PARCEL
MARCH-APRIL 2013
www.PARCELindustry.com
The small
SHIPMENT
INDUSTRY may be headed in a new direction, but the outlook is bright, especially when it comes to negotiating your carrier contracts. Page 14
A Simple Roadmap
to Deciding Which Shipping System Is Best for You. Page 18
Improving E-Commerce
Shipping Services‌ Even in Offshore Locations. Page 22
Transportation Solutions Section Page 24
PARCEL
CONTENTS MARCH-APRIL 2013 | volume 20 | issue 3
Features
Departments 06 Editor’s Note
Stepping Into Spring By Amanda Armendariz
07 Going Global
International Mail Shipping Documentation Changes By Tom Stanton
08 Transportation ABCs
What Every Residential Shipper Should Know By Brittany Beecroft
09 Regional Alternatives 14 Today’s Challenges to Negotiating Great Parcel Contracts
Despite these challenges, the outlook for parcel shippers is bright... if you know what steps to take.
By Rob Martinez
The More Things Change, the More Regional Parcel Carriers Stand Out By Jim Berluti
10 LTL Insights
Insights on LTL Carrier Pickup and Delivery Operations By Joe Heilig
11 Spend Perspectives
How Free Shipping Set the Tone for Holiday Shoppers By John Haber
12 Supply Chain Pivot Mardi Gras Logistics By Rob Shirley
13 Operational Efficiencies 18 Selecting and Implementing 22 Improving E-Commerce the Best Shipping Software for Your Operations
When making a change in shipping systems, there’s a lot to take into account. Here’s a roadmap to help you with your decision.
Shipping Services...
while reducing costs for offshore and us territory locations. By Kevin Unbedacht
Keys to Success in 2013 and Beyond By Susan Rider
28 PARCEL Counsel
Bill of Lading Pop Quiz By Brent Wm. Primus, JD
30 Wrap Up
Change Is in the Air
By Bob Fischer
By Michael J. Ryan
SPECIAL 4
MARCH-APRIL 2013 | www.PARCELindustry.com
Transportation Solutions Section Starts on Page 24!
Parcel president chad griepentrog publisher marll thiede editor amanda armendariz
[ amanda.c@rbpub.com ]
circulation director rachel chapman [ rachel@rbpub.com ]
marketing cierra bauer creative director kelli cooke advertising ken waddell
[608-442-5064 ] [ ken.w@rbpub.com ]
Josh Vogt [ 785-320-7950 ] [ josh@rbpub.com ]
2901 International Lane Madison WI 53704-3128 p: 608-241-8777 f: 608-241-8666 www.PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2013 Š by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/ or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider. Scoop Reprint Source, 800-767-3263 ext. 307, www.scoopreprintsource.com.
EDITOR’S NOTE AMANDA ARMENDARIZ
Stepping Into Spring t’s hard to believe that I’m sitting here trying to pen the editor’s note for our second issue of the year already. Where does time go? Before you know it, our much-anticipated spring will have flown by, the lazy days of summer will be over, and hundreds of logistics professional will be converging in Chicago for our annual PARCEL Forum. We, along with the PARCEL Forum advisory board members, are currently in the process of selecting the conference sessions. As it seems happens every year, we receive so many fantastic session suggestions that our only problem will be choosing which ones to include! Keep checking www.PARCELForum.com to stay abreast of the conference sessions and to register. We’ve got plenty of new things going on at PARCEL, too. Starting in mid-April, we’re going to be doing a little something we’re calling “Tuesday’s Tip.” Each Tuesday, we’ll send out an e-blast with a brief (but helpful!) tip or commentary from one of our industry experts. Topics will range from contract negotiation to international shipping to warehousing, just to name a few. If you’re not already signed up for our e-newsletter, scan the QR code to the right or simply visit www.PARCELindustry.com and click the newsletter tab at the top of the page. By doing so you’ll be sure to be included in this new offering. I hope you enjoy our March/April issue, and that the articles found within are helpful to you. I welcome feedback, so please contact me at any time. As always, thanks for reading PARCEL.
Are you signed up for our e-newsletter?
If not, what are you waiting for? As of press time, these were some of our most popular articles from recent e-newsletters: Are You Getting the Most Out of Your GPO? It’s Time for the Carriers to Man Up—Parts Two… and Three! To get great articles like these emailed to you on a monthly basis, just scan the QR code above, or go to www.PARCELindustry.com and click on the “Newsletter” tab a the top of the page.
We goofed!
In our January/February issue, we mentioned that Part Two of Roman Hlutkowsky’s article, Best Practices to Ensure Proper Technology Implementation, would be in the March/April issue. It will actually appear in the April e-newsletter. Sorry for any confusion!
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MARCH-APRIL 2013 | www.PARCELindustry.com
going GLobAL By tom stanton
international mail Shipping Documentation Changes n September 2012, the United States Postal Service (USPS) made changes in its export forms requirements so that they are more in compliance with US export compliance regulations. Perhaps it is time to review some export/import basics for companies making small package shipments via the mail.
CN22 yes: This form must be used for all First Class International Mail items, small packages, Priority Mail International Small flat rate boxes, Mail bags, and certain Express Mail International items that contain goods or merchandise. This form must also be used for First Class Mail or Priority Mail envelopes weighing 16 ounces or more, exceeding ¾ inch in thickness or containing goods or merchandise, i.e. other than documents. The form is to be completed in duplicate at retail and single form via PC Postage and other approved systems. Export records are to be kept for five years. CN22 No: This form is not to be used for shipments 1) valued over $400 2) Requiring an export license per 15 CFR or 22 CFR 3) shipments of goods to Iran, Sudan or Syria or 4) shipments of goods to Cuba or North Korea other than gift parcels or humanitarian donations. CheCk the box: There are seven choices to identify your shipment: 1) The first box identifies documents. This would be applicable if your shipment were over two
pounds or over ¾ inches thick. 2) The sec- is different than an item description. ond box identifies goods being exported for It’s important that a full description and samples. In most cases samples are pro- value for each item is included on the vided free of charge to a prospective seller customs form. however they still have a value i.e.; production costs. Often these are only rep- Qty/wt/value: The number of units resentative of a fully valued item. Some shipping, their weight and the transaction import regulations such as the US allow value of the goods belong in this section. samples not for sale to enter informally The transaction value is generally the free of duties and taxes. 3) Merchandise price paid or payable for the goods. Even is the general category of dutiable/tax- though an item is free of charge it still able goods that are not gifts, humanitar- has a value for Customs purposes. This is ian donations or hazardous materials. 4) the cost of buying or making the product Dangerous goods included infectious sub- if no sale takes place. stances shipped between laboratories, pre approved and labeled radioactive mate- hs tariff: This is the harmonized tariff rials, properly labeled human or animal number applicable for the product. There specimens and lithium batteries installed are a number of US resources to help you in equipment — see USPS international determine the classification for the prodmail manual for further details. 5) Gifts: uct. The harmonized tariff schedules of Items shipped free of charge — generally the United States can be identified online to a home address. These usually pass free at: http://www.usitc.gov/tata/hts/. Currently, of duty and taxes. 6) Humanitarian dona- an HTS code is only required for commertions: This is one of the few types of things cial shipments that are mailed thru the that can ship to Cuba or North Korea. 7) USPS. Normal B to C not for resale items Other: I am not sure what would fit this are not considered commercial shipments. category. We recommend classifying your goods to identify the correct tariff rate. p DetaileD DesCriptioN: The details required for the description are dependent upon the harmonized classification Tom STanTon, AFMS, LLC, International Analyst can be applicable. If the harmonized classifi- reached at 503.246.3521 or Tom.stanton@AFMS.com. cation for a particular item and a particular destination makes a distinction between black jackets and white jackWant to learn more ets, the description needs to identify about Country of Origin and NOEEI: whether the jacket being shipped is 30.37 A and H? black, white or other. So get some help Scan to read the on the correct harmonized number to full article! make sure your shipment exports and imports smoothly. A detailed description
