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DO CONSULTANTS HAVE THE ANSWERS YOU NEED? ASK THEM. PAGE 14

JANUARY-FEBRUARY 2019 PARCELindustry.com

DON’T LET THE COST OF RETURNS EAT A HOLE IN YOUR PROVERBIAL POCKET. PAGE 20

AMAZON’S JEFF BEZOS:

A MODERN-DAY KING MIDAS? PAGE 24

DATA, DATA, EVERYWHERE… BUT DO YOU KNOW WHAT TO DO WITH IT? PAGE 18


CONTENTS /// Volume 26 | Issue 1

14 18 20 22 26 06 EDITOR’S NOTE Innovation: The Name of the Game By Amanda Armendariz

07 SPEND PERSPECTIVES Retailers Increasingly Feeling the Shipping Cost Pinch By John Haber

08 OPERATIONAL EFFICIENCIES The Softer Side of Warehousing By Susan Rider

10 AND THE 2018 PARCEL FORUM GAME-CHANGER AWARD GOES TO ANIXTER! A profile of the company that took home the award at September’s PARCEL Forum, thanks to the innovations in their distribution center model. By Amanda Armendariz

18 DO YOU KNOW WHAT TO DO WITH YOUR PARCEL DATA? The amount of data a shipper has access to can be overwhelming. Here’s how to take that information and put it into practice. By Steve Beda

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20 WHEN IT COMES TO RETURNS, RETAIL IS WINNING… BUT AT WHAT COST? Product returns can eat away at shippers’ profits pretty quickly; here’s how to reduce their impact. By Ayal Latz

22 CHANGING YOUR MATERIAL HANDLING AUTOMATION: WHEN DOES IT MAKE SENSE FOR YOUR ORGANIZATION? Throughout your career, you’ll likely come to several forks in the road. Here’s how to determine which path to take as you strive to optimize your material handling processes. By Harry Drajpuch

24 IN PLANE SIGHT: AMAZON EXPANDS FLEET, SEES GOLDEN OPPORTUNITY Amazon’s doings are discussed in the news on a constant basis. But what, exactly, does their continued growth mean for the industry? By Brandon Staton

26 EVALUATING DIFFERENT DELIVERY CHANNELS: WHEN ARE THEY THE RIGHT FIT FOR YOUR OPERATION? Shippers have a myriad of ways to get their products into the hands of their consumers nowadays. But choosing the correct channel may be more difficult than you think. By Lisa Kennedy

29 PARCEL COUNSEL Anniversaries Revisited By Brent Wm. Primus, JD

30 WRAP UP Is the World Moving Too Fast? By Michael J. Ryan

SPONSORED CONTENT 14 DO CONSULTANTS HAVE THE ANSWERS YOU NEED? ASK THEM.


PARCEL PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ amanda.c@rbpub.com ]

EDITORIAL DIRECTOR ALLISON LLOYD [ allison.l@rbpub.com ]

AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ rachel@rbpub.com ]

CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ ken.w@rbpub.com ]

Why stop at parcel, GTMS solutions are for all modes all carriers GTMS Consulting Services RFP Assistance

GTMS provides its customers with RFP support, benchmarking, data analytics and KPI’s to measure the success of all your logistics

What makes GTMS a better solution 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 Inc. All material in this magazine is copyrighted 2019 © by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to 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.

GTMS has assisted hundreds of clients with cost savings not only through RFP but through your data creating  Smarter Shipping Habits  Controllable Cost Monitoring  Carrier Cost and Performance

Best in Class Rating and Routing

 GTMS creates significate spend reduction while creating ‘win triangles’ by optimizing the speed/cost relationship on all shipments.

Best in Class TMS (Transportation Management System)  Multi-Modal rating and routing  Desktop Solution  Batch Rating  Carrier Notification  Advance Ship Notification  Cost Plus Modeling

Call Us Today: 855.884.3555 | www.gtms.us JANUARY-FEBRUARY 2019  PARCELindustry.com 5


EDITOR’SNOTE

INNOVATION: THE NAME OF THE GAME By Amanda Armendariz

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was recently reading an article that was discussing a slightly new twist on New Year’s resolutions. Instead of coming up with a standard three to five resolutions, as many people do, the author was encouraging her readers to select a single word that they hoped to exemplify in all of their actions in the new year. It got me thinking: If I was to come up with a word that I hoped would both define and help guide the parcel industry in 2019, what would it be? The answer came to me pretty quickly: Innovation. After all, as we (and most other media outlets covering this sector) emphasize on a daily basis, the industry is constantly being pushed to adapt to various constraints. Ever-increasing customer expectations, shorter delivery times, and the near-universal demand for “free” shipping mean that shippers are being pushed to think outside of the box as never before. Gone are the days when consumers placed their order via phone or a mail-in order form and then happily waited two, three, or even six weeks for their product. Nowadays, shoppers would probably expect their products to appear in their homes or workplaces within minutes of ordering, if they could, but while we haven’t (yet) discovered

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the art of teleportation, there are still steps retailers can take to keep customers happy. First, it is critical that shippers understand just how much shoppers want fast and free shipping, and then explore the appropriate options. Are you making use of your physical stores as a shipping point, either in a ship-from-store or buy online, pick up in store (BOPIS) model? I know that it’s always a win/win for me when I get that text from Target, saying that my online order is ready to be delivered to my car once I pull into the parking lot. Now, yes, it requires me to still go to the store rather than just wait for the package at my house, but the two-hour turnaround time is well worth the short drive. Secondly, shippers need to have a firm grasp on their data so they are making the correct choices when it comes to getting their products in the hands of their consumers. There’s no reason to pay for shipping via Option A when your customer would be perfectly content to receive their order via Option B if that means a lower shipping cost and a negligible difference in delivery time. Consumers nowadays are all about choices, and it’s imperative that shippers make this mindset shift. Finally, it’s important to stay apprised of the various changes in the industry so you can adapt accordingly. Reading PARCEL is a fantastic place to start, as is our yearly PARCEL Forum, which is taking place this year from October 28-30 in Dallas. We hope to see you there! As always, thanks for reading PARCEL.

EDITOR’S PICK

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!

Our Most Popular Stories of 2018 By Amanda Armendariz

Determining the ROI of Adding Regional Carriers to Your Parcel Mix By Mark Magill

It’s a Climb: Five Smart Ways to Get Ahead of Next Year’s Peak Season. By Scott Guilmette


SPENDPERSPECTIVES

RETAILERS INCREASINGLY FEELING THE SHIPPING COST PINCH By John Haber

R

etailers are fighting a battle of epic proportions. The retail business model continues to evolve on an almost-daily basis as retailers work to figure out the right mix of physical stores while simultaneously investing in their online presence. Combining the physical with the online is a challenge, but as we saw during the holidays, the buy online, pick up in stores (BOPIS) concept was popular. Adobe Analytics reported that BOPIS increased 47% year-over-year, making it the biggest year of BOPIS on record. Retailers’ challenges have been compounded by rapidly escalating shipping costs. The 2019 rate announcements were a bit different than in years past. The United States Postal Service (USPS) was the first to announce 2019 rates last October. Facing mounting financial losses, USPS’s 2019 rate announcement is one of the largest increases on record. Indeed, effective January 27, 2019, the average price of a small package is expected to increase five percent. Among the announced USPS price increases are Priority Mail

Express, which will increase 3.9%, and Priority Mail, increasing 5.9%. In addition, First-Class Package Service, a lightweight expedited offering used mostly by businesses for fulfillment purposes, will move to zone-based pricing. According to the USPS, this change was made to better align it with the cost of service and improve value based on distance. Parcel Select, an important USPS service that is utilized as part of FedEx’s SmartPost and UPS’ SurePost solutions, is estimated to increase, on average, from nine percent to 12%. The second reason the 2019 rate announcements were different than in years past was the timing of the announcements, which was much later than usual. This, of course, could have been due to the USPS rate announcement. However, UPS 2019 rates were effective December 26, 2018, 21 days after they announced their increases. Among the UPS increases was its SurePost product. Average increases are nine percent for packages one pound or greater and about 9.34% for packages less than one pound. FedEx announced their 2019 rates in November with the new rates effective January 7. But what was missing were 2019 SmartPost rates, which were not posted to their website until after January 7. SurePost, SmartPost, and Parcel Select are options retailers may use to offer free shipping, which is a necessity to compete with competitors

like Amazon. Various surveys support the importance of free shipping, including one from Dotcom Distribution. In the company’s 2018 survey, more than 90% of the respondents placed a high value on free returns when they make an online purchase, and 91% said their future purchase is influenced by free shipping. A December 2017 survey from Internet Retailer further supports the preference of free shipping, with 52.8% of respondents noting the importance of free shipping. Even Deloitte weighed into the topic in September 2017 by asking over 5,000 survey respondents their thoughts on free shipping. The result was quite telling: When given a choice between just free shipping and fast shipping, 88% of consumers selected free and 12% chose fast. Of course, the greatest challenge for retailers is that free shipping is a paradox — it doesn’t exist, as someone has to pay for the shipping! Already faced with razor-thin margins, retailers will need to be creative with shipping options. But it is telling that surveys continue to highlight free shipping’s importance. Can it continue? Someone has to pay for it, and retailers are already under pressure to increase margins.

