OPTIMIZE YOUR PACKAGING & MATERIAL HANDLING PROCESSES. PAGE 20
THE E-COMMERCE EXPLOSION: CURSE OR WIN FOR THE PARCEL CARRIERS? P. 08
ARE YOUR DELIVERY PRICING POLICIES LEAVING YOUR ONLINE CARTS EMPTY? P. 16
NEGOTIATING LEVERAGE AS A SMALL SHIPPER. P. 14
SHIPPING AND SUSTAINABILITY: DECREASING YOUR ENVIRONMENTAL FOOTPRINT WHILE INCREASING CUSTOMER SATISFACTION PAGE 18
CONTENTS /// Volume 27 | Issue 4
16 18 24 26 28 06 EDITOR’S NOTE Preparing for Peak During a Pandemic By Amanda Armendariz
07 TECH SPACE Transportation Spend Management Systems Meet Small Parcel By Cathy Morrow Roberson
08 SPEND PERSPECTIVES E-Commerce Volume Explodes: Curse or Win for the Parcel Carriers? By John Haber
10 PACKAGING Packaging + Peak Shipping Season = Best Practices for Success By Sean Webb
12 OPERATIONAL EFFICIENCIES Certainty in Uncertain Times By Susan Rider
14 SUPPLY CHAIN SUCCESS How to Build Negotiable Leverage as a Small Shipper By Jack McCrum
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16 ARE YOUR SHIPPING RATES LEAVING ONLINE CARTS EMPTY? How to evaluate whether your pricing policies are a boon or a detriment to your sales. By Kenneth Moyer
18 SHIPPING AND SUSTAINABILITY Decrease your environmental footprint while increasing customer satisfaction By Clint Smith
24 ENSURING REGULATORY COMPLIANCE WHEN SHIPPING HAZARDOUS GOODS By David Cahn
26 NOT JUST A SEASONAL PEAK – A LASTING SURGE By Rush Fullerton
28 PARCEL COUNSEL Four Essential Elements of Payment of Freight Charges By Brent Wm. Primus, JD
29 TO SUM UP 30 WRAP UP Pivoting: The New Strategy By Michael J. Ryan
SPONSORED CONTENT 20 7 OPPORTUNITIES FOR OPTIMIZING YOUR PACKAGING & MATERIAL HANDLING PROCESSES 23 REDUCING THE PANDEMIC’S IMPACT ON THE PACKAGING DEPARTMENT How companies are using automated packaging solutions to combat business disruptions
PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ email@example.com ]
AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ firstname.lastname@example.org ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ email@example.com ]
PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 2020 © by MadMen3. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, MadMen3 or its staff becomes the property of MadMen3. The articles in this magazine represent the views of the authors and not those of MadMen3 or PARCEL. MadMen3 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. P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
JULY-AUGUST 2020 PARCELindustry.com 5
PREPARING FOR PEAK DURING A PANDEMIC By Amanda Armendariz
ight about now is when most shippers start kicking into high gear as they prepare for peak season. While much of the country is still relishing lazy summer days and trying to enjoy this time of year to the extent that we can with restrictions in place, retailers know that their busy season will be here before we know it. And this year, we have the added complication of planning for peak season in the midst of a pandemic that shows no signs of slowing down any time soon. Who knows what the workforce numbers, both for distribution centers and the parcel carriers, will look like in November and December if the cases keep multiplying the way they are. Are warehouses currently configured to allow for correct social distancing practices in an attempt to keep numbers down, and how much work would be required to get workspaces up to date if they are not? Will there be product shortages that could affect the end consumer? These questions are all valid, but unfortunately, there is no way to know what the country, the economy, and retail businesses will look like in a few months.
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So what can retailers do in the face of this uncertainty? First, communication with customers is key. People are more receptive to delays in delivery times or potential product shortages if they are aware of the possibility ahead of time. Have the department that is responsible for your website maintenance make sure that these notices are prominently displayed on your site so online shoppers can easily see them. Secondly, utilize alternative delivery methods if possible. Ship-tostore and ship-from-store were already gaining traction before the pandemic, and now could be a good time to further encourage buyers to utilize these methods. Ship-to-store (or utilizing your stores as mini-warehouses) combined with curbside pickup is an attractive option to those of us who are attempting to reduce contact with others while still purchasing as normal. Several times during my state’s shutdown, I ordered online, drove to the store, parked in the designated spot, and a team member brought out my order and placed it in my trunk for a contactless experience. I’m hoping that even more retailers will utilize this option during the holiday shopping season. Finally, be sure to reach out to your carriers, and don’t wait until the last minute. Start a conversation with your rep about your expected volumes and if there are any steps you need to take to make this unprecedented peak season as seamless as it can be, given the circumstances. As always, thanks for reading PARCEL.
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
Last-Mile Delivery During COVID-19 and Beyond By Josh Dinneen
How to Control Parcel Shipping Costs Despite Carrier Surcharges By Ken Fleming
Controlling Expenses in the Age of Home Office Shipping By Bob Malley
TRANSPORTATION MANAGEMENT SYSTEMS MEET SMALL PARCEL By Cathy Morrow Roberson
ransportation management systems (TMS) have been around for years. Historically, the types of TMS that many of us are accustomed to have focused primarily on such modes as trucking. Rarely, if ever, was small parcel included in such systems… until now. E-commerce has revolutionized how we, as consumers and businesses, purchase goods. As such, supply chains have adapted (and still are adapting) to manage the flow of such goods. These goods come in all sizes including exercise equipment, appliances, as well as apparel or cosmetics. On average, however, the majority of e-commerce goods are small; weigh less than three pounds; are delivered primarily by UPS, FedEx, USPS, DHL e-Commerce partner, or a regional small parcel carrier; and usually an average shipment may be one to three packages to a home or alternative delivery location.
TMS have matured over the years and now encompass data analytics and rate comparisons across all modes of transportation, including small parcel. In a 2019 Transportation Impact blog post, the company cites an ARC Advisory group research study that found that a TMS application can save a company up to eight percent of its shipping spend. In addition, as noted by Transportation Impact, Parcel TMS has become a more popular technology because shipping has become more complicated. There are also more parcel shipping options than ever, and rates are more complex as well. Indeed, these Parcel TMS have now become acquisition targets for the more traditional TMS. For example, in early June, Transplace acquired ScanData. According to Transplace, the acquisition will help expand its logistics platform capability. Transplace CEO Frank McGuigan said, “We were looking at third parties to support our current capabilities in parcel… we knew for sure that our current customers have a growing parcel need, and our current capabilities weren’t as good as they needed to be, especially as it related to multi-provider sourcing and optimization.” In 2018, supply chain technology firm, WiseTech Global, acquired Pierbridge, a parcel shipping TMS provider focused on medium and large shippers in the United States. There are certainly more acquisitions, including 3Gtms
acquiring multicarrier parcel software specialist Pacejet; trucking technology firm Trimble acquiring TMS provider Kuebix, which specialized in less-than-truckload (LTL) and parcel service; and 3PL GlobalTranz, which acquired Cerasis, a freight broker with specific modal strengths in parcel, LTL, and final-mile. And then there are the new kids on the block such as Logistyx. Founded in 2017, Logistyx describes itself as “A Cloud Transportation Management System to Power Global Parcel Shipping” and provides such solutions as Parcel TMS, a single platform for a shipper’s carriers, business intelligence, and professional services. Today’s TMS is certainly not like your father’s TMS 10-20 years ago. Instead, many are updated in real-time, multi-modal, and provide data that can be analyzed to optimize routes, transportation mode, and even monitor specific carrier KPIs. Stand alone or combined with other tech offerings such as warehouse management systems, TMS are worth their weight in gold. A variety of TMS are available; however, shippers will need to be careful and pick the right TMS for their needs. Not all TMS are the same.
Cathy Morrow Roberson is President of Logistics Trends & Insights LLC, a logistics market research firm. Cathy can be reached at croberson@LogisticsTI.com.
