THE UNIVERSAL AND PARCEL TRUTHS OF FULFILLMENT By Brian Fish
L
et’s begin this article with something on which we can all agree — there is no shortage of recommendations regarding how to engage parcel carriers during procurement events. My goal here is to not only address parcel requirements specifically, but also to provide universal truths when engaging carriers of any mode during the procurement process. Let’s start from the beginning — a very good place to start. It is first important to determine if the procurement process, regardless of mode, should be facilitated in-house or by a third party. This would not be an article written by a consultant if it did not include the phrase “it depends,” so let’s get that out of the way now. It is this person’s opinion that parcel operates in a world of its own, much further afield from the likes of truckload and LTL transportation. If you are reading this to enable this decision, perhaps the intricacies of parcel fulfillment will help drive this decision. The Universal Truths of Transportation Fulfillment I have facilitated a significant number of procurement events up and down the supply chain, and there are a number of characteristics of a successful process that do not change: 1. Bad Data = Bad Procurement Event Duh, you say, and you are correct. This should be obvious to all, yet time and time again companies rely on incomplete, unsubstantiated, or otherwise erroneous data to support their procurement events. The good news, other than the fact that everyone has this problem to some degree, is there are ways to mitigate the risk of responses not reflecting the needs of your business:
28 PARCELindustry.com JULY-AUGUST 2024
Development of a Quality Item Master Having an item master is as important, or perhaps more so, than the volumes themselves. Today, companies can rent or lease equipment for quick documentation of weights and dimensions of SKU and SKU families. Strongly consider completing this process before starting your procurement event.
Descriptive vs. Prescriptive Data Let’s say you have reliable, complete data regarding the origin-destinations, volume, and dimensions of your in-scope transportation. Coupled with the applicable service constraints, this should allow providers to return estimated costs with confidence. This portion of the bid allows for a descriptive bid response. In contrast, assume you have no reliable data on the number of historical claims. This drives the needs for a prescriptive approach, ensuring all bid respondents are using the same information on which to base their solutions (i.e. assume 500 claims annually with an average product value of $1,000). Seasonality and Growth Factors For companies in the retail sector, this is an obvious truth. Even for other industries, if access to a full year of shipping history is not available, it is important to provide visibility to the volume and duration of seasonal peaks and valleys. In addition, the procurement event should provide an estimate of annual growth for the duration of the initial contract length (again, to ensure bidders are working off the same information). 2. Separate the Bid vs. the Deal What is the end in mind when companies run a procurement event? Most will say find the best partner at the lowest cost. The best way to accomplish this is to set up the bid package so procurement et al. can compare all the bidding companies in a fair and equitable manner. This is, pardon the metaphor, the “dating” portion of the process. Toward the end of the bid process, you will award the business and begin your prenuptial agreement and then get married. Development of that agreement should be somewhat separate from your dating life, except you will use the volumes from the bid to calculate your rates and accessorials for memorializing in your contract. 3. Managing to the Contract Far too often, I work with companies who spend an extraordinary amount of time developing agreements with