John Haber is the Founder and CEO of Spend Management Experts. Contact John at solutions@spendmgmt.com.

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OPERATIONALEFFICIENCIES

THE SOFTER SIDE OF WAREHOUSING By Susan Rider

T

he first of the year is an excellent time to take stock of your operation and evaluate some changes that need to be made or identify some improvements that can enhance your throughput. Many take advantage of this less-than-peak time to implement new pieces of equipment or software. This is also a good time to review the processes and evaluate what improvements can be made in reducing touch times and walk times. An area often overlooked is what I call the softer side of warehousing. This deals with the most important part of your supply chain equation, which is the people. Your associates can make or break your operation. There

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is an old saying that goes something like this, “For every change you make that your people don’t like, there are 10 different ways they can get back at you for it.” This is applicable to all areas of the facility. One example I came across recently was that of an unhappy order picker. She wasn’t making production and was not happy about the increased rates. So, she would start an order, pick the first item, and confirm the picks on the rest without ever actually picking them. Unfortunately, it was a while before the distribution center picked up on her actions; by then, there were many unhappy customers. Sometimes there is nothing you can do to make some people happy, but by focusing on the softer side of your operation, you can make sure you retain the A players and the loyal hard workers in your operation. Focusing on the softer side becomes even more important as the workforce changes and evolves to a younger generation. For many, this younger workforce has been a challenge because all the traditional ways of motivating and operating has changed. The younger generation has clearly defined what’s important to them and how they want to experience their work life. In some facilities, there is a mix of associates from young to old; does this mean it is impossible to have a plan to motivate and retain the best associates? The

answer, of course, is no — but it does require a lot more time and effort. First, evaluate your training processes. Are you giving the team — no matter their age — the best start in your operation by training them efficiently and effectively? This is one of the potential areas of improvement that is seen in almost every warehouse. Some facilities have not focused on the training program or updated the tools to mesh with new changes. One facility I visited was training new employees on old processes, thereby setting up all new personnel for failure or frustration. The trainer was from HR, which is not ideal, as people from this department generally aren’t up on the accuracy of the training material. Here are some suggestions on how to keep those young employees and retain the older ones. Communication is very important. Don’t keep things to yourself; it’s far better to over-communicate if you think you aren’t sharing enough. Young employees may feel they are detrimental to your success, so by communicating issues, successes, plans, and activity with them, they feel like they belong to a team, which is important to them. Communication has always been critical, but many companies don’t do it well. The older employees may tolerate the lack of communication, but the younger workers will just move on.


Communication goes two ways. Young workers want to be heard. They think their ideas have value and want to know that management cares what they think. Patience is not a virtue of the younger generation. They have come from a life of expecting things now. They will not be happy when someone tells them to wait 90 days to discuss an issue or their progress. Older supervisors are used to leading and driving employees the way they like. Some changes in behavior need to be acquired to be successful with young personnel. Young staffers will be self-driven. They do not like micromanagement. They want to be given a task, be trusted to finish it, and have the autonomy to move on to the next item on their list. This may be an opportunity to reduce the number of supervisory roles in your facility. Incentive base pay is something the younger generation responds to well. They will earn extra income because they can do things much faster and will just

speed along the distribution center. Companies have been resistant to adopt incentive base pay in the past, but it makes sense if you have fair measures and can track productivity transparently. Why pay three people with fringe benefits when one person with incentives can do the same work? While walking a facility recently, I noticed a young gentleman flying through the pick module outdoing many of his comrades. I stated, “He’s on incentives, right?” The DC manager nodded and said,

“He does twice the work with better accuracy than most of our order fillers.” Win/win! Remember, the ultimate goal is to build a system where the employees are happy, not just satisfied. They will be more loyal, dependable, and less likely to jump ship for a 50-cent pay raise.

Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn.com.

JANUARY-FEBRUARY 2019  PARCELindustry.com 9


THE 2018 PARCEL FORUM GAME-CHANGER AWARD GOES TO ANIXTER!

I

By Amanda Armendariz

t’s always an enlightening exercise when the PARCEL Forum advisory board and staff select the winner of the Game-Changer of the Year award, which is presented at our conference every fall. Every year since the award’s inception in 2015, we have received some truly phenomenal submissions from shippers who are taking their parcel game to the next level. 2018 was no different, and while we received several outstanding nominations from companies who are innovating their supply chain, there was no question that the award should go to Anixter after seeing what they had done — and are continuing to do — with their supply chain operations. Located in Glenview, Illinois, Anixter is a leading global distributor of network and security solutions, electrical and electronic solutions, and utility power solutions. Anixter has the largest and broadest wire and cable product offering in the world and is the industry leader

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in providing solutions for every security application, including transportation, data centers, residential, commercial, retail, public safety, government, education, healthcare, natural resources, industrial, manufacturing/factory floor, and utilities. Anixter boasts a broad base of customers, including industrial and OEM customers, as well as integrators, end users, public/private utilities, and contractors. The company prides itself on its mission of building, connecting, powering, and protecting valuable assets and critical infrastructures. Through its unmatched global distribution network, Anixter helps lower the cost, risk, and complexity of their customers’ supply chains — which is no small task. When we received Anixter’s nomination form back in 2018, we were immediately intrigued to see what challenges a company of this magnitude was facing as well as how these problems were solved. Orlando McGee, Executive Vice Presi-

dent of Global Operations, sat down with PARCEL after the award was announced to share some insight. “First of all,” he explains, “Anixter’s business model is unique in that we are comprised of several segments with distinct requirements. For example, our NSS business is primarily pick, pack, and ship from an operations perspective in this facility specifically, with additional emphasis on the contractor services community. The EES business provides a different challenge in that it is focused on services and value-added activity, related to a specific set of electrical cabling.” Anyone who has been in this industry for any length of time knows that having separate sets of business requirements often means separate sets of challenges, and it was no different for McGee. However, he gladly rose to the occasion. “When I joined the organization two years ago, I was asked to take a greenfield warehouse near our primary


distribution center in Alsip, IL and create a campus environment, where we could begin to utilize technology to drive productivity gains, efficiencies, and cost reduction,” he shares. The problems that needed to be solved were varied. The first major issue was how to manage a pick, pack, and ship environment and a value-add service-oriented model out of the same facility, while still maintaining high levels of productivity and customer service. The second significant challenge was how to deliberately introduce warehouse technology into Anixter’s distribution environment to make the productivity improvements that many other organizations, such as Amazon and Grainger, have experienced. The reason the Alsip campus was chosen for this innovation was because, as McGee explains, of the unique nature of the activity that occurs in the facility in particular. Alsip is Anixter’s largest distribution center, shipping products globally, and it is the single source of

many SKUs, which also creates a single source of failure. Furthermore, at the Alsip campus, the NSS and security offerings are supported primarily by parcel shipping, as the nature of this product makes parcel the most appropriate mode to utilize. Given these factors, “It became obvious to me — and my team — that automating this facility and segregating business units would provide long-term success for the organization,” McGee says. IMPLEMENTING THE IDEA The strategy was very simple: Separate the two business units into distinct facilities on the campus that would support the unique nature of each business. “The model was built on the premise that we would create an automated environment for our pick, pack, and ship business, while modernizing and creating a center of excellence around our value-add activity in our cable cutting center,” McGee notes. JANUARY-FEBRUARY 2019  PARCELindustry.com 11