march-april 2013 | www.PARCELindustry.com
7
transportation ABCs By Brittany Beecroft
What every residential shipper should Know… e know the shipments travel in sealed containers in carrier occurs). Structure of the basic value of until they reach the DDU to ensure ship- Earned Discount includes spend from shipping with ments of that size are not lost or damaged. Domestic and International Air, Ground Who can benefit from mode-based ship- Commercial, Ground Residential, and the Big Two. What many ship- ping carriers? Realistically anyone with a any applicable SmartPost/SurePost serpers may not real- dense residential or returns profile. Like vices. This spend includes Returns reveize are the benefits of SmartPost and SurePost, the niche carri- nue. A shipper with 84% of their volume looking outside the box ers do not assess Residential or Delivery in Home Delivery or Returns must be cogof the Big Two and utiliz- Area fees. With the average increase in nizant of their thresholds and watch that ing an alternate carrier that specializes in these fees for 2013 around 7.5%, elim- pulling volume from FedEx or UPS does residential delivery and returns. Similar in inating them is advantageous to keeping not yield a net rate increase as they drop concept to a regional carrier, whose focus costs competitive. E-commerce is ideal to a lower tier with less aggressive incenis on a particular zone based segment of for mode-based carriers as well as phar- tives. With UPS, especially, the drop from shipments, residential and parcel return maceutical companies, fulfillment houses, the second to first tier can be significant carriers focus on mode-based shipments. publishers, and financial institutions. — some shippers seeing more than a 20% Regardless of zone, the goal of these car- These carriers can move parcels, BPMs, net increase in cost as they fall off tier. If riers is to provide quality Residential accessoB2C (and C2B) e-comrial spend is included merce solutions as well in the thresholds, when as depth into the mail you remove the volume, supply chain. you also remove the reaThe network concept son for the Residential is similar to FedEx’s fee, and net costs could SmartPost and UPS’s further climb. SurePost, utilizing the One other item to USPS for the final mile. consider is package These residential carriers bypass postal and flats — domestically, internationally, weight. Residential carriers will take up to sortation centers and “inject” the ship- and into Canada. And given their partner- 70lbs, but as we can see from SmartPost/ ments directly at the DDU (Destination ships with the USPS, they deliver to mil- SurePost costing models, once a shipment Delivery Unit) so the package is ideally as lions of residential addresses, including crosses over 10lbs Ground Residential/ close to the customer as possible for the rural routes and Post Office Boxes. Home Delivery networks become more cost Shippers currently using FedEx and/ effective. A good blend of each residential final delivery. A selling point with some residential carriers is the seamless move- or UPS, and considering a shift to a res- shipping option is ideal if the structure of ment of the packages; the packages are idential carrier, must watch how pulling your agreement can support it. p not held at one location but rather con- volume from their current agreement can tinue to move through the network until affect their Earned Discount tiers and subdelivery. As well, handling is always a sequent costs. Earned Discounts are based Brittany Beecroft, MBA, Manager of Parcel Services consideration, given the target package on cumulative base transportation spend for AFS. Prior to joining AFS, Brittany spent 12 years at metric for SmartPost/SurePost is the res- (the occasional UPS agreement will also FedEx as a Strategic Pricing Analyst, analyzing over idential package weighing less than five include select accessorial charges in the 5,000 agreements in her FedEx tenure. She consults pounds. Handling can vary per carrier, but cumulative total, which as we will see, can regularly with some of the largest shippers in the world often the bulk mail pieces and lightweight be even more detrimental to costs if a shift and is a sought after speaker and consultant.
With the average increase in these fees for 2013 around 7.5%, eliminating them is advantageous to keeping costs competitive.
8
march-april 2013 | www.PARCELindustry.com
Regional AlternAtives By Jim Berluti
The More Things Change, the More Regional Parcel Carriers Stand out t’s been 30 years since Eastern Connection opened its doors on Valentine’s Day in 1983 as a regional parcel delivery service. Since then, we’ve lived through dramatic events and industry changes, including the advent of the Internet, a major strike by UPS, terrorist activity, and the void left after DHL, the perceived lowerprice alternative among the industry giants, suspended domestic services. What hasn’t changed in three decades is the need among shippers to have an alternative way to deliver their goods. Cast as David against Goliath, regional carriers offered a business model that was different from the giants: a ground service that provides later pickups and earlier deliveries at a lower price. Today, regional carriers continue to apply this business model and gain market share because of another dynamic that hasn’t changed: Time is money, and companies looking to cut costs are increasingly not satisfied with business as usual.
Let Revisit the Age-oLd AdvAntAges of the RegionALs
Cost
With lower operating expenses and a reliance on ground versus air transport, the regionals have always offered better pricing than the giants. This includes not only lower base rates but also fewer accessorial charges and hidden fees, such as earlier deliveries and special handling charges. Many of these charges aren’t transparent
to shippers, but they add up. The bottom that their service is more reliable than line? Recent surveys show that regionals their poorer cousins can provide. are approximately 20% more cost-effective than the nationals for overnight as well But Let’s exAmine myth vs. ReALity as two-day deliveries. That can translate First, regionals are expanding their scope. into millions of dollars of savings. Today, they cover almost 90% of the nation’s ZIP Codes — and that footprint is expanding. Second, what about the notion that Recognizing the time-sensitive nature of nationals provide a higher quality service? many businesses, regionals have tradiActually, the regionals, with fewer exchange tionally offered later pickups and earlier points, have always had less margin for deliveries. Most regional services are open error. And now they can provide technol24/7, often operating even when airports ogy on the same par as larger competiare closed. Around-the-clock services are tors. With web-based shipping, barcoding, particularly important to those compamobile scanners, and integrated shipping nies that are open all night and those that systems, technology is becoming a comrequire critical shipments such as medmodity. Accordingly, you should determine ical supplies first thing in the morning, how your carrier shapes up in terms of onbefore the standard 10:30 a.m. delivertime and intact package delivery. ies. This flexibility applies to next-day serFinally, let’s be clear about this: No vice as well as deferred service, where one is suggesting that the regionals will the regionals can often guarantee two-day replace the nationals. Rather, it’s a quesdelivery compared to three or more days tion of finding the right combination of with the giants. complementary services that meet your particular needs. So do your homework. Weigh your options. Put your carrier to the test. It’s hard to quantify the value of personBecause today, more than ever, it’s good alized service, but shippers tend to prefer to have options when it comes to deliverdealing with friendly, familiar customer ing the goods. service reps who don’t make them feel p like they’re just a number. Sometimes, this includes the ability of the driver to enter “beyond the threshold” into a JiM BeRluTi is President & CeO of eastern Connecbusiness or home. tion, the largest regional small-package overnight These built-in advantages of regional carrier on the east Coast, covering over 5,000 ZiP services have been well-documented. Codes in the northeast. the company, which has 17 Why, then, haven’t the regionals made facilities, is open 7 days a week and 365 days a year. greater inroads against the nationals? services include next-Day Ground, Priority OverCertainly, the nationals offer one-stop ser- night, same-Day, second-Day, logistics & Warevice that covers all zones in the country housing, trucking, and expedited Mail. For more and abroad; they also enjoy a perception information, visit www.easternconnection.com.
