infrastructure actually permits integration of systems to help unify information across multi-channel inventory, order management, promotions, merchandising and distribution systems. Going multi-channel provides a streamlined means for interconnections across all of a retailer’s divisions or business units! E-commerce allows companies to record the relevant details of each pallet, parcel, and item being shipped. Parcel shipments can be tracked and proof of delivery quickly confirmed. Retailers can further analyze each customer’s transportation costs and performance, thus helping the retailer negotiate rates and improve service, organically over time. Retailers suddenly find themselves able to record every customer transaction and track consumer behavior and sentiment. This makes possible the ability for retailers to analyze millions of data, resulting in a real understanding of what consumers are purchasing, how to get into their online carts, and how to become part of their repeat purchase cycle. The result has been the emergence of new retail supply chains that are consumer-focused rather than product-focused. The emerging solution for efficient and timely e-commerce order fulfillment is one base on an integrated WMS driving an automated storage and retrieval system, married in the end to efficient goods-to-person piece picking technology. Systems using fast shuttle or robotic bin technology can ensure that real-time inventory is always accurate so that when customers place orders, confirmations of the pick and pack process can be provided back to the consumer in less than 30 minutes. With the emergence of such automated systems, fully integrated to a retailer’s online customer interface, a new level of flexibility and efficiency, above and beyond the capabilities of conventional automated and manual material handling systems, can now be realized for the movement of retail e-commerce products.
FulFillment in three Dimensions
Parting thoughts
E-commerce fulfillment is fundamentally a piece-pick operation, which is historically a hands-on procedure. It is perhaps counterintuitive, then, that the right automation will bring about minimized manual touch, resulting in more accurate orders, improved ergonomics, lowered labor costs and travel time, lessened returns and saved space by operating in a smaller footprint. To be sure, a stepped approach to e-commerce automation, especially where future demand is difficult to predict, is often the best route. With scalable software and infrastructure in place, retailers can build out automation as their e-commerce business grows. In essence, the automation can be targeted. Automation that addresses specific tasks, such as picking for fast or slow-moving SKUs, can sometimes turn a better ROI than completely automating a full warehouse. The gold standard of flexibility for any e-commerce business is to be able to easily increase fulfillment throughput and SKU density over time in a capital-efficient manner. Such an order fulfillment system should be able to scale seamlessly with a business year after year.
E-commerce, and now smartphone shopping, is fundamentally changing the nature of the retail supply chain. Distributors must learn how to adapt to rapidly expanding and changing e-commerce conditions. Efficiently optimizing inventory, storage space, labor, costs, and time in e-retailing is required to attain not only customer satisfaction, but a profitable operation. The key to managing this challenge is automated warehousing and distribution technology that has the speed to provide almost immediate feedback to consumers as to the status of their orders, along with the flexibility to adapt to changes in supply chain systems, distribution networks, and processes. p
Specific e-commerce challengeS When these consumer needs are compared to the challenges of distribution in an e-commerce environment, there are significant obstacles for fulfillment. These challenges include:
a) Large SKU counts with a very long, slow-moving tail; b) High and unpredictable growth; c) High penalty for poor performance resulting in potential brand damage;
d) Uncertain business terrain that demands flexible and e) f) g) h)
adaptive solutions; Demand for real-time and accurate inventory visibility; Small number of orderlines per order; High returns from end customer; Extreme peak season volumes.
Bill leBer serves as Director of Business Development for North America at Swisslog. Prior to joining Swisslog, Bill worked 26 years for Ciba Specialty Chemicals in a variety of roles including manufacturing, logistics, sales & marketing, business development and general management. Bill received his B.S. degree in Chemical Engineering and an MBA in Management from Rensselaer Polytechnic Institute. november-december 2012 | www.PARCELindustry.com
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How to Select
the Right ORdeR ManageMent SySteM
fOR YOuR Multichannel Business By curt Barry For the past 20 years, major international IT surveys have shown that more than 50% of all large scale system projects — such as selecting and converting your business to a new Order Management System (OMS) — are not delivered on-time and within budget, and they fail to meet management expectations. Some of the reasons include lack of project management; failure to clearly identify the systems requirements and select appropriate solutions; failure to estimate accurately the total cost of ownership for the life of the system; and communications failures throughout the process. This article identifies general IT industry practices that will help your company select the right Order Management System for your multichannel business. The process works well for all major systems including Enterprise Wide Solutions, Warehouse Management Systems (WMS), Finance and e-commerce platforms. Lastly, we provide insights into the benefits clients have derived from implementing OMS.
