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10 WAYS TO IMPROVE THE DELIVERY EXPERIENCE IN 2020 PAGE 28
HOW LONG CAN THE FAST AND FREE DELIVERY PHENOMENON LAST? P. 32 TO 3PL OR NOT TO 3PL, THAT IS THE QUESTION. P. 18 DAMAGED PRODUCTS = DAMAGED PLANET. P. 14
ND ? E P R S ITING U YO AUD H T WI AND E 22. P EL ENT PAG H ED EM O NE NAG GO T MA
CONTENTS /// Volume 27 | Issue 1
18 28 32 34 36 06 EDITOR’S NOTE Make 2020 Your Best Year Yet By Amanda Armendariz
08 OPERATIONAL EFFICIENCIES Looking to the Future By Susan Rider
10 SUPPLY CHAIN SUCCESS Delivery Area Surcharges Set to Become Less Rural in 2020 By Keegan Leisz
12 INDUSTRY INSIGHTS Making the Case for FedEx in 2020: How a Bold New Strategy Could Save the C-Suite By Brandon Staton
14 PACKAGING Damaged Products = Damaged Planet By Clint Smith and Mike Purgatorio
16 SPEND PERSPECTIVES Retail Partnerships: A Way to Reduce DAS? By John Haber
18 TO 3PL, OR NOT TO 3PL? When it comes to managing your e-commerce fulfillment, here are some items to consider before partnering with a third party. By Stephen (Steve) T. Hopper, PE
28 10 TIPS TO IMPROVE THE DELIVERY EXPERIENCE IN 2020 By Nate Skiver
32 THE STATE OF “FAST AND FREE” DELIVERY: WHAT RETAILERS AND PARCEL CARRIERS SHOULD KNOW By Valerie Metzker
34 THE 2019 PARCEL FORUM GAME-CHANGER OF THE YEAR AWARD GOES TO MOUNTAIN ROSE HERBS By Amanda Armendariz
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36 PARCEL COUNSEL A Look Back, A Look Ahead: Why Do I Need to Know This Stuff? By Brent Wm. Primus, JD
38 WRAP UP Is the Parcel Bubble About to Burst? By Michael J. Ryan
SPONSORED CONTENT 13 SEE SOMETHING. SAY SOMETHING. CHOOSING AN AUDIT PARTNER 22 HOW IMPORTANT IS YOUR COMPANY’S PARCEL SPEND MANAGEMENT? THESE 13 COMPANIES CAN HELP
PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ email@example.com ]
AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ firstname.lastname@example.org ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ email@example.com ]
P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 7 times a year by RB Publishing All material in this magazine is copyrighted 2020 © by RB Publishing. 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 or its staff becomes the property of RB Publishing, The articles in this magazine represent the views of the authors and not those of RB Publishing or PARCEL. RB Publishing 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 qualified 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.
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MAKE 2020 YOUR BEST YEAR YET By Amanda Armendariz
anuary always offers the opportunity for a fresh start, and whether you stick to your resolutions year-round or just do your best to incorporate good habits into your personal and professional lives (even if you fall short of your started goal), there’s something so exciting about a new year. It really is the perfect time to take stock of your objectives — and the challenges and obstacles that may be in your way — and figure out how you’re going to achieve them, especially for those of us in the small-package industry. Peak season has just ended, and now would be the ideal time to look at your package volumes, staffing sizes, and any customer service issues that arose during the influx. While this year’s peak season may be still months away, it’s best to address any issues now so that you can enter
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the holiday shopping season confident that all problems have been rectified. After all, with more and more options available to consumers, you don’t have a lot of chances to get it right. One bad shopping experience can cause you to lose a customer for good, while an exceptional experience can keep them coming back. Shipping spend is another area to watch this year. Customers continue to expect fast and “free” delivery, but as we all know, nothing is ever actually free. Someone needs to pay for shipping costs, and those costs are falling on the company more and more. While consumer growth is a fantastic thing, increases in your shipping costs are the opposite of the desired effect. Make sure you take the time to really look at the ins and outs of your shipping spend, either on your own, or with a knowledgeable third party, to see if you are overspending in areas that could reduced. There are a lot of increases in fees and surcharges this year, so the sooner you can work on reducing them, the better. We continue to strive to provide the most relevant, engaging, and educational content for you as our readers. If there’s something you’d like to see us cover more, please don’t hesitate to reach out to let me know. Here’s to a fantastic 2020, and as always, thanks for reading PARCEL.
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
Selecting a TMS? Several Dos and Don’ts to Keep in Mind By Geoff Milsom
Strategies for Remaining Competitive in a Changing Industry By Chad Thibodeaux
Improving the Customer Experience: 3 Ways to Make Your Supply Chain More Efficient By Alex Jones
LOOKING INTO THE FUTURE By Susan Rider
ur industry is seeing innovations that will change the way we operate the complete supply chain. Blockchain will improve transparency, reliability, and efficiency. Mobile robots are gaining traction, as many e-commerce companies pick to cart. This robot chooses the path and stops at each pick to ensure your order filler follows the correct pick path and stops at the correct location. There are companies that will even rent the robotic carts during peak times so you don’t have to invest in something that you will only use two or three months a year. Companies are also focusing on predictive analysis solutions, which offer faster and better decision making. Artificial intelligence solutions transform raw data into actionable insight and decision-making tools. But even with all the new innovative ideas, products, and systems, data migration is very much a key to success. This past holiday season, two of my orders (both from well-known companies) were duplicated. One company just told me to keep the item because of the
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expense of shipping it back and restocking. The other company told me to take it to a UPS drop-off location to be returned. When I asked someone how this happened, I was told, “The system crashed, and when it was rebooted, the orders were caught in the void and duplicated.” I couldn’t help but think that I’m just one person out of the millions of people that placed e-commerce orders this Christmas, and I had two duplicate shipments. How many duplicate shipments happened across the US? Even with the best state-ofthe-art technology, someone needs to be minding the store, so to speak. You may be wondering how you get to a place to utilize all the new technology while still operating efficiently and effectively. Start from where you are! Review your results from peak season. Where were the headaches, bottlenecks, and costly problems? Brainstorm solutions with your teams on how to correct each area and better utilize your existing material handling equipment, technology, and processes. Next, get ideas on each functional area and how to improve. The best way to look at this is to consider your people, process, technology, and equipment. Rank each area on a scale of 1-5 (5 being the best). Obviously, you want to find solutions for the areas rated 1 and then go up from there. Often, you may not need to spend money but just change your existing process.
Once you get the input from your diversified team, bring in an industry expert. You only know what you know; it would be worth a couple of days to hear what an industry expert would do to fix existing issues. Remember, you want to make sure to optimize your existing processes and identify areas of improvement before you even think about adding automation to the mix. Meanwhile, innovation continues to shape the industry. There are plans being made to enhance the last-mile delivery stage of order delivery. UPS has e-bike trials going on in two major cities. Orders will be delivered by an electric bike in areas that parking is not readily available. Amazon is looking at last-mile delivery also with its Amazon Flex program. You, too, can be a last-mile delivery person by signing up for the Amazon Flex program. Amazon is hiring individuals to deliver its packages in areas where last-mile delivery is more difficult or doesn’t make sense. The company is looking to make delivery one of its core competencies. By placing orders for electric delivery vans, planes, and semi-tractors, delivery will definitely get even more interesting in the next three to five years. I can’t wait to see what else happens.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at firstname.lastname@example.org.