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E-COMMERCE VOLUME EXPLODES – CURSE OR WIN FOR THE PARCEL CARRIERS? By John Haber
t the end of 2019, e-commerce represented 11.3% of total US retail sales. This percentage inched up to 11.8% at the end of Q1 2020. Some estimates suggest this percentage could double for Q2 2020 as businesses closed and consumers stayed home because of COVID-19. Many retailers reported double-digit growth in e-commerce sales in March and April. Walmart reported
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an increase of 74% over last year for the quarter ending April 30. Target reported digital sales in April nearly quadrupled, rising 275% over last year. Carriers including FedEx and UPS have been preparing for rising e-commerce volumes by introducing such service offerings as seven-day deliveries, faster delivery times, later pick-up times, returns solutions, fulfillment solutions designed for e-retailers, alternative delivery pick-up and drop-off locations, and more. But when COVID-19 hit the US, it hit hard and fast. Suddenly it was as if the holiday season was underway for carriers but without the preparation beforehand. UPS noted in its first quarter earnings that March volumes were 70% B2C with April trending similar. FedEx reported that for the quarter ending May 31, residential deliveries accounted for 72% of Ground volume versus 56% a year ago. The sharp increase in residential volumes created a host of problems and many customers experienced delivery delays. A number of consumers took to social media to voice their frustrations and share photos of overflowing packages at carriers’ facilities. However, not only were carriers faced with higher than normal volumes, they were also faced with the coronavirus itself. The virus affected an unknown number
of FedEx and UPS employees that would otherwise be sorting packages, loading and unloading delivery vehicles, and delivering packages. Networks slowed as a result. Having temporarily suspended all service guarantees and implemented international peak surcharges in March to handle a surge in international volumes, FedEx and UPS introduced new temporary peak surcharges to address the US domestic situation. UPS’ latest surcharges took effect on May 31 and for certain shippers addressed Ground Residential, SurePost, and Large Parcels. Meanwhile, FedEx’s domestic temporary peak surcharges took effect on June 8 and addressed Residential for FedEx Ground and FedEx Express, SmartPost, and Oversize Parcels for FedEx Ground and FedEx Express. Keep in mind, these temporary peak surcharges are in addition to already existing surcharges and individual shippers’ contracted rates. In addition to surcharges, FedEx also capped some shippers’ volumes. This is a similar approach to what carriers do during the holiday season if a shipper exceeds agreed upon volume commitments. However, this is not the traditional holiday season and many shippers were caught off guard by this tactic. UPS also took a page out of its holiday season playbook and dispersed
managers and supervisors across the US to pitch in and help at sorting facilities and deliver parcels. E-commerce will continue its upward trek and will figure prominently in shippers’ overall strategies postCOVID. For FedEx and UPS, lessons will be learned, and networks adapted to manage the continued e-commerce growth. Most evident will be the need for additional capacity. UPS appears to be looking towards other modes of transportation for assistance, specifically rail. As one of the largest rail customers, it is believed that UPS has booked a significant amount of space on Union Pacific, which, in turn, resulted in a shortage of equipment for Union Pacific in Southern California as well as a spike in spot rates. Looking forward, the use of a combination of transportation modes will continue to play a significant role in
the movement of e-commerce goods. However, communication and collaboration will be critical in order to maintain the necessary speed in delivery that is often required in e-commerce. It will also be necessary for FedEx and UPS to optimize their networks even further. However, the financial costs that will entail will also weigh on shippers in the form of higher rates and new surcharges and potentially jeopardize “free” shipping.
While e-commerce may have come as a win in terms of volumes, the curse of such volumes will show up in earnings as profit eaters. FedEx and UPS will need to develop strategies to turn the curse of high volumes into winning profits.
John Haber is the Founder and CEO of Spend Management Experts and can be reached at firstname.lastname@example.org.
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PACKAGING + PEAK SHIPPING SEASON = BEST PRACTICES FOR SUCCESS By Sean Webb
eak shipping season. These three words can evoke excitement or stress for many retailers, and sometimes both. Shopping during this time of year can account for 40% of annual sales for retailers. This puts stress on ensuring inventory is in stock, e-commerce sites are ready to handle the influx in shoppers, and warehouses are able to optimize fulfillment. While retailers will typically look to last year’s peak shipping season as a way to plan for the next year, 2020’s holiday shopping season is different. Due to the COVID-19 pandemic and the brick and mortar store closures it caused, retailers have already experienced some peak shipping season sales this year.
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While at the time this was a stressful event managing reduced work forces and an influx of customer orders with little time to prepare, retailers can take these lessons learned and increase efficiencies ahead of the 2020 holiday season. Some of these “areas for improvement” are new challenges that arose from COVID-19. Before the pandemic, retailers didn’t think about social distancing requirements or what would occur if warehouse labor was greatly reduced. Now, they must learn to adapt to these new challenges and new consumer demands that arose from the pandemic. Warehouse Labor: The world is full of unknowns right now. No one knows when life will return to “normal,” if ever. This means social distancing rules will continue to apply in the warehouse and retailers will also need to account for limited staff in case there is another outbreak around the 2020 holiday shipping season. Fast Order Fulfillment: For years, customers have grown accustomed to fast delivery. Two-day delivery was the norm while same-day was a luxury slowly turning into the standard. With the recent pandemic, shoppers now understand that some items — those considered nonessential — may take longer to ship. While this has certainly helped alleviate this pain point for retailers, customer satisfac-
tion is still a top priority. Sustainability: COVID-19 has brightened everyone’s eyes to the impact humans are making on our environments. With smog lifting and air pollution reduced, we have all seen just how much we influence the world. Because of this, sustainability efforts will be an even greater priority for consumers now more than ever. As retailers work to combat these three challenges, some are realizing that one department has the ability to solve them — the parcel packaging department. The packaging process has long been an area that takes time and staff in order to get customer orders out the door as fast as possible. Not only does manual packaging slow down order fulfillment by taking minutes to pack an order while utilizing a number of valuable warehouse workers, but it uses many unnecessary void fill materials. From polystyrene to air pillows to packing paper, sustainability is tough for this department. To combat this, some retailers will order hundreds of different-sized boxes in order to limit the use of void fill materials. Others will prioritize social distancing efforts and find ways to keep workers spaced apart in the packing area, sometimes by reducing the warehouse labor force. Both of these solutions are only band-aids. They can cause an exponential increase in packaging material costs
and reduce order fulfillment times with fewer workers. The retailers that want more than a quick fix will turn to automated packaging solutions to combat these new challenges COVID-19 brought to the warehouse prior to the 2020 peak shipping season. These state-of-the-art auto-boxing systems measure, construct, seal, weigh, and label each single- or multiitem order in a custom-fit parcel while eliminating or reducing the need for void-fill material. Some solutions can auto-box up to 1,100 parcels per hour using only one or two operators, adhering to social distancing requirements while also optimizing order fulfillment. In addition, the right-sized parcels some of these solutions create allow retailers to use an average of 29% less corrugate and experience an average of 38% reduction in material costs, prioritizing retailers’ sustainability efforts. These proven auto-boxing technologies generate highly effective packaging and optimize warehouse
efficiencies so retailers can keep up with holiday shipping demands. While last year’s peak shipping season showed retailers ways to improve operations, it was nothing like the new challenges that came during the COVID-19 pandemic demand. Not only were fewer workers in the warehouse to fulfill customer orders, but the majority of consumers were only shopping online. These new challenges were tough for retailers to overcome, and continue to be, but are a good lesson on how
to overcome the demands that may arise during this year’s holiday season. With the help of automated packaging solutions, retailers will look forward to 2020’s peak shipping season.
Sean Webb is the Business Development Executive at Packaging by Quadient, a leading provider of automated packaging solutions. He can be reached at S.Webb@Quadient.com. For more information, visit https:// us.packagingbyquadient.com/.
