PARCEL SHIPMENT Heading Full Steam into 2014
NOVEMBER-DECEMBER 2013 www.PARCELindustry.com
The small
Our readers rate the carriers: How do UPS, FedEx and USPS stack up? Page 20
INDUSTRY
What on earth is going on in retail delivery? Page 16
Doing it right and doing it undaunted! Page 26
Do-it-yourself international shipping:
conTenTS Features
november-december 2013 | volume 20 | issue 7
Parcel Departments 08 Going Global By Tom Stanton
Exporting to Mexico, Part I
09 Transportation Abcs
Online Shopping Carts as Shopping Lists: Not Abandoning, Just Browsing By Brittany Beecroft
10 LTL Insights By Steve Pollard
LTL Rate Agreements
11 operational efficiencies Oh Where, oh Where, Can My Inventory Be… By Susan Rider
20 our readers rate the carriers
In the parcel arena, there really isn’t one clear winner—all carriers have their strong points. But here’s how our survey respondents rate the top three carriers on a variety of factors.
12 Spend Perspectives It’s That Time of Year By John Haber
By Amanda Armendariz
13 regional Alternatives Revisiting High Tech and High Touch By Ted Kauffman
14 Ship right
Sharpening Your Inside Game By Karen D’Andrea
16 Supply chain Pivot By Rob Shirley
What on Earth Is Going on in Retail Delivery?
24 2014 outlook
Don’t let the dirty little secrets of freight payment from 2013 catch up with you next year
26 do-it-Yourself
18 Guest column: Impb Updates Another Great USPS Innovation: IMpb. Are You Ready? By Jim LeRose
By Doug Kahl
International Shipping: doing it right and doing it Undaunted! By Stephanie McNeil
28 PArceL counsel 30 Wrap Up
Contracts & Conflicts By Brent Wm. Primus, JD
Free Shipping... Real or Not By Michael J. Ryan
4
november-december 2013 | www.PARCELindustry.com
PARCEL president chad griepentrog publisher marll thiede editor amanda armendariz
[ amanda.c@rbpub.com ]
circulation director rachel chapman [ rachel@rbpub.com ]
marketing cierra bauer creative director kelli cooke advertising ken waddell
[608-442-5064 ] [ ken.w@rbpub.com ]
Josh Vogt [ 785-320-7950 ] [ josh@rbpub.com ]
2901 International Lane Madison WI 53704-3128 p: 608-241-8777 f: 608-241-8666 www.PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2013 Š by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/ or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualiďŹ ed recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949-702-5390, www.ReprintPros.com.
EDITOR’S NOTE AMANDA ARMENDARIZ
The Holiday Shipping Rush Are you signed up for our e-newsletter? s we head into the holiday shopping season, I’m reminded of how grateful I am for the prevalence of e-commerce and fast, free shipping. As of the time of this writing, it’s not even Thanksgiving, and I have probably 80% of my holiday shopping done, and I’ve never even set foot in a store to do so. While I admit I kind of miss the holiday sights and sounds of the stores at the holidays, I definitely don’t miss the 20-minute drive around the parking lot to find a spot closer than a mile away, or trying to maneuver my shopping cart through the crowds without hitting other frazzled shoppers. And I am grateful I don’t have to perform the sleight of hand that is required to stealthily grab the desired toy from the shelf and shove it under something else before my ohso-perceptive almost-four-year-old daughter sees it (luckily her two-month-old brother is a lot easier to shop with, since he’s rarely awake!) Quite frankly, I’m not sure how my mother did it in the pre-Internet age (she somehow managed, of course; I don’t think we kids ever knew what we were getting ahead of time, even though we were often with her when gifts were bought!). It’s so nice to browse Amazon or some other site during the kids’ naptime, read the reviews to see what toys are best received, select which ones will make Christmas the most magical at our house, and have them show up on my doorstep two or three days later. Yes, e-commerce is definitely a huge time-saver in my life; anything that allows me to spend more quality time with my kids is a win with me. But what so many consumers don’t realize (and I admit, it probably wouldn’t cross my mind if I wasn’t the editor of PARCEL) is that free shipping is not free for the companies doing the shipping. There is, naturally, a cost to shipping, and if consumers aren’t paying for it, then the companies are. But yet companies often can’t afford not to offer free shipping, since many consumers consider free, fast shipping a dealbreaker. So what’s a shipper to do? That’s why PARCEL has been focusing more and more on the e-commerce aspect of things this year, and will continue to do so in 2014. With free (or inexpensive) shipping now a staple in many consumers’ minds, shippers are going to have to adapt to this shift in mindset. Michael J. Ryan does a great job of touching on this free shipping phenomenon in his Wrap Up column of this issue, so don’t miss it. I hope everyone has a wonderful (parcel-filled) holiday season, and we’ll see you in 2014! As always, thanks for reading PARCEL. If not, what are you waiting for? As of press time, these were some of our most popular articles from recent e-newsletters: Help! I’m Hazardous! Carrier Surcharges and Federal Fines How Does “FedEx One Rate” Compare to USPS Flat Rate Products? 2014 UPS Rate Analysis Announced To get great articles like these emailed to you on a monthly basis, just scan the QR code above, or go to www.PARCELindustry.com and click on the “Newsletter” tab a the top of the page.
Tuesday’s Tip
Have you signed up for our Tuesday’s Tip feature yet? If not, you’re missing out on some great information emailed to you every week! Don’t worry, we know you’re busy, so these tips are brief and easy to read — but yet much-needed information for any transportation professional! All you need to do is sign up for our e-newsletter and you’ll get this information emailed to you every Tuesday.
CONNECT WITH US Like us PARCEL FOLLOW @PARCELmedia Join PARCEL Magazine Group
6
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
going Global By tom stanton
exporting to Mexico: part 1 ast month I met a marketing manager of a company specializing in equipment for water management. She commented that many US companies are “reshoring” because they have found that some Chinese companies consider US copyright and patent laws to be of “no consequence” and that costs of manufacturing in China are increasing. two companies that offer to assist you with all phases of manufacturing in Mexico – one is called “TACNA” (http://tacna.net/) and another is called “Made in Mexico” (http://www.madeinmexicoinc.com/). } Complete name and address of buyer or importer in Mexico } Complete name and address of exporter } Detailed description of the merchandise } Brand name, model, marks, serial numbers, manufacturers, weight; etc; } Unit value and total value of each item listed on the invoice and harmonized tariff number } Signature of seller, name and position } Shipper's invoice number and customer's order number b. Packing list: Required when more than one item is shipped, and should include: } Number of packages } A detailed list of the merchandise contained in each package } Net, gross and legal weight/volume in metric equivalents of each package and of the total shipment
Mexico Manufacturing less expensive than china: “Mexico's hourly wages are
other resources: Other resources you might check into are the US freight forwarders or the Mexican consulate. Most large forwarders such as DHL Global, CH Robinson, Panalpina, or CEVA have services to and from Mexico similar to those they offer for China. Mexican consulate offices have information to promote sales of Mexican products and importing into Mexico. How can a Maquiladora program help with manufacturing in Mexico?