To start the process, Anixter partnered with enVista to design a technologically advanced, modern warehouse that would manage the NSS side of the business. “During the process of the design, we benchmarked with several organizations that had taken this journey either recently or in the past,” McGee explains. “The strategy that we decided on was to ensure that Anixter was developing an environment that deployed the correct technology for our business and did not get caught in the game of implementing technology for the sake of technology. Ultimately, we decided that space in the new building would be at a premium, [so] we needed to maximize the cubic space in the facility.” Together, enVista and Anixter deployed a three-tiered picking module, which allowed Anixter to maximize its picking density, significantly reduce the travel path of employees, and provide substantial productivity improvements. To improve overall quality, the company introduced pick-to-voice, utilizing Blue-

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From L-R: Bob Beck, Dean Shirkman, Orlando McGee, Gene Holmes tooth headsets and tablets to improve accuracy, safety, and quality in the pick environment. Finally, in an effort to reduce employee movement, make consolidation more efficient, and support efforts to move product to Anixter employees, the company installed over

5,600 square feet of smart conveyors, designed to minimize noise and ensure maximum up-time. Once the optimal state was realized in September of 2018, the distribution center saw an approximately 25% gain in productivity, with the associated cost reduction and


efficiencies gains that will parallel pickups in quality and customer service. The changes brought about by this automation could not be more pronounced. “Prior to introducing an automated environment, the process in our Alsip facility was very manual,” McGee explains. “One of the concepts that we were looking to eliminate was the need for our employee to walk to the product vs. moving the product to our employees. Our Wmx system did allow for scanning of picks within an order, but that was the extent of the automation we deployed in our facility. In addition to the overall movement of our employees, there was a very manual consolidation process that we were looking to eliminate. The time required to move product to a consolidation point greatly hampered productivity.” On the contrary, the new system utilizes “smart conveyor technology, and pickto-voice allows for seamless movement of product through pick zones within our tiered pick module, not to mention the

elimination of unnecessary movement by employees.” This system also pushes consolidated LTL shipments into the consolidation area, limiting forklift traffic during the heaviest time of the day. And Anixter isn’t done innovating. “We are [also currently] looking at IoT and associated smart devices to deliver advanced and predictive analytics to support maximum up-time and advance warning for preventative maintenance activity,” McGee shares. “To complete our overall strategy, Anixter will begin the redesign of our center of excellence cable cutting center in 2019, providing a modern, technologically advanced campus to support both of our primary businesses.” This strategy proposed by McGee and his team was, at its core, simply doing what made the most sense given Anixter’s business goals, and the team couldn’t be happier with the results. Taking the greenfield space across the parking lot from the original facility gave McGee and his team a unique opportunity to split the inventory into two separate facilities,

thereby creating an environment that could focus on the attributes particular to each product set. Inventory in the newly automated facility focuses primarily on pick, pack, and ship inventory associated traditionally with the NSS and security businesses. The automation provides speed and greater through-put, as well as picking efficiency and higher quality. The original facility is now primarily focused on value-added services, such as cutting, twisting, and dyeing of cable product, as well as managing and shipping Anixter’s large reels of cabled product. McGee is thrilled with the results these changes have brought about. “So far,” he says, “we have seen increased through-put and higher quality of the product moving through our automated warehouse, and greater attention to detail on complex services in our cutting center.” I can’t wait to hopefully chat with some of the pros from Anixter at the 2019 PARCEL Forum in Dallas, October 28-30; I’d love to hear what further successes they have achieved!

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SPONSORED CONTENT

a COULD CONSULTANTS HAVE THE ANSWERS YOU NEED? ASK THEM 14 PARCELindustry.com  JANUARY-FEBRUARY 2019

As the popular saying goes, “You can’t manage what you can’t measure.” And, sometimes, with the vast amounts of data that parcel shippers have access to on a daily basis, it’s overwhelming even figuring out what, exactly, we should be measuring! Competition for consumer loyalty and satisfaction is fierce, and if we don’t get our products to the customer at the right time and in the right manner, it’s very likely they could be looking elsewhere next time around. But if we’re not looking at the whole picture of our data as we strive to be #1 to our customers, it’s very likely we could be measuring the wrong metrics. That’s where parcel shipping consultants often come in. They can take a look at your data and your shipping characteristics to determine what changes need to be made as you optimize your operation. Have some pressing questions that you need answered? Any one of the companies listed on the next two pages would be a great resource. So go ahead — reach out to one of them and begin the conversation. You’ll be glad you did.


ALEXANDRETTA

a TRANSPORTATION CONSULTING Alexandretta specializes in consistently driving cost savings for clients spending between $1mm-$500mm+ on parcel annually. Our expertise in the industry allows us to review every aspect of parcel data and optimize savings via detailed analytics, negotiations support, contract optimization, strategy, audit, and business intelligence. Typical savings average 10-20%, leading to increased profits and competitive leverage for our clients. Our dedicated team of parcel experts brings over 80 years of carrier pricing and sales expertise to our clients. Regardless of client size or spend, we find savings 95% of the time, therefore providing the biggest area of opportunity for shippers to impact their parcel spend. In addition to providing late shipment and manifest error recovery, we also provide sophisticated solutions that incorporate shipment booking, trend analysis, GL-coding, rate audit, shipment visibility, rate shopping, transit analysis, performance tracking, and business intelligence tools through our SaaS platform. Our platform connects with all major ERP systems and with over 600 carriers worldwide. While we are headquartered in the US and have a powerhouse team of domestic parcel experts on staff, we also bring a passionate team of global experts that optimize parcel savings in Canada, Europe, the Middle East, and Asia. Alexandretta brings a unique mix of integrity, expertise, commitment, resources, skillsets, and strategy to maximize profits in the global economy. www.alexandrettaconsulting.com

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CT LOGISTICS

CONFIDENCE: 96 years of experience has allowed CT to create a broad range of supply chain solutions — all tailored to meet our clients' unique requirements. We are a preeminent provider of freight payment services and supply chain management solutions. Work with CT to create customized business solutions. Together we will ensure an efficient, effective, and robust supply chain management system for your global needs. TRUST: Firms of all sizes have relied on CT to assist them in making solid,

informed decisions regarding their FBAP, Supply Chain, and BI needs. Our team of professionals assists our clients in leveraging expertise and technology to maximize ROI. SOC II and ISO 9001:2015 certified processes ensure stringent governance, and trusted support to your transportation partners, delivering meaningful and insightful management and information. LEADERSHIP: CT is a leader in the freight payment and supply chain management industry. CT’s enterprise level software for freight management includes: FreitRater™ and FreitWeb LCR and FreitLion™ for TMS, AuditPay™ for customized solutions for global freight payment, and our group buying program, TranSaver™. We create customized solutions that allow you to control the ever-changing needs of your global business. CONFIDENCE, TRUST AND LEADERSHIP... TRADITIONS SINCE 1923 This is the foundation and tradition that our clients have relied on since 1923. Our services and software will provide you with the latest leading-edge applications and systems, enabling better management and reduction of supply chain costs while adding more visibility, control and insight to your organization; that's our commitment to you. www.ctlogistics.com

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GREEN MOUNTAIN TECHNOLOGY

Green Mountain Technology (GMT) partners with the world’s largest parcel shippers to plan, execute, and monitor high-volume parcel networks. Our Parcel Spend Management (PSM) solution helps businesses compete in today’s hyper-competitive parcel marketplace. It simplifies network complexity, drives increased profitability, and enhances the customer shipping experience. It starts with a best-in-class parcel audit and invoice automation, then leverages that data for advanced analytics, optimization, and ongoing network improvement and contract management projects. 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. Our customers represent more than $5 billion in parcel spend and consistently experience a 5-10X return, net of our fees. Our outcomes are proven by numerous customer

honors, including QVC's Supply Chain Partner of the Year and Office Depot's Partnership Award. Learn more at www.GreenMountainTechnology.com