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CERTAINTY IN UNCERTAIN TIMES By Susan Rider
he threat of a pandemic had the ability to break the weak supply chains and embolden the strong ones. The ones less prepared have struggled in getting supplies, finding workers, protecting their workers, and shipping orders. The more prepared had contingency plans for a disaster in order to be able to perform; maybe not to the efficiency of prior years, but they were at least able to continue to service their customers. This never before experienced pandemic here in the United States can be a great educational tool for companies that want to get better, and it may be a huge detriment to those that don’t evaluate how they can be better. Let’s take a look at what the pandemic has brought to light.
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Procedures need to be in place to contain germs and viruses, preventing the re-spreading to not only customers, vendors, and suppliers, but also to fellow associates. Is it feasible to have workers wear masks in a warehouse that is not air conditioned? Probably not, but that doesn’t mean safety procedures to limit the spread of germs and viruses isn’t needed. COVID-19 brought to the forefront the security of product coming from different countries, as well as the need for space to quarantine and inspect items from certain regions and the necessity of alternate suppliers. If you waited until after the crisis hit, it’s far too late to get different suppliers on board. Setting up alternate suppliers is required as you attempt to minimize risk in the supply chain. Diversifying suppliers around the globe closer to the demand will be a trend going forward. E-commerce saw a boom. People will slowly start venturing out to get staples but will likely not spend hours shopping. Instead, e-commerce sites will see an enormous increase in volume, which will set a trend of ease and lessened complexity for the consumer. How do you make sure your company is one of the companies that learns from the pandemic
lesson? First, inventory management is important. If you have multiple sites with product, obviously you want to ship the ordered product from the closest facility. But if the product is not in stock at the nearest facility, you must know the next nearest and be able to separate the order into two types without duplicating shipments (most of the time the customer will never mention you shipped two or more but will definitely call when you shorted them an item). Secondly, this pandemic has shown a need for a hybrid. If the distribution facility is in NY and closed, but product is available at your store nearby, a skeleton staff could come in and pick and ship orders. Do you have enough workers? It’s not as if the shutdown wasn’t bad enough, but now as things open up, some will not return to work. What now? Just like peak season, many have gone to their alternative plans with bonuses, prizes, and other incentives. Hopefully, you were smart enough to stay in communication informing employees of what your facility was doing to ensure safety standards, customer product flow, and future working environments. For instance, many implemented a hand-washing policy before entering a facility, setting up portable sinks with sanitizer soap, giving more breaks during the day to wash hands.
Another item that Iâ€™ve been preaching for many years is that facilities must limit the human touches in distribution centers. Usually, this means better productivity, throughput, and accuracy, and after recent events, now you can add safety to the list. The suggestion as we slowly return to a new evolved normal: bring your team together for think tanks. What did we do well, what could we do better, and how did we absolutely fail? Meet with your shippers and include a think tank with them to see what they learned from this valuable lesson. What are they going to do differently? What do they have planned for improvement of procedures and elimination of bad processes? Next, meet with your suppliers and merchandisers and garner
the same type of information. After you have assimilated all their answers, you will be able to develop a plan to respond faster and be more prepared. One thing thatâ€™s for certain, many things changed during the first half of year 2020 and we will have to see how the rest of the year evolves. The supply chains that were agile are responding and improving. Some supply chains are still
putting out fires, but the uncertainty of the future will certainly bring change. Learning from the lessons will put you on the positive side of that change. Stay safe!
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at email@example.com.
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HOW TO BUILD NEGOTIABLE LEVERAGE AS A SMALL SHIPPER By Jack McCrum
egotiation with very little leverage is always aggravating, and that is even more apparent now. COVID-19 will eventually dissipate; that much is certain. However, many effects of the pandemic will remain. It appears this will be particularly true where consumer spending habits are concerned. As of June, domestic growth in retail e-commerce revenue was up 107% since January, with little sign of abatement. At the same time, the announcement of new store closures has become a regular feature in the media. While the long-term effects remain to be seen, the transformation of the parcel landscape poses a significant concern for carriers. It all comes down to network volume, cost-to-serve, and revenue. Maintaining attractive profit margins on e-commerce volumes is an ongoing challenge for carriers. Residential destinations tend to be less clustered, increasing fuel and handling costs, and the ratio of packages per destination (delivery density) is reduced as well. Although FedEx and
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UPS often assess surcharges to ease these costs, the profit margins are still less favorable than commercial shipments. As a result, the strategies of both carriers incorporate shortterm and long-term solutions to address the imbalance. Short-term measures to contain costs will continue to manifest in the form of new seasonal (or even annual) surcharges. Consider the announcements of FedEx and UPS in early June; in response to the effects of COVID-19, an event that reduced overall profitability in April and May, both carriers created new charges to mitigate the costs associated with increased e-commerce volumes. Implemented until further notice, the longevity of these measures is uncertain. However, if history provides any guidance, it teaches us carriers loathe to entirely scrap a â€œtemporaryâ€? surcharge. Long-term cost-reduction efforts focus more on internal operational efficiencies. FedEx, for example, has rapidly consolidated SmartPost shipments typically handled by the US Postal Service into its Ground network over the past two years. By the end of 2020, the vast majority of FedEx SmartPost package volume is expected to be fully integrated into FedEx Ground operations. Furthermore, both carriers have targeted delivery costs by adding delivery pickup locations. UPS Access Point, for example, seeks to reduce the cost to serve by cutting the last mile and increasing delivery density.
How to Leverage Your Program Understanding the importance of these strategic initiatives is critical. As cost-reduction efforts gain momentum in determining carrier behaviors, shippers must know how to effectively respond. Anticipating carrier decisions is first and foremost in knowing how to communicate with carriers. More importantly, understanding the driving rationale behind these decisions will enable you to leverage your program through actionable strategic alignment. In practice, the following steps can enhance these efforts. Understand & Utilize Shipment Data Thorough knowledge of any parcel program is a fundamental key to negotiation success. Regular assessment of carrier invoice data will enable you to better monitor your program, trim costs, and manage cost drivers. Understanding your data also strengthens negotiations. Strong, well supported datasets can help you articulate your savings requests through the exposure of various program requirements. Another advantage relates to carrier concerns. The more detail a non-incumbent knows about your program, the lower the perception of risk. The lower the perception of risk, the more inclined a carrier is to provide aggressive discounting. Develop a Delivery Density Strategy As previously mentioned, delivery density is an
important metric that carriers utilize in determining delivery costs. When it comes to carrier logic, two packages per destination are (almost) always better than one. This rationale tips the scales in favor of parcel programs with large commercial volumes. These types of programs prove very attractive to carriers like FedEx and UPS. However, residential shippers can improve their leverage by developing delivery density strategies, i.e., strategies designed to increase the number of packages per destination. Influencing customer behavior is a strategy often employed by organizations like Amazon. Encouraging add-on purchases is part-and-parcel to its program. For shippers, this concept directly relates to delivery density opportunities. Providing discounts on specific days, offering free shipping when customers spend above a certain amount, or even encouraging the use of centralized pick-up locations are just a few ways to incentivize consumer behavior and consolidate orders. However, each approach requires strong cross-function synergies within an organization. Alternatively, carriers often offer programs to incentivize the consolidation of your shipments. Speak with your carrier representative about topics related to dropship, ship-from-store, or centralized pick-up locations to find further optimization opportunities. Emphasize Strategic Alignment Parcel contract negotiations often underscore the needs of the shipper. While important, these events tend to fixate on the exchange of volume for discounts. The conversation is crucial; however, your leverage as a shipper is often tethered to volume and carrier change. Calling out carrier cost concerns in the negotiation changes the nature of the relationship. When supported by strong metrics and demonstrable actions, addressing the concerns of the other party adds substance to your bargaining position and fosters trust with your carriers. One of the simplest means of introducing this topic involves the data you share in an RFP. In your next negotiation, consider sharing delivery density metrics and volume by postal codes with your carriers and inquire after their cost concerns. Such an approach will initiate the conversation and allow you to demonstrate how your program aligns with their strategic needs.