november-december 2012 | www.PARCELindustry.com
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establish Goals and resPonsibilities Top management should form a steering committee to set direction, review progress, and resolve issues that arise. Appoint project team representatives from each functional area of the business. Select a person from this group to be the project manager or coordinator giving the team coordination on objectives and requirements and follow through with the vendors and outside resources. Selecting and implementing an OMS should not be an IT project solely. IT should be on the team, but we feel a manager from the user community should head up the project. Balance selection of the OMS with what functionality the business needs to grow and what systems can provide with the technology aspects of the decision (hardware, database, operating system, program languages, etc.). Formally agree on project direction and establish a project charter. As part of the project charter, the steering committee typically wants a reasonably accurate (+/- 10%) project cost and timeline without spending months to do it. Unless your company has experience with OMS conversion, it may be harder than you realize to establish these two goals with accuracy. Vendor estimates are notoriously low and more aggressive than actual practice. To do a thorough assessment of the systems, select the finalist and plan the implementation typically takes four to six months. From the point of contract signing, OMS conversions typically take seven to 12 months to implement. Can these time frames be reduced? Sure. But remember your staff have full time jobs, and it takes considerable involvement in requirements process, vendor demonstrations, etc.
doCumentation oF user requirements The objective is to draft the system requirements for the business and all departments using the OMS. The typical OMSs have functionality for order entry and customer service; credit and payment processing; order processing; warehousing functions of receiving, checking, marking, put away, replenishment to forward picking; customer order processing of pick, pack, ship, and returns processing; DC inventory control and cycle counting; marketing; merchandising and management reporting. OMS often do not have general ledger and other accounting functionality. To collect and agree upon these requirements, interviews will need to be conducted by department. Then the departments’ requirements are brought together into a single document. Also collect key reports and analysis that are performed in the current system and use system data in data warehouses or spreadsheets. It is also helpful and often essential to flow chart the processes of the current business environment in the departments. This will assist you in explaining what actually is happening rather than what you think is happening or used to happen. They are also helpful to understand how a prospective system can fit in the current business environment or how the business processes need to be changed. The user departments need to review the requirements and sign off on the work product and deliverables. The steering committee should review and sign off also so that the system selection process meets their current and future business objectives. 22
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How detailed are the requirements? Can we write an exception set of requirements rather than a full set? Because of the broad range of functionality a complete set of OMS requirements may be between 1,500 to 2,000 requirements. An exception set of requirements may be more like 500 to 900 requirements. The concept of the exception set is to specify the more unique requirements for your business. This assumes you know fairly well the functionality of the prospective vendors to whom you’re sending the Request For Proposal.
Create request For ProPosal (rFP) In this step, your convert your requirements into an RFP format. Include your company background, management objectives, expectations for total cost of their products and services including licenses, hardware, software, third-party hardware and software, services; training and conversion; annual maintenance support; methodology and project planning. As much as 50% or more of the cost may come from professional services. Discuss how your team sees the project proceeding and your specific instructions for replying to the RFP.
send rFP to Vendor(s) and Get Written ProPosal resPonses Pre-qualify vendors in advance that their system provides the functionality you are looking for. Create a short list of three to four vendors if at all possible. Dealing with a larger number, answering questions, and judging which to invite for demonstrations will be unmanageable for a larger group. Set up an Excel spreadsheet to compare vendors’ responses side by side. Set up another spreadsheet with all the categories of cost and compare the bidding vendors. Allow three to four weeks for vendors to fully answer and return responses.