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GTMS CONSULTING SERVICES

What makes GTMS a better solution? GTMS has assisted hundreds of clients with cost savings not only through RFP but through your data, creating carrier cost and performance, smarter shipping habits, and controllable cost monitoring. GTMS provides its customers with RFP support, benchmarking, data analytics, and KPIs to measure the success of all your logistics. GTMS offers best-in-class rating and routing, creating significant spend reduction while creating ‘win triangles’ by optimizing the speed/cost relationship on all shipments. GTMS' best-in-class TMS includes multimodal rating and routing, desktop solution, batch rating, carrier notification, advance ship notification, and cost plus modeling. www.gtms.us

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LJM GROUP

You Don’t Become the Best by Accident. Since 1998, LJM has been helping parcel shippers improve their profitability with our expert carrier contract negotiations and comprehensive invoice auditing services. LJM devises long-term strategies to reduce overall shipping spend with our sophisticated suite of parcel invoice auditing and carrier contract negotiating solutions. Recognizing the many variables in every parcel agreement, we foresee every opportunity for savings with our unmatched benchmarking analytics and parcel carrier corporate-pricing insider experience. Our renowned negotiators and strategists hold multidisciplinary tenure with the largest parcel carriers and have developed numerous pricing and cost models. We’ve built a proprietary software engine that offers tactical data-mining, supporting the art and science of parcel agreement evaluation and negotiation. Subsequently, we are prepared with enduring processes that will work to your advantage to reduce your carrier costs. Our senior management team retains more than 200 years of practice in logistics, JANUARY-FEBRUARY 2019  PARCELindustry.com 15


parcel management, and contract negotiations. There is nothing in the parcel arena we have not seen. LJM Group has a proven record of success, servicing thousands of clients, auditing hundreds of millions of packages per year, and successfully negotiating countless carrier contracts for many of the largest shippers in the United States. Simply put, we help our clients better understand, manage, and control shipping costs. www.myLJM.com

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SPEND MANAGEMENT EXPERTS

Spend Management Experts' mission is to provide strategic guidance and market intelligence that helps companies optimize their transportation and fulfillment spend across the supply chain. With transportation, distribution, and fulfillment costs rising due to an evolving business environment, even the most sophisticated supply chain operations are frequently overpaying. Carriers are raising the stakes with frequent rate hikes, policy changes, and complex billing models that lack transparency. We help shippers identify areas of excessive carrier profits and optimize spend across the supply chain by reducing transportation, distribution, and fulfillment costs by 20% or more. Our finance backgrounds and experience in analyzing costs relative to vendor profitability enable us to develop effective supply chain optimization strategies. We leverage proprietary models and market intelligence to identify savings opportunities and then build negotiation strategies based on that data and meaningful business cases. Our value proposition is based on a pay-for-performance fee model. We are only paid on real and measurable savings we generate and only after our clients begin to receive those benefits. Our three categories of service help shippers effectively manage spend across all modes:  Spend Analysis and Assessment  Strategic Supply Chain Planning  Analytics & Reporting The benefits are undeniable: reduced transportation costs, increased operational efficiencies, dynamic reporting and data normalization, greater budgeting and forecasting accuracy, and optimized supply chain planning. For more information,

16 PARCELindustry.com  JANUARY-FEBRUARY 2019

please visit www.spendmgmt.com or contact Kim McQuilken at kmcquilken@ spendmgmt.com. Connect with Spend Management Experts on Twitter, LinkedIn, and the Spend Management Experts blog.

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THE PARCEL CONSULTANT LLC

The Parcel Consultant offers tailored solutions designed to help you reach your e-commerce fulfillment goals. The ability to take a holistic view of your outbound order process is what makes us exclusive. We not only optimize every individual phase of fulfillment, but we also coordinate each phase to achieve a synchronized process. Delighted customers and improved financials are results of The Parcel Consultant impact. Our professional consulting services include carrier contract and rate analysis, fulfillment network assessment and design, pack station evaluation and setup, packaging improvements, shipping software selection and implementation, carrier service and mode optimization, peak season planning and execution, key performance indicator (KPI) review and creation, returns and drop ship program development, 3PL versus in-house analysis, shipment visibility improvement and countless other customized shipping solutions. The Parcel Consultant has helped Fortune 500 companies, startups, 3PLs, Amazon vendors, and specialty retailers enhance their e-commerce fulfillment capabilities. Regardless of where you are on the e-commerce journey, The Parcel Consultant’s cost reduction and service enhancing solutions will provide innovative and comprehensive guidance every step of the way. 321.8PARCEL or 321.872.7235 www.theparcelconsultant.com info@theparcelconsultant.com

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VISIBLE SUPPLY CHAIN MANAGEMENT

No one wraps up parcels quite like Visible Supply Chain Management. Founded as a fulfillment company with a single warehouse in 1992, Visible has grown to become one of the country’s leading providers of shipping, packaging, fulfillment, and logistics. Shipping 172 million packages a year, we rank second only to Amazon as a USPS reseller. The bulk buying power, together with Visible’s New

Blue shipping rates, save customers up to 41.2% on shipping costs. Custom packaging services reduce their costs more, by rightsizing package dimensions and weights, based on carrier rate brackets. Our four bi-coastal warehouses allow customers to lower rates even further, by optimizing based on shipping zones. As a result, Visible now works with over 25,000 customers, shipping to almost 140 countries and territories. Our experts fulfill packages using proprietary technology that helps it maintain a 99.84% accuracy rate, give customers 24/7/365 shipment tracking — and a 99.90% on-time shipping record. With this kind of parcel prowess, no wonder Visible is able to help e-commerce retailers better compete with the biggest brand names out there today. "As you might gather from our name, visibility is central to everything we do, because transparency is what we believe today’s supply chain management industry needs to focus on. From live package tracking to clear invoicing, we're proud to be helping drive the shift to smarter shipping." - Casey Adams, President Visible Supply Chain Management www.visiblescm.com

FEATURED PARCEL SHIPPING CONSULTANTS ALEXANDRETTA TRANSPORTATION CONSULTING www.alexandrettaconsulting.com CT LOGISTICS www.CTlogistics.com GREEN MOUNTAIN TECHNOLOGY www.GreenMountainTechnology.com GTMS www.gtms.us LJM GROUP www.myLJM.com SPEND MANAGEMENT EXPERTS www.spendmgmt.com THE PARCEL CONSULTANT LLC www.theparcelconsultant.com VISIBLE SUPPLY CHAIN MANAGEMENT www.visiblescm.com


By Steve Beda

DO YOU KNOW WHAT TO DO WITH YOUR PARCEL DATA? The amount of data a shipper has access to can be overwhelming. Here’s how to take that information and put it into practice.

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recently watched an interesting YouTube video that basically mapped out the history of the universe using a simple chronological chart with milestones ranging from the birth of the Milky Way all the way to the existence of life on earth. Based on a 24-hour clock, this translated to life existing on earth during just the last few seconds of the very last minute. While watching the video, I couldn’t help but compare the history of the universe to the ongoing digital revolution. I remember writing my first computer program using punch cards on a mainframe, and my first personal computer had only a few kilobytes of memory — just a few decades ago. It wasn’t long ago that the lack of data and computing power were real constraints for those that desired robust analytics to better manage their business. Today, we now have extraordinary amounts of data and computing power; however, we are only just starting to fully leverage the immense insight and value of all this data. This begs the question: “Do you know what to do with your parcel 18 PARCELindustry.com  JANUARY-FEBRUARY 2019

data?” I can assure you that companies wanting to become best-in-class are thinking hard about this question. To answer fundamental questions about your parcel spend and formulate strategies for optimization, you need to know and understand your current state. A common method for defining your current state is understanding your parcel shipping profile. Obviously, top-level package counts and total spend is important, but it isn’t really helpful in answering more complex questions about the carriers you use, optimal origins, or contractual rate discounts and their alignment with shipping patterns. To answer these sorts of questions, you really need to fully understand your shipping profile. You can’t get to the fun stuff, like saving money based on executing optimization strategies, without a complete understanding of your “as-is” state. So, let’s briefly refresh our memories on how to define your shipping profile. A parcel shipping profile generally consists of two distinct types of data element sets or descriptors. The first set