Jack McCrum is a Sr. Analyst, Transportation Solutions Consulting at enVista. Contact him at firstname.lastname@example.org.
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ARE YOUR SHIPPING RATES LEAVING ONLINE CARTS EMPTY? How to evaluate whether your pricing policies are a boon or a detriment to your sales.
By Kenneth Moyer
his time last year, before any of us could imagine large-scale store closures and mask-clad grocery shoppers, experts were predicting e-commerce sales growth in North America of around 15% for 2020. According to Signifyd’s Ecommerce
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Pulse data, online sales increased nearly 40% since late February. The evidence clearly shows a rapid acceleration in the pre-existing migration to online shopping, perhaps shifting the curve forward by several years. Adoption rates that were anticipated for 2021 and 2022 have already been
eclipsed, and it may be some time yet before brick & mortar operations resume anything resembling the prior norm. As millions of consumers are shopping online more than ever before, some perhaps even for the first time, it is critical for online retailers to evaluate their e-commerce practices for any area of competitive weakness. One of the most under-evaluated elements of the electronic purchasing experience is an organization’s shipping pricing policy. Let us examine how consumer expectations have changed when it comes to retailers charging for shipping fees for online or mobile purchases. In the “Pre-Amazon” world, most consumers expected to pay a shipping charge. They seldom questioned how charges were derived, and were tolerant of ancillary fees (handling charges, etc.). It was often accepted that an expedited or guaranteed delivery day would incur a higher shipping charge. In today’s “Post-Amazon” world, free or
flat-rate shipping is mandatory, expedited delivery is expected, yet higher price tolerance is limited and acceptance of ancillary fees (with few exceptions) has disappeared. With this evolution of consumer expectations involving shipping charges for online purchases, how do most shippers derive their pricing strategy to ensure it is appropriate? We often hear the following explanations: “We matched what our competitors are charging.” “We feel we had to offer free shipping.” “We pass on our actual carrier rates.” “We pass on our rates with an upcharge.” “Strategy?” If an online retailer cannot answer the following questions, it is likely time for a strategy overhaul. “What is your level of profitability or loss on shipping overall? Per product category? Per SKU?” “Is your pricing strategy driving away customers? If so, is it due to pricing level, structure, presentation, or all three?” “How would a change in rate level or structure affect your sales or bottom line?” If, after getting this far, it has become clear your internet shipping pricing policy needs a tune-up, then consider following these steps for e-commerce pricing policy success. Step #1 Evaluate the effectiveness of your current strategy. It is critical to understand your current shipping profitability at all levels: as a whole, by client, by product, and by order. This baseline can usually be achieved by fusing carrier invoice data with an order file containing the data points mentioned. Layer in critical metrics to complete the picture: cart abandonment rate at shipping cost exposure, reorder rates, order size, direct customer feedback, etc. Then compare your current practices to those of your top competitors to determine if they have an advantage in either cost or structure. Is what you are doing par for
the course? Is it innovative? Outdated? Once this self-evaluation is complete, if it appears improvements are necessary to remain competitive, it is time for… Step #2 Create plausible adjustments or alternate strategies based on data and research. There are two primary questions to be answered at this stage: “What is the appropriate price level?” and “What is the appropriate price structure?” Quantifying your customers’ reactions to a change in policy is critical. Platform A-B testing can help determine the shipping cost elasticity of your clients. By establishing multiple instances of your platform and dividing your customers into test and control groups, you can determine how changes in pricing level or structure affect sales, whether order size or frequency changed, and whether cart abandonment rates increased or declined. The goal of these tests is to answer the question: “Should you make shipping rates a competitive advantage or a profit center?” This question is the overarching issue when determining price point, and the answer should be made clear during A-B testing and customer feedback for price-elasticity. It is important to gain the answer to this question first. Once this is clear, the next question becomes pricing structure. The “shipping rates as competitive advantage or profit center” answer will play a large role in determining the appropriate structure. Solve this next. Any structure you choose must be consistent, predictable, clear, simple, and flexible. The most common pricing structures are: free, flat, variable-flat, pass-through, pass-through with upcharge, and custom. Each of these structures has unique advantages and disadvantages. For example, free shipping is simple, predictable, transparent, and creates an advantageous market position. However, it is expensive, which may lead to increases in product cost, reductions in delivery speed, and an eroding bottom line. Choosing an effective strategy can lead to higher sales volumes, larger order sizes, smaller shipping losses
or shipping profits, and an improved customer experience. Step #3 Try alternate strategies. Review the results then make changes. Do not be afraid to make adjustments, letting your customers’ behavior drive your decisions. A new strategy implementation will often mean some type of benefit to your customers, perhaps in the form of lower rates or a simpler, more predictable structure. Be sure to communicate these benefits to them during the ordering process. Step #4 Develop metrics for continuous evaluation of program effectiveness. Finally, comprehensive monitoring is critical to maintaining the program’s effectiveness. Develop KPIs that are industry appropriate. Perform continuous competitor research, and research well-regarded organizations in other industries. Whenever possible, solicit direct customer feedback. It will be necessary to reevaluate the program each time your carriers implement a rate increase, there is a shift in customer expectations, a new competitor enters the market, etc. Test your program regularly and keep an eye on your metrics. Don’t be afraid to make midcourse corrections; what is cutting edge today could be obsolete tomorrow.
Kenneth Moyer has more than 28 years of industry experience, including a 16-year multidisciplinary tenure at UPS. During his time with UPS, he spent 8 years in pricing, developing, analyzing, and implementing thousands of UPS pricing agreements. Kenneth has leveraged this valuable experience to effectively serve as Executive Vice President of Supply Chain Strategies for LJM Group, where he also serves on the company’s executive board. Kenneth has implemented robust solutions and negotiated best-in-class parcel agreements for some of the country’s largest shippers, including several Fortune 500 companies. He holds a Bachelor of Science degree from University of Maryland.
