OPTIMIZE YOUR COMPANY’S MATERIAL HANDLING PAGE 26
TIME TO PREPARE: PEAK SEASON IS ALMOST UPON US P. 20 DON’T LET YOUR NEXT CARRIER CONTRACT NEGOTIATION CATCH YOU OFF-GUARD P. 10 COUNTERING AMAZON IN THE FACE OF NEXT-DAY SHIPPING P. 8
P EOP L E , , T E N A L P PROFITS:
ckaging a P f o r e w o P The Perception r e m u s n o C d an PAGE 16
PERFECT YOUR PACKAGING PROCESS PAGE 18
CONTENTS /// Volume 26 | Issue 4
10 12 16 20 24 06 EDITOR’S NOTE The More Things Change… By Amanda Armendariz
07 SPEND PERSPECTIVES Is Reshoring Benefiting the Small Parcel Market? By John Haber
08 SUPPLY CHAIN SUCCESS Countering Amazon in the Face of Next-Day Shipping By Jack McCrum
10 BATTEN DOWN THE HATCHES! Don’t Let Your Next Carrier Contract Negotiation Catch You Unawares By Brad McBride
12 COMPETING AT SCALE How Smaller Companies Can Keep Pace with the Industry Giants By Brandon Staton
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16 PEOPLE, PLANET, PROFITS A Look at the Power of Packaging and Consumer Perception Beyond Parcel Protection By Dr. R. Andrew Hurley
20 READYING YOUR OPERATION FOR PEAK SEASON The Key Factors to Take into Account By Brian Chan
24 DON’T LET OVERSIZED PACKAGES BE A DRAIN ON YOUR BOTTOM LINE The Growth in Odd-Sized Packages Requires a Shift in Your Supply Chain Processes By Dominic Lozano
29 PARCEL COUNSEL F.O.B. Origin or F.O.B. Destination: What Is the Difference? By Brent Wm. Primus, JD
30 WRAP UP Are We Entering a Parcel War? By Michael J. Ryan
SPONSORED CONTENT 15 THE NEW DIM WEIGHT RULES YOU NEED TO KNOW 18 PERFECTING YOUR PACKAGING PROCESSES 26 OPTIMIZING YOUR MATERIAL HANDLING PROCESS
PARCEL PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ firstname.lastname@example.org ]
EDITORIAL DIRECTOR ALLISON LLOYD [ email@example.com ]
AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ firstname.lastname@example.org ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ email@example.com ]
P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 7 times a year by RB Publishing All material in this magazine is copyrighted 2019 © by RB Publishing. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing or its staff becomes the property of RB Publishing, The articles in this magazine represent the views of the authors and not those of RB Publishing or PARCEL. RB Publishing and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949.702.5390, www.ReprintPros.com.
JULY-AUGUST 2019 PARCELindustry.com 5
THE MORE THINGS CHANGE… By Amanda Armendariz
hen I was younger, I thought that the old adage, “The more things change, the more they stay the same” seemed so contradictory. Yet, the older I get, the more I realize how much truth that saying holds. Take Amazon’s recent announcement of oneday delivery for Prime members. Many small- to mid-sized companies were already lamenting the fact that two-day “free” shipping (I put the word “free” in quotes because as we all know, someone has to pay for shipping, whether that is the company or the consumer) had become the industry expectation thanks to Amazon setting the precedent. I have heard more than one shipper say something along the lines of, “How are we able to compete? There is no way we can offer free, two-day shipping to our customers without breaking the bank.” And now, in April, Amazon announced that it would be offering one-day shipping on numerous items for its Prime members, thereby creating the expectation of an even shorter delivery window throughout the entire industry. And with these types of changes come
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the same types of concerns; namely, shippers wondering how they’re going to get and maintain customer loyalty. After all, so much comes down to the delivery time and cost. I, myself, have even been guilty of shopping online, seeing something with a longer delivery window and higher cost, and choosing to just buy it on Amazon instead. I’m already paying for my Prime membership; might as well utilize the benefits. So it’s understandable that changes like this might cause shippers to panic a bit. The e-commerce game is a competitive one, and it’s unfortunately all too easy to lose your customers to someone else. However, I don’t want to sound like the voice of doom and gloom. The bright side is, while delivery time and cost are indeed important to customers, they’re not the only things consumers take into account. There are many other ways to capture and retain customer loyalty, and this issue is full of ideas. Whether it’s optimizing your process to better appeal to consumers who are concerned about the eco-friendliness of the packaging they receive to implementing a subscription service to better gauge when your customers will be expecting an order, there are ways to make your brand stand out. After all, in the face of change, one thing you want to make sure stays the same is your commitment to providing the best service at the lowest cost. We at PARCEL are here to help you do that. 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!
On-Demand Delivery Is in Demand: What Retailers Need to Succeed Amid Shrinking Timelines and Deadlines By Dan Byrne
Is Your Business Ready to Tackle the Amazon Effect? By Ana Shan
Same-Day Delivery as a Differentiator: Why B2B Retailers Need to Be Paying Attention By Valerie Metzker
IS RESHORING BENEFITING THE SMALL PARCEL MARKET? By John Haber
eshoring, which is the practice of bringing manufacturing and services back to the US, is difficult to quantify, but some organizations have made attempts to measure over time. The Reshoring Initiative, for example, noted that in 2018, reshoring was at its highest level in history, up 38% from the prior year. Since 2010, over 757,000 manufacturing jobs have been brought to the US from other countries. This number accounts for an estimated 31% of the total increase in manufacturing jobs for the US during that period, and 3.3% of the 12.8 million employed by manufacturing at the end of 2018. Reshoring from China represented 59% of the total. While some manufacturing appears to be moving to the US, low-end manufacturers, already facing rising wages and other costs, had started leaving China prior to the trade war. However, they are moving to Southeast Asia, not the US, and it’s not just foreign companies shifting supply chains.