DELIVERY AREA SURCHARGES SET TO BECOME LESS RURAL IN 2020
By Keegan Leisz
ith the start of 2020 upon us, the UPS and FedEx general rate increases are impacting shippers’ transportation spend. This year, as with years past, UPS and FedEx increased the price of their transportation services as well as some key accessorial charges. However, in addition to the rate changes, both national carriers announced significant changes in how they would classify two accessorials: Delivery Area Surcharge (DAS) and Delivery Area Surcharge – Extended (EAS). These accessorials are assessed based on the service level and the destination ZIP Code of a shipment. In the national carriers’ GRI announcements, each carrier announced they would be adding about 1,500 ZIP Codes, changing the classification from DAS to EAS or vice versa for about 2,500 ZIP Codes, and removing about 800 ZIP
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Codes from these lists. This is the first time in several years that more than a handful of ZIP Code have changed. These changes should leave shippers with three questions: 1. Are these changes meaningful? 2. How will they impact costs? 3. What should we expect going forward? The impact of the changes to the DAS and EAS ZIP Code list is much more difficult to determine than the typical rate increases, and likely will impact shippers differently based on shipping patterns. However, the US Census population data from 2017 can be used to figure out what portion of the US population was in a DAS or
EAS ZIP Code before and after the changes. This should give a macro level view on whether these changes are meaningful. See charts 1 and 2 for this analysis. Based on these results, the population that is in a DAS or EAS ZIP Code increased by about 9.65%. While 9.65% may seem like a meaningful increase, it does not definitively answer the cost question since the EAS coverage, which is the more expensive of the two charges, decreased. In order to determine the cost impact, a frequency of each charge needs to be calculated. For the purposes of this analysis, the population in a DAS/ EAS ZIP Code divided by the total US population
can be used for frequency. The frequency can then be multiplied against the national carrier’s list rates to get an estimate of the DAS and EAS cost per package. See chart 3 for the results of this analysis when using the UPS rates. When you look at each service group, you can see that the rate increase after factoring in the frequency change
is much higher than the rate increase without using the frequency. As mentioned earlier, these results could vary for each shipper based on their shipping patterns, but at a macro level, this tells us that the DAS changes, after factoring in the ZIP Code changes, will lead to a double-digit percent increase for each service group. In order to predict how these ZIP Code lists will change in the future, it is important to see how the profile of the new ZIP Code changed vs the old ZIP Code. In theory, DAS and EAS charges are meant for remote
locations that are not densely populated. So, looking at the changes in population density would be a good way to see if there are any trends in these changes. Chart 4 shows what those numbers look like for UPS (FedEx is almost identical). Based on these numbers, DAS Charges are becoming significantly less rural, while EAS charges are becoming slightly more rural. The DAS and EAS ZIP Code lists do not change frequently, so it is unlikely that there will be any more significant changes in the short term. However, if this trend continues in the long term, there could be a significant increase in DAS charges with a slight drop in EAS charges. In order to mitigate these changes, shippers can always look to renegotiate their small parcel agreements. Using these population numbers, negotiating aggressive discounts on DAS charges could become increasingly important as the DAS ZIP Code become less rural. However, shippers should still analyze their own network to see if these changes will have the same impact to them as they do on the national level.
Keegan Leisz is a Senior Consultant at enVista, a global consulting and software solutions ﬁrm. In his role, Keegan is responsible for negotiating parcel carrier contracts and specializes in analytics. You can contact him at kleisz@ envistacorp.com.
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MAKING THE CASE FOR FEDEX IN 2020: HOW A BOLD NEW STRATEGY COULD SAVE THE C-SUITE By Brandon Staton
n January 1, 2018, FedEx stock was at an all-time high. A mere two years later, FedEx has lost 40% of its value while analysts and pundits clamor to determine what will become of one of the world’s most admired companies. Operating income was down over 50% for FedEx in the last quarter, and its operating margin fell to 3.3%. Suffice it to say; it has been a tough couple of years. FedEx has made clear its intention to shift toward small- to mid-sized B2C shippers to better align itself with today’s e-commerce economy. Its moves to bring its low-cost SmartPost service in-house by the end of the year and to deliver packages every day of the week lay bare its commitment to this tectonic shift.
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And while the company’s leadership has come under fire — viewpoints range from replacing founder Fred Smith as the company Chairman and CEO to FedEx being an outright acquisition target — it’s worth considering whether they’ll end up being right all along. Consider the company’s well-publicized break from Amazon. For FedEx, Amazon business was primarily about density. Despite low margins, Amazon would pump packages into a FedEx network built for volume and ostensibly cover a lot of the cost to get the FedEx fleet into consumers’ neighborhoods. FedEx could then attack margins more aggressively on remaining customers. That strategy began to take shape on the tail end of its successful $1.6 billion incremental profit campaign, which ended in 2016. That initiative was widely regarded as a success, and part of the haul was to be earmarked to help ramp up capital spending in its Ground segment to meet growing demand. So what happened? Well, Amazon continued to grow exponentially. And though most industry insiders agree that public statements by FedEx (and UPS) portraying a general lack of concern for Amazon as a legitimate competitor were merely posturing, it is possible that FedEx didn’t take the threat seriously enough. Few, if any, business relationships remain mutually beneficial forever. Amazon’s growth so outpaced peer companies that its additional capacity requirements conceivably crossed a marginal threshold for FedEx.
In other words, they were growing so fast that FedEx had less and less room to subsidize Amazon’s low-margin business with high-margin hauls for other customers. FedEx’s recent rough spell runs deeper than its split from Amazon, but the move put the company’s sweeping strategic changes in the spotlight. Evidenced by the trend Amazon has shown to be sustainable, combined with the macro upside of e-commerce, it wasn’t a matter of if FedEx would pivot, but when. And that’s where things really get interesting. It doesn’t matter what trends analysts see in the stock or how long an industry expert has been plugged into internal backchannels — it really doesn’t even matter if you’re Fred Smith — when you consider that e-commerce sales still only represent about 11% of total retail sales, according to the U.S. Census Bureau. So, while the clouds over Memphis certainly look ominous, there’s a lot we just don’t know about what the future holds for FedEx. What is clear, however, is that there is enough potential upside to support the case for FedEx’s bold new strategy.
Brandon Staton is President and CEO of Shipmint, Inc. and has spent the last decade helping corporate shippers plan and execute sustainable cost-control and cost-containment strategies. Brandon earned an MBA in Entrepreneurship, Leadership and Strategy from UNC Kenan-Flagler Business School.
See Something. Say Something. Choosing An Audit Partner By Hannah Testani
Today, shippers need to be nimble and must continuously analyze existing processes to optimize and stay competitive. This makes it critical to leverage the right partner to ensure wasteful spend doesn’t go unnoticed. While the vendor universe is large, technology is an increasingly disruptive force in an industry that has historically lacked investment. Only a small subset of parcel and freight audit providers can deliver the solutions to meet these needs and picking the right provider can make all the difference. So, what should you be looking for? The Freight Audit & Payment (FAP) Provider Checklist 1. Commitment to Technology Technology is the most critical component and is the starting point for all audit, reporting, and analytics capabilities. It should be obvious whether you’re dealing with a true technology company or a legacy “tech” business. 2. Robust Reporting, Analytics, and Optimization Tools Reporting, analytics, and optimization tools are critical and help you leverage your data to identify areas for efficiency gains and process improvement. Providers frequently sell more than they can deliver — so ALWAYS insist on sending actual data to see reporting and analytics relevant to YOUR COMPANY. If they can’t show you your data before you sign up, it’s a bad sign. (See #1) 3. Real-time Visibility To (Normalized) Data In addition to having robust analytics, your data is only useful if it’s normalized and up-to-date. Many FAP vendors take days, if not weeks, to get electronic data loaded, audited, and available for reporting. This should take minutes or hours. (See #1) 4. Carrier Collaboration & Exceptions Management Maintaining and improving carrier relations is critical to a shipper and should be equally important to an FAP provider. The wrong
provider can quickly destroy years of goodwill if they manage exceptions poorly and don’t prioritize carrier relations. A best-inclass provider makes life easy for carriers with a dedicated carrier portal to track and manage billing issues and payments. (See #1) 5. Global Single-Vendor Solution Being able to leverage one vendor for all transportation modes and regions has significant benefits outside of vendor management and all-in cost. A single vendor means a one normalized data warehouse allowing you to holistically analyze your entire network and spend. (See #1) 6. Bank-Backed Payment Processing The recent bankruptcy of IPS Worldwide served as a reminder of the risks associated with outsourcing payments to privately-held FAP companies. Payments should only be outsourced to publicly-traded — and highly regulated — financial institutions. Intelligent Audit, in partnership with Triumph Bancorp (Nasdaq: TBK), is one of only three FAP providers with bankbacked payments. 7. Client Success While technology is the backbone of any good FAP provider, technology alone doesn’t make it a SOLUTION. A best-in-class FAP solution combines technology with dedicated strategic account advisors who act as an extension of your team — proactively analyzing your data, identifying issues, and helping you become a better shipper. Hannah Testani, Chief Operating Officer at Intelligent Audit, has over a decade of experience helping Fortune 500 companies leverage their data to ship smarter.