Vendor demonstrations From the side by side vendor comparisons of functionality and costs, determine which vendors to contact and schedule for demonstrations. We would keep that number initially to the two or three that best serve your requirements. We believe the best way to conduct the demonstrations is to script the demos and give the vendor time to prepare the demo with what you want to see rather than just letting the vendor demo it their way. Because of their broad range of function, OMS systems require at least six to eight hours to observe the functionality in detail. This is an area where companies typically often spend a couple hours and think they have sufficient exposure to make a decision, which is a mistake. During the demos, someone on the team needs to keep track of the observations versus the way the vendor answered the RFP. Adjust the vendor comparison with the team’s observations. During the demo there may be areas where modifications are necessary. Keep track of these and follow up in detail the modifications with narrative, screen mock ups and other descriptions. There should be a “to do” list for vendor follow up, potential modifications, questions, etc. An additional demo and follow up may be necessary to get the list resolved.
Preliminary Vendor Selection FinaliStS From the demos arrive at the two best potential vendors as finalists. Take these two through the final steps in the negotiation. This will end up with the best decision for your company. Draw up a list of questions and interview as many references as you can. Then schedule at least one site visit for a couple members of the team to businesses which are comparable to yours. We also recommend visiting the vendor finalists’ headquarters to meet the management team, interview the potential project manager that you will be working with, understand their philosophy on R&D and if there is a user group that recommends enhancements, etc. Remember generally these systems have a longer life and take eight to 12 months to install. You have expended a lot of effort; don’t shortcut these final steps.
SPeciFicationS oF cuStomizationS (aSSumed minimal) We believe that companies should do everything they can to initially not modify the systems. Modifications add risk and cost and lengthen the schedule with specifications, programming and testing. If modifications are necessary, detail the screens, reports, calculations, etc. of the necessary changes. Put these in writing, ask the vendor to prepare an estimate of the hours, dollars and time frame required. Few vendors are going to do modifications fixed price. Work with the vendor to give you a fair bid that has a certain level of accuracy unless you change the scope. Don’t sign a license agreement without understanding as best you can the costs of modification. These costs can be major. Your company and the vendor should sign off on the specifications and estimates.
imPlementation Planning As part of the RFP, ask the vendor and the team to do the best possible planning for the implementation. Most vendors will want to do the detail implementation planning in the implementation phase. We advocate doing as much as you can before the decision is made and contracts are signed. This will give you important observations and task lists of how much your process and business environment will change. This should become part of the business decision process. The objective is to identify the assumptions about what your company will be responsible for; all the processes and procedures that will change, what resources are necessary; a detail view of training process; conversion of specific files; and a realistic time frame for the project. As we said earlier, over 50% of major projects are over budget and off schedule from the original assumptions.
Final Vendor Selection
licenses, professional services, and support agreements is critical. Include all key decisions you have made including timeline, modification specifications, assumptions about services, etc.; these should all be part of the agreements.
a Word about Sign-oFFS Throughout this article we have mentioned places where vendors and the user community should sign off on deliverables, requirements, plans, etc. Since the 1970s, as general IT industry standards have evolved, sign-off on key deliverables has become a standard. It’s also the best way for you to get buy in from the management and department users.
beneFitS Most teams can come up with a soft list of benefits for moving to an OMS. In today’s business climate and with the competition for capital, CFOs we work with want to see a Return on Investment (ROI) within 18-24 months. Frankly, this is one of the hardest steps in the process. However, here are some areas to consider: } How will customer service be enhanced? Is the online, closely coupled website to OMS business system essential to growing your business? } How will the new OMS improve inventory management resulting in higher initial order fill rates, improved turnover, and reduction in aged inventory? Inventory is the largest balance sheet asset. } How will the new OMS and resulting process reduce labor costs in the call center and fulfillment centers? Eliminating process steps and touching product less times decreases costs. } How can barcodes throughout all the steps (inbound product and outbound customer fulfillment) reduce costs? } How are errors reduced? Studies on errors show they cost $35 to $50 and often lose customers in the process so you lose the Life Time Value forward. } What are the merits of the technology being proposed? Does it allow you to adopt other alliance partner applications and websites that are not possible? Is the change out necessary because expense and difficulty of supporting aging technology, databases and languages? p
Curt Barry is president of F. Curtis Barry & Company, a consultancy specializing in multichannel operations & fulfillment. Services include systems selection and implementation, improving fulfillment operations through cost reduction, benchmarking, process improvement and layout and design. He can be reached at 804.740.8743, www.fcbco.com, cbarry@fcbco.com.