Flexibility
Personalization
march-april 2013 | www.PARCELindustry.com
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LTL InsIghts By Joe Heilig
Insights on LTL Carrier Pickup and Delivery Operations ack in the late seventies when I worked as an Industrial Engineer for LTL carrier Ryder Truck Lines, the Senior Vice President of Operations had on his desk nameplate one word, “Service.” It sent a simple but concise message to everyone: the only thing LTL carriers have to offer their customers is service. How true, if you think about it: LTL trucking is relatively simple. Carriers provide a service of moving a product from point A to point B and delivering it in the same condition as when it was picked up at point A. This article will go into depth about the service beginning at point A and ending at point B the pickup and delivery function (P&D) of LTL trucking.
the carrier’s P&D operational cost will typically absorb 1215% of a shipment’s revenue depending on size of the shipment and length of haul. The primary objective of any P&D operation is to ensure that all loaded shipments are delivered and all assigned pickups are accomplished in a timely and efficient manner. To that end, the key objective is to minimize drive time (sometimes known as windshield time) and miles between each customer stop. P&D routes can be categorized into three types: 10
march-april 2013 | www.PARCELindustry.com
Urban
an inner city route such as downtown Atlanta with short runs (less than one mile) between stops.
Metro
a route in areas outside of downtown but within a major city’s metropolitan area.
Peddle
a route which encompasses small towns or communities, usually significant distances from the driver’s terminal.
Carriers typically develop routes for a driver to make up to 20 or more stops in a day. An urban route may have more stops due to reduced miles (50-60) and depending on the location of the terminal, while a metro route driver may drive 90-100 miles, and a peddle route may encompass 150-200 miles or more. In most cases the routing of delivery stops is more efficient because the carrier already knows all the stop locations and can route the driver in the most effective travel path. However, delivery appointment stops can require a carrier to totally revise the stops and may result in a less than optimal route. The normal procedure is for a driver to empty his unit of deliveries at the farthest point of the route before starting to make pickups. Pickup stops in many instances require backtracking on the route as pickups are relayed to the driver.
Carriers collect cost data on each stop. In years past, it was as simple as a driver manifest on a clip board, but today the most high-tech carriers utilize on board computers and handhelds. Carriers measure the drive time between stops, time at the stop, and delays. P&D route metrics include stops per hour, miles per stop, and shipments per stop. The metric that can have the most impact on your pricing is shipments per stop. It costs a typical carrier $120-130 per hour to have a P&D unit on the street. When a driver utilizes 30 minutes to make a stop (driving and time at the stop) then the stop cost would be $60. If two shipments are picked up, then the average allocated cost per shipment is $30; however if six shipments are picked up, the average shipment cost would be $10. Keep in mind it may take a little longer to load six shipments versus two, but the cost allocation point is made. The carrier’s P&D operational cost will typically absorb 12-15% of a shipment’s revenue depending on size of the shipment and length of haul. Therefore, the P&D operation is vital since it is the start and end of all shipments. Next time, I will discuss a LTL carrier’s dock operation. p
JOE hEILIg has over 35 years in the transportation industry. he has served as a senior transportation Analyst with enVista for eight years. he has also held numerous positions with major LtL carriers including Director of Industrial Engineering. Joe may be contacted at 803.708.8657 or jheilig@envistacorp.com.
Spend PersPectives By John haBer
How Free Shipping Set the Tone for Holiday Shoppers ack in December, Office for National Statistics announced I emphasized how retail sales fell by 0.6% in January 2013. free shipping positively This is the fourth consecutive monthly impacts customer satisfac- drop and has sparked fears of an unprection. When shoppers are edented “triple dip” recession. happy with both product While holiday season retail sales were pricing and shipping costs, generally low, e-commerce sales are the they reward the retailer one bright spot. In mid-December, comwith: more visits, an increase in Score reported that e-commerce spending number and value of purchases, more for the first 44 days of the holiday season shares/referrals, better reviews, increased was $33.8 billion, up 13% over the previloyalty and more repeat business. ous year. The NRF’s digital division Shop. This past holiday shopping season is org reported that online sales grew 11.1% proof in point. during November and December 2012 According to the National Retail and that 2013 online sales should conFederation, uncertainty over Washington’s tinue to grow between 9.0 and 12.0%. fiscal cliff negotiations constrained holiWhat’s more, comScore also singled day shoppers — 2012 holiday sales grew out the week of December 9-15, 2012, a scant 3.0%. All told, the U.S. Census as the heaviest five-day online shopping Bureau’s Retail Sales Report found that period on record breaking all records the retail growth rate for December 2012 with four individual days logging more was the lowest since January 2010. than $1 billion in spending. The second Looking ahead, we can expect simi- week in December is particularly imporlar growth concerns. The National Retail tant for e-commerce because it’s the Federation is predicting 2013 retail last week for shoppers to buy online and industry sales to grow 3.4%, a growth still feel comfortable that their gifts will rate of almost 20% less than the prelimi- arrive on time. nary 4.2% growth seen in 2012. January As a further incentive for holiday 2013 retail sales grew a measly 0.1%, sales, Amazon and some other retailnegatively impacted by tax increases and ers offered free two-day shipping. In higher gasoline prices. fact, on December 11, Amazon.com, The European outlook for 2013 is Inc. extended the ordering deadline for extremely disconcerting. The UK’s Centre Free Super Saver Shipping by two days. for Retail Research predicts flat retail This enabled customers to place orders growth somewhere between zero and 0.5% through December 18 with free delivin volume terms and 2.83% in finan- ery by Christmas on millions of items cial terms. While this projection includes across electronics, toys, sporting goods, online sales, the institute warns that brick books, music, clothing, kitchen, tools and mortar retail will suffer at the expense and more. Amazon Prime members of online sales. To further retails concerns were able to place orders up until 7:00 in the UK, on Friday, February 15, the UK p.m. EST on December 21 to receive
deliveries by December 24 using Free Two-Day Shipping. It’s no surprise that Free Shipping Day on Monday, December 17 (up 76% to $1.013 billion) was one of the busiest days of the holiday season with nearly 1,700 merchants offering free shipping by Christmas Eve through FreeShippingDay. com or on their own sites. In just four years, Free Shipping Day has grown from a one-off Black Friday spin-off to a billion-dollar day for online sales. Most retailers are adopting free shipping because it drives customers to spend up to 40% more per order and because their competitors will eat their lunch if they don’t. But free shipping is anything but free for retailers, especially when it also includes pricey overnight delivery. In order to keep free shipping from cutting into their margins, etailers are getting smart about their shipping spend. They are negotiating tough contracts with the parcel shipping services and opting for less costly last-mile delivery via the United States Postal Service (USPS). This will be increasingly tough in 2013, however, if the United States Post Office eliminates Saturday delivery beginning in August. While free shipping is here to stay, so is the importance of managing your shipping spend. p
JoHn Haber is an expert in shipping, freight and transportation spend management. in his current role he provides the vision, and the execution know-how, that helps companies save 10% to 20% or more in logistics spend. contact him at jhaber@spendmanagementexperts.com. march-april 2013 | www.PARCELindustry.com
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suppLy CHAIN pivot By RoB ShiRley
mardi gras Logistics ardi Gras’ first year in New Orleans was in 1857; it has since 2. become the world’s biggest party and has been nick3. named The Greatest Free Show on Earth. Mardi Gras means Fat Tuesday and culminates on the 4. day before Lent each year, but begins much earlier. In 2013 the first parade was on January 19, and the last was on 5. February 12. The Super Bowl was sandwiched in between on February 3. 6. The parades run from the spectacular to the ordinary. All have float riders, called Krewes, who toss throws such as beads, 7. doubloons, stuffed toys, and even coconuts. Most of the parades are owned by Krewes 8. who also have elaborate balls replete with royalty. Some are all men, some all women, some mixed, occasionally exotic, and some can be joined for a small fee. Parades also have marching bands; some 9. have been in the same parade for over a hundred years. The spectators are mostly family-oriented with chairs, ladders, coolers and barbeques with a very festive scene for children and adults. In the French Quarter the scene can be wild with lots of partying and some 10. things that need to be seen to be believed. Schools, banks, libraries, and any business that doesn’t actually serve Mardi Gras are closed Monday and Tuesday. The logistics behind this show are so massive that I had to personally attend again this year to provide the details: 1.