email@example.com 201.880.1110 ext. 121 www.intelligentaudit.com
DAMAGED PRODUCTS = DAMAGED PLANET
By Clint Smith and Mike Purgatorio
or years, the societal model has been fueled by a “take-make-waste” mindset. This mindset contributed to 267.8 million tons of solid municipal waste in the United States in 2017 — with only one-fourth of that material being recycled, according to the Environmental Protection Agency (EPA). Simultaneously, industrial waste has significantly impacted our planet. As we stop to look at the wake of our collective footprint, the Ellen MacArthur Foundation, an environmental engagement group, has forged a strategic vision — one that creates a model rooted in the elimination of waste from society. This school of thought, which has been deemed a “circular economy,” is a leading movement in safeguarding our planet. Manufacturers and retailers alike must aspire to design and adopt products that can be effectively reused after their initial lifecycle. This concept, of course, is no surprise — especially within the world of packaging and shipping. Businesses are stepping up to the plate to make this happen. Sustainability has become the lifeblood of every B2B and B2C entity’s annual
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strategy and goals, for two reasons: a thirst to preserve the planet, and growing pressure from consumers to be more responsible. Now more than ever, consumers are stopping to reflect on what is “green” around them, and as the e-commerce market continues to heat up, consumers will increasingly stop to reflect on the businesses around them and the packaging used to protect their products. With that said, it’s imperative for companies to take a candid look in the mirror to examine every aspect of their operation and its impact. From the standpoint of protective packaging, investments should center on solutions that offer a careful balance of sustainability and effective damage reduction. Why? Well, the sobering facts are plentiful. According to recent market research from Pregis, over five billion pounds of damaged products end up in US landfills every year. And the environmental cost of reshipping a damaged product can add up. To re-ship one parcel, it takes approximately 1.7 gallons of fuel, 1.8 kWh of electricity, 40.4 lbs of carbon dioxide emissions, and .13 ft² of habitat loss. On top of that, those same businesses are incurring unnecessary costs that can noticeably affect their bottom line. Those added expenses are materializing in a variety of ways, including re-shipping, product replacement, increased customer service and warehouse labor needs, re-packag-
ing, and a negative impact on customer acquisition/retention. In order to avoid these repercussions, there are a number of best practices that should be considered. Quantify Damages First and foremost, what are the product damage rates? Once an actual figure can be associated with this challenge, it sets a tangible goal for companies to measure against. Then, moving forward, it’s imperative to maintain monthover-month reporting of these figures to identify trends and correlations that may lead to optimizing shipping practices. Businesses should also be aware of their return policies, re-shipping processes, and the statistics associated with those operations. The more they know, the easier it is to ultimately identify inefficiencies in the system and come up with effective solutions. When it comes to protective packaging, it’s rarely a “one size fits all” strategy. Companies should examine the lifecycle and fragility of their product, then test a variety of packaging to ultimately match a solution to their needs — from cushioning and void fill, to surface protection and containment. Less Is More When designing or redesigning packaging, it is vital to balance the right amount of material with the added benefit of recycled content and recyclability for future use. This mission directly contrib-
utes to the core principles of a circular economy. Utilizing protective packaging that incorporates a percentage — big or small — of post-industrial or post-consumer content is becoming a staple for more and more manufacturers every day. Additionally, companies can reduce their footprint by rightsizing their packaging to their specific product and needs. Switching over to a more tailored solution and material will not only help reduce the amount of excess packaging, but better protect the product — which means less probability of damage during shipping and, in turn, less impact on the planet. There are a variety of on-demand, in-the-box, and mailing and bagging packaging solutions that can achieve that very result. Education Is Key Teaching businesses and consumers how to best dispose of packaging and other forms of a waste is just as important as utilizing recyclable products. According to the EPA, approximately 75% of waste produced in the US has the potential to be recycled, yet the reality is that the domestic recycling rate is approximately 34%. This is likely driven,
in part, by a lack of recycling knowledge, which could lead to the wrong materials making their way to recycling facilities. From there, their ultimate destination is, more often than not, a landfill. The EPA and other governing bodies offer various pieces of collateral to get the right information out there. The Sustainable Packaging Coalition also established the How2Recycle program, which designed labels that can be printed directly onto plastic packaging. These labels provide consumers with specific recycling instructions. Additionally, the How2Recycle website allows visitors to input their ZIP Code and locate the
nearest supermarket or retail store where recyclable materials can be dropped off. The online locator can be found here: https://how2recycle.info/sdo.
Clint Smith is Sustainable Packaging Director, Pregis LLC, where he is committed to leading sustainability and social responsibility efforts. Mike Purgatorio is Brand Manager, Pregis LLC. Through a multi-faceted marketing approach, he drives customer demand and supports the growth strategy for a number of the company’s product categories and key markets.
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RETAIL PARTNERSHIPS: A WAY TO REDUCE DAS? By John Haber
edEx, UPS, and Amazon are making it easier for consumers to pick up and drop off items at commercial locations such as partner retailers, lockers, and other authorized shipping locations. FedEx has established relationships with Walgreens, Dollar General, and select grocery stores, including Albertsons and Kroger. In addition, FedEx packages can be dropped off at Office Depot and OfficeMax stores and FedEx Offices, either standalones and those located in Walmart. UPS’ partner retailers include Michael’s, CVS, and Advance Auto Parts and are part of its Access Point network. According to UPS, 90% of the US population are within five miles of an Access Point location. Meanwhile, Amazon has aligned with Kohl’s, Whole Foods, as well as brick and mortar locations. Partnering with such retailers is beneficial in that it lowers costs for the provider and potentially increases foot traffic to the retailer’s store. In addition, FedEx’s Smart-
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Post and UPS’ SurePost, hybrid solutions in which the final mile is managed by the USPS, further lowers costs for FedEx and UPS. However, all Walgreens, CVS, Albertsons, Krogers, and other retailers are not created equal. The stores located in very densely populated areas have a lower cost to deliver, while locations in less densely populated areas may be hit with an additional fee based on a delivery area surcharge (DAS) or an extended delivery area surcharge. DAS are determined by ZIP Codes and are for both residential and commercial. The number of ZIP Codes have increased for FedEx and UPS due to the rise of e-commerce. For example, FedEx increased the number of ZIP Codes by five percent from 2019 to 2020, with the majority of ZIP Codes coming from DAS Extended, which are more remote areas. ZIP Codes such as 04236 (Greene, Maine) and 07871 (Sparta, NJ) are included in the multiple-paged list of ZIP Codes for UPS while ZIP Codes 06350 (Hanover, CT) and 12887 (Whitehall, NY) are included in UPS’ list for DAS extended. FedEx and UPS have dramatically increased these fees over the past five years. An interesting twist is that FedEx and UPS are bringing more SmartPost and SurePost parcels in-house due to lower costs for each provider to better manage these parcels. As such, DAS will likely continue to increase as both providers look to encourage consumers
and businesses impacted to utilize alternative pick up and drop off locations. Indeed, in just one year, 2019 to 2020, FedEx increased its DAS rates from a low of 4.76% for Residential to a high of 27.8% for extended Commercial while UPS increased its rates from a low of 5.3% for Residential to a high of 16.9% for extended Commercial. Combined, the increase in ZIP Codes and the cost increase will result in an average 10-15% increase for shippers just for DAS alone. For a large shipper, this could mean a six-figure increase. DAS and DAS Extended can significantly impact a company’s total shipping cost. There are a growing number of alternative solutions including pick-up and drop-off locations at retail partners as well as other parcel providers. A word of caution, however; these pick-up locations do not remove the entire DAS cost but instead reduce it from residential to commercial. While it may make sense on paper to attach a delivery fee to rural or extended locations, it would actually make more sense to charge a fee per stop versus per package. Until that happens, if it ever does, understanding the number of average packages per delivery is key to negotiate the best cost on DAS.
John Haber is the Founder and CEO of Spend Management Experts and can be reached at firstname.lastname@example.org.
TO 3PL, OR NOT TO 3PL?
When it comes to managing your e-commerce fulfillment, here are some items to consider before partnering with a third party.