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SHIPPING AND SUSTAINABILITY: Decrease your environmental footprint while increasing customer satisfaction
eep in the forest, a larger-than-life creature roams, leaving enormous footprints. Known as Bigfoot or the Sasquatch, very few people can actually claim to have seen this elusive figure. He could be a bear; he could be a hoax; he could be the product of overactive imaginations combined with a healthy dose of folklore. The general consensus, however, is that Bigfoot is not real. In shipping and packaging, there are a lot of definitions of what “sustainability” means. In fact, because there are so many different ways that companies can make more sustainable choices, it can sometimes feel just as elusive as Bigfoot. Companies often have big ideas on how they can reduce their carbon footprints. But when it comes down
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BY CLINT SMITH to creating a definitive plan, it slips quietly into the forest, leaving us with only a grainy picture of what we want to do — and no truly concrete way to move forward with our sustainability efforts. What we do know is that shipping has a massive impact on the environment. Parcel shipping has more than doubled in the last five years, and its yearover-year growth is 17%. This affects greenhouse gas emissions, and we know that we need to create an actionable plan to mitigate these environmental repercussions. Doing this can help companies take real steps toward actually reducing their carbon footprint, so that sustainability efforts yield real, not mythical, results. Create an Action Plan The missing link that turns sustainability
into a tangible effort is an action plan. Companies can start by identifying sustainability goals, creating accountability and ownership of these goals, and partnering with other organizations that can help. This puts the how at the center of sustainability efforts, which is what many discussions are missing. While these action plans can focus on the materials used in packaging, there are other actions that can be just as impactful that should be part of a sustainability plan. Understand the Impact of Damaged Goods An important part of the sustainability conversation is the effect of shipping volumes, as well as goods that are damaged due to inadequate or inappropriate packaging. According to a Walker Sands “Future of Retail” report, the number of packages returned due to damage is one in 10, and repackaging and reshipping new products to
consumers adds significantly to our overall carbon footprint. It’s easy to think that letting the consumer keep the damaged product and shipping a replacement is helping to bring down waste. However, a damaged product that is thrown out by the consumer contributes to the overall amount of landfill waste. Over 5 billion pounds of damaged products end up in landfills every year – product that could have been delivered intact if only the right packaging had been used to protect it. Find Ways to Use Packaging to Minimize Damage Not only are a lot of packages damaged in transit, but there are also a lot of opportunities along the journey for them to be mangled. They can be compressed, or packages can experience vibration or shock that damages the goods inside. They can also be exposed to water, heat, and humidity that affects the integrity of the shipping container and the condition of the items upon their arrival. Not only is it important to design packaging that’s effective for the appropriate transportation environment — including parcel, drone, truckload, and less than truckload shipping — but, when possible, utilize materials that are environmentally friendly and support a circular economy. Some of these choices are made from recycled content. This provides a way to reduce the amount of packaging that heads to the landfill — which is 80.1 million tons per year, according to the US Environmental Protection Agency. Additionally, you can consider using films to protect surfaces from damage like scratches and marring during transit, particularly with consumer electronics or automotive parts that require a flawless finish. For perishables, you’ll need insulated packaging to ensure goods arrive fresh and intact — bruised produce or spoiled meat are not an appetizing sight. Products are also damaged when they rattle around in
a box or are crushed by a heavier item on top, which is why right sizing is so important. For example, choosing a smaller box for a smaller item, and using sufficient cushioning, will protect the item better than placing it in a large box. Label choices can also have an impact on how shipping contributes to our carbon footprint. A label that isn’t readable or that peels off can mean the order either comes back to us, is misdelivered, or ends up in a landfill. For instance, items that are undeliverable and deemed low value (under $25) by the United States Postal Service are likely to be thrown away. In the UK, Royal Mail will throw away undeliverable mail after one month if they can’t return it to the sender. This is an opportunity to print shipping information directly onto the shipping bag with a poly bag, which removes the risk of losing the label or poor quality printing that make the label illegible. Educate and Communicate with Customers Consumers care about sustainability. According to a recent survey by OnePulse, 88% would be more loyal to a company that supports sustainability issues. And while there are multiple ways that companies can approach sustainable practices, one way to have an immediate, strong impact is by taking a closer look at protective packaging and the number of damaged products that are being delivered to customers. A Packaging InSight study discovered that 73% of people are unlikely to purchase from a company again if they receive a damaged product. Eighty percent of respondents also ranked product protection as the most important characteristic of the packaging materials used to ship items to their final destination. This is not only a huge opportunity to improve the unboxing experience, as dissatisfied customers will tell nine to 15 people about the negative experience, but also to educate customers. Providing them with information on why
certain materials are being used, as well as how to recycle them, can be critical for improving the overall customer experience. Changing packaging or adding more protective packaging elements can lead some eco-conscious consumers to believe that companies aren’t choosing what’s best for the environment. Customers may also ask why you’re not using a different kind of material to ship your products. And if you’re using something that may not be considered sustainable, it’s okay to explain why that material was chosen and the benefit it provides to your product and the consumer, whether it’s less damage, an extended shelf life, or less food waste. We can take a page from meal kit delivery companies and use creative packaging inserts and links to our website to explain to customers why this type of packaging was chosen (for example: to insulate fresh food and keep it at the right temperature). From there, you can communicate the proper end-of-life treatment for the packaging. On the labeling itself, or on the insert explaining why this packaging is used, you can direct customers to resources like those from How2Recycle so that they can find recycling locations near them. Also, bring your consumers along on the journey by providing them insight into how your company is continually working on creating more sustainable packaging choices. Ultimately, if a company can understand the impact shipping has on its sustainability efforts, choose the right packaging for the job, and educate its customers on the right packaging choices, it can reduce its carbon footprints and have real, tangible, corroborated results – instead of chasing after a mythical idea of sustainability that never materializes. Because, unlike Bigfoot, sustainability doesn’t need to slip quietly into the forest.
Clint Smith is Director of Sustainable Packaging, Pregis LLC.
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7 OPPORTUNITIES FOR OPTIMIZING YOUR PACKAGING & MATERIAL HANDLING PROCESSES As e-commerce order volume continues to grow, the right material handling and packaging processes are more important than ever, especially given how many factors are at play here. Looking ahead, shippers are about to gear up for the holiday peak shopping season that is also taking place during a pandemic, so businesses need all the solution optimization they can get. This might be an opportune time to revamp your material handling and packaging processes. Reach out to the following solution providers, and when you do, be sure to tell them you saw them in PARCEL.
Designed Conveyor Systems (DCS) was founded in 1982 and has grown to serve major clients in multiple industries by providing full-scale parcel and material handling solutions that are custom crafted for their need. We've built a reputation for delivering challenging projects on-time and offer turnkey solutions for the clients we serve. We don’t sell ready-made conveyor systems, we build relationships that empower us to craft custom parcel and material handling solutions, together. It’s the teamwork approach, sharing ideas and building on them, that produces the most worthwhile material handling solutions. In today’s environment, demands of e-commerce and the need to minimize shipping costs have resulted in shippers using a diverse array of secondary packaging sizes, shapes, weights and types. Packaging diversity — cartons, polybags, envelopes, mailers — coupled with abrupt swings between
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normal and peak throughput demands can be challenging for a single automated solution to handle without a significant investment. Instead, many facilities resort to costly and scarce manual labor to pre-sort outbound shipments to meet carrier preferences, and struggle to keep up with spikes in volume. At DCS, we’ve developed solutions that integrate multiple, different semi-automated sorting systems from different original equipment manufacturers (OEMs) to flexibly address these sortation challenges. To learn more about resolving your outbound sortation challenges, visit us at designedconveyor.com designedconveyor.com email@example.com 615.377.9774
Engineering Innovation, Inc. (Eii) has expertise in automation design to help you take the lead with solutions that automate, improve accuracy, and increase throughput. Eii will put you on the right track to match consumer expectations of faster, more affordable shipping. We provide innovative, automated solutions — in a smaller footprint with easy, cost-effective installation. Our future-proof modularity and configuration options allow for custom automation of your process, even as demands change. Eii can design a budget-friendly processing solution, whether you need modules that adapt to your current system or a completely new setup. Eii creates solutions that work for any size fulfillment, returns, mailing, and shipping operation. Our mission is to develop practical products that work in the real world to ensure our customers’ success, and we include service after the sale from the best “pit crew” in the industry. www.eii-online.com firstname.lastname@example.org 800.350.6450
Fluence Automation is based on a longtime history of commercial highspeed letter sorting equipment for mail presorters, corporations, and federal and state government vote-bymail. Building on this is our software product portfolio of high-end optical character recognition (OCR)/barcode reading (BCR), which includes CASS certification and address verification “scrubbing” for USPS addresses, and our sort manager software to provide USPS discounts. Supporting our e-commerce and courier-express-parcel (CEP) markets, we supply systems supporting the growth in the US and global industries with integrated material handling and automation systems. Our systems provide automation and productivity improvement in the area of receiving material, packaging orders, print & apply labels, rate shopping, sortation, and reporting. We offer fully integrated solutions, customized to the unique operations of our customer’s business. Our systems include our core specialty of encoding, which is the
process dimensioning, weighing, BCR / OCR, and looking up into a customer’s data. We supplement this with systems to convey bulk or singulated product, apply standard or customized labels with the fastest parcel labeling system on the market, our Raptor product line, and manage with high-speed diverting. To support our customers and their equipment, we have an internal software management team that assists our customers to maintain systems and upgrades and improvements. We have a nationwide service team supporting our customers’ in-house needs, focused on ensuring that our products provide the as-rated value to our customers, and a parts business to provide a care-free path to maintain spare and consumable suppliers.