about a fifth lower than China's, a huge turnaround from just 10 years ago when Maquiladora prograM-duty free they were nearly three times higher," Manufacturing: What does maquilladora according to new research by Bank of mean? The operational meaning is a factory America. The fastest ocean transit time or assembly plant established and operfrom China to the West Coast is approxi- ated in Mexico to encourage the developmately two weeks or three weeks to the ment of industry in Mexico. The Mexican East Coast and generally longer with government allows materials to be used in slow steaming to save on fuel. The tran- “maquilas” to enter duty-free, provided the sit time from Mexico City to New York is finished product is exported from Mexico. approximately five days and four days to The US assigns these maquila products a Los Angeles. Many manufacturing facili- zero duty rate if the finished product meets ties are just across the border and able the provisions of the US Harmonized tariff to deliver to most of the US in three days. schedule. What documentation is needed? So, shipments that currently move LCL from China are decidedly less expensive Basic docuMentation: The basic guidewhen imported from Mexico. So what line for exporting to Mexico is to prepare would it take to begin manufacturing in a commercial invoice and packing list Mexico? The first step is to find a vendor. along with a Spanish translation. Here are some guidelines for an export invoice profinding a vendor: Just like manufac- vided by the Mexican government: turing in China, the basics require a company in Mexico that has the ability to a. CommerCial invoiCe: The invoice must contain the following information: produce the products you have designed and manufactured in the US. We found } Place and date of issuance 8 november-december 2013 | www.PARCELindustry.com
suMMary: Manufacturing in Mexico is now less expensive than China and transportation costs are decidedly less expensive, particularly for the shipper of smaller quantities which currently move via LCL shipping from China. Finding a vendor/ manufacturer or establishing your own plant is the first step. Two companies that can assist in setting up a Maquiladora or contract manufacturers are listed. Freight forwarders and the Mexican consulate can also be of assistance in exporting to Mexico. Export documentation to Mexico is similar to that for any other country plus a Spanish translation. Next time we will take a closer look at finding a vendor and NAFTA compliance in “Exporting to Mexico part 2.” toM stanton, aFMS, llC, International analyst can be reached at 503.246.3521 or Tom.stanton@aFMS.com.
transportation ABCs By Brittany Beecroft
online shopping carts as shopping Lists: not abandoning, Just Browsing omscore reports 88% of consumers abandoned their shopping carts in 2013 — up seven percent from 2012. We can easily categorize the reasons consumers say they abandon their carts into two segments: shipping costs and delivery dates. Consumers want it fast, and they want it shipped for free — and they want to know early on in their ordering process if either of these two options is not available. Over 50% of consumers rank upfront transit times and shipping costs (knowing how long it will take and how much it will cost before they enter all their information) a pivotal consideration for online purchasing. So we have the research to show why consumers say they will abandon their carts, but do their words match their actions? What was once considered abandonment is now merely part of the overall decision making process for many online buyers — and a potentially lucrative opportunity for retailers to remarket for revenue. Ninety percent of conversions generate through familiarity — site visitors you already know or already know you (conversion being the shift from online browsing to putting items in your cart). SalesCycle.com shares that within that 90%, 26.8% made the conversion via email, and 30% came directly to your site (instead of being routed through social media or an online search). These numbers tell us consumers who know your brand, either through direct purchase or email, are most likely to abandonment as window shopping/conconvert when they get to the shopping ferring/researching/buying. Once retailers cart. Because the probability of com- think in terms of carts being permanent plete conversion (actually purchasing and dynamic (abandoners will spend over the items in your cart) is not consistently 50% more when remarketed) they can high, ecommerce retailers must target establish a remarketing program to genconversion at a more immediate level — erate additional revenue. Salescycle.com capturing the email address. Incentivize states every single cart abandonment your prospects with coupons, discounts, email sent delivers over $6 in revenue. and free shipping in exchange for that Remarketing emails should come in real email address. Two out of every three time, within the first few hours of the cart email clicks put items in your cart and being abandoned. Higher value carts have puts your brand in front of the consumer. higher abandonment rates, as the conShipping costs and delivery dates are sumer takes longer to research expensive key indicators for abandonment, but cart merchandise. Remarketing to this convalue and size cannot be overlooked. sumer shows your brand’s social voice When consumers must pay for ship- — please continue to research your item ping, lower value carts see more frequent and, when you are ready, come back to abandonment. We cannot mentally/emo- our site to purchase. Remarketing occutionally/financially justify paying $12.95 pies consumers’ mental real estate; supto ship a $17.99 item. The shipping cost port the customers with service, not sales, is 72% of the item value. There is true to remarket for revenue. p cost to free shipping, and it is cost retailers of lower value items cannot always absorb or offset. Consumers are open to Brittany Beecroft, MBA, is Manager of Parcel paying for shipping online, as the reason Services for AFS. In her position, she manages and they are online is so they do not have to oversees parcel cost management and RFP progo to the store, so they understand and cesses for the purpose of negotiating and retaining accept convenience sometimes comes best-in-class client-specific pricing. Brittany also with a cost. But the cost has to make provides training and guidance to sales and the sense or conversion spirals down to support staff to manage and support best-in-class abandonment. The ratio of the shopping parcel cost reduction and optimization services. cart to the shipping cost for lower value Prior to joining AFS, she spent 12 years as a Pricing items should be below 30%. Ideally it Analyst at FedEx, analyzing over 5,000 agreements. should be below 20%, but we must fac- She consults regularly with some of the largest tor the minimum net package charge shippers in the world and is a sought-after speaker from carriers — and the opportunity to and consultant. reduce it — as well as the ability to pass through uncontrolled costs such as the Residential Delivery Charge. Ecommerce retailers must view shopping carts as permanent wish lists, and november-december 2013 | www.PARCELindustry.com 9
LTL InsIghts By Steve Pollard
LTL rate agreements his month in our series of articles on the LTL industry, we will be discussing the Rate Agreement. Now that you understand important operational topics such as Pickup and Delivery, Line haul, Dock operations and carrier networks this will be the next, and very important, step to ensuring you have a sound and financially effective LTL network. Important topics that will be covered are what an LTL rate agreement includes, why you need one, what you should look at in negotiating your rate agreements, as well as how to determine the best LTL carriers (who to make your rate agreements with) for your business. Although cumbersome and sometimes difficult to understand, LTL rate agreements provide you pricing based on your specific shipping profile. Most rate agreements will be structured on a specific rate tariff. While most carriers have and publish their own tariffs, you can also request they use a non-carrier specific tariff, which can be beneficial when using multiple carriers. The carrier will then appoint a discount percent off the published tariff pricing. Agreements may contain one standard discount, several different discount levels spread among different states/regions, or even lane specific discounts. The agreement will also contain any other information such as minimum charges and NMFC Classification exceptions (FAKs). Having a rate agreement in place with your LTL carriers is essential for many reasons. First, without a rate agreement, you will be forced to rely on current, market level pricing that can vary greatly with both shipping demand and carrier capacity conditions. This will create a financial strain as you will not be able to accurately forecast your transportation budget. Also, your biggest loss often will be in the time spent procuring capacity and rates from carriers. Further, it will be nearly impossible to perform baseline analytics to determine the impact of a general rate increase or changes to ment but you must first have the data to understand your desired outcome. Selecting the right LTL carriers can be an important decision as well. Generally there are three types of LTL carriers: national, regional and inter-regional. Depending on your shipment profile you will want to select the carriers that best match your shipping needs. It is fair to say that no two LTL carriers are operationally the same, but the end result for each carrier is to ship your freight from A to B by the most economical means. Therefore partnering with the carriers that most reflect your shipping needs will not only provide the desired level of service but will enable you to attain the most competitive pricing available. Understanding your LTL shipping profile, partnering with the right LTL carriers and having a carrier’s pricing structure. Lastly, rate strong LTL rate agreements in place will agreements can protect you from erro- give you the visibility and advantage you neous charges and give better insight to need to create an exceptional LTL shipping network. p your LTL shipment costs. Negotiating a LTL rate agreement can be very challenging unless you have detailed shipping data and a solid understanding of STeve PoLLard is transportation Project Manager the rate tariff being used. Having data that with enVista, a leading supply chain consulting and includes both weight and class will enable It services firm specializing in freight audit/payment both the carrier and yourself to understand and carrier contract analysis/negotiation services that delivers significant transportation savings to their proper discount levels. The most imporclients. steve has 14 years of experience in transportant thing to understand when negotiating tation sourcing and specializes in conducting freight an LTL rate agreement is that the more a rate and cost analysis and RFP engagements. steve carrier understands your shipping profile, can be reached at spollard@envistacorp.com. For the better pricing they will be able to pro- more about enVista and their transportation services pose. In the end, there are many strategies visit our website at www.envistacorp.com. in negotiating a strong LTL rate agree-
the most important thing to understand when negotiating an LtL rate agreement is that the more a carrier understands your shipping profile, the better pricing they will be able to propose.