BY STEPHEN (STEVE) T. HOPPER, PE
ll of us make decisions about what tasks we are willing to do ourselves and what tasks we would rather hire someone else to do for us. Businesses commonly make insource-versus-outsource decisions too, and one of the key decisions for an e-commerce business is whether to outsource logistics operations to a third-party logistics (3PL) company. Since the rise of 3PLs in the 1970s, the term “3PL” has evolved to mean different things to different people, even to the point of becoming ambiguous. Just as there are many types of warehousing and distribution operations, today there are a variety of generalized and specialized 3PLs in the marketplace. Because 3PL services vary, businesses can outsource their
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supply chain functions and pay only for what they need. This trend, along with the rise of e-commerce over the past two decades, has resulted in hundreds of 3PLs that specialize in providing e-commerce fulfillment services. Deciding whether a 3PL makes sense for your e-commerce business can be a challenging exercise, let alone deciding which 3PL is the best fit. E-commerce businesses can select from an extensive menu of 3PL fulfillment services, in nearly any combination. For example, on the warehousing and distribution side, these services include: receiving; storage and physical inventory management (tracking, cycle counting, etc.); order picking; sorting; value-added services (VAS, such as kitting, light assembly, personalization, gift wrapping, packaging, and labeling);
packing; shipping; and reverse logistics and returns. When it comes to inbound and outbound transportation, 3PLs commonly offer additional services, including: carrier and freight procurement and management; fleet management and routing optimization; freight forwarding, consolidation, audit, and payment; carrier rate shopping; customs brokerage; shipment tracking; and last-mile delivery. It’s also common for 3PLs to complement warehousing, distribution, and transportation services by offering additional support services, including: Management and optimization of inventory (forecasting, procurement, replenishment, etc.) Vendor compliance Inbound and outbound carrier compliance Accounting functions Customer service (such as a call center, order entry, and return authorizations)
To provide these services effectively, a 3PL’s contract with an e-commerce company is likely to include a blend of the following components: Facilities for warehousing and distribution Staffing (labor) Material handling, storage, and packaging equipment and related tools Physical automation (such as conveying and sortation systems, shuttle systems, and robots) Information systems (such as a warehouse management system [WMS], a transportation management system [TMS], and a labor management system [LMS]) Facility and equipment maintenance Utilities, communications, and waste removal Insurance There’s no one-size-fits-all answer to the question of whether or not a 3PL is right for your organization. The right answer
for your business depends on the unique goals and challenges of your business. Let’s look at some of the pros and cons of hiring a 3PL for e-commerce fulfillment. The Pros On the positive side, hiring a 3PL can add value to your e-commerce business in several practical ways: Flexibility – A 3PL can accommodate fluctuations in your business cycle due to seasonality and economic volatility. You will only pay for their services when you use them. Expertise and experience – Logistics is 3PL’s last name, right? Its only business is to manage its customers’ supply chain operations. So, your 3PL will give you access to professional logistics experts who specialize in managing e-commerce fulfillment operations. Convenience – Setting up your own warehouse or distribution center (DC) takes time and effort. If you hire a
3PL, they will run your e-commerce fulfillment operations for you and take the monkey off your back. Scalability and rapid expansion – If you are expecting significant growth but are unsure when (or if) it will come, you can conserve your capital. You won’t pay for your 3PL’s services until you need them, when you experience that growth spurt. Lower startup cost and time – Similarly, if your business is in startup mode, the services your 3PL provides can grow with you, without the need for capital investment upfront. You can crawl, walk, and then run. Plus, your 3PL’s existing organization, experienced staff, stable infrastructure, and logistics network can save you time and help you hit the ground running. Industry relationships – It pays to know the right people. Your 3PL is likely to be knowledgeable about and have existing working relationships with other constituents in the supply chain
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ecosystem, including carriers, trading partners, ports, regulatory agencies, and suppliers of equipment and software. Information technology – These days, logistics is as much about exchanging information as it is about moving products. Leading 3PLs are wired to provide electronic data exchange (EDI) with your trading partners, connection with online logistics marketplaces, and real-time visibility, analytics, and reporting. Reduced freight costs – Your 3PL will likely be serving many customers, and their economies of scale result in consolidated shipping volumes with carriers and other trading partners. This means they can pass along lower inbound and outbound freight costs to you. Turnkey logistics solution – As your single point of logistics contact, your 3PL will serve as your traffic cop for all activities related to e-commerce fulfillment. They will be your knight in shining armor when your fulfillment operations run smoothly and efficiently, and your “single throat to choke” when they don’t.
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Freedom to pursue your passion – Let’s face it: Your top executives are passionate about your customers, your products, your marketing, and your sales, but not about logistics. Hiring a 3PL will allow your staff to focus on your core competencies and let your 3PL handle the hassles of fulfillment. Win-win scenario – Because your perceived value of a 3PL is tied directly to their performance, your relationship with your 3PL will be collaborative and strategic, by definition. When they succeed, you succeed, and vice versa. The Cons Despite all these upsides, hiring a 3PL can have its downsides, too: Loss of control – Control freaks and micromanagers beware! When you delegate, accountability and authority should go hand-in-hand. It’s unfair to hold your 3PL accountable for your fulfillment operations if you’re still in control, and if you relinquish control, you risk poor logistics performance.
Higher ongoing costs – While hiring a 3PL might help you avoid many startup costs, you are also likely to pay a premium to outsource your fulfillment operations over the long term. With a 3PL, the reality is that you will be increasing your ongoing operating expenses in exchange for avoiding capital expenses and the hassles of managing your own fulfillment. Limited access – Your physical inventory and your fulfillment team will be remotely located at your 3PL’s facility, rather than just outside your own offices. This presents obvious challenges when you need to see your inventory in person, such as to inspect it for quality issues. Customer service risks – No doubt, your relationship with your customers is vital to the success of your business. Since your fulfillment operations directly touch your customers and inspire their satisfaction, hiring a 3PL to ship your orders accurately and on time will require a great deal of trust. And if they
don’t, your customers will blame you, not your 3PL. Lack of attention – A 3PL wants your business, but they might also have contracts with thousands of other e-commerce companies who are competing for their attention. Unless your company is a big fish in their relatively small pond, it might be challenging to get responsiveness and action from your 3PL when you need it. Integration risks – You and your 3PL will be exchanging lots of important and often confidential data about your inventory, orders, and shipments. You can’t afford to have it fall in the cracks, so your information systems must be effectively integrated with your 3PL’s to ensure these exchanges are timely, secure, complete, and error-free. Loss of resources – If you close your warehouse or DC and outsource your fulfillment operations to a 3PL, you will be giving up existing internal logistics expertise and infrastructure. Consequently, if you later decide to bring
fulfillment in-house again, you will have to start over and rebuild. Inefficiencies – It might seem contradictory, but when it comes to adopting the best practices of the warehousing and distribution industry, many 3PLs are lagging. Their desire to serve too many different types of customers and to avoid spending capital to gain efficiencies can result in antiquated processes and infrastructure. And they will pass these inefficiencies on to you in the form of higher costs. So, What’s Your Decision? As with most strategic business decisions, there’s no quick-and-dirty answer to this tough question. The devil is in the details. Here’s the smart way to find the best answer for your business: 1. Define your e-commerce fulfillment requirements discretely. 2. Document the tangible costs and intangible value of each fulfillment alternative (insourcing and outsourcing). 3. Compare the alternatives rationally
and objectively. 4. Develop a comprehensive business case that determines the best direction. When you take this structured approach, you might find that outsourcing your fulfillment operations to a 3PL wouldn’t be sensible. But if a compelling business case justifies it, you might find that hiring a good 3PL as your strategic logistics partner would be right for your business. Either way, you’ll avoid a costly mistake.
Steve Hopper is Founder & Principal of Inviscid Consulting, whose mission is to help business plan and streamline their warehousing, logistics, manufacturing, and distribution operations to drive down operating costs, boost capacity, improve service levels, and mitigate risk. He can be reached at steve.hopper@inviscidconsulting. com or 404.832.5326.
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HOW IMPORTANT IS YOUR COMPANY’S PARCEL SPEND MANAGEMENT? THESE 13 COMPANIES CAN HELP Another year has gone by, and as you head into 2020, the question that still remains is if you have done everything you can to manage and possibly lower your shipping costs. It seems there are more surcharges and fees than ever, and with the continued growth of e-commerce, you might find consumer demands growing exponentially — along with your shipping spend. And while your customer base is a wonderful place to see growth, increases in your shipping costs are not. Need help? Here are 13 companies that can assist you in taking the bull by the horns and making 2020 your best year yet.