Xstream NPI’s Xstream dual shoe-sorter has a modular, compact, ergonomic-design that makes sorting of parcels and flats faster and more efficient. It is capable of automated sortation of up to 24,000 parcels and flats per hour. With an Xstream system, you will be able to sort poly-bags, boxes, flats, trays and tubs, and most irregular pieces as it can handle a wide variety of product sizes, shapes, and weights; it is OCR and BCR capable, with optional in motion weighing, dimensioning, and labeling; offers several
options for bin destinations such as carts, sacks, and gondolas and a versatile and user-friendly Windows-based user interface. The Xstream integrates with your existing conveyor system and continues growing as your business grows!
www.fluenceautomation.com email@example.com 888.832.4902
www.npisorters.com firstname.lastname@example.org 1.888.821.7678 (SORT)
Packaging by Quadient, a product line of Quadient, is a leading provider of automated packaging solutions that provide revolutionary auto-boxing technology to optimize all steps of package fulfillment. Its two models, CVP Impack and CVP Everest, offer savings on shipping and materials costs, decrease reliance on labor, and aid in sustainability efforts. These fit-to-size auto-boxing technologies measure, construct, seal, weigh and label variable dimension single- or multi-item orders of either hard or soft goods in one seamless process while eliminating or reducing the need for void fill material. The CVP Impack packs up to 500 parcels per hour and requires only one operator while the CVP Everest packs up to 1,100 parcels per hour and uses two operators. These auto-boxing technologies offer an average of 50% reduction in shipping volume and an average of 88% reduction in packing labor as the solutions can replace up to 20 manual packing stations. The customer experience is also greatly improved with an easy-open, easily recyclable right-sized parcel. Due to these innovative systems, some shippers using the CVP Automated Packaging Solutions have achieved a full return on investment in as little as six to eighteen months. Contact one of Packaging by Quadient’s experts today to discuss the CVP Automated Packaging Solutions and the ROI opportunities that can save you labor, shipping and material costs while boosting fulfillment during times when it matters most. us.packagingbyquadient.com email@example.com 855.210.2489
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Today’s new challenges mean new ways of thinking — to meet rapidly changing business conditions. S&H Systems has partnered with some of the most innovative companies in the world. And we’ve invested the time to understand how those innovations benefit our customers. But that’s not all. We’ve invested in a quality team — knowledgeable, accountable people who all hold the same uncompromising commitment to customer satisfaction, ensuring systems are installed to the highest standards. We’ve invested in work processes, developing our own project capacity software, so customers can plan accordingly and keep their competitive advantage. We’ve invested in safety, from our in-house staff to our installation teams, with daily check-ins from health to procedures. We’ve invested in our customers. Our people have the expertise and the dedication to every project — large or small — that builds long term relationships.
Small shipments are currently still sorted manually most of the time. Increasing shipment volumes demand to automate this process. VIPAC SMALLS SORT is an intelligent and modular system solution that combines the data capture of shipments and automatic sorting in one single system. The system can be used as a standalone solution in small hubs and depots or integrated into large hubs within the sorting processes. VIPAC SMALLS SORT is very flexible: Each shipment passes through the infeed, encoding, outfeed, and sorting sections, automatically arriving at the desired discharge point. In the Infeed section, shipments are automatically separated for error-free data collection. In the encoding section, VITRONIC Auto-ID systems record all shipment data such as codes and OCR, dimensions and weight. Together with
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Our customers appreciate that we keep our promises and manage the job until it’s completed to their satisfaction. With locations in Arkansas and Tennessee, our team is well-positioned to service customers throughout the U.S. With a range of in-house capabilities — from systems analysis and design, engineering, controls and software, installation and post-sales support — we offer everything you need for a well-run and ROI-focused distribution, fulfilment or delivery center. For your next systems integration project, give us a call. Experience a company that works hard to deliver both a great system and a great customer experience. Superior Solutions. Proven Results. www.shsystems.com firstname.lastname@example.org 870.933.7346
high-resolution images, a detailed data record is created for each shipment. The last of the four sections, sorting, consists of three VISORT modules and expands the system by six terminals. Further sorting sections can be connected in series. The individually configurable and dynamic sorting logic ensures efficient and accurate sorting in bins or cages. Small footprint, low noise, and flexible operation are key USP’s. The system is mobile and can be moved within the hub or sortation center or even transported to other sites in order to manage peak times. The system performs up to 3,500 shipments per hour. www.vitronic.com Wayne.email@example.com 678.386.7978
FEATURED SOLUTION PROVIDERS and THEIR CONTACT INFO Designed Conveyor Systems designedconveyor.com firstname.lastname@example.org 615.377.9774
Engineering Innovation www.eii-online.com email@example.com 800.350.6450
Fluence Automation www.fluenceautomation.com firstname.lastname@example.org 888.832.4902
NPI www.npisorters.com email@example.com 1.888.821.7678 (SORT)
Packaging by Quadient us.packagingbyquadient.com firstname.lastname@example.org 855.210.2489
S&H Systems www.shsystems.com email@example.com 870.933.7346
Vitronic www.vitronic.com Wayne.firstname.lastname@example.org 678.386.7978
Reducing the Pandemic’s Impact on the Packaging Department How companies are using automated packaging solutions to combat business disruptions The pandemic has changed the world. Masks and quarantining are the new ‘normal,’ along with unusually large amounts of online orders, increased shipping costs, and reduced warehouse labor due to social distancing requirements. While communities and consumers are finding ways to adjust to these changes, businesses are doing the same in order to protect their bottom line. Companies are always looking for ways to be more efficient and cost effective, but the pandemic has made this an even greater priority as they search for solutions to overcome these new challenges. With consumers choosing to shop online over brick and mortar stores and fewer workers in the warehouses due to social distancing guidelines, businesses are reevaluating and finding ways to streamline order fulfillment. Many have found that no department is more impacted by this pandemic than packaging. The increase in orders from consumers shopping online means the packaging department is faced with peak season order and shipping levels. This puts a strain on an already time-consuming job that demands speed. Add in social distancing requirements and fewer warehouse workers, and order fulfillment is greatly impacted. To make matters even more difficult, some major shippers have implemented temporary shipping surcharges to combat business disruptions from the pandemic. These challenges facing the packaging department can not only affect the customer experience but also a company’s profits.
Due to this, warehouses are turning to automation like the CVP Automated Packaging Solutions from Packaging by Quadient. Its two models, CVP Impack and CVP Everest, optimize order fulfillment, solve labor challenges, and reduce package volume for shippers across a variety of industries. The auto-boxing systems measure, construct, seal, weigh, and label each variable dimension single- or multi-item order of either hard or soft goods in a custom fit-to-size box while eliminating or reducing the need for void fill materials. The CVP Impack packs up to 500 parcels per hour requiring only one operator while the CVP Everest packs up to 1,100 parcels per hour and uses two operators, replacing up to 20 manual packing stations and adhering to social distancing requirements. These solutions offer an average of 50% reduction in shipping volume, decrease freight costs by an average of 32%, and save on packaging labor costs by an average of 88%. This provides some shippers a full return on investment in as little as six to 18 months. It’s your turn to combat the recent and potential future business disruptions with automated packaging technology. Contact Packaging by Quadient now for more information on our auto-boxing solutions and the ROI opportunities that can save you labor, shipping, and material costs when it matters most.