Chinese companies are also moving to Southeast Asian countries such as Vietnam, where they can avoid tariffs and pay lower wages. In recent quarterly earnings reports, FedEx and UPS have reported either little or declining growth in cross-border trade between Asia and the US, but both companies remain optimistic and have introduced services in this region. For example, in April, FedEx launched its Cross-Border E-commerce Export Solution in South China. According to their press release, FedEx uses a consolidated clearance declaration method as part of the solution at the FedEx Guangzhou and Xiamen Gateways. As a result, FedEx is able to provide faster, more efficient service that enables e-commerce companies to ship their products to international markets. UPS is also reducing delivery times. In May, the company announced that global imports to the Japanese cities of Yashio, Misato, Koshigaya, Kunitachi, and Fuchu would be reduced by one business day, while export shipments from the cities of Chiryu and Obu would arrive to destinations worldwide one business day earlier than before. Regardless of where manufacturers are moving operations, manufacturing activity is slowing thanks in part to front-loading of inventory ahead of tariff increases. The ISM manufacturing index reported the lowest reading since Trump has been president, down from a 14-year high in August 2018. Meanwhile, a separate factory Purchasing Manufacturing
Index (PMI) from IHS Markit also fell, dropping to the weakest level since 2009. As global manufacturing slows, UPS international volumes have slowed. In 2017, average daily international volumes increased 9.3% year over year. However, in 2018, the growth had slowed to 3.1% year over year. For FedEx, it is difficult to determine due to the 2017 NotPetya cyberattack, which crippled the company’s acquisition of TNT Express’s operations. For fiscal year 2019, which ended in May, total international average daily volume increased 1.4% year over year whereas for fiscal year 2018, the volume increase was 1.3% year over year. Just how much FedEx and UPS have benefited from any reshoring back to the US is difficult to determine, but one thing is certain: Both companies continue to grow volumes in the US despite slowing in international trade. In FedEx’s recent earnings announcement, the company acknowledged the global trade slowdown and its plan to focus on business-to-consumer (B2C) e-commerce. Likewise, UPS is also emphasizing its capabilities in B2C e-commerce. How long it will continue is unknown, but as long as consumer sentiment and spending remains positive, volumes will remain positive.
John Haber is the Founder and CEO of Spend Management Experts. Contact John at firstname.lastname@example.org.
JULY-AUGUST 2019 PARCELindustry.com 7
COUNTERING AMAZON IN THE FACE OF NEXT-DAY SHIPPING By Jack McCrum
n April 26, Amazon once again ignited a global conversation when it announced its strategic decision to offer free nextday shipping for Prime members. The announcement left many shippers in the e-commerce space with a challenging question: “How should my organization respond?” Several shippers, such as Walmart and Target, responded immediately with similar announcements of their own. Still, many leaders across the globe continue to grapple with identifying an appropriate, cost-effective response.
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Finding the correct answer often depends on honest self-assessment and the careful consideration of two questions: } Is the achievement of oneor two-day delivery times worth the investment? } What other options are available for my distribution network? Consumer experience is undeniably critical, especially when related to time-in-transit expectations. Amazon has offered Prime members free two-day shipping since 2005, and the subsequent popularity of the service quickly made two-day shipping an industry-wide benchmark. The potential popularity of oneday shipping therefore merits the close attention of both shippers and consumers alike. It is a milestone Amazon and other shippers will continue to push and improve on. However, it also represents an associated cost that demands additional mindfulness. Amazon finance chief Brian Olsavsky announced the one-day, enterprise upgrade will include $800 million in infrastructure investments in the first quarter. Achieving one-day shipping will likely require additional expenditures from the organization. Similarly, when Walmart announced its decision to rollout a competitive one-day shipping program, analysts from the UBS investment bank estimated $215 million in incremental investment.
Though Walmart disputes the assessment, both figures indicate one-day shipping will require some degree of capital investment to fully reap the potential benefits. For certain shippers, particularly organizations with well-established distribution networks and balanced inventory levels, investing in one-day shipping might prove valuable. The opportunity associated with one-day shipping certainly exists, notably, with improved customer satisfaction. However, few enterprises command the financial and operational resources of an Amazon, Walmart, or Target. Many will find the necessary investment either cost- or operationally prohibitive. For leaders in this position, it is important to consider the available alternatives that enable e-commerce competition without breaking the bank. Consider the Value of On-Time Delivery Is it worth striving for a one- or two-day commitment without consistency? The answer depends on understanding the targeted market. For some industries, focusing efforts on meeting on-time delivery promises can yield a greater net value than occasionally hitting a one- or two-day target. This strategy directly relates to a full understanding of benefits associated with one-day shipping, and what consumers value.
Look Beyond USPS, UPS, and FedEx Leveraging regional carriers can effectively reduce time in transit to certain markets and also cut overall transportation costs. Many of these carriers operate within specific markets across North America that often correspond to specific population densities. Due to their geographic limitations, however, shippers ought to carefully assess how well a regional shipper fits within a national distribution network. Adding the wrong carrier can impact revenue-based discounts from carriers such as FedEx and UPS. To mitigate this risk, itâ€™s crucial to analyze the sensitivity of revenue discount tiers if any apply, and monitor attainment over time. Utilize Existing Supply Chain Networks One of the more popular strategies adopted by organizations such as Walmart, Target, and Best Buy involves using brick and mortar facilities as
mini-warehouses. Under these schemes, customers are able to order online and pick up the order the same day from a local store. While this strategy reduces order satisfaction time, it also requires higher inventory levels across the supply chain and customer buy-in. One strategy is to assess the potential cost of additional volumes and research customer market trends before committing to implementation. While next-day delivery represents a quickly
approaching reality, competing with Amazon or other early adopters is far from impossible. Options exist for shippers of all sizes and are not limited to those described here. The key is understanding the market space and improving customer experiences.
Jack McCrum is a Sr. Analyst, Transportation Solutions Consulting at enVista. Contact him at email@example.com.
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BATTEN DOWN THE HATCHES!
Don’t let your next carrier contract negotiation catch you unawares.
ith hurricane season upon us and extreme weather events becoming an increasingly common reality nationwide, the arrival of bad weather tends to illustrate that there are two types of people in the world: those who are prepared, and those who are not. The latter can be seen running around town in a frantic hurry to secure last-minute goods, perhaps not even knowing what it is they’re looking for, shouting anxiously as uncertainty bears down on them. The former rest comfortably, knowing their work is done, greeting the impending trials and tribulations with a confident smile. The consequences of a bad negotiation can cause just as much damage to a company as if a massive storm blew the roof off. While physical damages can be repaired, being locked into
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long-term rates that are unfavorable is much harder for any business to crawl out from under. If you want to be smiling comfortably during your next carrier negotiation, here are four steps you can take to prepare and weather the storm. HAVE A CARRIER EVACUATION PLAN Understanding leverage during a negotiation, on both sides, is critical for your company to come out on top. It’s important to ask yourself the right questions while preparing, such as: } Am I willing to switch carriers? } If we did switch carriers, how would that affect the company operationally? } If we were to switch carriers, who else is available to handle our business? Knowing your options from an operational standpoint and who else in the marketplace could potentially be better for you are vital factors in being prepared for a contract negotiation.