Evaluate the total picture — the total cost of ownership, the fit of the system, what the vendors’ customers say about their support, and observations from site visits, etc.
Vendor negotiation and contracting We believe that an attorney that specializes in intellectual property law should review the agreements. Review of software november-december 2012 | www.PARCELindustry.com
23
: e s l u P Freight s y a w a e k a T y e K l e c r Pa
tructive remain cons rs e p ip h S y. int’l econom parcel air & tlook on the d u n o a le il b a ta R s y. a slightl reflect . to decelerate gains ahead urvey results g s th in w ’s c y ro ri g le p n e in ta m S n el volu leratio Morgan uck and parc ers see dece tr p t ip c h e s p x k e c u e tr il g, while on rail, wh rating pricin le e c c a t c e p shippers ex ley Morgan Stan 2 1 0 2 t h g Copyri
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NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com
Editor’s Note: PARCEL would like to thank Morgan Stanley for allowing us to reprint part of the following survey. The results are a must-read for any shipper. For the full survey results, including disclosures, please scan the QR code at the end of this article, or go to www.PARCELindustry.com and check out our content library.
1. Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l
3. Shippers Indicate Increased B2C Shipments, a Negative for Mix
2. Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l
Some key takeaways from Morgan Stanley’s recent survey are: Parcel Volumes: Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l Pricing: Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l B2C Shipping: Shippers Indicate Increased B2C Shipments, a Negative for Mix Product Mix: Product Mix Shift From Premium Services To Standard Ground Shipping Continues Competition: Carrier Switching Falls Across Segments
4. Carrier Switching Falls Across Segments
Please note that materials that are referenced here are intended for informational use only, so please do not forward the content contained herein. If you should have a need to use/share the materials externally, please contact Amanda Armendariz, RB Publishing. Additionally, MS and RB have provided their materials here either through agreement or as a courtesy. Therefore, MS and RB do not undertake to advise you of changes in the opinions or information set forth in these materials. You should note the date on the presentation.
For full survey results, scan this QR code or go to the content library on www.PARCELindustry.com. NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com
25
“Another outstanding event with up to date and pertinent content!“ Jeff Stevens | Logistics & Distribution Manager | MasterTag
25% of attendees ship 100,000+ packages per month and 9% ship more t
Still Cool After 10 Years… The 2012 PARCEL Forum was our best yet — what a fitting way to say “good-bye” to the Hyatt Regency O’Hare, where we’ve had the conference for almost 10 years. In 2013, forum attendees will be heading to the Hyatt in downtown Chicago for the first time ever, and while we’re definitely excited for that (and, from the sounds of it, our attendees are as well!), it seems like it will be hard to top this year’s show. We’re always a bit nervous leading up to a show — after all, anyone who’s ever attended a trade show (or put on one!) knows that there are multiple things that can go wrong. Sessions can flop, speakers can pull a no-show... the list goes on. Luckily, our forums have been a hit with attendees, vendors, and speakers alike for the last decade, and this year was no different. The sessions all rated highly, the exhibit floor was hopping, and our networking receptions and special events (like the wonderful FedEx hub tour we were taken on) were a hit. As editor of PARCEL magazine (and the managing editor before that), I’ve been attending the PARCEL Forum since 2006. People sometimes ask me
By Amanda Armendariz
if I mind traveling to the forum as part of my job. Honestly? I don’t mind it one bit. I truly enjoy the networking receptions — it’s so gratifying to chat on a personal level with people who share a professional interest (not to mention the fantastic food, drink and music that are always present at these events!). I enjoy seeing what sessions are the most popular among attendees, since that helps me judge if my editorial compass for PARCEL is pointing in the right direction. I love seeing all the attendees — some are familiar folks who return year after year, and others are newcomers who have heard great things about our show and want to check it out for themselves. And most importantly, it’s immensely satisfying being a part of an event that is considered such an educational resource for so many in the small shipment industry. So it’s a relief to be able to say that, once again, we put on a great show — and now it’s time to start planning next year’s! See you October 7-9 in downtown Chicago!