AFMS is the leading transportation price benchmarking firm in North America and Europe with business intelligence analytics focused on reducing transportation costs through carrier contract negotiations and automated freight audit and recovery. AFMS specializes in benchmarking your freight rates to tell you exactly what market discounts and concessions you deserve with your current carrier. The pedigree of the AFMS senior management team is unparalleled in our consulting space, over 500 years of combined sales and senior pricing experience from carriers like UPS, FedEx, and DHL. It’s an important foundation upon which our 28 years of business has been built. Our inside pricing knowledge is why the largest shippers in the US and Europe use AFMS to benchmark their rates and save big. GE, Sony, Disney, Under Armour, StockX, Dell, Honda, Toyota, Bose, Trek Bikes, Johnson & Johnson, and many more large shippers have all
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negotiated best-in-class rates with AFMS help. Our fact-based negotiation strategies, advice, and management solutions are why AFMS clients have the best shipping rates. Our senior managers are actively involved in every aspect of our client’s negotiation strategies and discussions, successfully averaging 15-20% better rates than those companies that don’t use AFMS. AFMS electronic invoice auditing and reporting tools are the most sophisticated in the industry, with over 750 reporting and management tools that provide valuable insight into a company’s logistic and day to day operational needs. Call AFMS for a FREE contract/pricing evaluation and 30-day test audit. www.afms.com email@example.com 800.246.3521
Have you thought about utilizing a parcel spend management firm? If not, it’s potentially a significant opportunity for savings — as much as 20%+. Alexandretta brings expertise for shippers to optimize both their domestic & offshore parcel agreements, as well as their LTL and airfreight agreements. Our multimodal, global expertise brings a more one-stop approach to spend management, for domestic and global shippers alike. It also sets our clients up with a relationship that supports growth, since we already have the expertise needed to move our clients forward. Our values put our clients first, from small internet retailers, to the Fortune 50, in order to make sure we do the right thing, always. We are committed to integrity and building relationships of trust; for the longterm success for our clients. We are WBE-certified and are focused on inclusivity, as well as giving back, and we’ve recently begun donating 1% of our profits to causes supporting sustainability. We believe that doing good business and doing good in the world go hand-in-hand. Drawing from our core values and over 200 years of combined experience, Alexandretta advises shippers on how to get the most out of their Parcel, LTL, and Air Freight negotiations from a pricing, service, strategy, agreement, and account structure perspective. And while these elements can be extremely complex, transportation agreements, if well-managed, are a tremendous opportunity for significant savings, competitive leverage & profit. Let Alexandretta be your guide for spend management success. www.alexandrettaconsulting.com firstname.lastname@example.org 714.777.3377
CT Logistics is celebrating 97 years of supply chain management services in 2020. Since 1923, companies have leveraged CT for freight audit, payment, TMS solutions worldwide. CT customizes all solutions for our clients to support all modes, including parcel. CT’s services will reduce your costs and save your company money. CT audits every shipment to recover money from your total parcel, package, and freight expenditures. All rates and cost items are calculated, including bundled pricing, hundred weight, and dimensional pricing. All shipments are reviewed for address, account number, COD, dangerous or restricted goods, declared value, and oversize. All shipments. including third-party, are reviewed for inside, residential, dimensional, Saturday pickup or
delivery, as well as GSRs (Guaranteed Service Recoveries). CT’s services also include supply chain management, TMS solutions, LTL and Full Truckload shipment execution, bid management, shipment planning and execution software, as well as professional services for consulting and advising. CT’s business intelligent platform provides global supply chain visibility for benchmarking and trending, with graphical dashboards for management information. CT is SOCII and ISO 9001:2015 certified.
enVista is a leader in the parcel audit and spend optimization market. Its core solution for audit and payment, MyShipINFO®, is supplemented with industry leading business intelligence capabilities to provide granular visibility to all shipments in a client’s parcel network. Over the past 18 years, enVista’s consulting practice has implemented solutions to help shippers realize significant transportation savings through cost modeling, service-level analytics, and contract management. The enVista audit process focuses on four primary cost drivers. Each shipment is tracked to ensure packages are delivered on-time and damage free. All charges are compared to the carrier service guide and client rate sheet. Any billing adjustment or accessorial charge is audited to ensure that it should have been applied and that the cost associated with the charge is in line with the customer agreement. Our audit team works directly with each client
to build compliance rules to validate activities on the account, like routing rules and fraudulent shipments. In addition to world class audit services, the enVista team proactively supports clients by monitoring key metrics in order to identify opportunities that exist for service optimization, packaging alignment, and other important cost drivers. Our analysts work as an extension of our client’s team to ensure their parcel spend is optimized and that they have the visibility to drill into any level of detail captured in the audit. Robust business intelligence (BI) capabilities coupled with enVista’s consulting expertise ensure our clients have the resources needed to achieve their transportation visibility and savings initiatives. www.envistacorp.com email@example.com 317.208.9100
www.ctlogistics.com firstname.lastname@example.org 216.267.2000, ext. 2190
Green Mountain Technology (GMT) provides the world’s largest parcel shippers with a Parcel Spend Management solution (PSM) engineered for competitive edge. This PSM solution combines a bestin-class parcel audit system with intelligent parcel spend analysis software to identify network opportunities and assist with contract management. It enables unparalleled success through our proven process focused on three key strategic areas: Process Automation, Network Intelligence, and Network Optimization. GMT’s highly engaged, strategic delivery model, unique network modeling and re-rating technology, and Fortune 500 customer base, uniquely positions GMT to deliver unparalleled value. GMT’s customers represent more than $7 billion in parcel spend and consistently experience a 5-10X return, net of our fees. www.GreenMountainTechnology.com Contact@greenmountain technology.com 901.507.9307
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Intelligent Audit (IA) is the technology leader in parcel and freight audit, business intelligence, and spend optimization. IA’s proprietary technology, paired with its team of strategic account managers, provides an unrivaled ability to uncover opportunities for cost reduction and process improvement. IA’s cloud-based solution addresses logistics pain points using data-driven analytics and reporting to analyze, benchmark, optimize, and help shippers gain critical insights into their global transportation networks. With best-in-class audit and reporting technology, clients are able to leverage their data to reduce costs, enhance real-time visibility, and improve end-customer experience. With more than 2,500 clients representing over $12 billion in annual transportation spend, Intelligent Audit prides itself on providing clients with the tools and insights to help them ship smarter. www.intelligentaudit.com email@example.com 201.880.1110
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ParcelLogix is the leader in flat fee small parcel price benchmarking and carrier contract negotiation services. They bring visibility to appropriate small parcel rates by providing granular target pricing saving their clients millions on shipping costs. The process is straightforward: ParcelLogix offers a free assessment of clients’ pricing to identify opportunities for saving, which is typically completed in 3-5 business days. Clients then have the option of choosing from two options: Price Benchmarking or Carrier Contract Negotiations. Price Benchmarking Following a comprehensive analysis utilizing ParcelLogix’s proprietary data and analytics tools, a detailed list of custom price benchmarks and corresponding savings are presented to the client. These targets become the roadmap for the client to follow during negotiations with the carriers (UPS, FedEx & DHL). Carrier Contract Negotiations Using the aforementioned price targets, ParcelLogix assists clients
throughout the carrier negotiation process to maximize the savings attained by clients. This negotiation assistance includes financial impact analysis of proposals received by the carriers, guidance on strategy plus access to ParcelLogix’s Business Intelligence Dashboards. Return on Investment ParcelLogix prides itself on being an affordable yet highly capable service provider. It is their goal on each engagement to return more savings to their clients than any other provider in the industry. In fact, many of their clients retain more than 90% of the savings achieved. Find out how much your organization is overpaying for small parcel shipping and visit ParcelLogix today.
No one knowingly overspends. But, in what might be the most difficult carrier pricing environment ever for shippers, chances are you have. And, why is that? Time is a valuable resource. Contracts are intricate. Any number of gotchas or hidden terms can go unnoticed and mitigate your contractual discounts. Not to mention, without benchmarking the market, how do you know you’re getting fair terms and pricing? Shipware was founded 19 years ago, committed to champion the shipper. We’re dedicated to leveling the playing field by creating a more balanced relationship between shippers and the carriers. With over $1 Billion in spend currently under our management, we’ve reduced parcel shippers’ costs 10-30% by helping negotiate contract terms and auditing carrier invoices to
recover your chunk of the billions in refunds that go unclaimed each year. Why should you team up with Shipware? Bottom line — the savings. Both cost and time. As our clients have said, “It’s always a pleasure to see our weekly invoices from the carrier reduced,” and Shipware’s “experts helped us negotiate our carrier contract, saving us much more than we ever thought possible.” We do this all with no disruption to your current operation and little time commitment on your part.
www.parcellogix.com firstname.lastname@example.org 800.471.2310
www.shipware.com email@example.com 858.879.2020
With costs rising due to an increasingly fast-paced business environment, even the most sophisticated supply chain operations are overpaying in an effort to gain a competitive edge. Providers are raising the stakes with consistent rate increases, policy changes, and complex billing systems that lack transparency. Spend Management Experts is the leading transportation, distribution, and fulfillment spend management consultancy that helps companies optimize supply chain spend, reducing costs by 20% or more. We are a team of experts who know where to look, armed with modern supply chain technology which makes us all the more efficient. Our approach won’t disrupt daily operations. We employ unparalleled market intelligence and proprietary cost modeling, targeting hidden costs and identifying savings opportunities. We build strong business cases based on your data to negotiate better terms, pricing and service for our clients. Our services help clients effectively
manage spend across all modes: Strategic Sourcing: We provide a complete evaluation of existing carrier contracts, terms, and pricing, as well as alternative sourcing solutions. From there, we are able to develop a savings strategy. Supply Chain Strategy: We provide companies with a complete view of their spending environment, enabling them to maximize efficiency and minimize waste. Business Intelligence: We ensure carriers comply with contract terms and agreements. We’ll help recover hard-dollar savings by identifying and claiming 100 percent of entitled funds. The benefits are undeniable; reduced costs, increased efficiencies, dynamic reporting, accurate forecasting, and optimized planning. Spend Management Experts delivers your competitive edge.