STOCK UP ON USABLE DATA During a bad storm, having potable water on hand is essential for survival. There’s a reason it flies off the shelves at stores when bad weather is on the horizon. During a negotiation, having usable data on hand is critical and is one of the reasons the supply chain industry is moving to embrace the digital revolution. Centralized access to real-time data across all modes can help you know where to set the bar before beginning a negotiation and can quickly and efficiently help business leaders make the necessary pivot during a tricky stretch of the back and forth. Stock up on the necessary supplies beforehand, and know exactly what your company is shipping, plus when, where, and for how much. KNOW THE WARNING SIGNS Nowadays, we can predict when and where storms will hit days before
By Brad McBride
they ever make landfall. This kind of knowledge and foresight saves lives, and if you can manage to bring the same kind of preparedness to the negotiating table, it just might be your company that you’re saving. Just like with an impending storm, it’s important to know what you’re looking at when comparing carrier contracts. How do minimums affect my base discounts? What revenue tier are we in, and what tier will we likely be in next year? What’s a guaranteed service waiver? The carriers deal with hundreds of these contracts each and every day. They know exactly what’s inside and where to look to increase their own savings. Do you? Knowing the warning signs of what to look out for during a negotiation is crucial to avoid locking your business into a long-term deal that could potentially wipe out your bottom line. Familiarize yourself with carrier contracts, or reach out to industry leaders who can help.
PATIENCE IS A VIRTUE, BUT ACT DECISIVELY Storms can be terrifying, especially when we are faced with the prospect of losing the things that are most precious to us. The same is true for a business, and oftentimes the fear of missing out on potential savings can cause business owners to act impulsively without properly analyzing the situation. Having the patience to accurately identify real opportunities and sift through the fluff of false promises can be hard, but it is well worth it when your company is reaping the benefits of increased profits for years to come. Set your own timetable and don’t let anyone rush you into a poor decision. When it IS time to act, do so decisively. Doing nothing can just as easily lead to profits leaking out of your supply chain. Change is hard, but the companies that are willing to speak up and make moves at the negotiating table
are the ones who will walk away the most satisfied. Whether you’re ready or not, the storms will come. Before going into any carrier contract negotiation, review your four-step preparedness plan. Don’t let your business be caught out in the storm.
Brad A. McBride has been in the transportation industry for 30 years. He founded Zero Down Supply Chain Solutions in 2003 after many years in high-level sales and operations roles in the logistics industry. Determined to make an impact on traditional industry practices and provide considerable savings for businesses, Brad also launched FreightOptics, the cutting-edge technology that provides one-login access to view and optimize all modes of transportation. Brad can be reached at firstname.lastname@example.org JULY-AUGUST 2019 PARCELindustry.com 11
COMPETING AT SCALE: HOW SMALLER COMPANIES CAN KEEP PACE WITH THE INDUSTRY GIANTS
hen you’re a small business in a big business world, the challenge of competing with the seemingly infinite resources of larger competitors can seem insurmountable. Companies like Amazon, Walmart, and Target have long leveraged lower operating costs to deliver on exceedingly high customer expectations. Especially in e-commerce, where shipping costs and delivery times are front and center,
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BY BRANDON STATON companies with gargantuan buying power have set the bar high when it comes to getting products to consumers cost-effectively in a matter of hours. But what if your business, too, could consistently deliver an outstanding customer experience at an affordable cost, both to the customer and to your bottom line? What if I told you that it didn’t have anything to do with auditing or negotiating your shipping contract (although, of course, that’s always a good idea)? What
if it meant that customer expectations were no longer so hard to manage? What if it eliminated volatility in your shipping characteristics? What if you knew what to expect? What if it were theoretically easy? The Benefits of a Subscription Service Achieving all of this may be easier than you think if your business implements a subscription service. Subscription services are all the rage because they mitigate some of the supply chain’s biggest challenges. Customers know what to expect, and you know exactly when they expect it. When both on the same page, it’s a lot easier to keep costs under control.
And when you can keep costs under control, you can focus on your core business, which is what is going to create the outstanding customer experience in the first place. Effective use of subscription services perpetuates customer satisfaction, provided your team’s core focus on vertical incentive alignment is well-targeted. In other words, if you are good at your core business, fulfilling subscriptions is as close as a business can get to auto-pilot. Operationally, the business is provided certainty in expectations. As customers subscribe, you understand when they expect their product(s) well in advance, allowing you to alleviate some of the cost constraints associated with rising shipping costs or expensive premium carrier services. Better yet, a solid plan can allow you to make good use of your carrier’s cheapest economy services. The only caveat might be the value of your merchandise, which could
make the cheapest national carrier services, UPS SurePost and FedEx SmartPost, less ideal. Still, a shift to ground services with either carrier could make costs more affordable in general while still providing end-to-end trackability and maintaining each carrier’s world-class reliability en route to the end customer. Managing holiday demand is a key pain point for many shippers since day-to-day volatility is compounded by surges in demand. While the holidays are never going to be easy, they would be easier if there were a way to mitigate some of the unpredictability associated with the busy season. A well-oiled subscription service will simply need available bandwidth to handle greater capacity as new subscribers sign up before and during the holidays. What this will allow a smaller shipper to do is be proactive rather than reactive when it matters most.
If you know when the package needs to arrive months in advance, you have much more time to plan accordingly to deliver on customer expectations. The time allotment provides better lead times, more accurate forecasting, and all-around better efficiency, which should drive down costs, or at least optimize them, in other areas of the business as well. Best of all, subscription services put companies in a relatively strong cash position since transactions often take place in advance of a more traditional point-of-sale transaction. Amazon, as most of us know, is somewhat of a pioneer in the subscription model, and savvy shippers should look to its customer benefit proposition in order to verify the logic. When shopping on Amazon, many of the products you shop for regularly are discounted further when they are combined with other items in the form of a subscription.
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Understanding why isn’t rocket science. Even Amazon could use some help every now and then understanding when their customers expect to run out of toilet paper. Don’t Overthink It The concept is simple: If I subscribe to your product, I am agreeing to your parameters. I’ll pay you on X date. In exchange, I will receive the contents of my subscription on Y date. Most likely, I don’t really care what happens in between if my subscription arrives as promised and there aren’t any hidden catches with the pricing (I’m looking at you, cable!) In other words, we have a mutual understanding and I’m just waiting on you to wow me by providing whatever it is you provide. As a small(er) business, you now actually have an opportunity that large(r) businesses might find more challenging — personalization.
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Your product or business should be more niche than giant corporate competitors, so you should have a bit more nuanced insight into what aligns me with your specific product. Additionally, you can begin to develop personas that I fit into that will give you insight into what I might like to try next. This boils down to a fundamental marketing analytics strategy, and the model doesn’t have to be overly sophisticated so long as the result generates a profit for your business. Subscription-based services don’t need to be the entire business model, but companies — especially smaller ones that are looking to compete against larger competitors with vastly broader resources — are making a mistake if they fail to at least consider this promising new trend. Smart executives should think critically about what they offer and leverage the talent within their organizations
to find the right fit. If a chunk of your current business — whether 10%, 50%, or all of it — can basically be automated through subscribers, your core team can allocate more of its time and energy to making the overall business even more attractive to current and potential customers. The exercise can condense your business in a sense, making it more predictable and efficient; two things that are vital to scalability and, more importantly, delivering a memorable customer experience.