10
november-december 2013 | www.PARCELindustry.com
OperatiOnal EfficiEnciEs By SuSan RideR
Oh Where, oh Where Can My inventory Be…. nlike record- and its whereabouts.” Taking that coning artist J. cept a little bit further, that software Frank Wilson could be intelligent and source for the singing the customer their items on some set of rules Last Kiss, like closest facility, closest facility with I do think complete order, closest facilities that some ware- will accommodate fewer separate packhouse profes- ages in shipping, etc. Or if the software sionals are singing could talk directly to the website, when that tune over inventory. the customer orders it could confirm While inventory is still a frequent problem exactly where the product is and when it with many, it would appear with the focus would be delivered with configured shipon Omni-channel it is going to become an ping cost. It’s that sort of software that even bigger problem. My projection is the will separate the little guys from the big company that can source, procure and boys in the future of ecommerce. balance demand and supply will end up Inventory cost is in the top three operaa winner in this future decade of same- tional costs within the supply chain, usuday delivery. When many are still work- ally following labor cost as a rule of thumb. ing on their inventory accuracy numbers The focus has always been on invenwithin the four walls of the warehouse, tory to some extent but with the growth others are forming an umbrella of tech- of ecommerce and the emergence of new nology over their entire supply chain to buyer demands, it has become the focus. give them a competitive edge. When your inventory levels are off or If your warehouse management sys- actual inventory doesn’t match the “book” tem is archaic or obsolete and doesn’t inventory, customers are disappointed. A give you the flexibility or advantage of disappointed customer may never come integrating to other systems controlling back to your website or, worse, with the inventory, it may be time to look for some- open conversation networks available he thing that will give you that advantage. or she may tell the world how bad you are The good news is: warehouse manage- at customer service. ment and distributive order management In the past, many only had to worry software has matured. It’s getting easier about the distribution centers and that to use and easier to implement. Recently, will seem somewhat rudimentary with the at a supply chain conference at Bryant convergence of in-store shipments and University, an online jewelry retailer was pick up in-store deliveries. It’s hard to telling their story; going live with a WMS imagine some retailers being able to hanin the cloud in less than a week and ship- dle shipping from store when they can’t ping orders with the system in three days! even get product from the stock room At the recent PARCEL Forum, a practi- to the store shelf to sell. Synchronized tioner said to me, “I just need a piece of inventory across all your supply chain is software to sit on top of all the other sys- harder to achieve than it sounds because tems that has a holistic look at inventory many times there are disparate systems running certain aspects of the network. Can it be done? Absolutely! Is it easy? No Prior to the boom of online commerce in recent years, some companies had the vision and were already implementing systems that would give a holistic view of all inventories. Back in the late 90s, Amazon was already building a distributive order management system that would make intelligent decisions. Today that system has become even more robust as evidence of Amazon’s ability to execute. Where do you start in evaluating the strength and abilities of your software? It may make sense to start with the most costly pain point and then work your way through every functional area in every facility. Make a list of all problems, opportunities and talk with your current software provider to see if they have developed any functionality to alleviate or to correct the items on your list. If your current software provider is coming up short or has decided not to support your current version of software, this is a red flag and puts your supply chain at risk. Technology is the driver to success and profitability in today’s economy. It is a tool to assist in making your supply chain more efficient and more accurate. If you don’t have the right tools now is the time to evaluate your alternatives. If your current software provider is okay but they don’t offer Distributive Order Management then look for bolt on systems that will provide you the functionality to achieve Omni-channel distribution. p
SuSan rider is Owner, Rider & Associates and Logistics and supply chain consultant, as well as a popular speaker at the PARcEL forum. she can be reached at susanrider@msn.com. 11
november-december 2013 | www.PARCELindustry.com
Spend PersPeCtIves By John haBer
It’s That Time of the Year he holidays will be here before you know it and so will 2014. Most companies are busy working on budgets, forecasts and tactical and strategic plans. Like most people I dread even the thought of these activities — until I sit down with my team and again realize how important the planning process is to effectively manage business. The reality is that the planning process never stops — it’s a cycle that evolves from day to day and month to month. The overall global economy doesn’t stand still — new technologies are developed every day and a well-oiled planning process differentiates winners from losers. In October I had the pleasure of speaking at one of the advanced sessions at PARCEL Forum. PARCEL Forum is always a great opportunity to network, see old acquaintances, entertain customers and develop new relationships. But what I enjoy the most about PARCEL Forum is the opportunity to learn. Similar to previous years, I always want to ensure that the material I present is thought provoking. I want people attending to leave the session and feel that it was valuable and that they learned something new or at least refreshed a concept that had been temporarily left behind. And while the terms, words and perhaps even model I presented are fundamentally basic to every supply chain, the proper application of these principles is elusive to too many organizations. Too many companies operate their supply chain in a static environment — a supply chain is a dynamic environment, one that needs to be managed fluently on a daily basis. This is the model I presented — it revolves around four core principles that help maximize supply chain efficiencies. The first step is all about gaining visibility. Gathering data into a centralized location so that the foundation is built and the following three steps can be implemented. Businesses can’t even start the planning process without having the proper data. We frequently see customers with poor planning processes as a result of not having the visibility and data they need to develop the best plans. The second step and often the most difficult principle to implement is achieving transparency. Now that we have all of this data what does it mean? How do we effectively analyze the information to best understand our business and our competitors? How do we develop short-term and long-term strategies to grow our business if we don’t have the people and processes in place to make the information transparent? Nailing strategy is the third wheel in the cycle. We have visibility, we understand the information but are we spending enough time properly strategizing? We always tell our clients and potential clients the following; “There are two critical facets to every engagement. The first is determining if there are opportunities for improvement and where they lay. The second and often more difficult facet is developing the strategy that provides the best scenario for us to execute on the opportunity.” Executing precisely is the fourth principle. We’ve gone all the way through the process, developed a sound strategy but we ultimately failed due to poor execution. Ever heard that explanation? We see it too often — brilliant plans, just poorly executed. The timing is off, new challenges arose, we had to cut back spending and just didn’t have the resources — all are reasons for poor execution. And in many cases the reasons are valid — but successful organizations overcome these challenges. They have contingency plans in place as a result of a robust planning process! As I mentioned earlier, the four core principles are the fundamental basics to optimize any supply chain. These principles must be a routine you live and work by and a model you use to run your business. It’s a continuous cycle, a process you need to live and breathe on a daily basis — not just once a year when budgets are due. p
John haber is an expert in shipping, freight and transportation spend management. In his current role he provides the vision, and the execution know-how, that helps companies save 10% to 20% or more in logistics spend. Contact him at jhaber@spendmanagementexperts.com.
