PARCEL October 2011

PARCEL PRICING SURVEY

Results Unveiled

PARCEL

OCTOBER 2011

www.PARCELindustry.com

THE INS AND OUTS OF

PACKAGING OPTIMIZATION Are you missing out on a significant discount?

Page 30

Reduce your shipping costs with these simple steps! page 26

What’s the tipping point for changing modes? page 12

Changes announced to First-Class Mail Parcels. page 15

WHAT TO SEE AT THE

PARCEL FORUM! Page 32

OCTOBER 2011 | volume 18 | issue 4

PARCEL PUBLISHER Marll Thiede EDITOR Amanda Armendariz amanda.c@rbpub.com

DEPARTMENTS

CIRCULATION Rachel Spahr | rachel@rbpub.com PRODUCTION DIRECTOR Chad Griepentrog

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Transportation ABCs

The Math Behind the UPS and FedEx Fear Tactics

BY BRETT FEBUS

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Mastering Management

14

Santa Claus Is Coming to Town

BY ROB SHIRLEY & WAYNE AMMEL

15

Parcel Perspectives

Ship Right

Changes Announced to First-Class Mail Parcels

BY ELIZABETH LOMBARD

5 Steps to Leading the Disengaged

BY MARK TAYLOR

12

Regional Alternatives

16

What’s the Tipping Point for Changing Modes?

BY PETER STARVASKI

GRAPHIC DESIGN Kelli Cooke ADVERTISING Ken Waddell | ken.w@rbpub.com Josh Vogt | josh@rbpub.com

Packaging

Why Brand Your Secondary Packaging?

BY DENNIS SALAZAR 2901 International Lane Madison WI 53704-3128 608-241-8777 • Fax 608-241-8666 www.PARCELindustry.com

FEATURES 18

Parcel Pricing Survey – Results Unveiled!

These results offer an opportunity to compare market data, carrier pricing and contract terms, and cost reduction strategies with hundreds of other shippers.

BY ROB MARTINEZ

26

Reduce Your Shipping Costs

Tips to get better parcel insurance, reduce the number of overnight air shipments, manage your returns and more!

BY JAMES MOSELEY

30

The Ins and Outs of Packaging Optimization

Consolidated parcels can be shipped at a significant discount

BY TOM ZINNER

EXTRAS 06 32 34

Editor’s Note What to See at the 2011 PARCEL Forum!

Cross-border Consolidation Made Easy: “This Company” Could Be You

REPRINTS For high-quality reprints, please contact our exclusive reprint provider.

Scoop Reprint Source • 800.767.3263 ext. 144 www.scoopreprintsource.com PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2010 © by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine.

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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.

EDITOR’S NOTE AMANDA ARMENDARIZ

See You at the Forum!

I admit it; I’m getting excited. The PARCEL Forum is only a little more than a month away — by the time this magazine is in your hands, it will be mere weeks away. Why am I so excited, you may ask?

Aside from the obvious perk of visiting Chicago in the fall (always one of the best times of year for that city), I look forward every year to meeting you, our subscribers. You are the reason we continually strive to present new and relevant information via our magazine, newsletters and webinars, in addition to offering you the opportunity to connect with other logistics professionals via channels such as this show. We take our role as a conduit of information very seriously, so it’s always gratifying to be able to connect with many of our readers on a one-on-one basis. It also allows us to get feedback from you on what we’re doing right, and what we could improve upon. So please, if you’re attending the show, don’t be shy. If you see me wandering about (and you most certainly will), don’t be afraid to say hi and chat for a bit.

Speaking of your fellow peers, I’m willing to bet that you’ll find part one of our survey results (which begin on page 18) very enlightening. Rob Martinez did an excellent job with this issue’s survey analysis, and it’s certainly eye-opening to see how you compare to others in the industry. Take a peek to see (among other things) how other logistics professionals are handling rate negotiations, whether they’re approaching negotiations on their own or with a third party, and the average discount they receive.

As always, feel free to drop me a line any time, or join our LinkedIn group to stay connected with your peers. Remember, we’re all in this together, and the more information we have, the better.

As always, thanks for reading PARCEL.

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OCTOBER 2011 | www.PARCELindustry.com

TRANSPORTATION ABCs with Brett

Febus

The Math Behind the UPS and FedEx Fear Tactics For the last two years, FedEx and UPS have been putting their shipping customers to a distinct disadvantage at the negotiating table by telling them they cannot work with third party contract negotiators (3PN). The carriers’ motive is obvious — they want to make more money. Out of fear of reprisal from their carrier, many shippers have shied away from using 3PNs because carriers have threatened to cancel their contracts if they do so. The behavior of UPS and FedEx caught the attention of the US Department of Justice, which initiated a probe into antitrust practices.

The strong-arming tactics have paid off for the carriers who are reporting record profits, and the end result for shippers is

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OCTOBER 2011 | www.PARCELindustry.com

that they are paying too much for parcel shipping. The amount of money being left on the table is staggering. We conducted an analysis to determine exactly how much money is at stake.

The analysis began with a market study performed by Morgan Stanley, which shows that companies who use a 3PN received discounts that were 49% better than those who used only in-house personnel. In 2006, Morgan Stanley studied 250 shippers of UPS and FedEx packages. They compared the discount levels of those who used a 3PN to the discount levels of companies who negotiated on their own — via RFP, auction or face-to-face, but without help from a 3PN.

We applied that savings to an estimated shipping volume of $75 billion for the two carriers, and calculated the amount to be approximately $12 billion that shippers are overpaying every year for parcel shipping services because they are worried that UPS or FedEx will cancel their agreements. Money that could be used instead to hire new employees, install new software and equipment or upgrade facilities. Talk about an economic stimulus for businesses!

So how do UPS and FedEx rationalize this customer-unfriendly practice of scaring shippers away from 3PNs? According to the carriers, “our people are best equipped to discuss pricing with the shippers.” Sounds pretty one-sided. Is that how you would purchase a new car — simply trust that the car salesperson had your best financial interest in mind? Probably not. Add to this scenario the fact that the carrier contracts are incredibly complex, and there is almost no pricing transparency outside of posted “rack rates.” Turning to a consultant who has negotiated hundreds of these types of contracts and who likely knows what your competitors are paying for shipping would appear to be in a company’s best interest.

The antitrust case against the carriers is moving forward with a jury trial scheduled for February, 2012. In the meantime, thankfully shippers do have options, and third party negotiators are ready to assist in obtaining the best parcel shipping rates.

The carriers contend that their policies don’t explicitly state they are terminating their relationships with third-party consultants, but that they would continue dealing with the third parties “at the discretion of the individual company’s management.”

For a copy of the Morgan Stanley report or for an update on the case against UPS and FedEx’s antitrust investigation, please contact Brett Febus at bfebus@insourcesmg.com or by calling 614-876-3407. p

BRETT FEBUS is the founder and President of Insource Spend Management, one the country’s most respected spend management consulting firms with more than a decade representing Fortune 500 and mid-market companies at the negotiation table. Insource is ranked as an Inc. 5000 Fastest Growing Privately Held Company.

Brett is a former UPS Sales and Operations Manager and was recently named an Ernst & Young Entrepreneur of the Year finalist for South Central Ohio and Kentucky.