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.
The New DIM Weight Rules You Need to Know How companies are using automated packaging solutions to combat increased shipping costs. Shippers have been dealing with DIM weight for over five years, but now new rules are being implemented by one of the largest carriers: the United States Postal Service (USPS). Just last month, USPS began a new DIM weight policy that applies to all parcels over one cubic foot and traveling less than 600 miles. This means packages that were exempt from USPSâ€™ DIM weight will now be charged either DIM weight or actual weight, whichever is largest. Adding to the bad news, the divisor of the USPS DIM weight formula (length x width x height / carrier-specified divisor) has lowered from 194 to 166. This keeps pace with other major carriers like FedEx and UPS, but it increases costs to shippers. While some say this new policy change was done to compensate for the increased costs of delivering larger items, it is apparent this update will greatly incentivize shippers to use the smallest parcel necessary for all customer orders. Shippers will also begin prioritizing the reduction or even the elimination of void fill materials. Turn to Automated Packaging Solutions The average e-commerce shipper uses just 65% of box capacity, wasting a lot of parcel space and requiring the use of void fill materials like bubble wrap, paper and air pillows. This equates to higher shipping and material costs. So how should shippers combat these new DIM weight rules while saving on costs? The answer: automated packaging solutions. These systems measure, construct, seal, weigh and label each order in a custom-fit parcel in as little as seven seconds using only one operator. Some solutions, like the CVP Automated Packaging Solution, also auto-box single- or multi-item orders
as well as produce parcels for soft or hard goods without any additional equipment or operator. This proven auto-boxing technology generates highly effective packaging and optimizes all steps of parcel fulfillment while saving on labor, shipping and material costs. These systems can also be utilized in a variety of industries, including e-commerce, retail, third-party logistics (3PL), wholesale and manufacturing. Boost Business The shippers that have already turned to the CVP to combat DIM weight have found a 32% decrease in shipping and DIM weight costs as well as a 50% reduction in shipping volume. They have also used 29% less corrugated material, saving even more on shipping materials. There have even been 88% savings in packaging labor, helping to offset the current packaging labor shortage. This innovative packaging technology will automate order fulfillment and streamline the supply chain, all while conquering DIM weight and the new carrier rules or changes happening yearly. Itâ€™s your turn to expand your business with automated packaging technology. Contact us now for more information about our autoboxing solutions and the ROI opportunities that can save your business on labor, DIM weight, shipping and material costs.
packagingbyneopost.com 855.210.2489 email@example.com
By Dr. R. Andrew Hurley
PEOPLE, PLANET, PROFITS A look at the power of packaging and consumer perception beyond parcel protection
onsumer research for packaging usually consists of research done in a lab or a store environment, but over the past few years, we’ve been tasked with more and more e-commerce work. Usually, we’re asked about the impact of e-commerce and how it affects retail packaging plans, how brands compete within and around Amazon, and how brands can maximize the opportunity of a more intimate connection with consumers inside their own homes. These are big questions for a big opportunity, and to tackle these complex problems, we find ourselves returning time and again to a core set of principles: People, Planet, Profits. People This is the consumer, the person generally at the end of the very complex and risk-filled marketing, production, and distribution cycle that makes up our economy. Consumers hold the keys
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to our success — they make judgments on value and quality that ultimately determine what is worth their hard-earned cash. With this in mind, it only makes sense that every product and package design process should keep the consumer perspective as a priority. Although the number one concern in parcel packaging should be protecting the product within, engaging the consumer in a positive way should always be a close second. We see this taking place in a number of ways, from efficient and effective dielines that allow someone to quickly hold and interact with their purchase (e.g., custom-sized book packaging with tear-strip access from Amazon), to the unexpected (e.g., Glade scent-filled air pillows), to the more robust and complex (e.g., high-quality graphics, softouch textures, and the well-known millimeter-tolerance packaging that creates a level of final anticipation for your latest Apple product). We’ve found a wide array of effective approaches
here, but what matters most is that the consumer gets the feeling that you’ve considered them — even if it’s a simple thank you note within. Planet This is a real and mainstream topic. It’s part of the household conversation, whether we are talking about shareholder reports from Wall Street, global news headlines, local city infrastructures, or even mass-market movies. Packaging has always played a key role in this conversation, and the e-commerce industry absolutely makes decisions with the planet in mind, especially when it considers the post-consumer waste process. As we’ve discovered, there are some methods to accomplish both planet and people considerations in a very positive way. Last year, we were tasked with investigating the impact tissue paper (decorative and unbranded) had on consumers’ e-commerce unboxing experiences when
compared to other void-fill solutions. Tissue paper’s low carbon footprint and minimal impact in the post-consumer waste stream covers the planetary concern, but the material also makes a difference for people. We discovered that decorative tissue creates a much more positive experience for consumers during the box-opening event than more utilitarian dunnage, yet it still offers a measure of protection for your product. Profit Profits are the beginning and end of the above people/planet approach because in the end, our consumer economy is built on profits. If an initiative, process, or action can’t be tied to profit potential, it won’t survive the business equation. A few months ago, we were able to attend an e-commerce event for local businesses run by FedEx, where it was stated that returns are the number one profit impact for e-commerce-focused businesses. One role packaging plays here is in
the protection of goods, keeping them safe in transit so they arrive functional and ready to meet or exceed consumer expectations. A strong argument can be made for investment in the consumer experience with packaging as well, both in the avoidance of negative, frustrating experiences and in thoughtful, engaging box-opening experiences. A couple years ago, Pregis asked us to investigate how various dunnage materials factored into the equation of consumer perception. We concluded that packing peanuts may offer price efficiency, but the frustration they create with the consumer can still negatively impact your bottom line. Conversely, tied into the Seaman Paper experiment referenced previously, we found that branded decorative tissue paper had a strong longterm impact on consumers’ recollections of the event. During interviews 120 days after the initial box-opening, we even found several consumers had saved the decorative tissue for some unknown
future use — a fantastic reuse of the core packaging material. Essentially, there are several paths forward to e-commerce success, but maintaining a good balance with respect to people, planet, and profit is a great tool to evaluate the options available. In the end, remember that designing with the consumer in mind is a key to success.
Dr. R. Andrew Hurley is the founder of Package InSight and The Packaging School, and an Associate Professor at Clemson University. For more information, please visit www.packageinsight.com or www.packagingschool.com.
Want to improve your packaging operation? Turn the page for some of the leading solution providers in this space.