12
november-december 2013 | www.PARCELindustry.com
Regional AlternAtives By Ted Kauffman
Revisiting high Tech and high Touch It’s no surprise that shippers continue to value good pricing, high quality, and superior service as key criteria when selecting a carrier. And it’s no surprise that the regionals have always provided lower costs and more flexible, personalized service. But what most shippers still don’t realize is that the leading regional carriers are now at the same level of technology as the industry giants. Real-time scanning? Check. Online tracking? Check. Automated sorting systems? Check. In fact, in some instances, regional carriers actually offer technological advantages. An example is timelier online management reports, with POD information, provided the same day as opposed to next-day, which is the case with UPS and FedEx. The upshot of all this advanced technology is that regionals guarantee on-time and intact service that is second to none. every time they call. So, yes, the cliché about being treated like a person, not a number, is true. The high-touch approach continues throughout a shipper’s experience. This is characterized by the willingness of regionals to offer customized solutions to meet individual needs. For instance, special provisions for the delivery of products that may be fragile or may require very early or very late pickups and deliveries. patients receiving this therapy needed to remain in an in-patient facility for the duration of the treatment. However, it became apparent that this strategy was cost-prohibitive, and it hindered patients’ lifestyles. Today, infusion therapy is increasingly being provided at home, and more and more suppliers are fueling this segment’s growth. The challenge? How to safely and responsibly ship these precious products to patients’ homes. The fact is that many of these patients are elderly and infirm, and they need specialized care…in this case depending on drivers to go “over the threshold” and hand off the package inside the dwelling. Regional carriers will do this. National “drop and run” services will not.
healThcaRe DeliveRy Takes on new meaning While all industries have time-sensitive needs, the healthcare industry provides a stunning example of how flexible shipping arrangements can make a big difference… sometimes even saving a patient’s life. In the mid-‘90s, Eastern Connection identified the need for a 24/7 service dedicated to healthcare logistics for hospitals, physician groups, long-term care facilities, and prisons. We launched our Medical Division as an extension of our established overnight priority service to help medical professionals transport blood and other specimens that require prompt and secure delivery to labs for testing. Deliveries also included medical equipment and instruments that require special care during shipping. More recently, we have expanded our Medical Division to offer customized home infusion therapy shipments, a service that continues to grow to meet rising demand. Some quick background on the booming business of infusion therapy, which typically involves using an IV to administer fluids and medication. Originally,
Tech anD Touch Takeaway Perhaps it’s time to diversify your portfolio of carriers and check out the regional alternative. Perhaps it’s time to insist on a carrier that “goes the extra mile,” whether it’s going over the threshold or going to an office or a home even if airports are closed. Certainly, the “Davids” in our business will never replace Goliath. But the regionals are now at a point where we can do just about everything the giants can do. Sometimes, we “out-tech” them, and at all times, we “out-touch” them. In short, we can do more…for less. p
Touching The cusTomeR Of course, personalized service has always been a hallmark of the regionals, and today this has even greater significance with the need for more specialized deliveries. While it may be hard to quantify the advantages of personal service, there are many tangible benefits. It starts from the minute a shipper places a call and discovers there’s no wait, no computer instructions; rather, a reallive customer service representative is on the line ready to serve — and for many customers, it’s the same professional
TeD kauffman is Chairman of eastern Connection. Founded in 1983 and based in Woburn, Mass., eastern Connection, with 17 locations, is the largest regional parcel carrier on the east Coast, covering over 5,000 ZiP Codes. For more information, visit www.easternConnection.com. 13
november-december 2013 | www.PARCELindustry.com
ship right BY Karen D’anDrea
sharpening Your inside Game ail center and logistics managers invest so much energy creating outbound shipping processes that help manage costs, track deliveries, and ensure a great end-to-end experience. What’s new today, however, is that many organizations are creating business value by retooling how they manage the packages that arrive at their facilities. Consider this college campus in the Northeast. In their effort to show parents how well they cared for the students on campus, they implemented an automated, closed-loop process to track, manage and secure incoming parcels that offered students greater convenience, greater accountability and faster delivery. By focusing on the needs of the end recipient, they demonstrated a commitment to the quality of student life in a real, tangible, personal way — a support point that has helped increase applications to the university. While every incoming parcel is critical to someone in your organization, few companies invest in automation and workflow management to the same degree as they do in their outbound operations. But the costs can be substantial. Without an automated inbound receiving process, a series of manual processes, paper forms, and duplicate entries are relied on to move items from the loading dock, mail center or front desk to their intended recipients — a system that can easily fall victim to human error. While most deliveries are made on time and 14
without incident, some shipments fall through the cracks. And, when they do, costs add up fast. } Items may be waylaid in house. Delays in delivering goods or documents that are perishable or time-of-the-essence pose risks for organizations and their customers. } Shipped goods may not reach their intended recipients. Whether these are lost, stolen or simply misplaced, if the organization received them from the carrier, the onus is on the organization to replace them — and the costs can be staggering. } Investigating, recovering and re-delivering missing items can quickly become an all-consuming task that wastes valuable resources and takes away from other more important responsibilities. A more automated approach can ensure chain of custody and confirm that every item reaches its intended recipient. The value is not just measured by the hard costs of wasted time and lost deliveries — but also the impact it has to your internal customers. Consider the law firm where a signed contract arrives via overnight delivery but doesn’t get into the hands of the partner who needs it in court that day. Or, the business that signs for delivery of an executive’s new laptop, but fails to ensure that the laptop reaches her before she leaves for an overseas trip. In both cases, current processes fail to provide the accountability needed to ensure proper handling and delivery. In some industries, the costs of misplaced parcels can have even more dire consequences. Healthcare organizations,
for example, receive specimens, lab reports, x-rays or medical equipment on a daily basis; and delays or errors in final delivery can directly affect patient care.
Ensuring EfficiEnt, AccurAtE, timEly confirmAtion Understanding these risks, one such healthcare organization took steps to automate its approach to inbound package management, adding accountability and control to the process. Their parcel distribution team now offers a higher level of service to internal customers at a fraction of the cost, with a more efficient, accurate and timely closed-loop process. With 10 campuses and over 540,000 patients, this healthcare network’s mail center needed to coordinate deliveries to a team of 11,000 associates. Previously, inbound packages were processed through a central receiving location and in-house distribution depended on a phone-andpaper based process. Both dispatchers and recipients had to manually complete forms. The process was time-consuming and gave managers little visibility with which to monitor and track items from central receiving to their final recipients. Understanding the need to improve efficiency and accountability, the healthcare network implemented an asset-tracking solution for inbound mail and parcels — ensuring a well-documented chain of custody for assets, packages, specimens, equipment and records. Automated data recording relieved operators at the central receiving center from photocopying packing slips and manually logging information. Automated notifications streamlined delivery and issued alerts, special instructions, pick-up notices, and electronic delivery
november-december 2013 | www.PARCELindustry.com
confirmation. And hand-held scanners made it easy to track the movement of every item through final delivery.
broad range of barcode types from carriers, couriers and postal services. } system Links. You can add efficiency by integrating inbound package tracking with internal systems such as purchaseorder or accounting systems — creating a checkpoint to validate that goods were received prior to payment. If you employ locker systems for self-serve package pickup, you can integrate the delivery information to that as well. } handheld devices. You’ll want the ability to quickly and easily scan items at every step of the delivery process. Capturing and recording electronic signatures along the way provides for a complete and accurate audit trail. } Two-way interactions. Top systems support automated communications, to alert recipients of package arrivals and any disruptions in service. These can also enable addressees to advise
the mail center of special handling required during delivery, or to report damage to items received. } effective Management. Customer-delivery manifests can help to prioritize deliveries by department, delivery routes or mail stops. Built-in reporting provides real-time updates on what has been received, delivered and confirmed. Whether your desire is to cut costs, increase efficiency or provide more reliable in-house delivery to your internal customers, inbound parcel management is quickly becoming a must-have capability. Because when you improve your inside game, everyone wins. p
Tracking The “LasT MiLe:” WhaT iT Takes To succeed As evidenced above, inbound parcel management is different from outbound package management — though just as important to an organization’s success. An effective solution will automate the tracking of mail and packages even after they reach your mail center, ensuring full accountability until they are delivered to their addressees. Best-in-class systems will simplify delivery logging, reporting and prioritization for mail-center staff, and will provide recipients a variety of options for checking delivery status and location. When considering options, be sure to take into account: } disparate Barcodes. Your inbound system must be able to scan, read and track a
Karen D’anDrea is Director, Marketing for Pitney Bowes’s Distribution Solutions (PBDS). Distribution Solutions include Pitney Bowes’ complete line of inbound tracking and global logistics management solutions. She can be reached at karen.dandrea@pb.com.