OCTOBER 2011 | www.PARCELindustry.com

9

MASTERING MANAGEMENT with Mark

Taylor

5 Steps to Leading the Disengaged Are you sick and tired of listening to excuses, stories and explanations when tasks are not fulfilled on time? Do you constantly listen to complaints, whining and negative comments?

Does your staff exhibit the behavior of apathetic victims? Do they only do the minimum amount of work to get by and not show any initiative? Is there no sense of urgency or accountability? Then you have what we call a Stage Two Culture. If you have traveled recently and been stuck in long lines waiting to get through airport security while you see dozens of officials standing around doing nothing, you have experienced this type of culture. If it happens in your workplace, you are not alone.

According to an extensive 10-year study, 25% of employees are in this category. This article will give you some strategies that you, as the leader, can take that will result in dramatic increases in productivity.

1. Work with the Living In any group of people, you will find that there are a few who are more ambitious than others. You want to work with those who want things to be different. Don’t start with the most cynical person on the team. The rest of the group will be watching, so choose someone with potential.

2. Help Them See Their Strengths Work with them on a one-to-one basis rather than in a group.

You can start by letting them know that you see potential in them and that you want to assist them. Show the employee how their work does make an impact. In particular, show them where they are competent and where their strengths are. You can use tools such as Marcus Buckingham’s book, Now, Discover Your Strengths, to teach them about their talents. In the same meeting, point out abilities they have that they have not yet developed, but be careful to make the tone of these discussions positive. Your goal is to build trust and have them develop confidence in their abilities.

3. Give Them Projects Where They Can Succeed Don’t be insulting but don’t give them projects that are overly complex. These assignments should not require “nagging” as this will reinforce insecurity. You want them to succeed so that their confidence can become stronger.

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4. Track and Acknowledge Their Success Create training checklists and competencies so you (and they) can track their progress. Encourage them to finish an educational program, such as a certificate, online training program or degree. You want to help them obtain some concrete achievements and recognize them for their accomplishments. This is why Zappos gives small incremental promotions every six months and offers increased pay for completed training and certification. They found that employees are much happier when they have an ongoing sense of progress.

5. Help Them Get Organized Many people have never been trained in organizational skills and can become overwhelmed with keeping track of tasks, trying to prioritize items and knowing when there are deadlines. If you offer them time management tips to get control of their time and lives, you will see marked improvements in productivity and confidence. David Allen’s book, Getting Things Done, is good in this regard.

In summary, your objective as the leader is to help those at Stage Two grow to the next level. You will know that you have succeeded when they begin to brag about their successes and compare themselves with their coworkers and ask, “What’s wrong with them?” The success of the ones you work with will shift the culture of the others that have given up the possibility for change. They will have witnessed it happen to one of their own. Then, you will choose the next one that wants things to be different. This is how you can create a cultural revolution in your organization. p

MArk TAylor delivers workshops, keynotes and retreats for companies that want to facilitate corporate change based on the models and processes of Tribal Leadership. He is the Chair of several New York City “think tanks” composed of successful Manhattan CEOs focused on “outperforming” their competition.

Mark applies his 35 years of experience as an accomplished CEO & corporate manager towards transforming the workplace so that all people can experience the joy that comes from making a difference. Mark holds an MBA and is a certified coach and Approved Tribal Leader. Visit his blog, www.vistagenyc.com, or contact him at 212-867-5849 or mark.taylor@vistage.com.

Parcel PersPectives with Peter

Starvaski

What’s the Tipping Point for Changing Modes?

Last issue, we discussed the six pack. This issue, we’ll take a look at your legs — your shipment legs, that is. From a shipper’s perspective, when you contract with one carrier to pick up and deliver your parcel, that’s one leg (even if the carrier may move it to different modes along the way). However, there can be cost savings by managing your own modes, or legs, and consolidating the front end of the transportation.

Too often in domestic shipments, parcels are only consolidated if they are going to the same consignee via the same service. In fact, that is part of the rules for most major carriers that provide parcel weight break discounts for consolidation. That simple mode shift discount is important, but it is not the only way to consolidate your parcels to reduce transportation expense.

For example, let’s consider shipments going across the United States. In order to keep the example real, let’s give the box some dimensions and a weight: 20” X 20” x 10” and 24 pounds. And, furthermore, we have 160 that need to go from Boston to separate consignees in Southern California. Because they are separate consignees, we cannot enjoy the carrier’s consolidated weight discounts. The cost of sending these with a major carrier’s list rates would be approximately $3,467.00 But what if we put these 160 parcels on pallets and hired someone to bring one large (approximately 4,000-pound tare weight shipment) to a carrier’s hub and let the carrier do the final delivery to the consignee. Would we save any money?

The answer is… it depends. What we have just created is a multiple leg shipment, and we need to investigate the legs.

The first leg with 4,000 pounds is the freight leg and, depending on what method we ship it, can have varying costs.

A Less than Truck Load (LTL) shipment would cost approximately $1,943.00. This is much less than shipping them all with the parcel carrier. However, this does not get the parcels to the consignee, and we need to add a zone 2 parcel leg, which would then add another $1,374.00. The total: $3,317, slightly less than the original $3,467 that it would have cost to ship them all parcel.

Some readers would now question the time in transit and see if there would be any delays with the multiple modes.

Interestingly, the multi-leg example above would result in

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meeting or beating most major parcel carriers ground commitments for a cross country delivery.

There’s another piece to this puzzle, however. When we investigate the cost of the freight leg, we need to look at the class of goods. While this is not used in calculating the parcel leg, it has a substantial impact on the cost of the LTL leg. The National Motor Freight Transportation Association (NMFTA) provides 18 freight classifications. While carriers are not required to fix their rates according to these classes, most LTL carriers do.

The classes are based on a number of factors, including the density of the material, the ease of handling, the value of the goods, etc. The classes range from a low of 50 to a high of 500. The lower the class number, the less expensive it will be to move the goods.

In the example where we moved 160 parcels and were just at the point where it would be cost effective to look at a multileg shipment, the freight rates were based on a class of 92.5.

At any class above that (using the list rates that were available on the Internet) the freight leg expense was cost-prohibitive to employ a multi-leg shipment.

As we increase the number of parcels going to the west coast, our cost savings increase. Also, if we can lower the class of goods, our cost savings will increase. This is represented in the chart on the next page. When multi-leg shipping is more expensive than straight parcel, the multi-leg cost is shown in orange. When straight parcel is more expensive, that cost is shown in orange. The point at which the straight parcel flips to orange is the tipping point, or inflection point in which we can start to save money with a multi-leg shipment.

The chart shows different amounts of weight for one class, and the same weights yet again for two different classes. It’s important to note that shippers can negotiate class. A lower cost item, for example, may not need the insurance levels associated with its class of goods. This can be especially true if you’re processing returns back to a facility and the items may be damaged, as just one example.

Here are some numbers (based on list rates around the end of 2010).