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a PERFECTING YOUR PACKAGING PROCESSES As you read in Dr. R. Andrew Hurley’s article on the previous page, packaging is no longer viewed as simply the container you use to get your shipment from Point A to Point B. Now, there are multiple considerations to take into account, with consumer loyalty and satisfaction (which is largely tied into environmental sustainability) at the top of the list. If you haven’t overhauled your packaging strategy recently, now may be a great time to do so. All of the experts listed here would be happy to meet with you as you strive to make your packaging process more cost-effective and well-received by your customers. 18 PARCELindustry.com JULY-AUGUST 2019
PACKAGING BY NEOPOST
Packaging by Neopost, part of The Neopost Group, is a global leader in automated packaging solutions and provides revolutionary auto-boxing technology to optimize all steps of package fulfillment. Its solutions offer savings on shipping and material costs, decreased reliance on labor, and aids in green initiatives. Fit-to-size auto-boxing technology measures, constructs, seals, weighs, and labels each variable dimension single- or multi-item order in one seamless process, making fulfillment faster, more reliable, and more efficient than ever before. In seconds, Packaging by Neopost’s solutions can package hard or soft goods in custom-fit parcels to reduce shipping volume by an average of 50%, material usage by an average of 40%, and freight costs by an average of 30%. Utilized in a variety of industries, including e-commerce, retail, third-party logistics (3PL), wholesale and manufacturing, auto-boxing can solve many of today’s shippers’ biggest pain points.
With auto-boxing, you can operate lean, use less material, and ship parcels more efficiently with less void fill and volume. Packaging by Neopost enables you to box orders smarter, create smoother, more reliable processes, and operate more cost-effectively to build a stronger fulfillment strategy. Contact one of Packaging by Neopost’s experts today to discuss your ROI potential and learn how an automated packaging solution can integrate into your current fulfillment design. packagingbyneopost.com
Sealed Air Brand Protective Packaging creates a world that works better by eliminating waste throughout the global supply chain including wasted material, energy, space, time, labor, and money. Products protected by Sealed Air packaging solutions ship faster and arrive safer because they’re backed by decades of powerful
data science and unmatched engineering expertise. Our solutions include Automated Packaging Systems, Padded Envelopes and Mailers, Void Fill Solutions, Blocking and Bracing Solutions, Cushioning Solutions, Temperature Control Solutions, and Surface Protection. DAMAGE REDUCTION We ensure that the products and materials that make the world work are protected throughout their distribution journey. Damage reduction means less wasted time, resources, and materials and ensures that customers have the right experience with a brand on the first try. CUBE OPTIMIZATION We design packages that optimize material usage, create minimal waste, and maximize protection for the items inside. Right-sized packages lead to lower freight costs and greater efficiencies, resulting in a more sustainable global supply chain. FULFILLMENT VELOCITY We create systems and solutions that don't just work faster, they work smarter. Driven by data intelligence and optimized to reduce time, effort, and waste, our solutions can increase throughput and decrease total costs without compromising on sustainability. CUSTOMER EXPERIENCE We believe that customer experience doesn't end with successful delivery. Attractive, protective, intuitive packages that open easily and can be reused or disposed of effortlessly have a lasting impact on customer loyalty and brand reputation — not just our brand, but our customers' brands as well. www.sealedair.com
TENSION PACKAGING & AUTOMATION
Tension Packaging & Automation designs and builds modular and scalable automated packaging, weighing, manifesting, and sorting systems for direct to the consumer order fulfillment distribution centers, AND mail order and central fill pharmacies. If you are hand-picking and packing items into corrugated boxes, poly-
bags, or padded envelopes, then one of Tension’s automated packaging and sorting solutions could be a very cost-effective option for you. Using both proprietary equipment and field-proven automation provided by our key partners, Tension provides a one-stop solution for your automated packaging and sorting needs. From small Sharp SX Tabletop bagging systems, to our unique HPC Horizontal Polybagging system and now our new Variable Length AutoPacker (VAB) that right sizes your polybag to save big money on consumables and DIM upcharges, Tension can handle almost any direct to consumer e-commerce packaging need. Tension Packaging & Automation is a division of Tension Corporation, headquartered in Kansas City, MO. We have domestic design, manufacturing, and sales operations as well as a global footprint that extends throughout Asia and Europe. Tension Packaging brings a totally integrated automated packaging and sorting solution to the pre-pack and direct-to-the-consumer order fulfillment market. Given that we are responsible for all facets of the solution (including concept design, machine, software, consumables, training, and support), we remain committed throughout the installation and operation process to make sure your automated pre-pack and order fulfillment solution project goes smoothly and meets all your expectations. www.tensionautomation.com
VISIBLE SUPPLY CHAIN MANAGEMENT
No one does parcels quite like Visible. 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 158 million packages a year, we rank second only to Amazon as a USPS reseller. The resulting 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. And four bi-coastal warehouses allow our 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. Its seasoned experts fulfill 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 the supply chain management industry needs to focus on, if it is to thrive. From live package tracking to crystal clear invoicing, we're proud to be helping drive the long-needed shift to smarter shipping." — Casey Adams, President Call Visible at 877.506.2614 for a free shipping analysis. www.visiblescm.com
FEATURED PACKAGING SOLUTION PROVIDERS PACKAGING BY NEOPOST packagingbyneopost.com SEALED AIR www.sealedair.com TENSION PACKAGING & AUTOMATION www.tensionautomation.com VISIBLE SUPPLY CHAIN MANAGEMENT www.visiblescm.com
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By Brian Chan
READYING YOUR OPERATION FOR PEAK SEASON: THE KEY FACTORS TO TAKE INTO ACCOUNT
ew studies project that worldwide retail e-commerce sales will reach a new high of $4.9 trillion by 2021. That is a 265% growth rate, and there are no signs of the growth letting up. Growth of e-commerce orders especially seems to explode around a holiday, and businesses need to ready their operations to handle the increase in orders and fulfillment. What do you need to consider when getting your operation ready for peak season?
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Many businesses have warehouses organized to handle large volumes of products, which are then shipped in bulk to brick-and-mortar stores around the country. But with e-commerce orders, which are characterized by low quantities of many items, warehouse operations need to be reorganized to handle the volume of stock keeping units (SKUs) that the business offers â€” and the speed of fulfillment needed to keep consumers happy. Prior to peak season, inventory levels often grow exponentially. Managers are taxed with the need to either efficiently
utilize their existing warehouse space or rent additional space, which can be costly. Studies show that only 20% of current warehouse space is being used optimally by most businesses. Therefore, it makes sense to maximize your storage capabilities by optimizing your storage utilization. Optimizing Storage Utilization Consumers are buying more and more products online, from groceries to automobiles. These SKUs need to be stored somewhere. If renting more space is out of the question, you need to maximize your storage utilization. When warehouse space is utilized properly, space is not wasted, and you don’t have to pay to store air. For example, if the storage rack is positioned to hold a four-foot by four-foot box, but the largest container is only three feet by three feet, then there is empty space that could be utilized by re-positioning the rack. You would be able to store more items in the same amount of space. Don’t forget to go vertical. Many warehouses and distribution centers have high ceilings. You can actually stack storage racks, one upon another, almost to the ceiling to gain unused space. Narrow aisle pallet racks provide high-density storage from floor to ceiling. Also, aisles can be made narrower so additional rows for storage can be added.