email@example.com 855.210.2489 us.packagingbyquadient.com
By David Cahn
ENSURING REGULATORY COMPLIANCE WHEN SHIPPING HAZARDOUS GOODS
azardous materials can be defined as materials that are acidic, caustic, combustible, corrosive, explosive, flammable, infectious, poisonous, radioactive, toxic, and volatile. Computer equipment may contain batteries or magnets, cosmetics may be made of flammable liquids, dental equipment may have hazardous solvents, frozen food may contain dry ice, and household goods may contain many dangerous items, such as spray cans under pressure. Shippers cannot afford to gamble on non-compliance and must have extensive record-keeping abilities on what they are shipping, gathering documentation from suppliers and from their finished goods processes, which must be included with shipments. This creates masses of paper. If you are audited, the auditors have to look through this documentation, which is typically haphazardly stored. Shipping chemicals, pharmaceuticals, and other hazardous materials is subject to scrutiny by the government because businesses must meet strict regulations. Companies need to
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understand these regulations, which are constantly changing, adding to the already challenging transportation requirements. Those businesses that operate globally are subject to even more regulation based on specific industry and country regulatory policies, requiring extensive governance of ongoing trade compliance programs. If a process manufacturer ships a product with missing documentation or without the correct documentation, a substantial and costly non-compliance fine is imposed. Penalties for violating federal hazardous material transportation law average around $75,000 and up. If you knowingly violate the laws and regulations that result in death or serious injury to a person or destroy property, the fine can be over $175,000. One chemical company shipped undeclared hazardous materials on an aircraft, which resulted in a fine of $325,000. The International Air Transport Association (IATA) recently issued new regulations for shipping hazardous materials via airlines which went into effect January 1, 2020. The updated list of regulations includes a new list of
hazardous goods, updated packaging requirements and instructions, and clarification of labels and markings. Hazardous Materials Paperwork Carriers transporting hazardous materials must have appropriate documentation that includes emergency response information in case of an accident. The paperwork provides details on what is being transported, including the ID number, shipping name as identified in the Hazardous Shipping Table from the DOT, the hazard class, quantity, type of packaging, etc. The Electronic Code of Federal Regulations (e-CFR) provides special provisions for shipping hazardous materials, such as radioactive materials, hazardous waste, environmentally hazardous materials, and more. Special markings must be displayed on packages containing lithium batteries. Certificates of Analysis (CoA) are often required when shipping manufactured products. CoAs confirm that a regulated product meets its product specifications. CoAs are typically generated by the quality assurance department within an organization.
Hazard Communication Standards Chemical manufacturers, distributors, and importers must provide Safety Data Sheets (SDS), formerly Material Safety Data Sheets for each hazardous product that is shipped. SDS contain information on the properties of each chemical; instructions and precautions for handling, storing, and transporting chemicals; first-aid and fire-fighting information; exposure control limits; and more. When operating in a coordinated manner, brand reputation risks are minimized by recalls or customer complaints while improving customer service. Advance Ship Notices (ASNs) tied to material shipments with their e-COA and batch records provide lot and serial number traceability. Product genealogy based on parent and child relationships is enabled by tracking ingredient and component lot mixing at every step. Combined with the shipment criteria, complete supply chain visibility is achieved for both inbound and outbound material movements and product quality.
Manufacturers often log plant floor data on clipboards and store it in binders. When required action or data is missed, downstream problems can occur. Auditors have to look through tons of paperwork when performing an audit, which can be slow and stressful. If paper was eliminated from business processes, the entire regulatory compliance process would be smoother, faster, and more reliable. Automate to Eliminate Paperwork Digitizing audit information fosters traceability and tracking of documents needed for trade, including material quality data sheets, import/export certificates, and more. Ensuring receipt of COAs and other regulatory compliance documentation has made digitization a requirement for shippers of hazardous materials. A digital transformation of the supply chain is needed to integrate quality attributes into the products people buy, move, and sell through the supply chain. These opportunities sustain a competitive edge.
Companies that embark on a digital transformation can use a digital supply network to automate business processes and connect a constant flow of information between suppliers, buyers, shippers, and logistics service providers. The information is collected, rationalized, and correlated across business processes and then extended to all trading partners. Streamlining communication among suppliers, customers, and manufacturing sites creates an enterprise-wide quality and compliance solution that minimizes costly product quality issues.
David Cahn heads up Global Marketing at Elemica, The Digital Supply Network Provider for the Process Industry. He has been implementing, marketing, and product managing leading enterprise applications for over 30 years, including ERP, SCM, TMS, and WMS solutions. David has held leadership positions at Phillips, KPMG, CA, AMR Research, Aptean, and Infor.
NOT JUST A SEASONAL PEAK – A LASTING SURGE
BY RUSH FULLERTON
rom Prime Day and back-to-school shopping to the big holiday test at the end of the year, peak season preparation has followed a similar, steadily evolving playbook through the years. But 2020 is unique. COVID-19 has altered the supply chain landscape, with US e-commerce spending in April rising 49% compared to a baseline period in early March before shelter-in-place restrictions went into effect. Yet even in unique circumstances, delivery networks must still prepare for the holiday peak season. Just last year, package volume exceeded delivery network capacity, leaving major carriers scrambling to deliver late-arriving gifts and deal with a barrage of negative customer feedback. Now holiday peak season is coming once again, and parcel distribution centers are dusting off old playbooks to source labor and equipment to meet demand. But what if the answer to peak preparation is not a temporary solution, but a more permanent shift in approach? Year-Round Challenges, Magnified During Peaks and Special Circumstances E-commerce volumes in general continue to rise, more than tripling as a percentage of total retail sales in little more than a decade, growing from 5.1% in 2007 to 16% in 2019, according to Digital Commerce 360. But holiday peaks and
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the unique circumstances of COVID-19 have special ingredients to exert extra stress on fulfillment and delivery networks. In fact, some lessons learned during past peak seasons are being implemented to help carriers handle volumes during COVID-19. For example, FedEx placed a limit on the number of items retailers can ship from certain locations in an effort to regulate the flow of online shipments. During the holidays, everyone has the same deadline – and an extension is not possible. If online shoppers order late, they still expect their gifts to be delivered in time for the holidays. Rather than late orders coming with an equivalent extension, the window to pack, ship, and deliver shrinks. Prior to COVID-19, competition for available labor was fierce enough to drive warehouse worker turnover at a rate of 46.1% annually. Now, the labor situation remains a challenge, but one of a different nature as the need for health and safety reigns supreme as economies re-open. Guidelines for social distancing and other safe practices are emerging for the warehouse as supply chains look to scale up to meet massive demand. Amazon has mandated employees stay six feet away from colleagues and is using disciplinary action to ensure compliance. Cushman & Wakefield has released six workplace readiness essentials for health and safety. Embrace Automation as a Tool to Scale The forces affecting distribution centers during peaks are the same ones dictating permanent shifts in the industry. E-commerce is growing at a scale in which both scaling up
for peak volumes and handling long-term growth cannot be achieved by simply adding labor. With these foundational realities in mind along with recent growth in e-commerce as a result of COVID-19, scaling up for peak season is no longer a fleeting, temporary act. Instead, it requires a more permanent, strategic shift to automation. Automation enables operations to handle high order volumes with the speed necessary to meet the increasingly fast delivery commitments of e-commerce and reduces dependency labor. Repetitive, low-value tasks can be delegated to automation and processes can be reconfigured to space workers further apart and handle less physically demanding tasks that magnify their strengths. Take the task of unloading trailers of incoming freight. Using an extendable conveyor that reaches completely inside a trailer can allow a worker to simply turn and place parcels at an ergonomic height. This smart deployment of automation boosts individual productivity by minimizing walk time, and it helps reduce repetitive bending and twisting to help reduce fatigue and enable longer lasting productivity. But automation is no silver bullet. Handling peak season is not just a question of package volume, but package type. Contemporary e-commerce brings special challenges in the form of package variety and irregular items that can challenge automation to fully deliver on promises of peak efficiency. Handle Package Variety, Changing Conditions in Stride With consumers ordering everything from jewelry and apparel to power tools and furniture, critical automated systems must keep up. Traditionally, non-conveyable items that are especially heavy, oddly shaped, oversized, or otherwise challenging for automated equipment have been a major driver of temporary labor in distribution centers. This packaging variety pushes product development teams to innovate. For example, take tilt-tray sorters and autonomous mobile robots. Large tilt-tray solutions handle everything from golf clubs to flat pack furniture, expanding maximum item length from 48 to 78 inches. Autonomous mobile robots offer immense flexibility, both in their ability to carry large items and to work in a variety of workflows. Robotics and associated solutions can adapt to change and get new functionality via software updates. For example, social distancing features can work to proactively help workers keep a safe distance and send an alert if a safe zone of six feet is breached. The Right Long-Term Fit In planning for sustained growth, holiday peaks, and unique circumstances, distribution centers must maximize utility and flexibility from automation investments. Thorough demand planning, system design, and engineering is necessary to deliver the proper mix of equipment, technology, and labor applied through the right processes to scale for peaks and handle daily business most efficiently.