consists of all the components that support how much you pay to ship a package, such as service, zone, weight, volume, package type, or residential destination. The second element set allows for the sub-categorization into business units, channels of delivery, or any component that describes your logistics flow from supplier to customer. Combining these data sets with transportation cost information (base rate, fuel, and accessorial charges), time-in-transit information, and other aggregate elements completes the overall profile definition. Collecting this comprehensive set of data over a long period of time and adding a robust analytical visualization tool enables you to capture and fully understand your current state. Additionally, by refreshing this data regularly, you can begin to effectively measure certain operational key performance indicators (KPIs), such as transit time or delivery status, to monitor and reduce the risk of disruption during peak order cycles. With a firm foundation and understanding of your current state, you can now quickly answer questions like “What did I spend?”, “How did my carriers perform?”, or “Is my contract aligned with my shipping profile?”. Now it’s time to leverage the value of this insight and develop effective optimization strategies that can create significant value for your business. These strategies can range from going to market via RFP for your parcel requirements, aligning your distribution network to reduce distance and transit time, avoiding unnecessary accessorial charges, leveraging regional carriers for last-mile delivery, reducing the use of premium services, or changing your packaging to reduce dimensional weight. To fully understand which of the strategies may be appropriate and reasonable, a different level of analysis is required.

historical profile (or planned profile) with actual execution results and monitoring any variance to your plan. Ultimately, being able to answer questions such as “Is my average transit time reduced?”, “Is my average cost per shipment lower?”, or “Are accessorial charges being reduced relative to freight?” is the name of the game. More importantly, being able to determine what actions you can take to make changes in your program or alter those outcomes is critical. In the end, maximizing the value of your parcel data requires a best-practice approach to describe, predict, and monitor actions to stay on course. While it may seem daunting, establishing a disciplined approach to capturing and normalizing data along with an adoption of the proper analytical tools will enable you to see, plan, control, and ultimately save money, which answers the fundamental question of how to maximize ROI and “What do I do with my parcel data?”

Steve Beda is EVP, Customer Solutions, Trax. He has spent the last 25 years working with companies on supply chain automation, execution strategies, compliance strategies, and more recently, spend management strategies. Over the past 10 years, he has assisted dozens of clients with contract optimization strategies through coordination of transportation RFPs as well as measurements of savings post-RFP.

THE POWER OF PREDICTIVE ANALYTICS Predictive analytics provide a powerful capability to actually model potential changes to your “as-is” state and essentially predict what the potential outcomes could be. It is a vital tool and can offer key insight and validation of your strategic initiatives. All predictive models require good (and very clean) data and typically start with a historical perspective, which acts as a baseline. Identifying and understanding any variance to baseline (current course) often reveals the best option to follow and establishes a prioritization of your overall optimization program. Whether you are targeting cost reduction, attempting to reduce transit time, or find a balance between the cost to serve and service, predictive tools can be successful at maximizing the value of your parcel data. How many times have you set out to achieve something, only to find that the actual execution of your plan is hamstrung by unexpected roadblocks? Measurement of how well your strategic plans are meeting expectations and having answers as to how to improve or make corrections is as important as the plan itself. To maximize the savings associated with a plan or strategy, getting as close as possible to optimal execution is paramount. This is where your shipping profile’s value is really highlighted, as it enables you to compare your JANUARY-FEBRUARY 2019  PARCELindustry.com 19


WHEN IT COMES TO RETURNS, RETAIL IS WINNING, BUT AT WHAT COST?

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n 2017, Americans gave retailers their best holiday season in over five years. According to a sales report issued by Mastercard SpendingPulse, US year-end holiday retail sales rose 4.9% compared to the same period the year prior, while online retail shopping similarly increased 18.1%. It was a big win for retail, showing an improved economy and a rise in consumer confidence. The year 2018 gave no indication of those sales slowing down. Consumer confidence remained at an all-time high, unemployment was low, and take-home wages were on the rise. Retailers were taking all of that into consideration as they prepared for a boost in holiday sales. According to projections given in late 2017 by the National Retail Federation, holiday sales were expected to grow at a minimum of 4.5% over 2017. But while product is moving quickly off the shelves, a huge percentage of it is making its way back. According to figures from Optoro, a company who specializes in the business of return shipments, consumers returned about $90 billion worth of goods in 2017 alone. Returns are nothing new to retail. And every business has evolved policies and

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procedures that work uniquely for each of them. Today’s online shopper returns their product, on average, about 25-30% of the time. That’s nearly triple the return rate for a brick and mortar store. Of course, this should come as no surprise as an online purchaser usually takes a leap of faith. You’re hopeful “the shoe fits,” without actually trying it on. And the post-holiday timeframe is no different. As purchases soared as high as Santa’s sleigh in December, returns began to climb just as high. But fear not. There are ways to help quantify these returns and protect yourself from massive losses in the future. Here are some of the key objectives to consider for your return policies that we hope will help you avoid a holiday hangover next year. STEP ONE: UNDERSTAND THE TRUE COST OF RETURNS A great return and refurbishment process starts with calculating all costs involved. If you underestimate your true costs, you may think that you can sustain a higher level of returns and still achieve your financial goals. If you overestimate your costs, you might be presenting a less friendly level of customer service, which could result in lower sales. Be sure to consider all of the key cost elements

in a return: customer service, shipping/ receiving, processing returned goods, refurbishment, recycling product, disposal of returned items, and storage costs. STEP TWO: HAVE A WELL-ORGANIZED MECHANISM FOR FEEDBACK AND GOALS FOR ONGOING PROCESS IMPROVEMENT The basis of a returns program must incorporate an understanding of why returns occur. Buyer’s remorse is always a contributing factor. Often, products do not meet the customer’s expectations. Think about the expectations you set with the customer. This includes product promises, item availability, order processing time, and shipping and delivery time. Your business can refine the product promise message to more accurately shape the customer’s expectation. A good order management system allows the customer service agent and consumer using the shopping cart to know whether or not the product is in stock. A fulfillment center capable of processing orders quickly reduces time from order to delivery. Geographic location can reduce time in transit, and lower shipping costs. Consider positioning your fulfillment so that the majority of customers will be reached within two days.


By Ayal Latz

You also might consider employing customer service agents who are trained with save-the-sale techniques. Agents who are intimately familiar with the products and promotions can better connect with the customer. Empower agents with a detailed and generous save-the-sale strategy. The dynamics of this will vary by product and promotion, but every program should be devised with the objective of minimizing returns. First, a knowledgeable customer service agent may be able to walk the customer through usage problems with their product. The issue could very well be that the customer does not know how to properly use the product and wishes to simply send it back. Only a properly trained agent will be able to correct this. Another effective save-the-sale technique is extending the return window for the customer. In many cases, this alleviates the customer’s concern about timing. Having extra time may lead to the customer changing their mind and retaining the product. Depending on the circumstances, it may be possible to persuade the customer to keep the product in exchange for a discount or a coupon towards a future purchase, which may be less expensive than processing a return. In any case, think creatively.

You always have lots of options when it comes to save-the-sale techniques. STEP THREE: CREATE AND MAINTAIN SATISFIED AND LOYAL CUSTOMERS The level of customer satisfaction and loyalty are key elements in a returns strategy and start with your strategic intent. Several options exist when it comes to handling customer return requests: Just keep it – For low-cost/low-value items, it’s often cheaper to allow the customer to retain the item, avoiding physical returns. The customer pays to return – This is the most prevalent methodology; however, consider adding a spin to it. Often, it’s less expensive for the marketer, especially via a fulfillment partner, to transport a returned package. As such, offer your customers a prepaid shipping label for a fee, which is a win-win for all parties. The customer will pay less and also avoid many of the hassles associated with shipping a return. Free returns for the customer – This one is obviously the most favorable for the customer but can be difficult for most retailers to entertain. If this method is chosen in order to score points with the customer, be sure to initiate the return via a return label program

at optimal pricing versus reimbursing the customer at retail shipping rates. This is what we always call a “Gold in Them Hills” option because everyone is happy, and the marketer can introduce it only after the save-the-sale attempts have failed. There’s more. By controlling the return method, marketers proactively can notify the customer of the return status, dramatically reducing customer service calls. Techniques include emails confirming the package is in the mail stream and on its way; when it arrives at the warehouse; when processed; and when the credit or refund is issued. All of these actions contribute to customer satisfaction. And they reduce customer service costs. At the end of the day, you want to build customers who are loyal to your brand and can communicate the positive experience you provide — thus creating trust with new customers.