Slotting inventory properly can solve the problem of SKU proliferation and maximize space by improving storage. Inventory can be slotted using a variety of strategies based on speed/velocity of products, item storage (carton, pallet, individual SKU), seasonal usage, etc. In a typical warehouse, approximately 80% of inventory is tied up in slow-moving items. Using high-density storage to minimize the footprint of slow movers means more valuable space, such as end caps and racks closest to the shipping and packing areas, is available for fast-moving items. Slotting software can determine the best location for each SKU to ensure the item moves easier and faster in the order picking process. Slotting improves storage density, opening up hidden storage space within a facility. Increasing Fulfillment Speeds If you compete with Amazon, your customers think one- or two-day delivery is the norm, which can be quite challenging. To compete, warehouse managers need to focus on increasing fulfillment speeds to get products out of the door as quickly as possible. One solution is to use carton flow systems within your picking operations. These allow picking to continue in the front of the rack while replenishment
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occurs in the back; pickers don’t have to stop picking orders while shelves are restocked. High-density pick modules are often used in e-commerce warehouses. They are multi-level: a combination of mezzanines, conveyors, carton flow racks, pallet racks, static racks, and other equipment that delivers goods to pickers at each level. By stacking the racks, less space on the floor is taken while pickers can take less time to pick orders from the rack of SKUs that are close by and easy to reach. Putting products in their optimal locations and labeling shelves reduces search and travel time for order pickers. Don’t mix multiple SKUs in the same bin/shelf. A picker may be directed to the shelf level where the SKUs reside and then will have to search through the different SKUs to find the item to be picked. This reduces picking productivity. Every SKU needs to have its own discrete pick location. Workers will be able to pick products quicker and easier in this format to maximize pick speeds. Reducing travel time speeds order picking. Travel time accounts for half or more of time spent picking orders. Try to combine orders into a single travel instance to reduce travel time. A warehouse management system and/or order management software can help by combining multiple orders into a single travel trip. Use conveyors to move finished orders to packing stations; once the order is on the conveyor, the picker can start a new order to fill without having to wait. Labor Shortage Everyone is talking about labor shortages in the supply chain. The warehouse and distribution center is no different, with order picking labor requiring about 50% of all labor resources in this operation. Training order pickers to pick as quickly and accurately as possible is important. Making the job attractive to skilled workers requires higher pay and creative incentives. Making schedules more flexible may help attract more workers; you can offer part-time (20 hours per week) shifts, which may be attractive to retirees and students. Track metrics and celebrate victories — employees like to see how their work contributes to the success of the business. Listen to employees as they may have ideas on how to improve operations. By improving labor productivity, maximizing space utilization, and increasing fulfillment speeds, your warehouse will be ready to take on the unique challenges of the holidays. It is important to not wait until you are in the throes of the seasons; start now, and you will have a well-oiled machine that enhances efficiencies and makes customers happy.
Brian Chan is a Product Manager at UNEX Manufacturing, Inc., a leading provider of order picking, storage, and material handling solutions for distributors, retailers, and manufacturers.
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COMING NEXT MONTH!
WHO ARE THE 2019-2020 Get to know more about the companies behind the equipment, software, services, and supplies you need for shipping more parcels, more effectively, and more efficiently across the country and around the world.
PARCEL SUPPLY CHAIN SOLUTION COMPANIES?
DON’T LET OVERSIZED PACKAGES BE A DRAIN ON YOUR BOTTOM LINE By Dominic Lozano
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he e-commerce landscape is radically changing, especially when it comes to defining the new normal for parcel delivery. Retailers specializing in larger, non-conventional items are accustomed to rising fees and surcharges to offset the logistical demands of delivery. The freight and LTL space has continued to expand as consumer demand for immediate delivery becomes more voracious. As a retailer looking to protect your bottom line from increased surcharges and fees, it’s important to have a good grasp of the rules and the best way to navigate them. Whether you’re shipping through UPS, FedEx, USPS, or a plethora of 3PL and last-mile competitors, how do you protect your business and the customer experience? Here are three key areas where you can immediately impact your bottom line.
passed on to the customer and used for more accurate budgeting.
Managing Hidden Costs Both newcomers and veterans to the large shipment space are looking for cutting edge strategies to fight the war against rising costs and hidden fees. The main determinants for cost of shipments continue to be the service used, size of your package, the origin and destination of the shipment, and special requirements, such as required signatures or Hazmat. Hidden fees for special requirements and additional handling can easily become an unnoticed drain on your bottom line. One option that may shippers utilize is partnering with shipping software that ties in directly to shipping carrier APIs, allowing them to immediately see what the best rate is, as well as if the packages will be subject to any surcharges, such as residential or large package delivery fees. Having this insight provides shippers with a bottom-line cost that can then be
Understand Your Shipping Options Understanding the way your shipment gets delivered is just as important as knowing when your shipment needs to be managed outside of the normal delivery chain. Having visibility into multi-carrier shipping options is crucial to removing the guesswork around obtaining the best shipping rates. Data from recent years points to customer priority of free shipping over speed. Recent parcel delivery standards of free two-day shipping shrinking to next-day delivery have become the gold standard. There are new opportunities for large and heavy shipments as players like Amazon enter the market and existing carrier networks are reconfigured to take advantage of the bulk product requirements and optimize shipment transit times. It’s more important than ever to better understand your options and ensure you are partnering with the shipping solution that best serves your customer base. The biggest increase in additional handling comes when your package exceeds 70 pounds. Just in the last two years, we’ve seen surcharges increase by 75% for additional handling. At scale, many delivery networks aren’t capable of efficiently transporting shipments greater than 70 pounds, which adds to the cost of shipping and handling. As more established shipping providers continue to iterate on the parcel delivery market, they have traditionally struggled to maintain efficiency with larger shipments, mainly because the traditional hub and spoke delivery system lacks an automated way to handle non-conveyable shipments. Last-mile delivery places the focus on the delivery of goods to the final destination. A recent report from Marketers Media expects last-mile delivery market size to exceed $55 billion by 2025, a 55% increase from 2018. Traditional players in this space include couriers, 3PLs, freight companies, and the larger players like DHL, UPS, FedEx, and Amazon. They are investing resources into the discovery of the landscape that will shape the future of delivery in the
years to come. A recent FreightWaves. com article discusses the competition: “…the last-mile delivery segment of such non-conveyable items as appliances, treadmills, and building materials is relatively open… Delivery firms can charge hundreds of dollars for delivering, setting up, installing, and taking away large-format items. And it’s where the LTL and truckload carriers will converge to do battle.” Efficiently Utilize Your Resources The manual work required to configure your own shipments can be both time-consuming and complex, leading to additional costs. This is particularly true when you’re managing single-carrier solutions. At scale, many e-commerce and warehouse shippers have tools that enable them to process hundreds and thousands of shipments a day. A multi-carrier software can provide functionality like enhanced barcode scanning, fast order lookup, full featured API connections with point of sale marketplaces and diverse shipping carriers, and a pricing tool to help you manage the best price with the service delivery option that will delight your customer. When you enable your team with these tools, you become more efficient in the way you can leverage your resources and flex to meet the needs of your changing business. It’s more important than ever to be fully plugged into the solutions that help you interface with the players that matter. Taking the time to set up your business for success will ensure your team is more efficient, you are not held hostage to a single provider’s hidden fees, and you can manage your shipping costs in a volatile market.