Multi-Leg Analysis, LTL/ ZONE 8 500lb Pallet(s)

class 77.5

class 92.5

class 125

origin: Boston Destination: Southern California two Shipping Methods: Straight Parcel (SP) or Multi-Leg to Southern Ca Pool/Hub commodity detail Box of Stuff, 20X20X10, at 24 lbs per Case 20 cases per pallet = 480lbs plus 20lbs (pallet weight) = 500lbs Pallet size: 48 X 40 X 50 Weight

Straight Parcel

Multi Leg

Freight Leg

Parcel Leg

# of Pallets

# of Parcels

500lbs

$433.00

$744.00

$572.00

$172.00

1

20

1000lbs

$866.00

$1,290.00

$947.00

$343.00

2

40

2000lbs

$1,733.00

$2,320.00

$1,633.00

$687.00

4

80

4000lbs

$3,467.00

$4,035.00

$2,661.00

$1,374.00

8

160

6000lbs

$5,200.00

$5,319.00

$3,258.00

$2,061.00

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240

Weight

Straight Parcel

Multi Leg

Freight Leg

Parcel Leg

# of Pallets

# of Parcels

500lbs

$433.00

$585.00

$413.00

$172.00

1

20

1000lbs

$866.00

$1,027.00

$684.00

$343.00

2

40

2000lbs

$1,733.00

$1,865.00

$1,178.00

$687.00

4

80

4000lbs

$3,467.00

$3,317.00

$1,943.00

$1,374.00

8

160

6000lbs

$5,200.00

$4,435.00

$2,374.00

$2,061.00

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240

Weight

Straight Parcel

Multi Leg

Freight Leg

Parcel Leg

# of Pallets

# of Parcels

500lbs

$433.00

$508.00

$336.00

$172.00

1

20

1000lbs

$866.00

$900.00

$557.00

$343.00

2

40

2000lbs

$1,733.00

$1,646.00

$959.00

$687.00

4

80

4000lbs

$3,467.00

$3,117.00

$1,743.00

$1,374.00

8

160

6000lbs

$5,200.00

$4,192.00

$2,131.00

$2,061.00

12

240

You might observe and ask why I stopped at 12 pallets. That’s because we hit another point of analyzing your freight leg around that quantity. The most common trailers doing long distance hauls across the country are 48’ and 53’ trailers. However, many LTL carriers will not accept your load unless it will also fit in a 28’ pup trailer. A pup trailer can hold around 16 Pallets. These pup trailers are often used in tandem and are very convenient for switching from one rig to another at pooling points.

As you increase beyond 12 pallets and approach the limit of 16, you should investigate a Truck Load (TL) quote. The cost for a full (48’ or 53’) truck load is approximately $3,000 plus fuel.

Remember, many multi-carrier shipping systems can provide both parcel and freight quotes. With a system that allows you access to both, you can conveniently take a good look at your legs. p

PETEr STArVASkI has over 10 years in the parcel shipping industry and is a recognized industry expert in parcel shipping, having authored numerous articles and whitepapers. He is currently Director, Product Management for Kewill’s Shipping Products.

REGIONAL ALTERNATIVES with Rob

Shirley and Wayne Ammel

Santa Claus Is Coming to Town Relax for just a minute and think back to when you were nine years old, before you saw the dangers we see every day now.

There wasn’t a TV in every room with hundreds of channels and you were not exposed to everything all the time. Adults were certainly under pressure then, but not in the way they are now.

Consider what the kids have seen in just 2011 — every day.

Unbelievable weather, violence, unemployment, housing problems, political strife and war are daily events.

Has the world really gotten away from us and run amuck?

We don’t think so, and neither do you. It is time to stretch the supply chain’s considerable talent and resources to do something BIG. What if hundreds of logistics companies, distributors, retailers and manufacturers utilized their fantastic technology, transportation and people to do something good for others, without first analyzing what’s in it for each contributor, but using creativity, connections and wisdom just because we can and know it is the right thing to do now? How BIG is BIG? Does a free gift for every child 10 years old and younger delivered to their door by a responsible adult sound like a worthy objective?

The supply chain makes and delivers almost everything in the world. Our world of BIG is $3.5 trillion worldwide. The resources are there, and we think the resolve for a mega project that is lasting will be there too.

The best way to accomplish this is to start small. One logistics company gets matched up with one manufacturer to receive goods and then delivers to one volunteer group for delivery to a neighborhood. Every logistics company, distributor and manufacturer can help no matter what they make or what mode they use or how big or small they are.

If leadership leads the way, the entire team and their families will want to get involved.

If we all contribute two to three hours on one day, there will not be a dry eye in the country. Due to the large percentage of the population that celebrates the Christmas holiday, local decision makers may find that Friday December 23, Saturday December 24, Sunday December 25 or Monday December 26 best fits the needs of the kids in their area. Of course, any time of the year is a good time to do good, so don’t be afraid to think outside of the box (pun intended).

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There are thousands of groups who do this every year; if we had the mass of the supply chain involved, we can deliver to every child within 10 years. Giving is more rewarding than receiving and will blossom and provide joy to all that contribute. As a bonus, you have already found that building relationships does turn into new business.

A good start would be for local logistics clubs, CSCMP local groups and/or APICS local groups to reach out to volunteer organizations like fire, police, EMTs, churches and schools to gain support along with manufacturers, distributors and retailers.

Which kids should you pick first? Kids who are special, kids who are handicapped, kids that are ill and kids who are needy will all be possible choices for help.

SCOPE – Supply Chain Opportunity Provides Enchantment evokes the kind of project we want to be part of.

A recognized Supply Chain Leader will serve as an ambassador for each state to begin to get SCOPE organized. These charter ambassadors are on board:

3

Colorado — Richard Ziemba, EVP Business Development for TransTek and former President, ParcelTek

3

Florida — Stuart Hyden, Founder, CEO of Fusion Logistics, Inc. and Past President, Express Carriers Association

3

Indiana — Lance Adams, Owner, Kruse Worldwide and President Express Carriers Association

3

Minnesota — Larry Kelly, Founder and Owner of AirVantage and Founding Board Member of Special Kid Care

3 Texas — Eric Donaldson, President, Hot Shot Delivery and Logistics and the Founder Texas Courier and Logistics Association

SCOPE is in the early stages, if you want to be part of something that is beneficial, meaningful and fun, reach out to us, we would love to hear from talented professionals in all aspects of the supply chain. p

Rob ShIRLEy is President and WAyNE AmmEL is EVP of ExpresShip, Inc., a strategic technology partner in the global supply chain. Rob and Wayne have formed Express Charity and ExpresSanta, focused on raising funds for kids. You can reach them at rs@xpchar.com and wa@xpchar.com.

SHIP RIGHT with Elizabeth

Lombard

Changes Announced to First-Class Mail Parcels In addition to the price changes announced in April, the Postal Service introduced two new commercial categories for FCM parcels, Commercial Base and Commercial Plus. (You can learn more about the specifics of those changes by referring to the May-June PARCEL article “New Opportunities with USPS Lightweight Parcels.”). Within the Mailing Services/Market Dominant category, price increases are primarily limited to the Consumer Price Index. And currently, with the exception of restricted material, there are no content limitations relative to the FCM Commercial Base and Plus parcels.

However, in August, the USPS published its final rule in the Federal Register introducing a new Competitive Product (aka Shipping Services) called First-Class Package Service. And, at press time, the USPS had announced that effective October 3, 2011, it is replacing its First-Class Mail commercial Base and commercial Plus parcels within its Market Dominant product offering with this new First-Class Package Service Competitive Product. In doing so, the USPS will have greater pricing flexibility based on a price floor. Each product must cover its costs, and in aggregate, they must generate sufficient net contribution to cover a certain percentage of USPS overhead.