12
There were a total of 62 parades in just Orleans Parish. Many were rescheduled
march-april 2013 | www.PARCELindustry.com
because the Super Bowl and some evenings had rainy weather The City of New Orleans spends over $3m for this event for policing, traffic, cleanup, and ambulances Over 300 trucks were used for just three parades on Fat Tuesday, final day of Mardi Gras The spectators were well over a million, which is three times the population of New Orleans Hotels were full for at least two weeks at full rates and minimums of three nights stay New Orleans has over 3,000 bars and most never shut their doors Revenue estimates exceed $600mm for the entire event The highest quality floats are all built to specifications by Blaine Kern at their Mardi Gras World manufacturing facility. This is the world’s largest float design and builder. Floats are generally 13’ to 18’ wide and 50’ long The largest float in history was introduced this year, called the Ponchartrain Beach (after a former theme park on the lakefront in New Orleans). It was towed by one tractor and had eight 50-foot double decker floats combined into one with about 400 Krewe members on board The cleanup at precisely midnight on Mardi Gras day is a sight to behold. In the French Quarter, an army of police with bullhorns tells the still-partying throngs thank you for coming, but time to go. If they can’t or won’t they are immediately loaded in moving van-sized paddy wagons. Following the police is the cleanup crew who pick up every bit of trash and then spray the streets first with fire hose-sized
pressure washers, then deodorize with a thick green liquid, then hit it again with pressure washers. 11.
By the crack of dawn, the streets are immaculate. Just in time for the beginning of Lent that lasts until Easter Sunday for self-denial and fasting
Lagniappe (means a LittLe something extra in new orLeans Lingo): a.
The food is of course spectacular. My favorite is Galatoires, try the pompano
b.
Brennan’s is the best breakfast you will ever have, try Eggs St. Charles
c.
ACME for oysters, best served raw
d.
Mother’s for po-boys, a submarine sandwich with attitude, roast beef is legendary
e.
Central Grocery invented the muffeletta and they are still great
f.
Café du Monde has fantastic beignets (powdered donuts) and coffee
g.
Pat O’Brien’s invented the Hurricane, this one is a sleeper with a punch
h.
Sazerac is America’s first cocktail and Ramos Gin Fizz were both invented in the French Quarter
i.
Stay at the Royal Sonesta or the Monteleone, both in the Quarter
You have to see this to believe it yourself. Next year, Mardi Gras is Tuesday March 4, 2014 or try the JazzFest April 26 to May 5 this year. p
rob shirLey is President of ExpresShip, a consultancy in the global supply chain and can be reached by email rsxpship@gmail.com, website Expresship.com, or LinkedIn.com.
OperatiOnal EFFiCiEnCiES By SuSan RideR
Keys to Success in 2013 and Beyond he economy service. Where traditionally, retailers would CSCMP reports in its State of Logistics has been vol- buy a full truck load or full pallet once Report that logistics cost increased by atile to say the every month, they are now buying cases $1.2 billion in 2011 and is equivalent least in recent and smaller deliveries three times a week. to 8.3% GDP. Transportation cost rose years. Changes are This huge shift in the demand and sup- 10.4% in 2011; some of the rise in cost happening rapidly all ply of goods is resulting in a new design is attributable to the increase in fuel cost, over the industry. Looking of processes, facilities, partners, and loss of capacity, and increase in fees. The into a crystal ball, what is transportation modes. transportation industry continues to be hit happening in the future, and This trend is causing collaboration from by several areas that will have a dramatic how do you prepare for success trucking companies, LTL truckers, and car- impact in the future. Hours of service for in 2013 and beyond? riers. Collaboration will become more and the trucking industry has had tremendous Thinking out of the box about your more important as the industries change impact, along with new CSA regulatory processes and operation is absolutely nec- much more rapidly than in the past. laws and aging truck drivers decreasing essary. Evolution is the key, because those Vertical industries such as retail, pharma- the pool of available drivers, which has that don’t evolve risk becoming extinct. ceutical, electronics, fashion apparel, and caused concern. The aging transportaThe business world is cluttered with com- many others are learning that the key to tion infrastructure in the United States panies that didn’t respond to changing a successful supply chain is agility. Agility will continue to impact the transportaenvironments, trends, and demograph- may require more partners, such as 3PLs tion industry including our roadways, rail, ics. The newspaper industry is an exam- and transportation companies. and ports. ple of an industry that didn’t evolve The growing parcel industry is changing The key to success in the future will be quickly enough in response to the demand rapidly as the online retailers are scram- agility. The ability to respond quickly and for online information. The movie rental bling for business. Online sales generated to be agile with products, services, and proindustry is another. $202 billion in revenue during 2011 and cesses will lead to success. Collaboration Most recently, Blackberry’s demise with are projected to grow over 60% during the will have significant impact in the future the emergence of smartphones is another next five years. Two day delivery will not as companies who have been adversargreat example. In contrast, a company that suffice with the new demographics emerg- ies in the past look to partner for mutuabsolutely thinks out of the box is Amazon. ing as an impactful buying generation. Two ally beneficial opportunities. Technology Amazon, an online retailer who started day delivery is not quick enough or accept- will continue to impact our futures. The with just books as a business model, saw able; this generation demographic wants need to stay informed and abreast of new it coming, saw the evolution and was the the products they order NOW! They are the changes will become more impactful as first to set themselves apart with the intro- entitlement generation and will go else- the industry responds in a more rapid pace duction of the Kindle. Just remember what where if they don’t get the service they than ever before. p Albert Einstein said regarding the defini- expect. Therefore, the online retailers are tion of insanity: You can’t continue to do searching for ways to deliver product faster. what you have always done and expect a The top two initiatives on the list of SuSan rider is Owner, Rider & Associates and different result. Therefore, if your bottom retailers in 2013, as reported by the Logistics and Supply Chain Consultant, as well as line is bleak, distribution cost rising, ship- Retailers Association, are service innova- a popular speaker at the PARCEL Forum. She can ping cost escalating, it is time for a re- tion and improved delivery to customers. be reached at susanrider@msn.com. engineering and to start a new evolution of Online retailers, along with brick and moryour distribution center network. tar retailers, will be focused on innovation A trend that is affecting many in the and creating better customer experiences supply chain is smaller orders with faster in order to grab market share. march-april 2013 | www.PARCELindustry.com
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Today’s
Challenges to Negotiating Great Parcel Contracts
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Despite these challenges, the outlook for parcel shippers is bright... if you know what steps to take. By Rob Martinez
SO
you ship lots of packages and spend tons of money with the parcel carriers. Millions even. You’re a big customer. You’ve been invited to their hubs. And to major sporting events. Once a year, you get a visit from a high ranking title from Atlanta or Memphis. You’ve even been assigned a dedicated, national account representative who’s in your building all the time. Then why do you feel like such a small fish when it comes time to negotiate your parcel contract? Make no mistake about it. It’s harder now. And you’re not alone. In our 2011 PARCEL Survey on Pricing & Benchmarks, by a margin of 4 to 1, shippers feel it’s harder today than ever to negotiate parcel contracts. Asked why, the top four responses were: 1) Lack of competition within parcel provider market; 2) Carriers’ focus on yield management; 3) Pricing has become commoditized; and 4) FedEx and UPS have a tacit agreement to avoid pricing wars. Part One of this article addresses several challenges to negotiating best-in-class parcel agreements in today’s margin-focused market. Part Two provides suggested strategies and solutions.