Dominic Lozano is General Manager of ShipWorks, the leading enterprise shipping software program for serious and successful e-commerce merchants and warehouses. ShipWorks software and order fulﬁllment solution helps online retailers and warehouses organize, process, and ship their orders quickly and easily from any PC. Visit www.shipworks.com for more information. JULY-AUGUST 2019 PARCELindustry.com 25
OPTIMIZING YOUR MATERIAL HANDLING PROCESS
Throughout this issue, there have been several articles that highlight the importance of optimizing your material handling process. Brian Chan’s article on page 20 gave a great look at the crucial role your warehousing operation plays around peak season, but let’s face it; how your warehouse approaches the material handling process is always a major factor in your company’s success, no matter the time of year. And Dominic Lozano’s article on page 24 demonstrates how the growth in the number of odd-sized packages is causing some problems for shippers, so if your company finds itself shipping more and more odd-sized parcels, you might be wondering how to handle these shipments. Sound overwhelming? It doesn’t have to be. Here are some of the top solution providers in the industry; reach out to them and mention you saw them in PARCEL.
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With more than a half century of experience, DMW&H has honed a unique approach to automation solutions. We design, integrate, install, and support complex material handling systems that deliver complete, collaborative automation solutions to meet or exceed your fulfillment and distribution needs. DMW&H’s history of providing innovative solutions to the Post and Parcel industry is at the heart of this division. By choosing to partner with us, you’ll have direct access not only to competitive services and pricing, but also to the industry's best talent, in a company with an exemplary reputation and a true passion for helping you overcome your business challenges and win in your marketplace. Innovative, industry-specific solutions are part of our Post and Parcel team. We understand your needs, from managing cutoff times, throughput, and processing time, to handling the increasing mix of bags and car-
tons to be delivered. We’ll design, manage, implement, and support a robust material handling system to help you keep your processing center running smoothly. Our knowledgeable, talented team of consultants, engineers, experts in controls and software, and project managers will work with you from conception to engineering to final commissioning. They'll design and deliver a material handling solution that will meet or exceed your strategic, operational, and financial goals. www.dmwandh.com
Fluence Automation was formed in 2017 and is the former Sorting and Parcels division of Bell and Howell. In 2018, Fluence acquired POST-IS, a parcels automation company. Over the last 30+ years, the people and products that are now part of Fluence have earned a strong position in the commercial sorting segment, and delivered numerous systems for various entities, including the USPS®, the US Government, local government, other national posts, mailing service providers (MSPs), various parcels automation entities, and many Fortune 500 companies in various segments. We have a broad range of specialized technologies to address challenges in various applications, ranging from outbound and inbound mail and parcels automation, high performance imaging and OCR, and high-speed linerless labeling solutions. We pioneered the use of multi-line optical character recognition (MLOCR) technology in high-speed mail sorting, and this has evolved over the years to our current SABRE imaging platform. Our Criterion Apex and Elevate mail sorters are well known for reliable high performance sorting. Our NetSort software handles a wide range of mail/ parcels classes, and our WinSort software handles various inbound and general sorting functions. Our parcels systems (ParcelMgr systems, Raptor labeler, and Small Parcel Sorter) offer high performance imaging with optical character recognition (OCR), labelling, conveying and sorting, backed by one of the best service teams in the industry. At Fluence, we continue to serve our long-term mail sorting customers in the best manner possible, while advancing automation solutions in parcels, and growing our services footprint in software and maintenance. www.fluenceautomation.com
HY-TEK INTEGRATED SYSTEMS
Hy-Tek Integrated Systems is a full-service one-stop shop, providing customers with comprehensive integrated systems, lighting, and storage and handling solutions. Driven by quality, innovation, and solid, long-term relationships with leading manufacturers, Hy-Tek creates a working partnership with customers, collaborating from start to finish, on projects of all complexities. With more than 55 years of business success, Hy-Tek designs to your objectives and goals for inventory storage, building throughput capacity/accuracy, labor/handling, and material/process flow. Whether we design a concept from scratch or are brought in to enhance your current system, Hy-Tek establishes a thorough understanding of your operation to determine your unique application and needs. From the dedicated attention provided by our in-house engineering staff, project managers, or installation and service crews, Hy-Tek professionals embody a wealth of experience and expertise unmatched by the competition. Motivated by high expectations, it is Hy-Tek’s goal to provide cost-effective, efficient solutions that exceed your expectations. Employee-owned Hy-Tek serves customers in the United States, Canada, and Mexico from offices in Georgia, Kentucky, Ohio, New Jersey, Pennsylvania, and Tennessee. Contact us at www.hy-tek.com or 800.818.6242. For every material handling application, there’s a Hy-Tek solution.
Hytrol designs and manufactures advanced conveyor systems, controls, and solutions for customers with processing, manufacturing, warehousing, and distribution needs. For more than 70 years, Hytrol has demonstrated an unwavering dedication to understanding the unique material handling needs of businesses. Hytrol is focused on creating innovative, customized conveyor solutions that help companies achieve their goals. www.hytrol.com
NPI has been designing mail sorters for over 30 years. NPI’s Xstream is a highspeed, automated flats mail and parcel sorting solution. With throughputs up to 30,000 articles per hour, a modular design that facilitates future expansion, and an ergonomic footprint, Xstream makes flat and parcel automation faster and more efficient. Xstream processes both incoming and outgoing articles with ease. Xstream sorts a wide variety of articles weighting up to 70 lbs. having dimensions up to 24” long, 17” wide, and 12” thick. Xstream features two independent feed stations that easily accommodate plant rolling stock or may be alternately integrated with existing conveyor systems to expedite the presentation of articles into the process stream. Xstream features state-of-the-art Barcode Reading (BCR) processes operating in a user-friendly Microsoft Windows-based software environment. In its basic, dualsided configuration, Xstream features up to 120 sort destinations. Xstream is supported by time-tested software applications and utilities for system control and diagnostics, barcode processing, sort plan and report generation. With its ergonomic design, the Xstream is the perfect parcel automation solution for any processing environment. www.npisorters.com
COMMITMENT From our first meeting through final installation, SH Systems is committed to designing, installing, and supporting the warehouse system solution that works for you. Our people have the expertise, the drive, and the dedication to every project — large or small — that builds long-term relationships. Our customers appreciate that we keep our promises and stick with the job until it’s done to their satisfaction. Our industry expertise includes e-commerce, fulfillment, parcel, food and beverage, warehouse and distribution; exactly the right type of projects for today’s retail demands. And we’re proud to have won the 2018 Hytrol #1 integration partner award. Technologies that we offer include conveyor and sortation systems, palletizing and depalletizing, robotics and AGVs, AS/ RS and mezzanines. In-house capabilities cover the range of systems analysis and JULY-AUGUST 2019 PARCELindustry.com 27
design, engineering, controls and software, installation, and post-sales support; everything you need for a well-run and ROI-focused distribution center. With locations in Arkansas, Georgia, and Tennessee, our team is well-positioned to service distribution centers throughout the US. 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. Call 470.226.3308 or visit www.shsystems.com.