november-december 2013 | www.PARCELindustry.com
15
SUPPLY CHAIN PIVOT BY ROB SHIRLEY
What on Earth Is Going on in Retail Delivery? n the October issue of product value for this? Shutl acts as a been compared to Coke and Pepsi. DHL was not able to weather the battle against of PARCEL, we dis- marketplace for local courier companies cussed the rapid growth Google Shopping Express bought them within the US. FedEx and UPS may of Amazon and its moves BufferBox to store packages for cus- look like they are on the sidelines, but they into groceries and same tomers to pick up. Google is also offer- will come out strong. Having a major brand, day delivery. Feedback from ing delivery services in the Bay Area enormous network of air/ground, global that Red Flag article was from retailers to consumers. Its program reach, package/LTL/mail, powerful IT, very significant, particularly from showcases an extensive selection of strong customer bases and enormous work forces are all powerful strengths. Recently retailers and carriers, with one products available at stores. overriding question: “How do we Walmart revolutionized distribution reported volume estimates because of web compete against this juggernaut?” while inventing itself for vendor deliv- orders are impressing the analysts with betAmazon has a mighty fulfillment ery to its stores. Its Ship-from-Store con- ter recommendations for FDX stock. Both infrastructure; however, if it doesn’t cept has faster delivery than Amazon. are forecasting early December as its peak have the inventory in one of its 50+ ful- Will a stand-alone system like this be the day for the year because of CyberMonday fillment centers closest to the buyer, there answer? Walmart Labs is working on their on December 2. Previously, the peak days have been a few days before Christmas. is often no way the “free second day” is hi-tech solution in Silicon Valley. With residential delivery costing the cost-free to Amazon unless it has an interWith Amazon’s rapid expansion, it is est free loan from buyers like me paying for offering home delivery on a same day and carrier exponentially more than business Amazon Prime. overnight delivery basis What about everybody else who does for everything from books not have this kind of marketing, inven- to electronics to grocertory and fulfillment machine? The omni- ies. Texas, for example, channel retailers are scrambling because will have three Amazon they are getting creamed by “showroom- locations serving 60% ing.” Some reports have indicated up to of high end Texas buy60% of consumers who “showroom” end ers. Amazon is predictup buying from Amazon. ing 25% greater volume The other Internet delivery services like growth this peak season. Post Mates, Deliv, and Task Rabbit are Meanwhile, ShopRunner just received delivery because of density, distance and scrambling too. This group is focused $200m in funding from Alibaba, based in volume, how can retailers compete in this on delivery to consumers in big buying China. ShopRunner offers a cool website increasingly competitive environment? The retail empire has the best chance markets like San Fran and NYC, provid- for consumers to choose a retailer (80 at ing one-to-two hour service that includes last count) and automatically receive two to strike back and leapfrog based on their anything from a sandwich to a 42-inch day free delivery and free returns. The own powerful brands, customer base and TV being picked up and delivered. Only retailer pays the shipping, handling and 150,000 fulfillment centers called stores. a smart phone, a vehicle and a driver of course a healthy fee to ShopRunner. Some are becoming smarter as omni-chanlicense to qualify. Is this what branded retailers hoped to nel players with store shopping, online eBay Now was part of this group until become? It is co-opetition, but does it orders from the web, catalogs and kiosks. it recently announced an acquisition of optimize their brand and retail space? Amazon and Internet players can’t offer this Shutl and will cover the top 25 marFedEx and UPS are both doing extremely range of channels and never will — or they kets for same day delivery. Are branded well and are never ones to sit on the sideline. will have to become brick and mortar retailretailers willing to give up a percentage They are so competitive that their rivalry has ers too, thus raising their costs.
Seventy-five percent of retail sales are purchased at stores within 15 miles of the consumer’s home.
16
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
Retailers already understand co-opeti- HERE IS A SCENARIO WITH CO-OPETITION tion by the very nature of being adjacent AS THE POWERHOUSE: to each other in malls. They have virtu- 1. Create a branded work force with a ally won the “tax battle” with web firms uniformed driver for every major mall having to actually pay retail sales tax. to pick up, pack, label and drive the Seventy-five percent of retail sales are combined orders of all the retailers in purchased at stores within 15 miles of the the mall a few miles down the road consumer’s home. to carriers If retailers offer a rapid delivery pro- 2. Reverse the logic for online ordering by gram for items bought online, at a low matching the consumer’s ZIP Code to cost, with high speed and with unithe closest store, rather than arbitrarily formed drivers that are trained and recchoosing the central distribution center ognizable, they can have their cake and 3. Use a single web based system to eat it too. It is becoming evident that weigh, price and label to optimize retailers need to participate with each service and cost other to most effectively compete with a 4. Offer a range of speeds from the carribuying volume advantage for delivery to ers for specific delivery outplay the newcomers. 5. Make it cost effective so retailers can I can envision a scenario where a conoffer a low nominal fee or free to consumer will order online at 6 PM on a sumers and still own the customer Monday, have it picked from the store relationship for less than other options closest to the consumer and be delivered 6. Use the store to reach a continually the next day to their home by a uniformed broader range driver — all for something under $6. This 7. Focus on the positive aspects: is in effect a clever zone drop-ship proa. Significant cost savings and gram that takes advantage of underutiincreased speed lized distribution centers called stores.
b.
c. d. e.
Marketing power of national retail brands and co-opetition advantages Convenience to consumers and retailers High level consistency with full tracking The power of green to help the ecology
8. Malls could win the biggest because volume of store sales being increased by shipping, thus adding to their revenue percentage A showdown that involves true heavy hitters like Amazon, eBay, FedEx, Google, Mega Malls, retailers, UPS, USPS and Walmart is very exciting. My experience is better, faster and cheaper are always a winning formula. p
ROB SHIRLEY is President of ExpresShip, a strategic consultancy in the global supply chain; contact him at rsxpship@gmail.com or visit www.xpship.com.
GUEST COLUMN
IMPB UPDATES BY JIM LEROSE
Another Great USPS Innovation – IMpb. Are You Ready? hrough rain, To get more information on how your sleet and company can get compliant, send an email snow, we all request to IMpb@usps.gov or visit: https:// count on the ribbs.usps.gov/intelligentmail_package/ USPS. Now we documents/tech_guides/IMPB_FAQs.pdf. can count on them IMpb Tracking will be offered at no to let us track them additional charge for shippers and will while they trek. Raising be required for discounts using the folthe bar once again, the lowing package delivery services: USPS now provides detailed First-Class Package information on the where Priority Mail abouts of its parcel deliveries, Parcel Select every step of the way. It’s called Parcel Select Light Weight IMpb (Intelligent mail package bar Bound Printed Matter, Media Mail and code). For parcel shippers, using the new Library Mail parcels IMpb is a requirement and the extended deadline to implement this technology is If you already utilize Internet postfast approaching. For consumers, IMpb age companies such as Stamps.com and is a reason to choose the USPS. DYMO Endicia, rest assured these comConsumers love to track their ship- panies have already deployed IMpb and ments and know when something will be are ready to take on your business. delivered. Better tracking will increase So why is the USPS pushing shippers volumes and help the USPS increase to use IMpb? I asked Peter Manning, revenue. In addition, it will save both the USPS eCommerce Cost Reduction companies and consumers money. and Shipping Specialist located in New The requirement for mailers and ship- York City. “The Intelligent Mail package pers to adopt IMpb actually went into barcode was designed to provide 100% effect January 27, 2013; however, package visibility for those using the giants even as large as Pitney Bowes USPS service. Achieving this visibility have asked for an extension and con- requires a USPS barcode on every packtinue to work toward meeting the dead- age or trackable mailpiece – in addition line (did they contract with the same to an end-to-end tracing capability within company that set up the Affordable Care the USPS. Also, it means an increase in Act website)? So the USPS graciously the number of scan “events” on every extended the deadline for certain mail- item. In fact, up to 11 scan events can ers to January 26, 2014. Beware, not be reported for each shipment.” For adopting the new IMpb technology can domestic packages, the following are the eliminate discounts, reduce tracking typical scans that will be reported: capabilities and give competitors a huge Electronic shipping information received advantage. It’s unlikely any additional Acceptance extensions will be offered. In-transit / processed (multiple) Arrival at unit 18 NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
Out for delivery Delivered IMpb uniquely identifies mail class and a combination of Extra Services (listed below) for packages. This addition benefits consumers by helping them achieve their shipping goals, including: Hold for pick-up Adult signature Return services Day certain delivery Critical mail Package intercept Scan-based payment IMpb combined with the newly announced Sunday delivery places the USPS in a position to significantly grow its business along with eCommerce companies and that will help drive the economy. Kudos USPS! Could this new paradigm of great service and superior tracking put the USPS back in overall growth mode and help reduce deficits without the help of the federal government? Indeed, Benjamin Franklin would have been proud. Merchants and consumers get ready; the sleeping giant has awoken, once again. It’s the new USPS, and IMpb will tell you the whereabouts of your important package, through rain, sleet and snow! p
JIM LEROSE has been a transportation industry consultant for three decades. Formerly with Pitney Bowes, he is Principal of Agile New York, a leading provider of multi-carrier shipping software / shipping cost reduction strategies and CEO/Founder of EcoReturn — a revolutionary ecommerce return solution. Visit: www. agilenewyork.com and www.ecoreturn.com. Contact him at jim.lerose@agile-network.com or 888.214.1763.