Trax is the global leader in Transportation Spend Management solutions. Combining industry leading cloud-based applications with expert services, we are transforming traditional freight and parcel audit to help customers better manage and control their global transportation costs and drive enterprise wide efficiency. With a global footprint spanning North America, Latin America, Asia, and Europe, we deliver data-based visibility and insights, higher savings and better control of transportation spend for shippers of all sizes. Trax’s Total TSM solution is purpose-built as a closed loop spend management solution for transportation; combining and leveraging a best-in-class set of data management and audit capabilities with a rich set of spend intelligence solutions or Transportation Spend Intelligence (TSI). Total TSM represents the next generation of freight and parcel audit to drive the industry toward
comprehensive transportation spend management to deliver the capabilities shippers require to better manage and control their transportation costs. Best-in-class analytics can transform transportation cost data into an advantage for any shipper. Trax delivers transportation spend intelligence through our TSI solution suite, enabling shippers to analyze their transportation spending and answer key questions like “What happened?”, “Why did it happen?”, and “What can I do about it?”. Whether it’s our TSI Insights solution, which captures all spending and KPIs in a best-in-class business intelligence solution or our patent pending TSI Variance Analysis, which quickly lets you measure the changes in your spending and identify the root causes of those changes, TSI gives you control.
www.spendmgmt.com firstname.lastname@example.org 404.902.5390
The increasingly complex nature of small parcel shipments makes it difficult to get a timely, accurate picture of true cost and service fulfillment. High volumes, multiple surcharges, contracted delivery guarantees, limited access to information — it all adds up to a complicated invoice process prone to inaccuracies and unnecessary costs. U.S. Bank Freight Payment can help you address these challenges with robust solutions that integrate small parcel and freight data for an accurate view of true transportation spend. Transaction-level detail on more than 200 audit points provides visibility into performance and automated cost recovery eliminates laborious efforts to contest charges, file claims, and obtain refunds. Our small parcel experts work with you to provide customized recommendations that can help proactively identify areas to reduce expenses. Plus, you can depend on the reliability and security of a bank that’s gone beyond regulatory, audit, and compliance requirements to earn the highest data certification to keep your competitive information safe. Visit freight.usbank. com/smallparcel to learn how you can get the reliability and visibility you need to make your supply chain a strategic advantage from point of origin to the last mile. freight.usbank.com/smallparcel CPSTransportation@usbank.com 866.274.5898
www.traxtech.com email@example.com 800.755.0110
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No one wraps up parcels quite like Visible. Founded as a fulfillment company with a single warehouse in 1992, we have grown to become one of the country’s leading providers of parcel logistics, fulfillment, shipping, and packaging. And we're now one of the fastest-growing companies in the US. How fast are we growing? In 2019, we brokered over 115,000 freight shipments, weighing almost 600 million lbs, shipping them almost a million miles. On top of that, we also fulfill more than 240 million units a year, saving customers up to 41.2% on shipping and fulfilling with 99.84% accuracy — 99.9% of parcels arriving on time. Add in proprietary shipment tracking that gives customers end-toend transparency on parcel progress and billing, finding the right solutions via multi-carrier strategies — and it’s easy to understand why over 25,000
customers trust Visible with their logistics, shipping, and fulfillment. We also provide complete scalability and 1.26 million square feet of warehousing, in four warehouses, on two coasts. Contact us for your free parcel shipping analysis today. Perhaps Casey Adams, our President, puts it best, "We help get products to consumers in the best possible way for companies' business models, and we do it while providing clarity in an industry that generally doesn't have it. Transparency is hard to come by. But not when you build your business from the ground up to provide it. The clue is in our name. Visible." VisibleSCM.com firstname.lastname@example.org 887.506.2614
Featured Companies and Contact Information AFMS
www.afms.com email@example.com 800.246.3521
www.alexandrettaconsulting.com firstname.lastname@example.org 714.777.3377
www.ctlogistics.com email@example.com 216.267.2000, ext. 2190
www.envistacorp.com firstname.lastname@example.org 317.208.9100
Green Mountain Technology
www.GreenMountainTechnology.com Contact@greenmountaintechnology.com 901.507.9307
www.intelligentaudit.com email@example.com 201.880.1110
When you combine the decades-long expertise of seasoned industry professionals with cutting-edge logistics technology, the results are astounding. That’s the case at Zero Down Supply Chain Solutions. Zero Down provides parcel shippers with a winwin solution for saving time, money, and other valuable resources. Join the digital revolution. The Zero Down team helps clients enter the digital age and automate their systems, gain visibility, negotiate more favorable carrier contracts, access all modes, and so much more — all for a fraction of the savings provided. In fact, Zero Down doesn’t send an invoice unless you save money. Save hours of time with our mobilefriendly technology. At Zero Down, our audit and spend management solution is powerful and robust. By leveraging our proprietary, cloud-based technology FreightOptics, our auditing process makes sense of the thousands of data points in each carrier invoice, checks
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invoices for accuracy and extracts the most relevant data on your behalf as information you can leverage. See refunds in as little as 7 days. We perform a forensic data audit on each shipment, looking for the big and small. From service failures, to incorrect or missing discounts, to erroneously-billed surcharges, our system uncovers every inaccurate charge you can use for reimbursement to your account. Easy integration. With FreightOptics, there is ZERO up-front investment and ZERO IT involvement required for parcel implementation and minimal time and effort to implement freight audit. For a complimentary demo of our services and capabilities covering all modes of transportation, contact our team today. www.zdscs.com firstname.lastname@example.org 800.785.7959
www.parcellogix.com email@example.com 800.471.2310
www.shipware.com firstname.lastname@example.org 858.879.2020
Spend Management Experts www.spendmgmt.com email@example.com 404.902.5390
www.traxtech.com firstname.lastname@example.org 800.755.0110
freight.usbank.com/smallparcel CPSTransportation@usbank.com 866.274.5898
Visible Supply Chain VisibleSCM.com email@example.com 887.506.2614
Zero Down Supply Chain Solutions www.zdscs.com firstname.lastname@example.org 800.785.7959
10 TIPS TO IMPROVE THE DELIVERY EXPERIENCE IN 2020
s recently as just a couple of years ago, the term “delivery experience” was little more than an industry buzzword, often prefaced by “the Amazon effect” or “the e-commerce boom.” However, delivery experience has rapidly become a strategic focal point for many companies, and with good reason. Consumers expect a consistent, transparent, and frictionless delivery experience, and companies that fail to meet these expectations risk losing customer loyalty and, ultimately, revenue. A recent report published by Project44 titled “The Delivery Economy & The New Customer Experience” had this to say regarding the growing importance of the delivery experience: “Consumers are no longer just buying a product, they’re buying an experience. Fast, inexpensive shipping that provides
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Providing a positive delivery experience begins well before a package is shipped, let alone delivered. Whether presented as static content on a Shipping/FAQ page or dynamically displayed on PDPs, shipping options should be simple, clean, and easy to understand. The last thing you want is to have a customer become confused, frustrated, and abandon before even reaching checkout. Whether you offer a flat rate by shipping option or free with a threshold (or both), make sure the options are simply presented in a table or graphic that is easy to comprehend.
Clearly communicate an estimated delivery date (EDD). It is no longer sufficient to provide the standard five-to-seven-day delivery window and show an EDD of seven business days (gasp) in checkout for all customers. EDDs calculated specific to a customer’s delivery address are table stakes. Present the EDD in line with delivery options in checkout to ensure the customer has a clear understanding of when she can
BY NATE SKIVER consumers precise visibility into the process is becoming more influential than core purchasing elements — like price, value, and customer service.” With this in mind, below are 10 tips to help build a winning 2020 delivery experience strategy. Re-assess your shipping strategy. Are the shipping options provided to your customers meeting their expectations? Are shipping options, including delivery time and cost, on par with your company’s competitive set? If the answer to either question is “No,” determine what changes are critical to improving the delivery experience and develop an implementation plan to address your customers’ needs. 2. Provide succinct, simply stated shipping options.
expect to receive her order (done well by Urban Outfitters below).