One-stop shop solution for data capture and sorting of smalls 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
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integrated into large hubs within the sorting processes. VIPAC SMALLS SORT is very flexible: The four sections are mobile and can also be used at other locations thanks to their compact dimensions. 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 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 USPs. 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
FEATURED MATERIAL HANDLING SOLUTION PROVIDERS DMW&H
www.dmwandh.com FLUENCE AUTOMATION
HY-TEK INTEGRATED SYSTEMS
www.npisorters.com SH SYSTEMS
F.O.B. ORIGIN OR F.O.B. DESTINATION: WHAT IS THE DIFFERENCE? By Brent Wm. Primus, J.D.
n this installment of PARCEL Counsel, we will look at the relationships between a seller (consignor) and a buyer (consignee). While the exact nature of the contractual arrangements between buyers and sellers is as varied as there are buyers and sellers, the basic document is typically a purchase order or a sales order. For domestic sales, this will almost always include a F.O.B. (Free on Board) term of sale derived from the Uniform Commercial Code (UCC). Preliminarily, it should be noted that for international sales, the parties typically use a term of sale based upon the Incoterms promulgated by the International Chambers of Commerce. While the Incoterms include a F.O.B. term, it is very different than the UCC F.O.B. term. The Incoterm F.O.B. term of sale will not be discussed here; however, it is very important that the reader not confuse the two terms. The terms “F.O.B. Origin” and “F.O.B. Destination” — either standing alone or with additional modifying words — will determine (unless otherwise agreed to in a separate
writing or contract) the responsibility for (1) the shipment of the goods, (2) payment of freight charges, (3) risk of loss, and (4) passage of title. A seller has a general obligation to deliver the product to the buyer. The F.O.B. term indicates the geographic location to which delivery must be made in order to satisfy this general obligation. In actual practice, a specific geographic location would be used instead of the words “Origin” or “Destination.” Let’s assume that we have a transaction pending between a seller in Seattle, Washington and a buyer in Butte, Montana. If the parties desire the transaction to be “F.O.B. Origin” they would then say “F.O.B. Seattle.” When the term of sale is “F.O.B. Origin,” the seller’s obligation to deliver the product ends when the seller places them “into the possession of the carrier.” This is known as a “shipment contract.” Conversely, if the term of sale is “F.O.B. Destination,” it is known as a “destination contract.” The seller has the obligation to deliver the goods to a specified point, e.g., Butte. So, what responsibilities would a seller have today with respect to the shipping arrangements when the term of sale is F.O.B. Origin? If the seller and buyer have an agreement whereby the buyer has agreed to undertake the obligation of making the arrangements for the transportation, colloquially known as a “customer pick-up (CPU)” or
“customer arranged freight,” the seller would be relieved of any responsibilities except for the duty to properly package the goods so as to withstand the rigors of the contemplated transportation. Thus, the primary difference between an “F.O.B. Origin” term of sale or an “F.O.B. Destination” term of sale is that the price of the goods sold in an “F.O.B. Destination” contract is a “delivered price” where the cost of transportation is “built in” to the price. On the other hand, the price of the goods specified in an “F.O.B. Origin” contract does not include a charge for transporting the goods from the seller to the buyer. However, it should be noted that whichever F.O.B. term is used, it can be modified by agreement between the parties based upon their individual preferences and also bargaining power. Thus, deciding whether to use F.O.B. Origin or F.O.B. Destination for the term of sale is just the beginning of the analysis. In the next installment of PARCEL Counsel, we will look at the factors to be considered in choosing, modifying, and negotiating the basic UCC F.O.B. term of sale. 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.
JULY-AUGUST 2019 PARCELindustry.com 29
ARE WE ENTERING A PARCEL WAR? Michael J. Ryan
any years ago, a new term, called “coopetition,” was created. This term primarily referred to how the private carriers were using the USPS Parcel Select service to do a package’s final-mile delivery, which has been the backbone of the USPS growth in the e-commerce world. However, this is changing at a rapid rate. It is apparent that the third private integrator in the US is about to open shop: enter Shipping with Amazon (SWA). Amazon wants to control the final mile with their own non-asset network. What does
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this mean for the industry as a whole? I’ll let you decide for yourself, but there is no denying that change is certainly afoot, as evidenced by these recent announcements, which are changing the landscape of the delivery business: } Stamps.com announces that they are going to discontinue their exclusive sales agreement with the USPS } FedEx cancels air agreement with Amazon } FedEx will start seven-day service for ground shipments starting in January 2020 } FedEx announces that they will charge ground rates for 2Day service } UPS and FedEx will deliver Parcel Select shipments if they have a ground delivery to the same address } UPS forms partnership with 58 million ShopRunner members } UPS and FedEx have established fulfillment services for SMBs } Amazon is offering next-day delivery to 72% of the US } Walmart is offering free next-day delivery with no membership fee } DHL eCommerce has announced that they will offer same-day and nextday service in the US
of building a $1.5 billion “super hub” at the Cincinnati airport; this hub is scheduled to open in 2021. They will also have over 70 wide-bodied aircraft in their network.
Most of these announcements have happened in the past 60 days. There is clearly a drive — by all of the carriers — to control the entire delivery experience. Amazon is in the process
Michael J. Ryan is the Executive Vice President at Preferred Shipping (www.preferredship.com) and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or firstname.lastname@example.org.
There is clearly a drive — by all of the carriers — to control the entire delivery experience. Despite all these changes and the uncertainty that often accompanies them, it’s important to remember that competition is always good for the consumer. All of the carriers are making significant investments in automating their sort facilities, which will make them more efficient and cost-effective. It looks like in a couple of years, the term “coopetition” will no longer exist, and the new term will likely be: ”Delivery: First, Fast, and Free (FFF)”.
PARCEL July/August 2019