Our Readers Rate the Carriers
In the parcel arena, there really isn’t one clear winner— all carriers have their strong points. But here’s how our survey respondents rate the top three carriers on a variety of factors. by Amanda Armendariz
Well, folks, it’s our last issue of 2013, which means that this issue is the perfect spot to place our carrier performance survey, in which our readers reflect on the past year with their carriers. Did the carriers excel at customer service? Drop the ball on on-time deliveries? Perform so-so on claims processing? And how did one carrier stack up to the others? The answers are all right here, so sit back, take a look, and see how your experience lines up with those of your peers.
Did you use FedEx in the last 12 months for domestic parcel shipping? 14% Yes No
Did you use UPS in the last 12 months for domestic parcel shipping? 18% Yes No
Did you use USPS in the last 12 months for domestic parcel shipping? 27% Yes No
86%
82%
73%
20
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
Here is how FedEx rated on a scale of 1-10: 10 9 8 7 6 5 4 3 2 1 1 is poor, 10 is excellent
Here is how UPS rated on a scale of 1-10: 10 9 8 7 6 5 4 3 2 1 1 is poor, 10 is excellent
Here is how USPS rated on a scale of 1-10: 10 9 8 7 6 5 4 3 2 1 1 is poor, 10 is excellent
Customer Service On-time Service Performance Claims Processing
Delivery Performance (driver courtesy, package handling) Pricing (published rates for service levels, willingness/fairness of negotiations) Refunds for Late Delivery
More Thoughts on the Parcel Industry Is there enough competition in the parcel delivery market to keep pricing reasonable and service good? YES 51.5% NO 48.5%
Will the cost of transportation be a greater percentage of gross company revenue in 5 years than it currently is? YES 83% NO 17%
If you believe there is not enough competition, what can be done? } Would love to see DHL come back into the US market. Ever since they left, we have seen much higher increases from both UPS & FedEx. } Shippers need to create more competition between the duopoly and other options. } USPS is too regulated on parcel delivery to promote true competition. } Deregulate USPS; regional carriers link up. } Change the model for USPS to enable them to compete with FedEx and UPS to service small to medium size business shippers. } Unfortunately, not much. UPS & FedEx get people in with their “guaranteed delivery times” . They can charge whatever they want plus surcharges and customers don’t have much choice.
For those who answered yes, the overwhelming consensus was that fuel surcharges would be what drove this cost up.
How important are regional carriers to respondents’ shipping mix? 21% Very important Important Somewhat important Not important at all
26%
15% 37%
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
21
If regional carriers are part of the shipping mix, here’s the percentage of parcels shipped with them: 50% 46% 40%
The primary reason for using regional carriers: Cost Service Speed Reliability Other
15% 4% 50% 19% 12%
30%
31%
20%
19% 11% 11%
The top 3 biggest complaints about their primary carrier: 1. Accessorial charges (editor’s note: no surprise there, right?) 2. Pricing 3. Fuel surcharges and customer service response (tied)
10%
1-5%
6-10%
11-25%
26-50%
50%+
Carriers and level of service used throughout the year (respondents checked all that applied): FedEx Next Day FedEx 2-Day FedEx Ground UPS Next Day UPS 2-Day UPS Ground USPS Next Day USPS 2-Day USPS Ground LTL 22 NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
81% 77% 80% 71% 69% 83% 34% 41% 62% 63%
Parcel Regional Next Day Parcel Regional 2-Day Parcel Regional Ground Local Next Day Local 2-Day Local Ground Consolidator Next Day Consolidator 2-Day Consolidator Ground Same Day Service (i.e. airlines)
19% 11% 20% 20% 8% 18% 6% 5% 13% 15%
If respondents modified their primary carrier in 2013, here is why: 12% 8% 48% 12% 8% 12%
Our respondents’ annual volume of outbound parcels: 50% 46% 40%
30%
20%
19% 13%
16%
10% Needed to achieve better pricing Dissatisfied with service Changed our level of service (i.e., air to ground) Diversified to use more carriers Reduced the number of carriers used Rebid transportation and a different carrier(s) won
6% <100,000 100,000- 500,0001-4 499,999 1 million million >4 million
Thoughts on this survey? Let us know how your opinions line up with those of your peers!
PRODUCT SPOTLIGHT EZ-WorkDesk Parcel Induction EII’s parcel solutions include the revolutionary EZ-WorkDesk and EZ-Parcels systems which rapidly process parcels for induction and routing. EZ-WorkDesk provides quick parcel induction capabilities with the lowest initial investment, EZParcels adds greater automation, speed, and versatile routing with package diverter sections. Both machines capture data from the face of the package, as well as weight and dimensions, and apply a label. EII combines more than 30 years of mailroom experience with over 20 years of postal automation design experience to develop solutions that work for mailers of all sizes. Engineering Innovation Inc. 765.807.0699 sales@eii-online.com www.eii-online.com
Package Audits Reduce Your Costs
Parcel Audit System
Decrease your parcel costs and save your company money with the most advanced and comprehensive parcel audit program in the industry. CTrak’s proven benefits include a totally automated, Global audit system that delivers maximized savings with minimal fees to reduce your shipping, administrative and accounting costs. CT Logistics 216.267.2000, ext. 2190 sales@ctlogistics.com www.ctlogistics.com
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
23
2014 OUTLOOK This year, we have seen two audit and payment providers sued and subsequently driven to bankruptcy due to their malfeasance, while others are involved in legal suits. These are unfortunate circumstances to say the least. Yet the signposts to such circumstances are often identifiable if you know where to look. With freight costs consistently rising and the complexity of determining total cost of transportation becoming ever more difficult to determine, the importance of having comprehensive and accurate visibility to help you model and determine shipping costs remains of paramount importance. Whether you choose to audit internally or elect to outsource this function, there are some little secrets you should be aware of.
By Doug Kahl
Don’t Let the Dirty Little Secrets of Freight Payment from 2013 Catch Up with You Next Year few accurately audit every aspect. Many will manually do a random sample or attempt a rate audit but miss surcharges, adjustments, and conversions. This is one reason why the freight audit and payment industry exists. But are all auditors equal? No. Some will just conduct a spot check or random sample. Others specialize in a specific mode, for example, Truckload (TL). While they may do an excellent job with TL, they may simply spot check or run a rate audit only on parcel shipments. The key to overcoming this hidden secret is to ask your current or potential analyst how they go about analyzing your invoices and to make sure it’s a comprehensive method. Let’s take a look at some other, more egregious secrets and myths of freight payment.