PART ONE – CHALLENGES
FEW NATIONAL PARCEL PROVIDERS When I started my career in the parcel business, there were multiple carriers competing for parcel volumes. In addition to FedEx and UPS, there was Airborne Express, DHL, Flying Tigers, Burlington, BAX Global, Emery and even Purolator. Now we’re down to only two national private parcel carriers in the US — FedEx and UPS. Of course, it’s difficult to create negotiating leverage with little competition in the market, especially when those companies’ stated focus is on margin improvement, i.e. making as much money as possible on every shipment.
RISING PARCEL COSTS As competition in the parcel market has winnowed, annual rate hikes have sharply increased. A study of FedEx and UPS annual rate increases reflects a shift in the market pricing around 2006. Rate increases for the most recent eight years (2006-2013) are roughly double the previous eight years (1998-2005). See Table 1.
GRI HISTORY 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Average 1998-2005 Average 2006-2012
UPS AIR 3.30% 2.50% 3.50% 3.70% 4.00% 3.20% 2.90% 2.90% 5.50% 6.90% 6.90% 6.90% 6.90% 6.90% 6.90% 6.50% 3.25% 6.68%
FEDEX AIR 3.50% 2.80% 0.00% 4.90% 3.50% 3.50% 2.50% 4.60% 5.50% 6.90% 6.90% 6.90% 5.90% 5.90% 5.90% 5.90% 3.16% 6.23%
UPS GROUND 3.60% 2.50% 3.10% 3.10% 3.50% 3.90% 1.90% 2.90% 3.90% 4.90% 4.90% 5.90% 4.90% 5.90% 5.90% 5.90% 3.06% 5.28%
FEDEX GROUND 3.70% 2.30% 3.10% 3.10% 3.50% 3.90% 1.90% 2.90% 3.90% 4.90% 4.90% 5.90% 4.90% 5.90% 5.90% 5.90% 3.05% 5.28%
Table 1 MARCH-APRIL 2013 | www.PARCELindustry.com
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In addition to freight rate hikes, shippers have seen dozens of new accessorial charges over the past decade, many of which did not exist prior to 2006. Accessorial charges — like Delivery Area Surcharges, Fuel Surcharges, Weekly Service Fees, Large Package Surcharges, Additional Handling Service charges and the like — now account for as much as 30% of a shipper’s overall costs.
are often inserted to minimize defection to alternative carriers. These include diversion and minimum net charges penalties as well as early termination agreements. In each of these three cases, a shipper would literally have to pay the carrier financial penalties to divert business to another provider, failing to achieve minimum revenue objectives, or terminating the carrier agreement prior to term expiration.
Other service guide changes have caused rates to increase dramatically. Ground minimum charges, for example, have increased an average of 6.3% since 2006. That’s a hike of 53.7% over the last eight years. See Table 2.
Uneven playing Field
year
groUnd minimUm Charge
2006 2007 2008 2009 2010 2011 2012 2013
3.80% 4.00% 4.20% 4.57% 4.84% 5.17% 5.49% 5.84% average CUmUlative
inCrease%
5.3% 5.0% 8.8% 5.9% 6.8% 6.2% 6.4% 6.3% 53.7%
Table 2 Shippers have seen several changes over the years on dimensional rating. In 2007, UPS and FedEx adopted the Air dimensional freight policy for Ground shipments over three cubic feet. And of course in 2011, the dimensional divisor changed from 194 to 166 for both Air and Ground. These changes accounted for hundreds of millions in new revenues for the carriers.
Complex and Constraining parCel agreements Today’s parcel agreements are more complex and conditional than ever. In general, rate charts are multi-dimensional, based on service level, weight and zone. Packaging and billing options can also come into play to determine discounts (or loss of discounts). Freight incentives are based on a set of published pricing, which of course changes annually. The structure of incentives is tiered and based on service levels and rolling revenue bands. Revenue bands are based on gross transportation charges — prior to discounts — and exclude accessorial charges. Minimum charges mitigate discounts, as do dimensional charges. And there are dozens of important terms and conditions that can affect your parcel rates. Additionally, volume shippers are seeing many constraining elements in today’s parcel agreements. Several clauses
One of the biggest mistakes I see repeatedly is a shipper coming to the negotiation table unprepared. Very often, carriers know more about a shipper’s distribution than the shipper. Not too surprising since the carriers “own” your shipping data. Moreover, shippers often don’t understand the impact of terms and structure of their carrier agreements. Perhaps most importantly, shippers lack benchmarks. Benchmarks provide data points from other companies for comparative purposes. For example, imagine going into a negotiation knowing that you were being charged 20% more than three out of four shippers with similar spend and package characteristics. How much better prepared would you be when your carrier rep says, “You’re getting the best deal in our district”? Finally, many shippers lack analytical tools to better understand distribution metrics, package characteristics, or the impact of pricing actions (new proposal, general rate increase, etc.). So how do you negotiate best-in-class parcel contracts with FedEx, UPS and other parcel carriers?
part tWo – solUtions & strategies
do yoUr homeWork prior to negotiations Before stepping up to the negotiating table, shippers need to collect and analyze shipment detail to better understand usage, costs, accessorial charges and other variables. Develop reports to understand service usage, seasonality, weight ranges, zonal distribution, accessorial costs, cost per shipment, residential/ commercial mix, shipments impacted by minimum and dimensional charges, and other factors. This detailed analysis gives shippers a priority list to focus on concessions that have the greatest cost savings impact.
One of the biggest mistakes I see repeatedly is a shipper coming to the negotiation table unprepared.
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Quantify which accessorial charges most adversely impact costs and target these charges for waivers or reductions during negotiations. Regardless of what your carrier representatives tell you, all accessorial fees are negotiable. Conduct benchmarks to determine what range of discounting is possible and how your rates compare with other shippers
of similar size and/or package characteristics. If you lack the ability to benchmark internally, there are a number of companies that can assist you in this important process. Many third party market experts are willing to conduct an obligation-free, complimentary assessment of your current rates and terms to assess potential savings.
ExplorE AltErnAtivE CArriEr SolutionS, GAin lEvErAGE Despite its financial woes, the US Postal Service remains a viable alternative especially for non-urgent, lightweight, residential and/or cubic shipments. In its Q1 2013 earnings announcement, Shipping and Package Services was a bright spot for the USPS, gaining four percent over the same period a year ago. And Parcel Return and Parcel Select revenue grew 19.2% YOY. Regional carriers such as Eastern Connection, Lone Star Overnight, OnTrac, Spee-Dee Delivery, PITT-OHIO Ground, LaserShip, TransTek, Prestige Delivery and many others offer reliable parcel delivery services at rates as much as 30% less than national carriers. There are parcel consolidators — DHL Globalmail, Newgistics, Blue Package, Parcel Pool and others — that compete with FedEx SmartPost and UPS SurePost for Parcel Select service, with the USPS serving as the final mile delivery provider. Leverage these alternative delivery providers — USPS, regional carriers and parcel consolidators — whenever possible in negotiations with FedEx and UPS. However, even if you find yourself in negotiations with UPS and FedEx only, you can still effectively lower shipping costs. UPS and FedEx are fierce rivals. Use the other carrier as leverage. It’s important to note that parcel pricing is largely predicated on “cost to serve” models at FedEx and UPS. Both carriers have become very adept at internal cost metrics, developing complex revenue management tools to forecast the profitability of a shipper’s business. FedEx aims to shed $1.7 billion in costs over the next several years. Perhaps you can help. Collaborate with your carrier rep. Ask for ideas to lower the cost profile of your business. Areas for exploration include increasing the use of automated tender, pickup consolidation, hub bypass options, package tender and materials improvements to lower claims, minimizing high-cost call centers by through online self-tracking, changes to pick up schedules and delivery routes, packaging optimization to improve truck and aircraft utilization, and dozens of other options.