Ayal Latz is President of a2b Fulfillment, a third-party logistics service whose solutions are designed to improve the customer experience while reducing operating costs through a variable model. Visit www.a2bf.com for more information. JANUARY-FEBRUARY 2019  PARCELindustry.com 21


CHANGING YOUR MATERIAL HANDLING AUTOMATION: WHEN DOES IT MAKE SENSE FOR YOUR ORGANIZATION? Throughout your career, you’ll likely come to several forks in the road. Here’s how to determine which path to take as you strive to optimize your material handling processes.

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ogi Berra once said, “When you come to a fork in the road, take it.” Believe it or not, that advice isn’t as silly as it sounds, especially when the fork in question is an opportunity to improve the efficiency of your material handling. The average fulfillment center is full of such opportunities. And, thankfully for your operation, many of them are easy to spot. Here are some signs that it’s time to hit the “refresh” button on your warehouse processes and consider some level of automation.

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BY HARRY DRAJPUCH FORK ONE: WHEN ORDER VOLUMES ACTUALLY DO WARRANT INVESTMENTS IN AUTOMATION In e-commerce sales, where growth is the name of the game, you need to make absolutely sure that your fulfillment engine can keep pace with your sales trajectory. After all, every “buy button” click is not just a source of revenue; it’s a promise to deliver. No e-tailer wants its fulfillment operation to be the bottleneck to growth. Sometimes, that requires automation to support the needed throughput. But be careful here. Orders that spike after a special promotion or black swan

event may not sustain over the long haul. Before forking over precious capital to invest in warehouse automation, make sure your forecasts are based on reliable projections and not unfounded optimism. FORK TWO: WHEN ADDING MORE STAFF WON’T ADD VALUE If your knee-jerk response to increasing order volumes is to hire more staff/ temps to keep up, it may be time to re-think that approach. For one thing, the logistics industry is in the midst of a massive labor shortage, which means there’s no guarantee that you’ll be able to find the number or caliber of personnel you’ll need, especially during the holidays. For another, your fulfillment center(s) may already be so congested that


bringing on even a few more associates could create a physical constraint that will erode overall productivity. If labor management has become a challenge or you’ve noticed that associates are routinely getting in each other’s way, it could be time to replace people with equipment or technology. FORK THREE: WHEN IT (LITERALLY) LOOKS LIKE IT’S TIME FOR AN UPGRADE Even in this data-driven era, there’s still no substitute for the powers of visual observation. (Or, as Yogi might say, “You can observe a lot just by watching.”) When you and your supervisors are present on the fulfillment center floor, it tells a story like no key performance indicator (KPI) report can — including whether or not people are following your standard operating procedures (SOPs), who’s working at maximum capacity (versus who’s just doing a great job of looking busy), and which clogged areas are truly a result of space, equipment, or design constraints rather than haphazard work-arounds. Trust these visual inputs much like you’d trust your gut, because if they suggest that things can only be improved by doing things differently or less manually, it definitely bears looking into. FORK FOUR: WHEN TECHNOLOGY PROMISES A RAPID ROI When it comes to upgrading your facility’s equipment or introducing new automation, there’s a fine line between being an early adopter and being a troglodyte — and smart businesses are pros at knowing where that line is. It’s never a good idea to automate for automation’s sake, but some technology decisions are no brainers. In a high-vol-

ume fulfillment environment, simple, inexpensive technology like box erectors and tape machines can pay for themselves almost immediately. By contrast, if the potential payoff has a long runway — say three years or more — proceed with caution. In this day and age, material handling innovations proceed at such a rapid pace that you might need to consider another upgrade within that timeframe. FORK FIVE: WHEN BENEFITS BRING VALUE BEYOND INCREASED PRODUCTIVITY Most companies adopt fulfillment automation to increase speed and productivity. However, there are other advantages that can and should factor into your technology go/no-go decisions. For example, don’t underestimate the huge role that warehouse automation or other improvements can play in improving order accuracy and customer satisfaction. After all, it takes a lot of time and money to rework an improperly filled order before it goes out the door, and that doesn’t even begin to take into account how much you’ll pay for returns — and quite possibly, lost business — if that inaccurate order actually reaches your customer. Technology certainly needs to pay for itself in added productivity, but the case for automation investments should not ignore the less obvious benefits — particularly if you’re experiencing problems with order and inventory accuracy. Voice picking, for instance, not only increases productivity, it does so with near-perfect accuracy. That results in fewer re-works and returns, and much happier customers. FORK SIX: WHEN THE TIME IS RIGHT FOR YOU (INVEST IN EQUIPMENT AND TECHNOLOGY AT YOUR OWN PACE)

In the midst of all this advice, it’s important to remember that investing in technology and equipment is a process, not an event — and that the most sensible strategy for warehouse automation may be a more evolutionary, modular approach. While your business is gaining traction, that may mean predominantly manual processes supported by a warehouse management system (WMS). As order volumes increase, it may make sense to incorporate other forms of automation like box erectors and automatic void-fill systems. Finally, as your business matures and requires high-volume, high-velocity picking and shipping, it may make sense to invest millions in advanced material handling methods that integrate with your WMS. A modular approach allows your company to deploy systems and automation when (and only when) your volume dictates. As a result, you can funnel available cash to wherever it’s most needed and avoid getting tied into inflexible processes or investments that may not be a good fit for your business as it grows. As Yogi once said, “The future ain’t what it used to be.” Tomorrow’s warehouses will feature a lot fewer people and a lot more technology. They key is to be smart about what technology you deploy, and when.

Harry Drajpuch is Chief Executive Officer for Amware Fulfillment, a national 3PL that helps brands scale warehouse fulfillment operations to keep pace with business growth. With fulfillment centers in every region of the country, Amware enables one- to two-day delivery to 98% of the United States. Visit www.amwarelogistics.com for more information.

Even in this data-driven era, there’s still no substitute for the powers of visual observation. (Or, as Yogi might say, “You can observe a lot just by watching.”) JANUARY-FEBRUARY 2019  PARCELindustry.com 23


By Brandon Staton

IN PLANE SIGHT: AMAZON EXPANDS FLEET, SEES GOLDEN OPPORTUNITY

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n literature, a cautionary tale is folklore embedded with a moral message. Obvious danger is ignored, and the main character meets its demise as a result of certain misgivings. The lesson to be learned, whether explicitly stated or implied, is clear in the end. Amazon founder, Jeff Bezos, is a modern-day King Midas — but with a twist. Amazon’s December announcement that it will expand its Amazon Air fleet from 40 to 50 (a 25% increase) came days after FedEx CEO Fred Smith downplayed any threat from the e-commerce giant.

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“We don’t see them as a peer competitor at this point in time,” Smith told investors. Yet, each day, it seems more likely that we will soon see what becomes of FedEx and UPS once Bezos gets his hands on the industry. Can he turn cardboard into karats, or will the weight of the move prove too heavy for Amazon to sustain? The world’s richest man, Bezos already has found his company on both sides of pressing societal issues. Workers and politicians have raised concerns about conditions and pay, and small businesses have clamored that Amazon is forcing them to shutter their

doors. Meanwhile, some 200 cities (more recently 20) have been at Bezos’ beckoning call in their attempts to land Amazon’s second headquarters in their respective cities. Admiration or disdain for the company seems to depend on the lens through which one views it. The American economy is founded upon capitalism and whether for or against the e-commerce giant, there is no arguing that Bezos — one of history’s greatest entrepreneurs — has capitalized. By the end of 2017, Amazon employed 566,000 people; almost twice as many as the next eight leading global internet companies combined.