COMPREHENSIVE AUDIT OR A RANDOM SAMPLE Consider the complexity of the parcel contract and how the carriers arrive at a net rate. Start with the base rate minus discount. Now add in the applicable assessorial charges. Don’t forget to apply the fuel surcharge (FSC) and properly account for which assessorials the FSC applies to from those it doesn’t. Keep in mind that the FSC periodically changes so be sure your system is upto-date. Now there may also be adjustments that occur from the time a shipment is manifested until it is delivered. Often these adjustments are presented either on the original invoice or shortly thereafter. Sometimes the adjustments may not be reported for weeks after delivery and original invoicing. This also leads to the possibility of receiving duplicate invoices. Do you catch and apply each of these adjustments, no matter the time frame, to properly arrive at the total cost of transportation at the package detail level for every shipment? Doubtful. And that’s just parcel. If we are to consider Less-thanTruckload (LTL) then we need to take classification, a different host of surcharges, and FSC that are adjusted more frequently into consideration. Looking at international shipments, in addition to rating and surcharges, there are language and currency conversions as well as banking requirements that need to be taken into account. Few companies have the robust, specialized systems required to do all of that. While most capture cost information, 24 NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
MAKING MONEY ON THE FLOAT Many of the old-fashioned auditors set up a system where they would receive funds from the shipper in advance of issuing a check for payment to the carrier. From the date a shipper’s funds are deposited into the auditor’s account until the date the check to the carrier clears for payment, the interest on those funds was a prime source of revenue for that auditor. While an individual shipper may think there’s not that much to be made on their amount of funds, keep in mind that the auditor may have billions of dollars of freight under their management. In today’s world of near zero interest rates and electronic fund transfers, if an auditor charges you little for auditing services and looks to make their money on the float in payment, something is amiss. Understand the different between “audit to pay” versus “audit and pay” service options. Simply stated, in the “to pay” option the auditor provides comprehensive auditing services and gives you an authorized to pay or OK to pay report. The funds are always kept in your own account and you issue payment directly to your carrier(s). In the “and pay” model, the auditor notifies you of the amounts you owe, you transfer funds into an account from which they will disburse payment to the carrier(s). There are situations, especially if you have a large number of carriers to manage, where the “and pay” option makes great sense. This also leads us to our next secret.
COMMINGLING OF FUNDS Nothing may be more important than doing your due diligence on the internal controls and processes of your auditor. Ensure that any funds you advance to an audit firm are maintained in a secure account, separate from the funds of other shipper clients the audit firm serves. If you find an auditor pooling multiple client funds into a single account from which they manage payment to carriers, the probability exists that one shipper’s funds are being used to pay another shipper’s carriers. This situation is what ultimately led to a few firms in the industry going under and being sued by clients who were left footing bills for which they had technically paid. In an audit and payment application, the auditor is acting as a disbursement agent. Ultimately the shipper is responsible to make sure the carrier is paid for services provided.
results of this evaluation will help you determine the strength of a service providers systems and controls. Given the numerous auditing firms that are private companies, financial records are often not readily available. A red flag should go up when an auditing services provider refuses to provide certified, audited financial statements to a shipper’s designated financial professional for review.
CARRIERS COMPLAINING ABOUT SLOW PAYMENT Oftentimes, the best source to find a pending problem, particularly when operating in an “audit and pay” environment, is a shipper’s carrier base. When calls start coming in from multiple carriers that they are not being paid within the terms of the agreement, and a shipper has advanced funds to the audit and payment company, immediate action must be taken. Importantly, these dirty little secrets aren’t limited to outsourced auditors. Many of them can also happen with an internal audit and payment function that does not receive proper oversight. While most companies leverage professional, ethical companies and teams to oversee this critical business function, like any business area that involves significant dollar transactions, due diligence is imperative. p
INDUSTRY STANDARDS ARE FEW This is not a regulated industry. There are few watchdog groups or associations that report on adherence to acceptable business standards. In addition, many of the participants are privately owned firms, making it more difficult for you to obtain the wealth of information that is typically available for a publically owned company. One source for accreditation is the Statement on Standards for Attestation Engagements, known as SSAE 16. In this evaluation, service organizations have their audit, risk, and control processes accessed by an independent party. Reviewing the
DOUG KAHL is a Vice President with enVista, a comprehensive supply chain consulting and leading transportation services management organization. Doug can be reached at dkahl@envistacorp.com, 602.334.6233, or visit www.envistacorp.com.
NOVEMBER-DECEMBER 2013 | www.PARCELindustry.com
25
Do-It-Yourself International Shipping: Doing It Right and Doing It Undaunted! By Stephanie McNeil he frustration and potential pitfalls of international shipping are increasing exponentially as the rules and regulations change from location to location. Becoming proficient at international shipping documentation is a key objective for organizations to improve cycle time and costs and avoid penalties. Unfortunately, manual completion of export documentation is one of the greatest triggers for shipping errors and penalties for errors. But you can improve your organization’s proficiency in this area, to ship with ease and peace of mind, contributing to greater customer satisfaction. International shipping paperwork is costly — in time, money and penalties. In a day and age of continued focus on cutting costs and improving throughput, the inefficiencies wrought by international paperwork can impede your shipping department’s productivity and reduce your shipping volume. Even if you’re fortunate enough to have staff that understands export requirements, they still may get bogged down in completing the required paperwork, have shipments held
T
up in customs for mistakes in the documentation, and even incur potential fines due to errors. The checklist for international shipping is endless. It starts with the paperwork, commercial invoice, the harmonized codes, the signatures, and finally the requirements of each country to get each shipment past customs. Each time you ship a product internationally, the country’s customs department will review the documents they require with your shipment. If a wrong form is filled out, is incomplete, or documentation is missing, at best, your shipment will be held up at the border. At worst, you may be assessed a hefty fine, and your shipment may be interminably delayed or never make it through customs period. Bottom line, errors in the paperwork translate to lost customers because your company cannot fulfill its promise. Apart from losing business, fines for non-compliance can be exorbitant, and that may be the least of your worries, especially when you consider the following: the Automated Export System (AES) was designed to allow electronic filing of your Shippers Export Declaration (SED) prior to shipping.
26
november-december 2013 | www.PARCELindustry.com
This dramatically decreases both the time to create paperwork while improving the flow of goods through customs, thus avoiding costly delays for your customers. Failing to use the AES correctly comes with fines ranging from $1,500 to $10,000 per occurrence, and even jail terms! With this in mind, many companies have taken to having their shipment carriers, such as UPS and FedEx, handle the international shipping paperwork. While this is easier on their shipping staff, it’s harder on their budget as these companies charge a minimum of $20 per international order for this service and could easily charge upwards of $70 per order depending on complexity. If you are a high volume international shipper, the cost of this luxury adds up quickly and takes a significant chunk out of your bottom line. Freight forwarders can also add value to the shipping process, but at a significant cost. Now is the time to take control of your international shipping to improve productivity, reduce errors and contain costs. You can keep your international shipping in house but avoid the afore-mentioned problems by bringing in automation. So, what should you look for in a shipping platform that will simultaneously cut costs and make international shipping painless? First, look for a system that facilitates information sharing between systems. Cutting out manual data entry from system to system translates into tremendous time savings. This eliminates the chance for human errors and typos which can result in hefty fees, and frees up personnel to focus on other more value added tasks. Next, look for a system that is smart. A “smart” system is programmed with all the specifics about all of your organization’s products and auto-populates the documentation with all the necessary information — saving time and effort. And while you’re at it, wouldn’t you like a system that does the paperwork for you? Today’s systems can automatically recognize an international shipment and process the appropriate paperwork based on the materials being shipped, where the order is shipping to, or both. Finally, look for interoperability. Choosing a system that works with all of your carriers from the get-go is a must. Not having to hop from terminal to terminal or from website to website is a huge time saver and will also keep your sanity in check. International shipping paperwork doesn’t have to be painful or expensive – it just requires employing the right tools for the job. Fortunately, technology platforms exist that enable companies to confidently process the paperwork for international shipping efficiently, saving time, money and frustration, and keeping you free from fines and operational risk. p
STEPHANIE MCNEIL is Manager, Ship Sales & Service, Insite Software. Visit www.insitesoft.com for more information.