While this change may not seem significant, there are a few changes in which mailers and shippers need to take notice. First, with the move of Commercial FCM parcels to the Competitive category, parcels mailed at commercial base prices cannot contain content defined as a ‘letter’ per 39 Code of Federal Regulations (CFR) 310.1. The CFR describes a ‘letter’ as a message directed to a specific person or address and recorded in or on a tangible object.

Why might this be important? There are generally two applications for FCM parcels, one being light-weight merchandise such as electronics or pharmaceuticals. The second application sometimes serves as a cost-saving alternative to Certified Mail and Return Receipt pieces, where documents, i.e., ‘letters’ are placed in parcel-type containers and then can be combined with Delivery Confirmation or Signature Confirmation to gain delivery information at a lower cost.

Since April, many mailers for this second type of application have enjoyed the discounted single-piece FCM commercial base parcel price (15 cents lower than the retail parcel price) to send important documents. However, with the October 3 change, since personal correspondence is not permitted for

the new First-Class Package Service commercial base parcel category, mailers will need to resort back to the FCM retail price for parcels containing ‘letter’ type content.

An exception to this limitation of personal, ‘letter’-type content is that parcels may contain invoices, receipts, incidental advertising and other documents that relate in all substantial respects to merchandise contained in the parcels.

Mailers and shippers could also use the First-Class Package Service commercial plus option because it has no content restrictions (other than the generic restrictions on non-mailable matter), except that in many cases, the “fixed” pricing of plus parcels could be significantly higher than the per ounce rates of retail or base parcels.

The second change for these parcels mailed at commercial base prices is that with the content restriction, these packages are open to postal inspection, which is essence is why the contents can’t be personal, e.g. ‘letter’. (All other First-Class Mail, including First-Class Package Service parcels mailed at commercial plus prices, are closed against postal inspection.)

Finally, with this new product, the basic required markings change for presorted parcels, i.e., ‘‘Presorted (or ‘‘PRSRT’’) First-Class Package’’ (or ‘‘PKG’’) must be printed as part of; directly below; or to the left of the postage. As with the former FCM commercial base and plus parcels, First-Class Package Service parcels claiming even single-piece commercial parcel prices (except when paid via Permit Imprint) must be marked ‘‘Commercial Base Price’’ or ‘‘ComBasPrice’’ or ‘‘Commercial Plus Price’’ or ‘‘ComPlsPrice’’ as applicable.

With this new First-Class Package Service category, businesses and organizations will once again need to look closely at their mailing and shipping applications to ensure they are selecting the most appropriate class of mail and pricing category within that class of mail to meet their objectives at the most cost-effective price. Parcel shippers can look forward to new categories within Standard Mail. It is anticipated that October will bring newly proposed changes from the Postal Service along with price changes for both the Market Dominant and Competitive Product categories. p

ElIzabETH lombaRd Manager, Postal-Carrier and Certifications, Pitney Bowes Inc. Contact Elizabeth at elizabeth.lombard@pb.com. october 2011 | www.PARCELindustry.com

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PACKAGING with Dennis

Salazar

Why Brand Your Secondary Packaging?

“It’s the last thing on your mind but the first thing your customer sees” is a line our marketing manager came up with some time ago to communicate the importance of secondary packaging.

As a manufacturer, you have countless things to manage, ranging from labor costs to raw material availability. As a distributor/reseller of product, the focus is on packing or repacking the product as cost-efficiently as possible so it arrives at the customer safely.

First Impressions The box, tape or void fill material used on an order may not seem very important, but in many e-commerce cases, it is the very first and perhaps only tangible contact your company has with your customer. Your package and packaging has taken the place of the handshake, smile or even the friendly voice that we once used to receive whenever we made a purchase.

That is why many companies are now seizing this terrific opportunity to reinforce their message and brand to their customers, making sure the arrival of the eagerly awaited package is a positive and memorable experience.

This is even more critical if you are selling a green product to a green consumer because what we have all learned is that the green consumer scrutinizes everything coming into their home, including your packaging. Rarely does a week go by that we are not contacted by a seller/shipper who received a customer complaint such as “love the product, hate the packaging.”

If it seems I may be exaggerating the importance of packaging, please remember that very few of us offer an exclusive product that our customers cannot find somewhere else on the Internet. Even though we offer competitive prices, we know there is always someone out there selling the same product for less. In that competitive environment, everything becomes important and “good enough” often times is not.

The best part of branding secondary packaging is that in most cases, it adds little or no cost.

Easy and Low-Cost We all try to make a good impression on our customers so they’ll remember us and want to come back to buy more of our products. I believe we send a message whether we are trying or not, so the trick is to make sure it is a good one. Whether you promote your company to be green, neat, fast or professional, 16

october 2011 | www.PARCELindustry.com

WhiCh OPtiOn WOrKs fOr YOu? What are some of the products that a shipper can brand or custom print?

3

Boxes Perhaps the easiest to accomplish with little or no additional cost, compared to plain, unprinted RSC or die cut boxes. In some cases, a small increase in purchase quantities can minimize the printing cost.

3

Tape In some cases, printed boxes are not a good option because of the number of box sizes, or the volume simply does not permit it. In those cases, printed water activated paper tape or pressure sensitive plastic tape may be the solution.

3

Paper Void Fill Almost every packaging paper is available custom printed, including heavy duty Kraft and even lightweight industrial tissue. Customers can’t miss your logo or message if it’s obvious and literally in their hands.

3

Inflatable Void Fill Once reserved only for the very largest companies, it is much more affordable and easier done than people think. Bubble wrap on demand and void fill air pillows can be custom printed with your company name, logo, website, etc.

your packaging can easily and in most cases inexpensively reinforce that positive message.

“Printing is Problematic” It’s a misleading line often delivered by shortsighted vendors with limited custom capabilities. They talk about long lead times, expensive printing plates, high cost, large minimums, etc. but the fact is these points usually prove false. If you are contemplating private branding your packaging, do not hesitate to ask about a supplier’s capabilities and experience and also, don’t forget to ask for samples. A qualified potential supplier will be glad to show you the branding options available to you as well as examples of work they have done for others. p

Dennis sAlAzAr is president and co-founder of Salazar Packaging, Inc. and one of the most prolific writers in the area of sustainable packaging. Contact him at dennis@salazarpackaging.com.

We Asked, You Answered.

Parcel Pricing Survey – Results Unveiled — By Rob Martinez —

Part One – Survey DemOgraPhicS anD ShiPPer SentimentS Use of Regional Carriers

57%

Industry Participants included a balanced mix between many industries including manufacturing (32% of survey respondents), retail or wholesale (16%), warehousing, fulfillment & distribution (17%), education, government, non-profits (8%), insurance and finance (4%) and others (23%).

Regional carrier adoption is still relatively small. While 39% of survey respondents reported using regional carriers, nearly twothirds of that group ship less than five percent of their overall volume through regionals.

25%

Annual Revenue

18

OctOber 2011 | www.PARCELindustry.com

04%

50%

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Kn

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0%

02% 30

15

-4

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13% Do

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05% 9% -2 15

%

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11% 07% % <5

Pr no ef S er av Se in rv gs ice

09%

Monthly Packages Shipped Fifty-eight percent of survey respondents ship fewer than 10,000 packages monthly; 14% ship between 10,000 and 25,000; eight percent between 25,000 and 50,000; six percent between 50,000 and 100,000; and 14% ship more than 100,000 packages monthly.