None of this would be possible without the support of our corporate sponsors:
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“There was a lot of good, relevant content to many of the presentations. They sparked some good ideas that I plan to incorporate into our program. Meeting my peer group was perhaps the most valuable thing about attending the conference. It was good to network and compare notes with other programs. Overall, it was a great event, and I plan on attending next year.” Mark J. Taylor | Sr. Transportation Analyst-Parcel | Lowe’s Companies, Inc.
han 1 million a month; 89% of attendees indicate they ship internationally. “Best PARCEL Forum EVER!” Harold Friedman | SR. V.P. Global Corporate Development | Data2Logistics
PARCEL Forum ’12 Vitals 489 verified attendees 306 exhibitor personnel 72 exhibiting companies
november-december 2012 | www.PARCELindustry.com
27
spotlight
Buyers’
wish list
2013
Flats Manager the Bell and howell FlatsMgr solution automates the task of sorting outgoing or incoming flat mailpieces using the most efficient technology available on the market today. this system can displace the need for manual processing or less efficient flat mailpiece processing while increasing the quality and traceability of each mailpiece. Bell and Howell marketing@bhemail.com 800.220.3030 www.bellhowell.net
A look At the products you wAnt
Print, Mail, Ship, Track! For over 30 years, harte-hanks has been the vendor of choice to leading retailers for reliable, quality mail services. whether printing personalized mail, all styles of direct mail, to supply chain, logistics, to tracking software, harte-hanks has the capability, equipment and services to handle all your mailing needs.
Packaging Made to Order – At the customer facility packaging is rarely the right size for organizations that ship a very diverse and ever changing set of products. with Box on demand any size box can be made in seconds to match the item(s) to be shipped.
Harte-Hanks, Inc. contactus@harte-hanks.com 800.456.9748 www.harte-hanks.com/page /mailingservices_marketing
Box on Demand rmorse@boxondemand.com 269.964.7181 ext. 123 www.boxondemand.com
Yup! We can deliver that.
Global Transportation Management
} can dunham express deliver a 50 lb package at a 5 lb rate? } can dunham express offer extended next day service ? } will dunham express cut your regional shipping costs by 10-40%? Guaranteed! Dunham Express 608.242.1000 www.dunhamexpress.com
Get more visibility and control of your shipping operation. designed to help your organization manage logistics more efficiently, sendsuite live provides web-based services that allow the flexibility and power to effectively plan, route and manage shipments to provide a balance of service and cost reduction. Pitney Bowes 203.482.3306 info@pbsendsuitelive.com pb.com/sendsuitelive
Package Audits Control Costs.
InsiteShip: Shipping for Manufacturers & Distributors
Control your costs and save your company money with the most advanced and comprehensive parcel audit program in the industry. CTrak’s proven benefits include a complete automated Global audit and duplication prevention audit of all Freight and Parcel Costs, Reduced Shipping Administrative Expenses, and applied Accounting and Customized Reporting.
The leading provider of enterprise shipping software serving manufacturers, distributors, and retailers, InsiteShip automates repetitive and challenging shipping tasks and eliminates costly errors. InsiteShip includes robust shipment planning tools such as rate shopping, pick and pack options, customer-specific labels, automatic email notifications, and automated international and hazardous materials documentation.
CT Logistics sales@ctlogistics.com 216.267.2000 ext. 2015 info.ctlogistics.com
Insite Software Smcneil@insitesoft.com 866.746.0377 www.insitesoft.com/ products/ship
MOO-VING THE RIGHT INVENTORY OUT THE DOOR
Lower the Cost of Fulfillment and Delivery
Do customers accidentally receive expired products or request last minute order changes? Too many shipping errors? Need visibility to inventory? Interlink Technologies can solve these problems and more with Warehouse Link (WHSe-LINK) WMS. To contact Interlink, call 800.655.5465, visit www.thinkinterlink.com or stop by ProMat 2013 Booth #3579.