Parcel Counsel By Brent Wm. Primus, J.D.
cONTracTS & cONFlIcTS hen negotiat- will be used in deciding a case. Typically parties may wish to resolve their conflicts ing transpor- the laws chosen will be those of the state using the laws of a particular state whose tation contracts where the Court would be located, how- laws are known and familiar to both parties. the focus is typi- ever, that is not necessary. For instance, In recent years, litigation has become cally on matters in disputes arising from transportation very expensive. Accordingly, parties negosuch as rates and contracts, U.S. federal laws or an inter- tiating a contract should consider ADR. charges, time limits for national treaty may control certain points There are many formats. For instance, in notices and deadlines for relating to specific transportation issues, Minnesota there are nine categories, the commencing lawsuits, limitations but, the parties could choose the laws of primary of which are arbitration and mediof liability for cargo claims, and insurance a particular state relating to the resolution ation, but also on the list are consensual coverages. These contracts can often be of contract disputes over which the fed- special magistrate, summary jury trial, early many pages in length…and buried at the eral law or treaties don’t control. neutral evaluation (ENE), non-binding adviGiven the nature of transportation sory opinion, neutral fact finding, mini-trial, back will be a clause relating to dispute resolution in the event problems should contracts, jurisdiction and venue are and mediation-arbitration (Med-Arb). arise. This installment of PARCEL Counsel extremely critical. More often than not, It should be noted that the use of ADR will take a look at such clauses and why the shipper and the carrier are located in does not have to be “all or nothing.” For they should not be overlooked or be “just different states. In international dealings, instance, the parties could agree to use an afterthought” once the main business the transportation service provider will arbitration or mediation up to a certain doloften be in an entirely different country lar amount, e.g., $50,000 or $1,000,000. points have been agreed upon. Generally speaking, there are two meth- on a far away continent. Accordingly, a Similarly, the parties may wish to leave ods for dispute resolution — litigating in a contract clause which specifies that any matters involving rates and breaches of court and what has come to be known as litigation is to take place in the home contracts in the Court system, but choose ADR (Alternative Dispute Resolution). We city of a party is a distinct advantage. to use arbitration for cargo claims with or will start by taking a look at some basic This is so because the cost and incon- without a monetary maximum. terms, that is, “Jurisdiction,” “Venue,” and venience associated with litigating matThere are two organizations providing such ters “away from home” can often be as services for the transportation community. “Choice of Law clause.” Jurisdiction is a term used to describe much or greater than the dollar amounts One is the Transportation Arbitration Board, a Court’s power to decide a case. A Court in dispute. Inc. (TAB), sponsored by the Transportation On the other hand, for matters involving & Logistics Council, Inc. (TLC) and the must have jurisdiction over both the subject matter of the lawsuit and also the loss and damage claims, the parties might Transportation Loss Prevention & Security agree to have the matter venued near the Association (TLP&SA). The other is the parties to the lawsuit. The term venue refers to the location of location of the incident. This could result Transportation ADR Council, Inc., sponthe Court or forum where the case will actu- in cost efficiencies. For instance, it might sored by the Transportation Lawyers ally be tried. Jurisdiction and venue are be less expensive for the lawyers to travel Association (TLA). For more information similar, but distinct concepts. For instance, to the location of the incident and the wit- regarding these services, please visit http:// a Court located in any county in a state may nesses than the other way around. It would www.tlcouncil.org/TAB.p have jurisdiction to hear a particular case, also allow for the witnesses to the events but would not be the proper venue for the to have ready access to the selected court BreNT Wm. PrImuS, J.D., is the Ceo of Primus law case if, for instance, none of the parties without excessive travel costs. While the state used for the choice of office, P.A. and the senior editor of transportlawtexts, resided or did business in that county. inc. Previous columns, including those of William J. A choice of law clause is the term used law clause will often be the same as in Augello, may be found in the “Content library” on the for a provision in a contract whereby the the jurisdiction and venue clauses, it is PARCel website (www.PARCelindustry.com). Your parties stipulate as to which set of laws not necessary to do so. For instance, the questions are welcome at brent@primuslawoffice.com. 28 november-december 2013 | www.PARCELindustry.com
WrAP UP By Michael J. Ryan
free Shipping… real or not e are in the midst of the peak shipping season, and many e-commerce shippers have adopted a “free shipping” policy. However, some merchants are offering 100% free shipping and some stipulate that the order must be at a minimum dollar amount. Let’s take a look at some key areas relative to this topic: include regional carriers, local couriers, USPS Priority Mail, parcel consolidators or any other innovative approach. It will be the merchants that optimize their shipping cost who will be the winners in this space. One of the largest e-com-
1.
Buyer Preference
Most customers prefer to just pay one price for their orders and get normal delivery, which is within five business days. There is research that states that the quicker a customer receives their order, they are more likely to have a positive experience and will be more likely to order from that e-commerce provider again.
Merchants, beware that the hidden cost of shipping popping up during the checkout process could create “Buyer’s Remorse,” and you may lose a potential customer forever by providing this surprise at the end of the order process The future trend is that more and more merchants are moving towards “Free Shipping” for standard delivery. The industry challenge is that there is no consistency and as the more sophisticated e-commerce shopper searches for the best price, they do not understand the full transaction cost until they go to checkout. Merchants, beware that this hidden cost during the checkout process could create “Buyer’s Remorse” and you may lose a potential customer forever by providing this surprise at the end of the order process. I would like to advocate that all merchants go to free shipping for standard delivery.
There is no such thing as free shipping… let’s get that on the table first. Until we can get to a point where we can “beam” a package to delivery… there is REAL cost associated with this part of the transaction. This is more a marketing issue than a cost issue. Merchants need to figure out how to build this cost into their macro business model… not at the micro level. However, as stated in the above, the customer prefers one price. If they want to upgrade to a faster service, then there should be a premium for that service. It is imperative for all merchants to look at all delivery options, which could
2.
ActuAl ShiPPing coSt
3.
induStry StAndArdizAtion
merce companies in China (www.JD.com) utilizes their own delivery network with their own employees utilizing electric bikes… now that’s innovative. Many companies are looking to parcel outsourcing as a strategic approach to this new challenge. p
MichAel J. ryAn is the Executive Vice President at ProStar Logistics and has over 25 years experience in the parcel industry. He can be reached at 708.224.1498 or Michael.ryan@prostar.com.
30
november-december 2013 | www.PARCELindustry.com
0.2 second dims. 0.5 cm accuracy. Dimensions & weight Barcodes & OCR data Every form & label Item photo
100% certified. QubeVu’s patented 3D dimensioning technology trounces other systems at a fraction of the cost – now certified by some of the world’s best-known and most exacting standards organizations. Fast, accurate, a ordable dimensioning. Plus. QubeVu concurrently captures dimensions, weight, barcodes, images and OCR data from almost anything – all in a reliable, economical, zero-footprint design with embedded firmware and no moving parts. Learn more about QubeVu: www.postea.com/qubevu. QubeVu® . Another innovation from
©2013 Postea Incorporated. All rights reserved. Certification details at www.postea.com/qubevu/certification.shtml. QubeVu is a registered trademark of Postea. Other company, product, and service names may be trademarks or service marks of others.