WRAP UP BY MICHAEL J. RYAN
Ding Dong…2016 Is Here! s a parcel shipper, you just survived the largest price increase in the history of the parcel shipping industry. In 2015, there was a rate increase (4.9% but actually larger), fuel index changes, dimensional weight charges, oversize charges (just in time for peak season) and multitudes of additional charges. What can we expect for 2016? Hopefully it will be easier than 2015. Here are some of the trends that I believe with continue to change the parcel shipping business this year:
3. Store to Consumer: I think we are just seeing the beginning of this trend. Most of the brick and mortar retailers have a distinct advantage by having inventory close to the consumer and could provide next day delivery by using multiple service providers. This has been Amazon’s strategy but it has done it with massive distribution centers. There are technology providers that can execute this strategy very quickly and cost effectively.
dle multiple customers. For small and medium sized organizations, this is the best route to take.
4. Multi-Carrier Shipping Technology: This is a mission critical item to deploy in 2016. A multi-carrier technology will provide you the opportunity to optimize
7. Amazon: It looks like it is about to launch its own dedicated air network in the US. There is speculation that it is going to take over the three primary Hubs from DHL’s old domestic network (Wilmington, OH; Allentown,PA and Riverside,CA). This is the beginning of Amazon in building out its own network in a play to reduce its cost and take control of the service levels.
6. Regional Carriers: These carriers are gaining more strength in the e-commerce space and are well aligned with the Store to Consumer model. If you have not looked into the regional carriers, I would highly recommend this strategy for 2016. They offer an alternative solution from the big carriers.
With the advent of Amazon and the USPS getting stronger, this should bode well for the shipper.
1. Dimensional Weight/Oversize Charges: The major carriers want to get paid for the space and/or weight of any package. This continues to be a drag on most companies and should be a number one priority for most shippers in terms of minimizing the extra fees. If you are offering free shipping, this will wipe out your profit, so take a hard look at this. 2. USPS: The USPS is becoming a viable carrier in the B2C space. With its recent price increase (January 17, 2016), it has made a statement that it wants to drive as much business as possible through its Parcel Select program. It is driving the package consolidators to enter these parcels at the DDU level, which makes sense because the USPS has the largest delivery network in the US. The Priority Mail service is exploding and becoming a widely used service for many e-commerce companies. 34
JANUARY-FEBRUARY 2016 | www.PARCELindustry.com
your shipping cost and service. These systems always seem to be a little pricy but they have a quick return on investment and will position your company to be more competitive. 5. 3PL Outsourcing: There are many organizations that try to “do it all” and they go through a long and expensive learning curve. There are many e-commerce fulfillment companies that can provide the scale (from start up to full scale). They also get the advantage of pooling their volume for their customers, which can lower their shipping cost. They have all the technologies and processes in place to efficiently han-
In 2016, the competitive landscape for the parcel business will continue. With the advent of Amazon and the USPS getting stronger, this should bode well for the shipper. FedEx and UPS can no longer keep driving the cost up. A healthy dose of competition should make them re-think their pricing strategies. However, most of their business is powered by B2B customers but a drop in B2C could impact their network efficiencies. ¾
MICHAEL J. RYAN is the Executive Vice President – Parcel Solutions at Pro Star Logistics and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or firstname.lastname@example.org
PARCEL January-February 2016