Still, the challenges that have surfaced during Amazon’s meteoric rise are real, and they prompt important questions that are impossible to answer but that must be discussed. AN UNPRECEDENTED SUCCESS? Amazon’s success is what enterprise entrepreneurs dream of — the creation of something so impactful that it touches the lives of just about everybody. For this and many other reasons, it’s implausible to try and discern the appropriate gap between Bezos’ worth and employee pay, a controversial sticking point for those that feel Bezos’ wealth has come at the expense of workers that helped him create it. Employees will always lobby for more, as they should, and leaders will always push the company to become better than it was, as they should. When the proper balance is struck, chances are, you’ll find yourself somewhere among the world’s most admired companies, like Amazon (and FedEx and UPS, too). When Amazon announced that it would increase the minimum wage for

all workers to $15 per hour, and subsequently confirmed that the change would indeed increase the total compensation for all works, it accomplished what few other companies have. It successfully used a pressing societal issue and turned it into a widely regarded public relations success; one that stood up to pickets and politicians alike. When companies grow to sizes the likes of Amazon, complicated management issues are inevitable. Compounding the challenge is the publicity associated with such scale. People at various companies are paid solely to cover that beat and report on anything they deem newsworthy, which largely results in scrutiny more than feel-good stories. It’s only news if the man bites the dog, as the aphorism goes. Then there’s the more macroeconomic issue of fairness. And in most small businesses’ cases, “The Amazon Effect” is a blend of survival of the fittest and keeping up with the times. There just isn’t enough evidence to support the fact that Amazon is putting small businesses out of business. In the span between when Amazon went public in 1997 and the end of 2015, the number of non-employer small businesses in America grew 57.6% to more than 24 million, despite the largest economic downturn since the Great Depression. (The number of employer small businesses has remained relatively constant over that time.) According to a 2018 Feedvisor survey of mostly US-based Amazon sellers, almost half of all businesses generated 81 to 100% of their revenues from Amazon sales. In the third quarter of 2018, Amazon generated $31.88 billion in third-party seller service revenue, up from $22.99 billion in the previous year. More than half of paid units sold on the Amazon platform were sold by third-party sellers, making it the company’s second-largest revenue segment behind Amazon Web Services. In layman’s terms, there’s a lot of gold going around. Economics are governed by trade-offs. Amazon’s success has and will continue to generate new challenges for the company itself as well as others in the market. There will continue to be plenty of

storylines emerging from Amazon in the months ahead. Bezos’ demonstrated success navigating societal and political issues is an element that only adds to the tremendous viability of his leadership and Amazon’s presence within the complex global and economic and political landscapes. Make no mistake, the burning question is and will continue to be: How will Amazon change shipping as we know it? For Amazon, market entry will represent a significant separation from what thus far has been its core. Historically, that limits the odds of success for new ventures. Of course, Amazon isn’t most companies. While Fred Smith doesn’t see Amazon as a peer competitor “at this point in time,” that time is coming. The irony of it all is that when the time does come, Amazon could very well make things better for businesses and employees. If it can deliver on its promise of cheaper shipping, then it would reverse a years-long trend of rising shipping costs that is among the leading culprits of businesses’ lagging profits during the digital age. With its investment in a second headquarters, the company has already promised tens of thousands of new jobs and economic investment in New York and Northern Virginia. The Amazon Air and Amazon Delivery Service Partner programs are sure to create additional employment opportunities. It remains to be seen whether Bezos can turn package delivery into another Amazon gold mine, but here’s the twist: Is Amazon ignoring the danger of market entry, or are established carriers FedEx and UPS ignoring the danger of underestimating a man who thinks he can make a golden 767 fly? One thing is for sure: Someone is about to learn a valuable lesson.

Brandon Staton is an MBA candidate at The University of North Carolina Kenan-Flagler Business School and President and CEO of Shipmint, Inc., which helps corporate decision makers quickly connect with the industry’s top shipping consultants to save time and money. Visit www.goshipmint.com for more information. JANUARY-FEBRUARY 2019  PARCELindustry.com 25


EVALUATING DIFFERENT DELIVERY CHANNELS: WHEN ARE THEY THE RIGHT FIT FOR YOUR OPERATION? By Lisa Kennedy

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he rapid growth of technology and the number of innovative service providers are advancing the variety of options available for retailers and direct-toconsumer brands to deliver products ordered online to customers. As a result, shippers must constantly evaluate their last-mile delivery options to ensure they are providing the best possible service using the most cost-effective process. There are several strategic questions that should be considered before evaluating the different options shippers have for products that end up on a consumer’s doorstep. Retailers want to save customers time by leveraging new technology and connecting all the parts of their business into a single, seamless shopping


experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use. Leveraging size and scale for national retailers is the current strategy, and last-mile delivery is an essential component of this strategy. Key criteria include a shipper’s current network, customer service expectations, and ancillary services required by the retailer. Looking back five years ago, several services used today (such as parcel delivery lockers, crowdsourcing, and service providers such as Deliv) were available, although they were not utilized as extensively as they are currently. Looking forward five years, retailers will look to take out labor as they process online orders. This will be done by automating fulfillment warehouses; incorporating delivery

options using mobile lockers and driverless vehicles/mobile units; and pushing collection of the order to the customer, which will allow flexibility regarding when and where products are picked up. First and foremost to consider are shippers’ current networks for identification of the optimum last-mile delivery solutions available to customers. How can the current network be leveraged to lower shipping costs? Are there regionally located warehouses and/or brick and mortar stores for which product can be inventoried and/or shipped to for customer pickup or final delivery? Customer service expectations rank high on the type of service that will need to be provided. Do customers expect same-day or next-day delivery, or will they accept delivery of products without a committed timeframe? Retailers’ solutions to parcel deliveries are varied, and many are testing multiple solutions. The leading parcel service providers, such as UPS, FedEx, and USPS, still deliver over 80% of e-commerce parcel orders. The issue becomes apparent as e-commerce orders rise, labor to perform final deliveries is becoming constrained, and costs are rising. To address these issues, multiple options are being explored by retailers. The most popular solution is buy online, pick up in store (BOPIS). Home Depot, Walmart, Amazon, Whole Foods, and others have established lockers in their brick and mortar stores to facilitate order pickup and avoid having to perform the actual final delivery to a customer’s home. Walmart is testing warehouses adjacent to brick and mortar stores with robotics that automate the picking and packing for online orders, and consumers go through a drivethrough at the warehouse to pick up their order. Many same-day parcel service solution providers are currently targeting food and drink delivery for customers. Some companies are working with grocers or restaurants. Tompkins believes these same-day delivery services will expand

to include more consumer products and other frequently consumed items. For delivery to a consumer’s home, the solutions vary. National retailers are investing in captive service options. Target acquired Shipt, a leading online same-day delivery platform. Target will leverage its network of stores, Shipt’s technology platform, and their community of shoppers to offer same-day delivery to customers. Walmart launched Spark Delivery for same-day delivery of grocery orders using crowdsourcing. The drivers are recruited and managed by Delivery Drivers Inc. Walmart also works with outside service providers like Postmates, Doordash, and Deliv for grocery delivery. In early 2018, Walmart ended delivery partnerships with Uber and Lyft, also abandoning a test in which Walmart employees delivered groceries to customers after their regular shifts. Kroger has teamed up with Waymo to test an online grocery service in which driverless vehicles pick up customers at their homes and take them to the store to collect their orders. The service is being piloted in Chandler, Arizona. Instacart is being tapped to provide home delivery for companies such as Costco, BJ’s Wholesale, Publix, CVS, Whole Foods, and Aldi. Instacart offers same-day to one-hour deliveries in major cities such Los Angeles, Miami, New York City, Chicago, Austin, Washington D.C., Houston, and Atlanta. Instacart handles the entire pick, pack, and ship process for retailers by cruising the store aisles for items, checking out, and delivering to a customer’s home. To cut delivery costs, online retailers are looking to destination delivery unit (DDU) shipping to get the product as far into the USPS system as possible so that the Postal Service performs the final delivery. The process may include sending a full or partial truckload of product to a metropolitan destination, where a local service provider will sort the packages and bag, then deliver to specific postal destinations. About 50% of all Amazon’s parcel orders JANUARY-FEBRUARY 2019  PARCELindustry.com 27