Carefully evaluate each carrier proposal. If discounts are tied to rolling averages and revenue thresholds, make sure you have the business to support targeted revenue bands. Make certain your contract includes discounts for all services. Understand the impact of minimum charges and dimensional rating. Try to negotiate waivers or caps to the annual January rate increases. The best carrier pricing programs are often obtained through competition. If you haven’t changed carriers for some time, chances are you’re spending too much. Carrier sales representatives are commissioned in part on profit margin. Therefore, most reps are not willing to offer extensive discounts unless forced to compete for your business.
In its Q1 2013 earnings announcement, Shipping and Package Services was a bright spot for the USPS, gaining four percent over the same period a year ago.
nEGotiAtE, nEGotiAtE, nEGotiAtE! Use leverage in your negotiations. Meet with alternative providers including regional carriers, parcel consolidators and the US Postal Service. Conduct annual bids, consider splitting your business amongst multiple providers, and meet regularly with non-incumbent carriers.
Don’t get locked into constraining terms. Push back on deferral penalties, early termination clauses and other constraining language. Try to maximize base discounts, rather than building incentives into revenue thresholds and rebates. If forced into revenue-based discounts, leave considerable room should you elect to move a portion of your business to another carrier. Consider the services of third party market experts for distribution analysis, contract benchmarking, and parcel procurement. According to Morgan Stanley’s Annual Best Practices Survey, 11% of the top 400 parcel shippers in the US have hired consultants to negotiate their FedEx, UPS, DHL and other transportation contracts. Most notably, these shippers — commanding a collective $1B in annual parcel shipping expenditures — report that parcel consultants reduced shipping costs as much as 49% lower from what the company had been able to negotiate on its own. Finally, pursue long-term contracts. While you reserve the right to negotiate your contract at any time, fixed term contracts offer shippers rate stability and cost predictability. While it’s clear the present parcel market presents challenges for many shippers, there are many strategies shippers can pursue to reduce costs. Good luck! p
rob MArtinEz, DLP is President & CEO of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Rob offers more than two decades experience negotiating parcel contracts for some of the most recognizable brands in the world, and is a sought after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858.879.2020 Ext 114 or rob@shipware.com. march-april 2013 | www.PARCELindustry.com
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Selecting and Implementing the Best Shipping Software for Your Operations
When making a change in shipping systems, there’s a lot to take into account. Here’s a roadmap to help you with your decision. By Bob Fischer 18
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How can you be sure you’re choosing the right shipping system for your company? It’s the Number 1 question every manager faces when weighing the costs and benefits of replacing an obsolete system. As straightforward as the question is, there is, unfortunately, no easy answer. Shipping operations – and shipping software requirements – are more complex than ever, and there is usually no “out of the box” solution that fills most shippers needs. Selecting a solution requires a certain level of trust that the software will actually perform as planned once it is configured for your needs. However, there is a way to improve your odds for success. You can make the most informed decision by following three important steps:
Step I: Create a ShIppIng requIrementS “BlueprInt” The first step every buyer should take is to create a shipping requirements document or blueprint that defines both “must have” and “preferred but not required” operational requirements. Ideally, this document should be drafted before you even begin speaking with potential vendors. The document doesn’t have to be perfect, but it is important to have a general workflow document to guide any dialogue with vendors. Shippers who do so without it can unwittingly turn the control of the conversation over to the software vendor. Creating the requirements document may seem like a daunting task but it doesn’t have to be. One approach is to take the existing documentation for your current system and use it as a starting point. Odds are that there will be undocumented changes since the document was created, but these can be noted. I would also suggest inviting operational team members to help you map the existing and future shipping workflow on a whiteboard. As you go through this process, try to avoid thinking solely in terms of replacing the functionality of the current system. This is the time to identify current and future shipping that can deliver significant value to your business. For example: } Are certain shipments being processed manually due to billing, labeling, or documentation requirements that your current system cannot handle? } Can your order entry department access the shipping system to quote accurate freight rates on customer orders? } Are other departments able to access your shipping system to process non-warehouse shipments? } Are there other carriers you’d like to add to your portfolio but are prevented by current system limitations? } Are you planning to expand its e-commerce operations? How will your shipping system need to be configured to accommodate it? } Are you prepared to handle new international customer orders as e-commerce business grows?
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The goal is to define and prioritize the specific deliverables you expect from the new system and the metrics you can use to measure results. If your mandate is to reduce transportation costs by 10%, what specific functionality is required to arrive at that reduction? If you want to reduce freight upcharges due to incorrect addresses or routing instructions, what is required in the new system and how will you measure results? These are just a few ideas to consider as you develop your requirements document.
step ii: COmpare VendOrs Once your requirements document is roughly complete you’re in a great position to consider potential vendors. The Internet may be helpful in your initial search, but you may also want to:
OrganizatiOn-Wide dialOgue is CritiCal Another best practice to ensure that the new system is delivering all the value it can is to invite input from every department that needs shipping information to do its job. Although shipping systems are traditionally located in the warehouse, accurate shipping information is routinely needed throughout the organization, from purchasing to sales to order entry, customer service and finance. How would these departments like to be able to access shipping information? What information do they typically use, how do they obtain it, and how could this be improved upon? What additional information would they like to have, if possible? Organization-wide dialogue may take time and generate more feedback than planned for, but it may also uncover great costsaving opportunities that would have otherwise been missed. For example, here are some issues we commonly hear:
Carrier-agnOstiC Or Carrier-prOVided? Carriers also offer a range of free systems, which may sound very appealing as a means to get the basic job done with very little upfront investment. However, it’s wise to carefully scrutinize what “free” means. Most of these systems may offer some level of automation and freight rating and routing, but they will not offer the same level of rate, route, or mode selection that a vendor-neutral system provides. Before you choose a carrierprovided system, consider the following:
} “We have a shipment request sheet that is manually filled out with the ship-to address, etc., then sent with the parcel to the shipping department where it is manually keyed into the shipping system. This process is error prone and time-consuming.” } “We’d like to allow employees to ship personal packages at our negotiated rates as an employee perk and possibly accept their credit card as payment for freight. They won’t have to ‘run out’ at lunch to ship a birthday gift when they could do it from their desk. How can you help us?” } “The big box stores require specific data to populate carrier reference fields for transmission to the carrier. We do this today by having the shipping operator read free-form notes on the pick slip and depend on this information to be entered accurately into the shipping system If there is an error, we are fined by our customer. We’d like to automate this process.” } “Customer routing guides mandate that shipments be processed freight collect and/or third party billing. Too many times we’ve erroneously shipped these orders “prepaid and add” only to have the customer refuse to pay freight as specified in the routing guide. I’d think that this could be done programmatically to eliminate the manual intervention. Can you help?” These are just a few examples of areas of opportunities that, once discovered, can streamline the workflow and save costs in areas that may have been overlooked. 20
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} Ask your industry peers; find out what they like and don’t like about their system } Ask your carrier representatives about multi-carrier shipping systems they’ve seen in other customers’ sites