ParcelMgr from Bell and Howell lowers the cost of parcel fulfillment and delivery by automating the tasks of reading, weighing, labeling and sorting parcels or flats. The fully automated system can handle the majority of parcel and flats postal pieces at speeds up to 5,000- 7,000 parcels per hour.
Interlink Technologies 800.655.5465 www.thinkinterlink.com
Stamps.com PC Postage … now with postage invoicing! Boasting the most reliable technology, award-winning support, and new USPS postage invoicing, Stamps.com is firmly positioned as the leader in online shipping. call or email us today to find out how more than 400,000 Stamps.com subscribers save time and money using Stamps.com and the USPS. Stamps.com Shipping Solutions 888.927.8267 shipping@stamps.com www.stamps.com/parcel
Bell and Howell marketing@bhemail.com 800.220.3030 www.bellhowell.net
IN THE NEXT ISSUE…
SOLUTIONS
FOR YOUR WAREHOUSE AND
MATERIAL HANDING
Parcel COunSEL By Brent Wm. Primus, J.D.
the new Highway Bill and transportation Broker surety Bonds n August of this person pays an annual premium, howyear, President Obama ever if a loss occurs the insurance comsigned a new Highway pany does not have the right to seek Bill — “Moving Ahead reimbursement from its insured — that for Progress in the 21st would defeat the purpose for which Century Act” aka MAP- the person bought the insurance. With 21. This 584 page document that in mind, insurance premiums are deals with many issues. In this set by an insurance company so that installment of PARCEL Counsel over time the amount of premiums colwe will focus on just eight pages lected from its customers are suffirelating to transportation brokers and cient to cover the claims paid out by the freight forwarders. During the legisla- insurance company. With respect to companies issuing tive process this was referred to as the “Fighting Fraud in Transportation Act of surety bonds, they know that although 2011.” The most controversial part of this they have the right to seek reimburseportion of Map-21 is the increase in the ment from the broker for repayment of amount of a broker’s surety bond from $10,000 (set in 1937) to $75,000. As a starting point, I would like to explain what a surety bond is and how it differs from insurance. A surety bond is intended to serve as any amounts the surety has to pay out. a financial guarantee whereby one entity, It is also understood that this right is of known as the surety, guarantees the little value since the claim against the financial performance of another, known broker would not normally arise if the as the principal. With regard to transpor- broker was financially solvent. Thus, tation brokers, the purpose of the bond the surety companies may require colis to provide a source of payment to car- lateral to secure their potential liabilriers in the event the broker fails to do ity for paying claims against the bond. so. The surety charges the broker an The amount of collateral required can annual fee for the bond. If the surety has range from none at all to 150% or more to pay the motor carriers, the surety has of the face amount of the surety bond the right to seek reimbursement from the depending upon the financial strength principal, i.e. the broker, for the amounts of the broker. This aspect of a surety bond is what paid out as the result of the failure of the has caused the controversy. Shippers broker to pay the carriers. This is very different than when one and motor carriers have long advocated purchases insurance. With insurance, a for an increase in the bond amount. Over
the years the brokerage industry has resisted this change because, amongst other things, of the fear that it would lead to the demise of smaller brokers. With the increase of the bond amount of $10,000 to $75,000, the amount of collateral that could be required becomes very significant. What small company has an extra $75,000+ in cash to post for a bond? The new law also extends the requirement for a surety bond to freight forwarders who were not previously required to have a surety bond. My understanding of why the bonding requirement is now being extended to freight forwarders is that, if not done so, existing brokers would simply cease operating as brokers and begin operating as freight forwarders to avoid the bond requirement. It should also be noted that although the new law has passed, it is not to become effective until one year after it was passed, that is, August, 2013. In the meantime, the Federal Motor Carrier Safety Administration (FMCSA) has been directed by Congress to write regulations to implement the provisions of the new law. p
In the next installment of Parcel Counsel we will continue our analysis of the Fighting Fraud in Transportation Act of 2011… but, all for now!
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november-december 2012 | www.PARCELindustry.com
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the Parcel website (parcelindustry.com). Your questions are welcome at brent@primuslawoffice.com.