14

% <5

ne

Of the group shipping through regionals, 28% report savings over the national carriers, while nine percent prefer regional service over FedEx and UPS.

14

The majority of those surveyed (62%) ship primarily to businesses, while 38% ship to residences. The survey results match recent national estimates by Colography Group and others.

Cost Savings with Regional Carriers

5-

Primarily Ship Residential or Commercial?

no

Predictably, UPS (52%) and FedEx (32%) were cited as the “primary” carriers (greater than 50% of the shippers’ overall volume). Other carriers that survey respondents named as primary included US Postal Service (9%), regional carriers and parcel consolidators (4%), UPS Basic/SurePost/Mail Innovations (2%), and FedEx SmartPost (1%).

03%

Primary Carrier

04%

07%

Small and large companies alike were represented with annual sales revenues ranging from under $25M (35%), $25M$500M (31%) and over $1B (26%).

Shipware LLC, in conjunction with PARCEL, recently conducted a national survey on “Parcel Pricing, Benchmarks, Trends and CostSavings Strategies.”

440 PARCEL readers completed the survey, representing a balanced mix of business sizes, industries, parcel volume and carrier mix. The results published below offer shippers an opportunity to compare market data, carrier pricing and contract terms, and cost reduction strategies with hundreds of other shippers.

In Part One, we lay out survey demographics and address strategies taken by shippers to reduce parcel costs. This section

includes negative shipper sentiment on negotiating with UPS and FedEx as well as recent carrier policies regarding third party consultants.

In Part Two, we report on the tactics used by shippers to negotiate parcel contracts, the use of benchmarking and other strategies to reduce cost. Shippers are able to compare their own negotiated incentives on air and ground services as well accessorial charges with other shippers surveyed.

Finally, in Part Three, we draw comparisons on key survey questions between respondents based on size and carrier choice.

Strategies to Reduce Parcel Costs With general rate increases and higher dimensional costs, what strategies have shippers taken to mitigate these costs?

48%

16

%

28

13% he Ot

Last Rate Negotiation Shippers are renegotiating carrier pricing agreements on a frequent basis. 64% of shippers have renegotiated within the last year, while only 36% reported negotiations took place at least one or more years ago.

32%

The dimensional divisor changed from 194 to 166 for domestic services, and from 166 to 139 for international services effective January 3, 2011.

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Overall Rate Increases Due to New Dimensional Divisors

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Shippers are upset with UPS and FedEx general rate increases.

Interestingly, of those respondents that feel the increases are too high, 41% don’t feel there’s anything they can do about it, while 59% have an active strategy to mitigate rising costs.

09%

FedEx and UPS General Rate Increases

12%

26%

%

17

ing

N/A or Don’t Know

34%

%

40

Too high, active strategy

th

Too high, hopeless

No

About Right

27%

%

20% 15%

19%

17.5%

19%

18%

05%

28

%

4-6 Months 7-12 Months 1-2 Years

n’t N/A Kn or ow

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9% -1 15

4% -1 10

9% 5-

% <5

No

ne

01%

08%

17.5%

<3 Months

october 2011 | www.PARCELindustry.com

19

Is Negotiating with UPS & FedEx Harder or Easier?

Sentiment on Carrier Policies Not to Work with Third Party Experts

When asked if it’s harder or easier to negotiate with FedEx and UPS now than in the past, shippers by a margin of 4 to 1 feel it’s harder to negotiate today. A quarter of respondents reported no difference.

%

41

Harder %

11

Easier

%

28

No Difference

%

21

N/A or Don’t Know

35%

Not Concerned, Don’t Use Them Up to Carriers

06%

In explaining their response that today’s carrier negotiations are harder, shippers provided numerous reasons including: a lack of competition (44%); carriers are focused on revenue yield per package (43%); and the perception that pricing has been commoditized (43%). Interestingly, 30% feel there is a tacit and collusive agreement between FedEx and UPS to avoid pricing wars.

%

Carrier Yield Management

44 % 43

Commoditized Pricing

43

Lack of Competition

%

%

Tacit agreement between UPS/Fed Ex %

30

21

Use of Third Party Consulting Firm for Carrier Negotiations The majority of shippers continue to approach carrier negotiations on their own (85%). However, within the last 12 months, 12% of shippers leveraged the expertise of third party market experts to assist on contract analysis, benchmarking, contract negotiations and other assistance. Three percent employed third parties, but were unsuccessful as the carriers did not participate in rate discussions.

03% 12%

Not Aware

29%

Why Harder?

Don’t Know

As reported in PARCEL, in 2010 both FedEx and UPS implemented internal policies to boycott third party negotiators.

While 35% of shippers are unaware of the policy and 30% are not concerned because they do not use third parties, only six percent agreed the carriers should be allowed to do whatever they want in choosing with whom to do business. By a margin of nearly 5 to 1, shippers surveyed expressed anger and frustration regarding these carrier policies by agreeing to the statement, “Who are the carriers to tell me what to do?”

Who are they to tell me what to do?

30%

Primary Carrier Motivation for Third Party Boycott Internal memos at both FedEx and UPS cite rate confidentiality as a primary motivation to the policy. Not so, according to shippers we surveyed. Only 29% feel the policies were enacted to protect disclosure of confidential information. Sixty-three percent believe the policy is designed to protect carrier margins.

29% 63% 13% 24%

Rate Confidentiality Money/Margin Avoid Adversarial Relations Don’t Know

Are UPS & FedEx Guilty of Collusion?

Of those shippers that have an opinion on the subject — by a margin of nearly 5 to 1 — shippers believe UPS and FedEx acted in collusion to boycott third parties. The Department of Justice continues a formal investigation into antitrust contentions at FedEx and UPS, and a 2010 lawsuit for antitrust claims is scheduled to go to trial in early 2012.

Yes Yes

No We tried, carriers opt out 85%

20

OctOber 2011 | www.PARCELindustry.com

41%

48

%

No Don’t Know

11%

PArt twO – NegOtiAtiONs AND BeNchmArKiNg Do You Benchmark Parcel Rates & Terms?

Next Day Air/Priority Overnight Incentives

12% Ot

he

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Kn

1%

0% -7 61

51

Do

Two Day Air Incentives

20%

22

25%

%

67

12% 09%

09%

Is USPS a Viable Alternative to FedEx and UPS for Ground Services?

A N/

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>6 1%

-6 0% 51

41

% 31

-4 0

0%

49%

-5 0%

11% <3

Incentives off Published Rates

41

%

No

N/A

24% 10%

09%

12% 32%

N/ A

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Incentives off Published Rates

Kn

1% >4

0% 31

-4

0%

0%

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N/A

21

No

-2

Yes

11

0%

55%

<1

Is USPS a Viable Alternative to FedEx and UPS for Air/Express Services?

09%

14%

16%

Yes

Ground Incentives (1-10 Lbs)

18%

As we saw previously, 26% of shippers have switched from FedEx and UPS to lower cost alternatives like the US Postal Service for a percentage of shipments. Unfortunately for the US Postal Service, however, a perception gap exists between the reliability of air versus ground shipments using USPS.

13%

Other

12%

04

-6

0%

Incentives off Published Rates

%

%

41

Formal Benchmark w/Others

Peer/industry comparisons consultants

-5

0% <4

%

0%

07%

The benchmarking concept is simple: Compare your company’s rates relative to others. Any shortcomings become opportunities for improvement and the basis for contract negotiation.