} Will the system allow you to fully compare routes and rates between multiple carriers and modes? } Does the carrier require you to commit to a certain freight volume and a contract in exchange for the free system? Can this commitment or contract be canceled and at what cost? } Will you be able to integrate the system to exchange realtime data with your host systems? Who will be responsible for the implementation and updates? } What is the availability of support after the integration and what are the service level agreements of the supporting party? } Is the carrier willing to apply an equivalent monetary investment with a vendor solution that more closely meets your needs in lieu of the carrier-provided solution? These and other aspects are important to consider in calculating the cost to implement your new system as well as your ability to respond to rapid business changes. Let’s say, for example, that your competitors shift to free shipping for all customers and you find that your best weapon to compete is to add other lower cost carriers to your mix. If your carrier-provided system means you’re committed to a certain volume of freight, your options are limited. The best way to protect your business is to choose a truly carrier-agnostic solution that allows you to shift your freight dynamically, as business patterns change. VendOr due diligenCe Equally important to evaluating the quality of each vendor’s software, it’s also critical to ensure that you’re partnering with a solid, stable company with sufficient resources to support your company for the long-term. Your due diligence process should include: } Company history, operations and financials } Technical and industry expertise } Company’s product roadmap } Product development and support resources } Customer base
Once you’ve determined which vendors offer the software solution you require, get to know the company. Schedule a visit to their corporate headquarters to meet the staff; insist on meeting and interviewing the team members who will work on your project. It’s also important to visit actual customer sites where the software is in operation, preferably in a configuration that is similar to your needs. Step III: RequeSt a One-Day plannIng SeSSIOn At this stage, you should have a very short list of potential vendors for your project. The best way to determine who may be the best partner is to conduct a detailed one-day planning session to review the vendor’s product, project implementation and support methodologies. Plan to have a combination of your key operational and IT staff involved in this discussion to ensure that all critical areas, as outlined in your requirements document, are covered. The vendor should be prepared to bring their project resources to this meeting and provide a demonstration of the system, based on real world scenarios provided by your team. Additionally, part of the exercise should be to begin to identify data mapping requirements between the shipping and other enterprise systems. Gap analysis to identify missing data mapping elements should also be discussed. The idea is not to complete this data mapping exercise at this meeting,
but to identify the right team members to create a detailed data map before implementation begins. You’ll gain great insights into the vendors’ level of expertise based on their responses and ideas generated during this one-day planning session. You should also be in a good position to identify the best vendor for your project. BOttOm lIne — It’S a paRtneRShIp The selection of a new shipping system is not just about purchasing software, it’s about building a productive partnership. Shipping software is rarely installed as a plug and play solution — it is implemented as a highly configured system that is intended to perform for years. To achieve the greatest operational and financial returns, partner with a vendor whose team brings in-depth technical and industry experience to the table. When you’ve chosen a partner that both develops and implements its own software, you’ve gained a collaborative environment that will serve you well in the long-term. p
BoB Fischer is the co-founder and CEO of Advanced Distribution Solutions, Inc., (ADSI), a provider of logistic management solutions for the supply chain industry. A recognized logistics technology expert with 30+ years experience, he has helped companies of all sizes address complex order fulfillment, shipping, and supply chain visibility challenges in domestic and international operations.
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Improving E-Commerce
SHIPPING SERVICES
While Reducing Costs for Offshore and US Territory Locations The 2012 year was another record for e-commerce. More and more consumers are using the comforts of their homes and smartphones to do their shopping. Retailers continue to search for ways to draw in more online shoppers with free shipping, free returns, online discounts, etc. As a retailer you have 2012 behind you and are now getting back into the planning and execution stages of making 2013 even better. You are planning on shipping more, providing better service, and making better margin. Perhaps just as predictable as e-commerce sales increasing in 2013 seems to be the reality of the annual integrated shippers’ rate increases. January 2013 brought not just the New Year, but also new rates for shipping parcels from FedEx and UPS. As you dig into the fine print and take a close look at the new accessorial charges, you may find that the increases are more than what is advertised. Your fuel surcharge may have decreased, but most likely all other charges have gone up. At the end of the day, no matter the decrease in fuel surcharge, your rates are going up again. The areas that tend to end up with the highest percentage increases per parcel during that yearly increase are those 22
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difficult to reach areas, such as Hawaii, Alaska, Puerto Rico and other US territories, like the Virgin Islands and Guam. These areas have additional accessorial surcharges tacked on, not only for the residential and remote locations, but will often include increased fuel surcharges due to the distances these parcels are shipped. Finding ways to reduce the cost of shipping to these areas without sacrificing transit time is achievable. For instance, many high-volume shippers these days are moving away from a single shipping partner model and implementing a diverse delivery model that supports a “best in class” service strategy at a competitive price. They are focused on not only lowering the cost of shipping, but also improving the service level. In order to move that direction and see the benefits, you will need to take a look at your technology and warehouse flexibility. But one thing is for sure, if you put the effort into understanding all the costs and service levels associated with your shipping service, you can find alternatives that will not only save your company’s hard-earned dollars, but can also improve your service and transit times to offshore locations.
Moving toward an integrated carrier postal consolidation solution for these offshore locations will lower your base rates, but be very careful as it will significantly increase the transit times by four to nine days or even more, especially when shipping to APO/FPO/DPO locations and remote villages in Alaska and US territory islands. Using a postal consolidator model from FedEx or UPS (like SmartPost or SurePost) will significantly increase transit times around service and may not be a good way to earn the loyalty and return business of those seven million customers living offshore and in US territories.
OFFSHORE TRANSPORTATION OPTIONS There’s a lot of ocean and just as many miles of sky between your continental US shipping warehouses and Hawaii, Alaska, Puerto Rico, and the US territories. There are a few transportation options you could use to ship to these areas, but each alternative has their pros and cons. A brief look into each of these options will help you understand which may be best for your company. Barging may seem a great option if you have big volume, but it is very slow given it only leaves from port a few times a week and 15 knots on the ocean takes you nowhere quickly. Ground options like LTL or rail may be an option for Alaska, but still a very slow one. In order to line haul to Alaska, the vehicle would need to transverse miles and miles of nothingness and again, you will need some serious volume to take advantage of decent rates. As for Hawaii and Puerto Rico, I have yet to find a road or track that can reach those islands of paradise. That seems to leave air as the only viable way to get your parcels to these remote (yet very beautiful) locations for your e-commerce solution. Four hundred and fifty miles an hour is much faster when compared to barging and ground transportation. (I am still holding out for that Star Trek “Transporter Energize” option, although I wonder what the cost of that shipping model would be.) Let’s face it, these days all e-commerce customers are expecting out-of-this world transit times, even those in remote locations. E-commerce providers that are able to deliver and find the sweet spot between cost and service to these locations will likely earn great loyalty and repeat business.
DIVERSE DELIVERY MODELS As mentioned earlier, the ability for your warehouse, labeling and in-house technology to use carriers outside of the standard integrated carriers will enable you to use different options. Some areas like P.O. Boxes, APO/FPO/DPO require an alternative to FedEx or UPS ground and air solutions. Due to specific shipping regulations, only the United States Postal Service (USPS) is allowed to deliver to our Armed Forces and P.O. boxes. Using FedEx SmartPost or UPS SurePost will add significant transit time to these areas because USPS Parcel Select service is used — making it very likely that there will be barging involved in
getting the parcels to their final location. Offshore locations like Hawaii, Alaska, Puerto Rico, and US territories also suffer from the same issues using SmartPost and SurePost. As you compare the options, make sure to do a detailed comparison on all the costs and services. Keep in mind that many regional carriers heavily discount or do not have any accessorial charges. You may also find that a regional carrier’s dimensional factor calculation is much higher, a good thing for you as this will help you save on your rates. Work with them on finding the right service level and cost balance to fit your goals. A good regional carrier will be anxious to show you how they can balance both the cost and service level in a way that may be a better fit for you than your current model. That leaves you with a couple options to reduce costs and manage transit times when shipping to these difficult-to-reach locations. You can use USPS Priority Mail service to fulfill your shipping needs. The other (and less expensive) option is working with an offshore regional carrier that provides a hybrid solution of using air service from the 48 states and then a last mile postal consolidation service. This provides lower costs without sacrificing the needed excellent transit times for e-commerce.