Rush Fullerton is Vice President, Material Handling Systems, Inc. JULY-AUGUST MAY-JUNE 2020 ď€´ PARCELindustry.com 27
FOUR ESSENTIAL ELEMENTS OF PAYMENT OF FREIGHT CHARGES By Brent Wm. Primus, J.D.
n theory, the payment of freight charges is a simple matter: A transportation provider sends its invoice and the shipper-customer pays it. In reality, the process is so complicated that an entire industry has arisen devoted to auditing carrier invoices. What is the rate? The first element is “What is the rate?” As used here, the term “rate” means the basis for calculating the carrier’s total charges invoiced to its customer (for instance, the dollar amount of the rate per mile where the charges are based on mileage). This leads to two further questions. First, “How was the rate determined?” Was it set by the carrier in its tariffs or negotiated between the carrier and its customer? Second, “Where can the rate be found?” If set by the carrier, it pre-
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sumably would be in its tariff or service guide. If set through a negotiation, it would be part of an individually negotiated contract. The answers to these three questions are critical for a shipper to know in order to examine the invoices received to see if they accurately reflect the proper rate. 49 CFR 378. Another essential element for a parcel shipper to know is that there is a Federal Regulation, 49 CFR 378, setting forth the procedures to be followed by motor carriers relating to freight charges. The Regulation’s title, albeit a bit wordy, accurately describes its contents: “Procedures Governing the Processing, Investigation, and Disposition of Overcharge, Duplicate Payment, or Overcollection Claims.” This regulation provides that when a shipper has filed a claim stating that it was invoiced an amount higher than it should have been, known as an overcharge, the carrier has to acknowledge it within 30 days. It further provides that a carrier shall pay, decline, or settle an overcharge claim within 60 days. It is very important to note that this regulation only applies to motor carriers, not air carriers. While this is simple to state, it becomes complicated when a parcel shipper uses FedEx or UPS as both of these two large corporate groups act as both motor carriers and air carriers. See “The Legal Characteristics of UPS and FedEx” (PARCELindustry.com/LegalCharacteristicsUPSFedEx) Since air carriers are free of the economic regulation
of their rates, routes or services, their procedures and time limits are addressed in the provider’s own tariffs, service guide, or terms and conditions. Federal Statutes. There are also two very important Federal Statutes setting forth time limits relating to the collection of overcharges from a motor carrier. 49 USC 13710 provides a 180-day time limit for either a carrier to submit an invoice for charges in addition to those on the original invoice OR for a shipper to contest the amount charged. 49 USC 14705 sets forth an 18-month statute of limitations (the deadline to start a lawsuit). This means that a shipper must start a lawsuit within 18 months of the date of delivery if the claim is not settled. Similarly, a carrier must start a lawsuit to collect its charges within 18 months of the date of delivery. Late payment penalties. Late payment penalties are financial penalties set by a carrier in its tariff or service guide that would be applied when an invoice is paid past the established credit term. These penalties can be very substantial, including the loss of any discounts, and can come into play even when an invoice is paid one day late. 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 firstname.lastname@example.org.
TO SUM UP
In the “Pre-Amazon” world, most consumers expected to pay a shipping charge. They seldom questioned how charges were derived, and were tolerant of ancillary fees (handling charges, etc.). It was often accepted that an expedited or guaranteed delivery day would incur a higher shipping charge. In today’s “Post-Amazon” world, free or flat-rate shipping is mandatory, expedited delivery is expected, yet higher price tolerance is limited and acceptance of ancillary fees (with few exceptions) has disappeared.
It’s easy to think that letting the consumer keep the damaged product and shipping a replacement is helping to bring down waste. However, a damaged product that is thrown out by the consumer contributes to the overall amount of landfill waste. Over 5 billion pounds of damaged products end up in landfills every year – product that could have been delivered intact if only the right packaging had been used to protect it. — CLINT SMITH
— KENNETH MOYER
Even in unique circumstances, delivery networks must still prepare for the holiday peak season. Just last year, package volume exceeded delivery network capacity, leaving major carriers scrambling to deliver late-arriving gifts and deal with a barrage of negative customer feedback. Now holiday peak season is coming once again, and parcel distribution centers are dusting off old playbooks to source labor and equipment to meet demand. But what if the answer to peak preparation is not a temporary solution, but a more permanent shift in approach?
SHIPPERS CANNOT AFFORD TO GAMBLE ON NON-COMPLIANCE AND MUST HAVE EXTENSIVE RECORDKEEPING ABILITIES ON WHAT THEY ARE SHIPPING, GATHERING DOCUMENTATION FROM SUPPLIERS, AND FROM THEIR FINISHED GOODS PROCESSES, THAT MUST BE INCLUDED WITH SHIPMENTS. THIS CREATES MASSES OF PAPER. IF YOU ARE AUDITED, THE AUDITORS HAVE TO LOOK THROUGH THIS DOCUMENTATION, WHICH IS TYPICALLY HAPHAZARDLY STORED.
— RUSH FULLERTON
— DAVID CAHN JULY-AUGUST 2020 PARCELindustry.com 29
PIVOTING: THE NEW STRATEGY Michael J. Ryan
ne of the new terms during COVID-19 is “pivoting.” This was a term that I only understood as a child in playing baseball, basketball, and football, but it has become the new business survival term. As businesses are pivoting into new goods and services, COVID-19 is re-defining many businesses. How is this impacting the parcel business? First of all, e-commerce business has exploded, while retail is struggling. However, do not count out the retail industry. They have many assets (stores) that could pivot into combo stores/mini-warehouse locations. This will allow them to compete with Amazon’s free, next-day delivery for Prime members. This strategy also helps them harness the power of their brands. Merchants have
30 PARCELindustry.com JULY-AUGUST 2020
seen their orders double and triple as people stayed home due to the pandemic, but they were not fully prepared for the surge. Many of these organizations were challenged with keeping their workforces safe during the crisis, but they pivoted in making their facilities compliant with CDC recommendations. The carriers saw volumes that were equivalent to peak period. They had to pivot their networks to handle this surge in ground business, adding capacity at a time when their networks were generally slower. Also, in the midst of this, they were fighting for the safety of their employees. The carriers were truly heroes in keeping America moving during this unprecedented time. Over the years, the parcel industry has been empowered by personal relationships. Many of you have built relationships with your carrier reps and executives. How will this change in the future? In the near-term, it will be very difficult to meet in person. Have you thought how you are going to continue this personal relationship in a “contactless” world? Most carrier reps have been working from home and pivoting in this new sales approach. There is still one common theme, and that is that it has never been more important to enable and foster these relationships as businesses continue to grow and change. We have seen an increase in video conferencing
and phone meetings, and as we move forward, the world of building and establishing relationships will likewise pivot. This new approach will accomplish the same thing… relationships based on trust and commitment.
Have you thought how you are going to continue this personal relationship in a “contactless” world? It is difficult to predict the near and far future but there is one thing that is certain: the world is changing at lightning speed, and the way that each of us pivot together will determine who will be successful and who will not. Adaptability has always been a coveted skill in the business world, but it has taken on a new urgency moving forward. As the world continues to pivot, it is up to each of us to adapt accordingly.
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 email@example.com.
A closer look at 38 companies with the equipment, software, services, and/or supplies to help you ship more packages, more frequently, and more efficiently
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PARCEL July/August 2020