Review Delivery Info + Items
Provide a post-purchase delivery experience solution. What kind of experience do you think a customer has if she sees “Label created, not yet in system” when clicking on the link in her ship confirmation email? (Hint: It’s probably not a good one). Post-purchase delivery experience requires a solution to communicate with customers, instead of requiring them to track packages (which, as a parcel nerd, I don’t even like to do). Whether you partner with someone
or develop something internally, it is imperative to provide your customers with a solution that informs them of tracking or status updates and facilitates customer interaction. Leverage parcel data to enhance delivery predictability. While standard TMS functionality, such as using carrier-provided transit days, may be sufficient to calculate an estimated delivery date, an opportunity exists to leverage parcel delivery data to better inform carrier routing decisions and provide a more consistent delivery experience. Consume parcel delivery data to measure a percentage of packages delivered by day, across carrier services, ship day of the week, and destination ZIP Code. Set acceptable delivery performance thresholds within a TMS and incorporate this logic into the package routing decision process.
Implement a delivery experience management solution. Failure to identify delivery issues before they affect the delivery experience is a good way to lose customers. Many options exist to identify delivery exceptions and communicate the issue to the customer, ranging from a manual process of using carrier tracking tools, CRM software and email, to parcel visibility solutions designed specifically to solve delivery experience issues. Engage a cross-functional team to assess your company’s current process and areas of opportunity and determine the solution that best addresses shortterm needs and enables flexibility to adapt to the changing needs of your customers. Evaluate shipping costs and budget accordingly for planned changes. Whether handled internally, partnering with a parcel audit and analytics provider, or a combination of both, perform a detailed cost analysis to ensure shipping strategy initiatives can
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be supported according to established metrics (e.g. shipping cost per unit or shipping cost as a percentage of revenue). If shipping costs are too high, now is the time to re-negotiate your parcel agreements, as well as engage prospective carriers. Explore alternatives to the “Big Two” carriers. Shippers must think outside the Brown and Purple boxes to fully assess carrier delivery options. Collectively, the USPS, postal consolidation carriers, regionals, and final-mile delivery providers remain an underutilized asset in the e-commerce delivery space. While it may not be easy to break away from the revenue and volume commitments often required from UPS and FedEx, remaining “locked in” to one of these carriers simply limits your options. Engage with alternate carriers and, if needed, leverage third-party consultants to assist with evaluating options, assessing contracts and rates, and
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selecting delivery partners that align to your shipping strategy. Test, Test, Test. Adding capabilities to enhance the delivery experience doesn’t have to be an all-or-nothing proposition. Utilize a brand, customer segment, product, or order type to test different shipping and delivery options. Explore and test new carriers and/or services at a small scale to ensure they are properly vetted prior to fully implementing. Test, measure results, iterate, and repeat until the desired results are achieved. Personalize the delivery experience. If you really want to provide an elevated delivery experience, personalization is critical. A one-size-fits-all approach is simply not enough in an environment where customers have more access to data, require precise visibility to their order, and demand the ability to influence the delivery. If free next-day delivery can be offered to a customer because she lives
50 miles from your distribution center, make it available to influence her purchasing decision. There is only so much value to be gained from the “surprise and delight” approach of providing a generic estimated delivery date, only to deliver three days “early.” Just delight your customer and incent her to buy. Those who design, implement, and offer a compelling delivery experience will have an edge over the competition and be well-positioned for success in 2020.
Nate Skiver is the founder of Level Playing Field Spend Management, a parcel consulting company that provides value for its clients through creating parcel shipping programs that reduce expense, while delivering a positive customer experience. Prior to founding Level Playing Field, he spent more than 15 years focused on building, executing, and managing parcel transportation programs for leading global apparel companies. He can be reached at email@example.com.
By Valerie Metzker
THE STATE OF “FAST AND FREE” DELIVERY: WHAT RETAILERS AND PARCEL CARRIERS SHOULD KNOW
hanks primarily to Amazon (and the explosive growth of Amazon Prime), consumers in 2020 are conditioned to expect that virtually anything bought online can be shipped for free. That’s true for small orders like prescriptions and batteries, and for huge items like appliances and tires. If it means a shopper has to buy an annual subscription, or spend a little more to meet a free-shipping minimum, most people would consider that a low bar to meet. But as every retailer and e-commerce seller knows, shipping is never free. Today’s multi-billion-dollar parcel carriers are getting paid. They moved nearly a billion parcels this past peak season. That shipping cost is being ultimately absorbed by sellers and is reflected in the price buyers are paying for products. And parcel volume growth isn’t slowing down — it’s accelerating. According to the Pitney Bowes Parcel Shipping Index, global parcel shipping volume
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grew 70% from 2014 to 2017, to 74.4 billion parcels. The index projects global parcel volume to rise at a rate of 17% to 28% from 2018 to 2020, surpassing 100 billion parcels this year. Handling increasing parcel volume isn’t just about figuring out how to do more of the same. The process of getting things where they need to go is under a transformation. In a recent report, Gartner found that transportation is the largest portion of delivery costs, due to a shift from carriers handling bulk freight to small parcels. Gartner also observed what many companies are feeling: as volume continues to grow, companies only have time to react instead of plan. That means many are missing opportunities to revolutionize parcel logistics with innovation and alternative delivery models. How Fast Does “Fast” Need to Be? According to research from Freightwaves, consumers unsurprisingly still have an appetite for fast delivery,
with 60% of shoppers saying they’ve abandoned an online purchase because of slow delivery times. With record volumes to handle — and so much at stake with consumer expectations — efficiency, on-time consistency, and flexibility are key for parcel delivery services, whether it’s same-day, nextday, or deferred. This year’s US peak shipping season saw about a billion package deliveries (up 4.5% from 2018). Retailers are offering more same-day options, which increases demand and the need for trucks, local delivery vehicles, drivers, warehouses, and warehouse workers. This year, the challenge was also complicated by a shorter selling season (the holiday season was six days shorter in 2019 than is typical), new restrictions on driver hours of service, and the December 16 implementation of new rules for Electronic Logging Devices in commercial trucks. All of these factors impact capacity and the ability of networks to deliver fast and on time.
Emerging Shift in Consumer Behaviors On the flip side of the “freer and faster” coin is Gartner research analyst Tom Enright. He’s counseled retailers on their supply chain and fulfillment strategies for more than a decade. In a groundbreaking report published in November 2019, he detected an emerging shift in consumer behavior: “Consumers are starting to express increased concern about the environmental impact of retailer’s shipping practices, and are seeking slower, more sustainable options.” Consumers are now defining convenience as order fulfillment on their terms, and they’re expressing more and more concerns about the environmental impact of fast, one-off deliveries. It’s a conflict between three consumer choices: The desire for instant gratification The price reduction they can get for waiting longer for a delivery The impact fulfillment speed has on transportation, packaging, and other environmental issues.
According to Enright, for retailers, these shifting demands are driving the emergence of two new requirements that are somewhat at odds with current models: Retailers must be more environmentally sustainable in order fulfillment operations. Retailers must offer a wide range of shipping speeds and prices, especially if incentives or other benefits are included the offering. Considerations for Retailers and Parcel Carriers That means retailers — and their parcel delivery partners — need to consider more flexible fulfillment options. These will need to be able to satisfy a consumer who wants a totally different delivery than currently exists. Companies will need to consolidate multiple online purchases from different retailers, have them combined using less packaging, and have it delivered as one shipment a week from Tuesday. That’s instead of three separate shipments expedited for delivery
tomorrow — or even same-day. Major retailers like Amazon, Walmart, Target, and The Home Depot are doubling down on offering same-day delivery options. And for parcel delivery providers, it remains a highly fluid and exciting market. New network models are not only welcome, but will be required to meet the ever-evolving demands of shippers. The explosive growth of package volumes, as well as consumers’ desire for next-day and, increasingly, same-day delivery, aren’t likely to wane anytime soon. And retailers and parcel carriers will need to pursue creative, innovative ways to keep up with those expectations and meet that demand.
Valerie Metzker is the Head of Business Development at Roadie, a crowdsourced delivery service that works with consumers, small businesses, and national companies across virtually every industry to provide a faster, cheaper, more scalable solution for scheduled, same-day, and urgent delivery.