However, of those shippers that benchmark parcel rates, the vast majority do so informally by sharing rate information with industry peers (67%). Sixteen percent conduct formal benchmark studies, and 22% rely on third party consultants.

10%

11%

Benchmarking Sources

16

25%

58

12%

42% %

22%

What are shippers doing to lower escalating parcel costs? More than half (58%) benchmark their rates against peer companies.

Yes No

The following charts provide benchmarks for carrier discounts off published list rates as reported by survey respondents. Shippers can use the following pricing benchmarks to better understand what’s possible, as well as to compare your company’s current contract incentives.

october 2011 | www.PARCELindustry.com

21

11%

12%

N/ A

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>4 6%

36 -4 5%

26 -3 5%

16 -2 5%

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09%

11%

14%

17%

25%

Ground Incentives (11-30 Lbs)

Incentives off Published Rates

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<2

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14%

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16%

28%

Ground Incentives (31-50 Lbs)

Incentives off Published Rates

Incentives off Published Rates

22

october 2011 | www.PARCELindustry.com

A N/

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6% >5

5% 46

-5

5% -4 36

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21%

28%

Ground Incentives (51-150 Lbs)

25% or Better Discount Negotiated on Accessorial Charges

16%

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d

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Why choose Dunham Express as your Regional Delivery Partner?

R See why Fortune 500 companies use our services R Next Day Delivery throughout entire shipping zone including WI, MN, IL, IN & UP of MI R Handling and sorting 95,000 packages daily R Ask about our Passionate Customer Service R 11 Locations throughout the Mid-West region R Scanning and Web based tracking capabilities R See how we can extend your next day delivery footprint R Later dock pickups R Lowering your damage claim costs R Award winning On-Time deliveries R Call about our customizable shipping solutions that fit your needs R New shipping platform to better serve you

Do

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We make ship happen...

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31%

Has your carrier rep ever told you that accessorial charges — items like Residential Surcharges, Delivery Area Surcharges, Weekly Service Fees and the like — are not negotiable? Fortyseven percent of shippers surveyed have negotiated a discount of 25% or more on at least one accessorial charge. Twelve percent have negotiated surcharges concessions, but the discount was less than 25%. Only 31% of shippers have not negotiated accessorial charges.

What Changes Would You Make to Your FedEx/UPS Agreement?

69%

Surcharges are one of shippers’ biggest frustrations. When asked, “What changes would you make to your UPS or FedEx Pricing Agreement if you could?” 69% of shippers want fewer surcharges. Fifty-five percent want better discounts, and 31% would shun rolling averages and earned discount thresholds.

55%

Whether it’s 10 packages or 10,000, you matter to us.

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800-236-7127 | www.dunhamexpress.com sfoate@dunhamexpress.com

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Call or email to see the benefits from a free analysis of your current shipping program

october 2011 | www.PARCELindustry.com

23

Part three

Part Three draws comparisons on key survey questions between respondents based on size and carrier choice.

Correlation of Monthly Parcel Volume and Overnight Incentives Received While package characteristics like weight, dimensions, zone, residential/commercial, delivery density play a major role in pricing, parcel volume drives discounts. Seventy-five percent of small shippers (fewer than 10,000 parcels per month) have negotiated incentives under 50% for overnight services, while 76% of volume shippers (monthly parcel volumes greater than 100,000 packages per month) get discounts of 61% or better. <10,000

10,000-24,999

25,000-49,999

50,000-99,999

100,000

60.0%

50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

<40%

41-50%

51-60%

61-70%

>71%

Overnight Incentives

Primary Carrier by Shipping Volume Is there a correlation between shipping volume and carrier choice? UPS scores higher with volume shippers. Sixty-two percent of survey respondents whose volume exceeds 100,000 packages a month select UPS as their primary carrier versus FedEx at 29%.

Lighter volume shippers (fewer than 10,000 shipments per month) have also selected UPS as the primary carrier, but the range is much closer at 47% using UPS versus 34% with FedEx. Low volume shippers also reported greater use of the US Postal Service (12%) and regional carriers and parcel consolidators (6%). FedEx SmartPost found its niche garnering 19% of the volume of shippers with monthly parcel volumes between 25,000 and 50,000. <10,000

10,000-24,999

25,000-49,999

50,000-99,999

100,000

60.0%

50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

FedEx

FedEx SmartPost

UPS

Scan the QR Code to view the rest of Part Three!

24

OctOber 2011 | www.PARCELindustry.com

Other UPS (SurePost, Basic, Mail...)

USPS

Regionals/Consolidators

rob Martinez, MQC, CMDSS, is President & CEO of Shipware, LLC, a parcel audit, recovery and consulting firm that helps parcel shippers reduce costs 10-30%. Rob welcomes questions and comments, and can be reached at 858879-2022 or rob@shipware.com.

ReduCe

Your Shipping Costs Tips to get better parcel insurance, reduce the number of overnight air shipments, manage your returns and more! By James Moseley

ith Internet sales on the rise, more ship- carriers don’t even call it “insurance.” They call it Declared pers of jewelry, gold coins, watches, elec- Value Coverage. Why? Because, unlike real insurance, it covers tronics and expensive fashion are filling only what the carrier Service Guide says it covers.

If you ship something that the Service Guide prohibits, B-to-C orders. This means more parcels, lower declared values, demand for lower you can pay for Declared Value Coverage, and the carrier will shipping costs and deliveries to all consumer take your money — sometimes for years — but if you file a addresses nationwide. To recover in today’s claim, there’s no obligation to pay, because it’s not insureconomy, big carriers want denser freight, higher per-parcel ance, it’s Declared Value Coverage, and it only covers with values, higher shipping charges and deliveries to commercial the Service Guide allows. addresses. What the market wants and what the carriers want are at direct odds. In the end, the market always wins. The Solution question is, how do you win? Take the following suggestions You can pay much less for coverage through a third-party proand implement them, if possible, into your shipping operations, vider. But you should be sure that policy is sufficient. Ask the following questions: and you’re sure to see some savings.  To see a current (not old) Certificate of Insurance.

Use GOOD Third-Party Insurance  To see a summary of the warranties, exclusions and deductMost carriers are charging $0.75 per $100 parcel insurance ibles under the policy. in 2011. They also have a minimum charge of $2.25. Some  To talk to the insurance broker that arranges the policy.

26

october 2011 | www.PARCELindustry.com

This is what you’re paying for. If your provider has a good policy, he’ll be proud to show you evidence of it. If he doesn’t, he’ll be slow to show it off. You need to be sure he has a provider that is a solid company whose reputation and financial status deservedly inspire confidence.

The VP of Logistics of the jewelry giant brought out a huge computer print-out. He said, “At the start of last fiscal year, I told all my people to ask one question every time they shipped anything to anyone. The question was: ‘Is 2-Day OK?’ “Everyone screamed. They said the clients wouldn’t stand for it. The competition would kill us. But I told them: just ask.

Guess what? Eighty percent of the time the answer was: ‘Sure.’

Declare by the Ounce There’s no such thing as a one-pound box. There are 0.98- Now let me show you this computer print-out. I saved $1 milpound boxes and 1.02-pound boxes. But most carriers round lion this year by asking that one, simple question.”

When you order something online and get the choice of the shipping weight up to the next pound.