Shipper/Product Location

Delivery Range

Service Requirements

Shopping Required

Products

Service Provider Solutions

Other Solutions

B&M store/most service providers are in metropolitan areas

Local >30 miles

Same-day delivery (tends to be groceries/ consumer products)

Yes

Consumer grocery/ consumables/ office supplies

• Shipt • Instacart • Other regional service providers

• BOPIS • Customer pickup at store without leaving vehicle

B&M store/most service providers are in metropolitan areas

Local>30 miles

Same-day delivery

No

Consumer grocery/ consumables/ office supplies/ food delivery

• Deliv • Regional last-mile service providers • Other crowdsourced delivery options

• BOPIS • Customer pickup at store without leaving vehicle

Regional B&M stores and/or regional warehouses

Within 100 miles

Next-day delivery

No

All products except prepared food delivery

• UPS, FedEx, USPS • Regional last-mile service providers

• BOPIS

Regional B&M stores and/or regional warehouses

Regional >500 miles

Two-day delivery

All products except prepared food delivery

• UPS, FedEx, USPS • Regional last-mile service providers

• BOPIS

Regional B&M stores and/or regional warehouses

National/ International

Two+ day delivery

All products except prepared food and grocery

• UPS, FedEx, USPS • Regional last-mile service providers

• BOPIS

are delivered by USPS. Other services retailers are looking to provide customers include delivery to alternate locations during transit. In the event the customer wants the product delivered to their office versus to their home, this an option. This allows flexibility for when and where the customer will receive the package. The future of parcel delivery is hinged upon future technology and regulatory issues. Postmates, Doordash, and GrubHub have all raised hundreds of millions of dollars and are actively exploring robotics, which could cut delivery costs by as much as 40%. Uber is interested utilizing drone delivery. They are a part of a Federal Aviation Administration trial program to deter28 PARCELindustry.com  JANUARY-FEBRUARY 2019

mine how drone deliveries should be regulated. Uber wants to deliver drone operations sometime in 2019, with the goal of delivering Eats orders by 2021. Mobile lockers are on the radar for companies like Amazon. This would assign the times a locker is in a specific location to be available for a customer to pick up. This solution could work well in urban areas where there is a high density of deliveries. Other newer technologies include allowing a mobile robot into a consumer’s home for product delivery. In this scenario, the customer would not have to be present to receive the order, giving complete flexibility to the retailer. This would have limitations depending on

the setup of the delivery destination, but these are options being explored. It is certainly an interesting time for the parcel industry, and we can’t wait to see what the future holds.

Lisa Kennedy is Project Manager, Tompkins International. She is a business strategy consultant with 20 years of experience in growth and strategic planning across industries. She has overseen management of consulting projects from business development to final presentation, and she has developed analytical, conceptual, and communications skills that support effectiveness across multiple industries.


PARCELCOUNSEL

ANNIVERSARIES REVISITED

By Brent Wm. Primus, J.D.

T

his installment of PARCEL Counsel is being written just after New Year’s — a traditional time for reflection. In 2005, my colleague, and the first author of this column, William J. Augello, wrote an article entitled “2005: Happy or Unhappy Anniversary?” In the article, he noted the anniversaries of significant events that revolutionized transportation regulation in the United States. Let’s revisit these anniversaries, such as:  The 10th anniversary of the Interstate Commerce Commission’s (ICC) demise  The 25th anniversary of deregulation in the railroad industry  The 25th anniversary of partial deregulation in the motor carrier industry  The 28th anniversary of deregulation in the air cargo industry  The 50th anniversary of the first sailing of a containership developed by Malcolm McLean Adding 14 years to each anniversary brings us to 2019. Mr. Augello went on to describe the effects of these changes as of 2005 and addressed the larger question as to

whether they were of benefit to the nation. After each of his following observations, I have addressed the current status. 1. “As a result of the ICC’s dissolution on January 1, 1996, no government agency has a mandate to protect the shipping public. The few remaining legal regulatory protections were transferred to the Department of Transportation, with direction from Congress not to allocate scarce resources to resolve private disputes. As a result, shippers must turn to the courts to enforce whatever remedies remain in the law — not a practical or cost-effective way to resolve most transportation disputes.” No change. With respect to loss and damage claims, in particular, many carriers rely on this to deny meritorious claims knowing that for claims less than a few thousand dollars, or even $50,000, the cost of litigation in a faraway state makes pursuit of the claims economically impractical. 2. “The Federal Motor Carrier Safety Administration has ignored Congress’ directive to eliminate the distinction between common and contract carriers.” No change. Indeed, in 2007, Congress again directed the FMCSA to eliminate the distinction… which continues to be ignored by the FMCSA. 3. “Motor carriers have eroded the traditional liability limitations that prevailed under the Carmack Amendment, and have published limitations that the ICC formerly refused to permit.”

The erosion continues. A common limit of liability of $25.00 per pound in 2005 has now gone to $5.00, or even $1.00, for a spot rate quote, and $0.10 per pound is now the prevailing limit for “other than new” cargo, which could apply, for example, to machinery worth hundreds of thousands of dollars. 4. “Mergers and bankruptcies within the motor carrier industry have led to fewer sources for nationwide LTL coverage. Fuel surcharges, driver shortages, and insurance costs have reduced the pool of equipment available to shippers.” The trend continues. In addition to the factors noted by Mr. Augello, in 2019, we have the effect of electronic logging devices (ELDs) monitoring drivers’ hours of service. So, in a sense, 2019 is a mixed bag. As of January, a robust economy has pushed the limits of the carriers’ capacity… meaning that even the largest shippers are pressed to negotiate favorable terms. On the positive side, increased operational efficiencies of the carriers, and the supply chain in general, has led to overnight delivery being the new standard for consumers. All for now!

Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Your questions are welcome at brent@primuslawoffice.com.

JANUARY-FEBRUARY 2019  PARCELindustry.com 29


WRAPUP

IS THE WORLD MOVING TOO FAST? Michael J. Ryan

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he standards for global e-commerce are changing at lightning speed. Technology is moving faster than physical capability. After all, it wasn’t that long ago that five- to seven-day delivery was acceptable in the US. Amazon has been the big disrupter in this space by offering a two-day service for free to Prime members. Now, this expectation is spreading into the international arena. In the global e-commerce arena, speed and cost are the new factors that win the race. The private express carriers (DHL, FedEx, and UPS) have spent billions of dollars in developing their global networks, with DHL Express being

30 PARCELindustry.com  JANUARY-FEBRUARY 2019

the market leader. In addition to a higher expectation for a faster and lower-cost delivery, merchants have some major challenges to overcome, such as: 1. Duties and taxes (which must be calculated and collected up front) 2. Commodity restrictions 3.Customs clearance 4. Fast delivery with full trackability (to residential addresses) 5.Flexible or alternative delivery points 6.Effective in the specific country’s returns process The USPS and other postal authorities have been challenged with the new notion of speed and fast delivery. There are some new hybrid organizations that are developing solutions that utilize international flights and use local delivery companies for the final-mile delivery. The utilization of technology could be the big disrupter here. For example, DHL Express has just launched a new feature called On Demand Delivery, which allows the consumer to change the delivery address and/or time to one that is more convenient. This happens as the shipment is in transit from another part of the world. This is just one example of how technology is changing the landscape of international e-commerce. Many countries are re-visiting their de minimis value rules to enhance the overall efficiency of inbound packages to their country and improve the customer experience of their people.

In the area of commodity restrictions, not all products are treated equally in all countries. It is imperative for merchants to understand these local rules and regulations. As for customs authorities around the world, it is their duty to protect their countries and be their “watchdog” for all items entering the country. However, technology will continue to improve the inbound clearing process, which will get us closer to a frictionless delivery. In addition to fast and cheap, global consumers want to have the ability to track shipments within hours of placing the order. This is a simple requirement for many global shoppers. The returns process is plagued with the high cost of getting products returned to the origin country, but there is a trend for merchants to set up partners in high-volume countries, which vastly improves the whole transaction process. The race is just beginning in the global arena for fast and cheap. With 95% of the world’s population living outside the US, how are you going to stay competitive with cost and speed?

Michael J. Ryan is the Executive Vice President at Preferred Parcel Solutions 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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