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The 2019 PARCEL Forum Game-Changer of the Year Award Goes to
At the 2019 PARCEL Forum in Dallas, TX, Mountain Rose Herbs was recognized for the steps they took to streamline their parcel operation. By Amanda Armendariz
ountain Rose Herbs, based in Eugene, OR, was founded in 1987 and today sells herbs, essential oils, and teas directly to the home consumer. On average, over 1,000 shipments a day leave the warehouse, and approximately 300 of these packages fall under HAZMAT classification. These shipments were creating issues for their operations, shares Kris Mitchell, Shipping Manager for Mountain Rose Herbs, and it was the company’s approach to solving these problems that led to the PARCEL Forum
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Advisory Board selecting Mountain Rose Herbs as the 2019 Game-Changer of the Year award winner. “We sell a large assortment of essential oils and herbal extracts with a variety of flash points, most of which fall within the ‘flammable’ or ‘combustible’ HAZMAT categories,” Mitchell explains. “Both categories have very different requirements for packaging and shipping the HAZMAT products. It has been a challenge to comply with FAA and DOT regulations as well as each carrier’s packing and shipping requirements, including weight and packaging restrictions.”
These differing requirements drove Mountain Rose Herbs to seek out a more streamlined solution. “With so many different HAZMAT regulations and requirements with different carriers and government agencies, it was impossible to regulate each package,” Mitchell shares. “The shipping staff did their best to try to ship the packages as required, but it was very confusing and time-consuming.” For example, both flammable and combustible liquids form a vapor above the surface, which can ignite and burn. The main difference between the two designations is that flammable liquids can ignite and burn at a lower temperature (100-139 degrees), whereas combustible liquids ignite at higher temperatures (140-199 degrees). Mountain Rose Herbs must handle the flammable products with more care to ensure the transport is handled safely by limiting the amounts they ship per package and determining on a case-bycase basis whether it can go via ground or air. Shipments of combustible liquids are less restrictive, but USPS still requires special labeling for this class (although UPS does not). USPS and UPS also have different weight limits for ground/air shipments as well as requiring different labeling on the outside of the package. For example, USPS does not permit shipping more than one ounce of flammable liquid in
Clifton V. Allen II, System Administrator (L) and Kristine Mitchell, Shipping Manager, accept the award from Joel Dunkel, President of EventEvolution, at the 2019 PARCEL Forum keynote luncheon.
the air system, while UPS will allow this with shipping papers and a fee. Streamlining the Process The company knew it had to make some changes to its processes in order to streamline shipments getting out the door with the correct packaging and designation. Mountain Rose Herbs created a new code in its internal ERP system for each essential oil and herbal extract. This code defined how many fluid ounces can be shipped in one package and which carrier to use to ship that particular HAZMAT product. “The code is passed to our shipping system
so that packers and shippers know an order contains HAZMAT products with special shipping requirements,” Mitchell says. “During the packing and shipping process, they can implement the proper procedures to ensure we are following the carrier’s requirements. Our company upgraded its shipping system to ShipExec, which gives us the ability to restrict which carrier can ship our HAZMAT products.” In addition, Mountain Rose Herbs created a core group of about 10 employees that are specially trained and certified to pack and ship HAZMAT packages, and the system routes these
shipments exclusively to this small group of employees to prepare and ship. The system restrictions prevent employees who have not been properly trained in HAZMAT from accidentally packing or shipping these packages incorrectly. “ShipExec also allows us to create popup windows for the shipper to quickly verify that all steps have been followed appropriately, and they serve as a final check to ensure no mistakes have been made in packing Hazmat shipments,” Mitchell elaborates. This process also helps new employees avoid errors since the requirements are programmed into the software from the time of order entry through the completion of the shipping process. The results have been overwhelmingly positive. By implementing this solution, Mountain Rose Herbs avoided shipping packages that did not meet the FAA, DOT, and the parcel carriers’ regulations and requirements, ultimately avoiding huge fines. Furthermore, “We are 100% in compliance and have impressed our HAZMAT experts and auditors who have visited the facility,” shares Mitchell. Congratulations to Mountain Rose Herbs for their recognition as the 2019 Game-Changer of the Year award winner! JANUARY-FEBRUARY 2020 PARCELindustry.com 35
A LOOK BACK, A LOOK AHEAD: WHY DO I NEED TO KNOW THIS STUFF? By Brent Wm. Primus, J.D.
o start the new year, PARCEL Counsel will take a look at two legal developments from last year that will have an effect on parcel shippers in 2020. This begs the question: “Why do I need to know this stuff; I am not an attorney?” The short answer is that a working knowledge of the laws and regulations affecting the supply chain is critical for a transportation professional in order to identify and then minimize legal and financial risks. For transportation professionals involved in finance, an understanding of legal trends and their effect upon one’s company better equips them for budgeting transportation expenses.
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During 2019, there were two developments relating to loss and damage claims — one favorable, one not so favorable. The favorable development for parcel shippers is that the limit of liability for most international air shipments was raised from 19 SDRs to 22 SDRs per kilogram to account for inflation since the previous adjustment in 2009. By way of background, an SDR, or Special Drawing Right, is comprised of a blend of the currencies of the United States, European Union, China, Japan, and the United Kingdom. It is the monetary unit used to settle accounts between countries. The exact dollar equivalent of an SDR varies daily. As of January 8, 2020, one SDR equaled US $1.38. Thus, the new limit which went into effect for claims on or after December 29, 2019 will be approximately $13.80 per pound compared to the previous limit of $11.92. The unfavorable development for parcel shippers is that UPS issued a new tariff that went into effect on October 2019 and required that “UPS must receive notice of claims within sixty days after Delivery.” The tariff further states that “Where UPS does not receive notice of claims… such claims shall be deemed waived and will not be paid.” In my own opinion, this tariff is not enforceable. This opinion is based on the fact that the federal statute governing claims, referred to
as the Carmack Amendment, states in relevant part that “A carrier may not provide by rule, contract, or otherwise, a period of less than 9 months for filing a claim…” Thus, if UPS were to decline a claim because a claim had failed to file a “notice” of the claim within 60 days, the declination would be invalid. However, whether my own opinion is correct or not, my suggestion for higher volume shippers is to try to contract away from this new tariff provision. For other shippers, I believe they should make every attempt to file the “notice of claim” within the 60-day period. I say this because, as a practical matter, I believe that it would be a very protracted and expensive process for a shipper to challenge this tariff provision in court. And even then, there is no certainty that the court would rule in favor of the shipper. To conclude, 2019 is behind us and 2020 lies ahead. During the coming year, this column will do its best to keep the readers up to date on legal developments. So… stay tuned!
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 on the PARCEL website at http://parcelindustry.com/by-author-1130-1.html. Your questions are welcome at firstname.lastname@example.org.
IS THE PARCEL BUBBLE ABOUT TO BURST? Michael J. Ryan
he parcel industry continues to be challenged by Amazon. FedEx, UPS, DHL, and the USPS have built sophisticated distribution systems that are second to none in the industry. However, Amazon continues to be a leader in the parcel business. It is estimated that it will handle more packages than FedEx and UPS in the next 12-18 months. This seems hard to believe, but given the growth of e-commerce, it’s not out of the realm of possibility. Amazon has a captive customer base because of its dynamic marketplace and all the services that are wrapped around it, making it easy for merchants to sell
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their products to a wide range of consumers. However, it’s important to pause and consider whether or not we are heading for a bubble burst in the parcel industry. I have been in this industry for over 30 years, and I am still grappling with the idea that you can order toilet paper online and get it delivered to your house… in one day… for free. There is a cost to provide this level of service, yet more and more consumers expect (or even demand) free delivery. Amazon’s delivery network, of course, is largely funded through its “Prime Membership” fees, and it is likely that, just as we have seen with the primary parcel carriers, Amazon will continue to raise this fee to cover the rising shipping costs. The company is also making a commitment to a “branded” delivery experience, which we should see within the next 12 months. Recently, FedEx terminated its relationship with Amazon, but UPS is still delivering packages for them. I’m sure UPS is continually evaluating this business profile and will determine if it makes sense to maintain a “co-opetition” relationship. It looks like FedEx and UPS are aligning themselves with the SMB merchants, which usually generate a higher margin. There seems to be three types of relationships in the market: partner with Amazon, build your brand, or do a combination of the two. This is creating some very
interesting dynamics in the e-commerce world. Over the Christmas holiday shipping season, merchants were advised by Amazon to not use FedEx and to use Amazon services instead. As I go back to my original premise, the expectations that are being set in the market do not seem to be real — or sustainable. Consumers are expecting delivery the next day at no cost, but the margin for many products does not support an individual delivery. I believe there will be more change in how this model is supported (such as consolidating orders and only delivering twice a week or setting up a single delivery agent for all delivery companies by ZIP Code). There seems to be a lot of pressure on all the carriers based on the expectation that has been established by Amazon. This coming year will be a true test for all the carriers and how they can drive out cost in their networks. If this can not be accomplished, then the bubble will burst and, once again, we will see the industry move in a new direction.
Michael J. Ryan is the Executive Vice President at Preferred Shipping (www.preferredship. com ) and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@ preferredship.com.
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