“Overnight: $20 Shipping & Handling” or “3-5 Days, Free Shipping,” which do you usually choose?

Solution The US Postal Services lets you declare parcel weight by the ounce. When it comes to high-value, lightweight goods, like Solution bracelet clasps or earrings, sending a two-ounce mail parcel Every time you ship anything to anyone, even valuable goods, ask, can save you major dollars over even a ground shipment with “Is 2-Day OK?” or “Is Ground OK?” You may even want to say: a commercial carrier. And to Zones 2-4, even First-Class Mail “2-Day is Free, but there’s a $10 surcharge for overnight. Which gets there overnight. Try ultra-light one-ounce bubble mailers do you want?” Ten dollars might not entirely cover your overnight to keep weight costs down. up-charge, but it may get a lot of recipients to agree that 2-Day is fine. You may not be a multi-million-dollar company, but in percentage terms, you’ll benefit in the same way the big guys do.

Ask the $1 Million Question Worried that 2-Day is less secure than overnight air for highI once watched an account rep try to persuade a jewelry company with 6,000 stores to use overnight AM service for all jew- value? I once conducted a statistical analysis of five million elry shipments for “security reasons.” Of course, carriers make shipments of jewelry in the US. More losses occurred by overnight service than by 2-Day or Ground. More losses occurred on more money on overnight air than on 2-day air.

october 2011 | www.PARCELindustry.com

27

Wednesdays than over weekends. And double-boxing produced no fewer losses than not double-boxing. Why? Who knows? All I care about, when it comes to shipping losses, are statistics.

Urban myths won’t save you a dime.

Choose the Appropriate Signature Option Most carriers charge to obtain a signature upon delivery.

This can cost $3.25 for a standard signature and $4.25 for an adult signature. This is a major source of revenue for carriers, but you don’t always need to pay for a signature. Most carriers always get a signature when delivering to a business, while they may leave a parcel on the porch when delivering to a residence.

And carriers don’t deliver from person to person but from address to address. Adult Signature doesn’t guarantee the signature of a specific adult — only some adult. If you ship to Barbra Streisand with “Adult Signature,” the adult signature you get may be her maid’s!

Solution Use transportation management software that can automatically differentiate a residential address from a commercial one and permit Delivery Confirmation for insured parcels addressed to businesses. If you limit this to smaller amounts, e.g. $5,000 and below, you’ll save dramatically without compromising security in a statistically significant way.

28

october 2011 | www.PARCELindustry.com

Manage Return Shipments Economically If you send out merchandise that may be returned, you might care about how fast it gets to your client — but do you care how fast it comes back? If not, why pay as much to get it back as you paid to get it there?

Solution Use transportation management software that allows you to create Return Merchandise Authorization (RMA) packing slips with embedded codes that:  Allow the return sender to generate labels online only when needed (using your pre-set code).  Activate and bind the correct insurance amount automatically.  Give you remote, online control to adjust insurance amounts up or down.  Cause you to pay only when the label goes live for return shipping and insurance.

Track Your Packages Pro-Actively If a parcel goes astray, the sooner you notice it and call the carrier to intervene, the more likely you will:  Recover the parcel, and  Avoid customer dissatisfaction.

Carriers have over 50 “exception codes” indicating that a parcel is going off the rails. To track pro-actively, you need to

separate problem parcels from all the rest, by highest to lowest value, by relative, expected delivery date and real-time.

Solution Use transportation management software that can track parcels from all the carriers you use on one, convenient, online, real-time dashboard. It must be able to sort by:  Date range  Value Range  Delivered Status  En Route Status  Exception Status  Expected Delivery Date The system should compute the correct expected delivery regardless of whether the parcels are traveling overnight, 2-Day, 3-Day, ground or internationally and automatically measure exceptions against carrier expectations to give you (and your recipients) critical pre-alerts with embedded response options.

With a tool like this, you can ignore the vast majority of parcels that are on track and concentrate only on the few that need your immediate attention. Your losses and labor costs will go down and your customer satisfaction will go up.

inventory system, type it into your shipping system, and then type the shipping cost and tracking number into your accounting software, your labor is costing you more than what the “free” system gets you.

Solution Use transportation management software that integrates to your inventory and accounting software. You will pull data from your inventory into the shipping program and push the results back into your software — automatically. If you produce picktickets with barcoded labels, you can use barcode scanners to read pick-ticket barcodes and automatically produce a label from them. This will eliminate human error, save time and give far superior customer service.

JaMeS MoSeLeY is President/CEO, TransGuardian, Inc. Visit www.transguardian.com or email jim@transguardian.com for more information, or call (877)570-SHIP (7447).

Integrate Sales, Inventory, Accounting and Shipping Software Some carriers give you “free” computer shipping systems. The problem is, you may end up with multiple systems and three times the labor. If you have to print information from your

october 2011 | www.PARCELindustry.com

29

By Tom Zinner

The Ins and Outs of Packaging Optimization Consolidated parcels can be shipped at a significant discount

W

holesalers and retailers have trended away from large distribution centers, moving instead to leaner dropship operations. To achieve this nimble speed to market, suppliers have been forced to use small package carriers as opposed to LTL or FTL carriers. Drop-shipping has allowed suppliers to move product with added speed; however, racing the product directly to its final destination has come at a cost.

There must be a way to drive down cost with the same flexibility as drop-shipping.

In the break bulk arena, NVOCCs and forwarders have examined and optimized the placement of cartons in containers.

What if this same technology was applied at the parcel level?

We discovered that a similar application rolled out at the parcel level would yield the same proven results as “tried and true” carton-container optimization. Packaging optimization is an essential technology that must be tapped in order to reduce costs in the burgeoning drop-ship market.

30

october 2011 | www.PARCELindustry.com

Small package carriers charge customers a per-package rate based on the carton weight and the distance between origin and destination. The cost of shipping per-pound is proportionately more expensive for lower weights and decreases significantly with weight increase.

Savvy shippers have taken advantage of these lower rates and have started packing larger quantities into cartons. In addition to reducing shipping costs, parcel consolidation also helps to reduce the number of charge-backs. No retailer likes to receive a deluge of small parcels — it is extremely labor intensive to unpack and shelve the items. It is simply more efficient to receive larger consolidated items.

It’s All in the Details The consolidated cartons must stay within the dimensional weight range determined by the small package carrier. If all the smaller packages could be placed into larger containers and stay within the defined dimensional weight, they could also take advantage of volume discounts.

Dimensional weight is simply the length x width x height. If the total is less than 5,184 cubic inches, the resulting charge is based on the actual weight of the carton. If the total is over 5,184 cubic inches, the shipment is then assessed the dimensional weight based upon a negotiated dimensional factor (currently a factor of 166). For example, if a carton is 24” x 18” x 11” and weighs 20 pounds, the total is 4,752 cubic inches.

This carton would be shipped at a 20-pound rate. If the carton is 24” x 18” x 13” and weighs 20 pounds, the total is 5,616 cubic inches. Based upon dimensional weight, that same package would be shipped at a 29-pound rate— an increase of 31% in the shipping rate when compared to the actual weight of the carton.

This calculation-heavy process is clearly an ideal scenario for technology to step in. The resulting process is called Packaging Optimization.

A Game of Tetris In order to achieve effective cost savings, the contents should be effectively arranged within the parcel to fit into a smallest size carton. Workers were under pressure to place as many cartons into an overpack as possible. However, we found that productivity slowed tremendously as they tried to determine the best way to pack cartons together in a master carton. On average, master cartons were only 60% full. Far too much air was being shipped.

Through a series of complex algorithms, we were able to engineer an effective software solution that determines the most efficient way to load a package.

The process is very much like a three-dimensional game of Tetris — simply tell the program what products should be shipped and the software generates a guide explaining where the “pieces” should go. In this analogy, the “guide” is the automatically generated pick-tickets. Workers place the items into the overpack as instructed.

Naturally following, since the workers have a visual road map to steer them, accuracy is also significantly increased. The goods simply would not fit into the overpack if an incorrect SKU was selected from inventory, and the technology would not allow the worker to move on to the next step until the correct barcode was scanned. With the Packaging Optimization process in place, order accuracy was increased to 99.9%. In addition, the labor required to assemble the packages was also optimized by nearly 150%. In order to further drive down cost, the application also ensures that the consolidated rate is less than the cost of the individual shipment.

Conclusions Consolidated parcels can be shipped at a significant discount — up to a 40% savings in shipping cost. This adds up to major savings when multiplied repeatedly across the entire supply chain.

The competitive advantage is clear. In an industry where each cumulative discount directly correlates to the bottom-line, such cost-saving measures are essential to come out on top.

toM zinner is Director of Supply Chain Software at transportation software provider IES, Ltd.

SePteMber-october 2011 | www.PARCELindustry.com

31

Package Audits Control Costs.

product spotlight

what to see at

PARCEL

FORUM Are You Concerned About Parcel Rates?

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10 ooth 8

Shippers need to be able to manage the impact that these improved carrier margins are having on their transportation expense.

Let Data2Logistics help you keep your transportations costs under control.

Intermec www.intermec.com 425.348.2600

CT Logistics sales@ctlogistics.com 216.267.2000 ext. 2015

We Live Here.

We Deliver Here.

B

31 ooth 9

Contact — Drew Klepper dklepper@lso.com 800.800.8984 WWW.LSO.COM

Data2Logistics, LLC 609.683.3917 www.data2logistics.com

If you’ve spent time in the casino and gaming industry, you know how vital it is to run an airtight operation, whether you’re mining data, optimizing distribution, or streamlining responsiveness. Visit Intermec to learn how mobile computing puts you in the winner’s circle.

Control your costs and save your company money with the most advanced and comprehensive parcel audit program in the industry. CTrak’s proven benefits include a complete automated Global audit and duplication prevention audit of all Freight and Parcel Costs, Reduced Shipping Administrative Expenses, and applied Accounting and Customized Reporting.

Lone Star Overnight focuses on reliable overnight delivery utilizing air and ground transportation between Texas, Oklahoma, western Louisiana and southern New Mexico.

LSO’s unique network and regional service area helps customers increase revenue, offers later pickups and reduces shipping costs all at very competitive rates compared to the national carriers.

One parcel carrier recently reported domestic operating profit increased 31%, while another reported net income up 33%.

Your Best Odds On ROI.

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Parcel Distribution Company.

Expak Logistics has grown to be the choice of many large companies. We put an emphasis on excellence and customer service with flexible tailored solutions to meet your needs. With no weight reporting necessary, no special packaging, no size reporting, and simplified billing & pricing, we make it easy.

Expak Logistics www.expaklogistics.com 800.401.4648

The Superior Choice for Voice.

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Pick Execution Numina Group’s Multimodal Voice Picking Solution: (1) Increase Accuracy to 99.9% and Productivity by 25% or more; (2) Natural Voice — Speaker Independent Eliminates Operator Training; (3) Hands Free — Fast and Safe, (4) Advanced Design Dramatically Reduces Start-Up Time and Costs (5) Plug In-Ready Voice with Labor Management Module www.numinagroup.com 630.343.2622 sales@numinagroup.com

Highly Intelligent Transportation Management.

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Get more visibility and control of your shipping operation. Designed to help your organization manage logistics more efficiently, SendSuite Live provides web-based services that allow the flexibility and power to effectively plan, route and manage shipments to provide a balance of service and cost reduction.

Pitney Bowes www.pb.com

Reduce Your Overall Shipping Costs.

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GlobalShip from Logicor is an enterprise-class, multicarrier shipping and TMS solution that utilizes a single point of execution for all small package (DHL, FedEx, UPS, and USPS + many more), LTL, and TL shipments — not only simplifying shipping processes, but also reducing your overall cost.

Logicor 480.857.7900 www.Logicor.com

Driving Your Business!

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Psion’s EP10 packs full-sized functionality into a handy, ergonomic device — making it the industry’s most powerful, durable enterprise PDA. Unlike consumer-grade hardware, EP10 is optimized for commercial and industrial applications. It delivers all the performance of Psion’s premium industrial handhelds — in a more affordable, compact form.

Psion www.psion.com Americas@psion.com 800.322.3437

Multiple Processing Steps, Into One!

Siemens Envoy first-of-its-kind parcels multi-functional processing station that’s reducing multiple steps into one. Siemens Envoy features: Weighing, Wide area omni-directional OCR, Barcode scanning, Label printing, Dimensioning and Connection to host IT infrastructure.

Siemens 877.947.7005 cmsinfo.sea@siemens.com

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PUT THE SPOTLIGHT ON YOUR SOLUTIONS IN THE NEXT ISSUE. Contact Ken: ken.w@rbpub.com or Josh: josh@rbpub.com for details.

ApplicAtion Article

Cross-border Consolidation Made Easy: “This Company” Could Be You

When a Pitney Bowes’ customer decided to close its North American manufacturing and distribution centers outside the U.S., it suddenly needed a smart way to ship from the U.S. to Canada. With a substantial volume of small parcels destined for customers across Canada, this presented a significant challenge that was solved through the implementation of Pitney Bowes’ SendSuite Live.

Initially, the company relied on a multi-stage solution. Once a day, trucks left two U.S. sites carrying packages in bulk over the border to a distribution facility managed by a third-party.

Upon arrival, each package was removed and re-rated through Canadian couriers and Canada Post.

These multiple steps added time and cost — and perhaps most importantly — denied the company visibility to its shipments. The re-rating process took as long as two days; and during that time packages were essentially invisible from a tracking perspective.

Pitney Bowes was able to offer this company support for cross-border consolidation by rating parcels for Canadian carriers prior to delivery across the border.

Pitney Bowes, Inc 1 Elmcroft Road Stamford, CT. 06926 sendsuiteliveinfo@pb.com

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Implementation, including integration with the company’s SAP system, took just four months. SendSuite Live now enables the customer to pull Canadian shipping/postal data and rates, and label each package before it leaves the United States. This new process eliminates the costly re-rating step in Canada and enables visibility all the way to customer delivery.

With the consolidation of the two Canadian facilities, the company has been able to save $1.8 million annually. By integrating cross-border consolidation services through SendSuite Live, Pitney Bowes solved the customer’s challenges and also increased savings, decreased delivery times and ensured endto-end visibility for international shipments into Canada.

Pitney Bowes developed and integrated a solution to take the benefits of SendSuite Live beyond the U.S. border. The customer realized Pitney Bowes had the capability to conceptualize and deliver the shipping solution they needed — and do so quickly and efficiently.