“ALREADY GOING THERE” OFFSHORE OPTIONS Integrated carriers own many planes, trucks, and have a plethora of expensive store fronts and warehouses. They also need to pay the fuel and utility bills for all their vehicles and buildings, all while utilizing their own exclusive and expensive logistics network. It’s no wonder they needed to introduce a fuel surcharge and accessorial charges years ago. Other types of carriers exist who don’t have all the overhead that integrated carriers do. They are able to pass those savings on to you in the form of better rates. Instead of owning many vehicles and buildings, they move parcels by using a combination of “already going there” partners and providing their own assets for technology, labeling, sorting, and destination transportation. This hybrid network of strategic partners includes trucking services, space in cargo and commercial planes, and utilizing the USPS last mile already-going-there service. One of the advantages of this type of hybrid logistics model is that the costs of each “already going there” partner is spread out over many users of their services. This lowers the regional carriers’ overhead and provides an opportunity for you to save money. Service is equally important to costs. Good regional carriers make sure that their hybrid offshore shipping solutions are built to maximize both cost and service. Look for an offshore regional carrier that meets e-commerce transit time demands with consistency, lowers costs and also provides full tracking of the parcels to the final delivery. You may be able to lower your costs, improve your transit times, and increase your 2013 e-commerce business p
KEVIN UNBEDACHT is President of International Bridge (DBA www.ParcelPool. com.) He has helped the company succeed in providing excellent shipping service to Alaska, Hawaii, Puerto Rico, U.S. territories, APO/FPOs. Kevin can be contacted at Kevin.Unbedacht@MyIB.com or www.MyIB.com. MARCH-APRIL 2013 | www.PARCELindustry.com
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ApplicAtion Article
Grow your E-commerce Business in the Canadian Market Canada is the United States’ largest trading partner, with more than $1.8 billion worth of goods crossing the border on a daily basis. To support this valuable trade relationship, the US Commercial Service publishes a guide for US businesses interested in expanding their customer base within Canada. The guide, “Doing Business in Canada: 2012 Commercial Guide for U.S. Companies” includes information and suggestions for success but the best advice can be found on the first page: “Though Canada remains the most accessible market in the world, doing business in Canada is not the same as doing business in the United States. Canadian Customs documentation, bilingual labeling, packaging requirements, ITAR (International Traffic in Arms Regulations), and Canadian federal and provincial sales tax accounting can be surprisingly challenging.” US businesses are increasingly tapping into Canada’s market with an interest in capturing a piece of the booming ecommerce market. However, many businesses are surprised by the complexities of doing business in Canada. In recent years, Canadian consumer’s ecommerce volume has exploded. Canadian consumers spent $16 billion on ecommerce sales during 2010, a figure expected to increase to $30 billion by 2015. US retailers have been key benefactors with Statistics Canada reporting 60% of online shoppers have placed orders with US businesses. Ecommerce presents an opportunity for businesses that complete preparations to understand the Canadian market. Consider the experiences of a retail chain that learned hard a lesson about operating in Canada. A recognized shoe giant was forced to discontinue service to Canada in 2011, citing distribution agreements with brands sold in the US, along with uncertainty and unpredictability of delivering orders to Canadian customers given customs and other logistics constraints. An important piece of advice for US businesses is to identify an experienced logistics partner with expertise in the Canadian market. A strong logistics partner will not only transport your goods to your Canadian customers, but will serve as a comprehensive source of guidance and solutions. For example, a Canadian provider will anticipate your Canadian consumer’s preference to shop in Canadian dollars, and will ensure your website has the appropriate pricing and able to make currency conversions. Other areas of focus include market research and a marketing plan, a Canada-based pricing strategy, advertising, and the website. Many US businesses decide to integrate Canadian transactions into their existing websites, while others prefer to “localize” their Canadian presence with a uniquely Canadian site. Either way, a US business will need to
include necessary fields to capture data for Canadian customs requirements. Other important considerations: • Crossing the Border. Although the US and Canadian governments are taking steps to alleviate some regulatory and border clearance processes, crossing the border remains complicated, with new regulations taking effect, and existing ones being modified, with little warning. An experienced logistics provider will understand the intricacies of the border clearance process, and will be a participant in “trusted shipper” programs, which provide expedited border clearance. • Reaching your Canadian Customer. Once across the border, shipments will need to enter a Canadian distribution network for end-delivery. While most Canadian residents live in urban areas, plans are necessary to reach consumers who live in remote regions of Canada. Canadians expect a range of delivery options. While same-day or overnight service is impossible in remote Canadian territories, your business will suffer if you cannot provide a guaranteed delivery window. • Managing Customer Returns. Customer returns account for roughly eight percent of a business’ total sales, the figure is substantially higher for e-commerce sales. Customer returns have become an important part of customer experience, with 85% of online shoppers indicating they would not purchase from an online merchant if the returns policy was not convenient. Returns management becomes complex when border crossing is involved, goods returning to the US are “international transactions,” and trigger customs requirements. A well-managed returns process enables businesses to recapture value in secondary markets, and generates customer goodwill through fast and satisfactory transactions. Canadian consumers have long had an affinity for American goods, and rising popularity of online shopping has brought those products within reach. Many US businesses are already tapping into the lucrative Canadian e-commerce market. Critical to success, is a well-managed plan that takes into account the uniqueness of the Canadian market and the importance of guaranteed service to Canadian consumers. Call 1.888.511.4811 or visit purolatorinternational.com
ApplicAtion Article
Streamline Your Supply Chain Through a Better TMS The last thing your organization needs is for your transportation management system to become another information silo. But with SendSuite Live, you get a browser-based solution with virtually unlimited integration capabilities, which help break down these silos by providing instant access to information for both internal and external stakeholders across your entire supply chain. Whether you’re shipping from a mail center, desktop, a remote work location, or in a production shipping environment, SendSuite Live helps streamline your operation, reduce costs, and manage business risks while giving you capabilities to create efficiencies you never thought possible.
– purchasing, accounting, and even the C-suite – to have access to a myriad of information which allowed the company to make better business decisions across the entire enterprise, and optimize their logistics network while substantially reducing costs. The client realized Pitney Bowes had the capability to work with them to address their challenges – and create a solution that streamlined processes, sped delivery, and enabled savings while minimizing the time and effort required for integration. Companies have a diverse range of shipping locations - warehouses, stores, corporate mail centers, offices, distribution centers, and even remote home offices. Running a logistics operation is highly complex. Whether you’re managing parcels from the mail center, documents from the desktop or freight from the warehouse SendSuite Live offers the flexibility and scalability to address any shipping environment.
THE PB DIFFERENCE
Consider this: A Pitney Bowes’ customer just secured a new contract for global parts distribution from an auto manufacturer. The customer needed a solution that could be deployed in a production environment quickly and efficiently, with integration into the company’s legacy systems as well as a new SAP warehouse management system. This company thought its options were limited, given the demanding timeline and the complexity of the solution. It was only when the customer met with Pitney Bowes that they realized they had a number of options. Pitney Bowes deployed and integrated its SendSuite Live global transportation management system into both new and legacy systems. SendSuite Live allowed the customer to gain better cost controls through the election of best delivery options across multiple modes of transportation. More importantly, the application’s analytical tools and reporting functionality allowed different departments
SendSuite Live is a powerful web-based solution designed to guide simple to complex shipping operations to the next level in cost management, process efficiency and compliance. This robust solution utilizes a single platform to manage all transportation related activities. It optimizes, integrates and automates all shipping processes while providing the highest degree of real-time visibility, control and choice throughout your operation. SendSuite Live features an enterprise-class Service Oriented Architecture (SOA) platform designed to meet the strictest IT demands for secure, scalable and reliable processing. Built on .NET and Microsoft SQL Server, SendSuite Live can be deployed on a single server or across clustered servers for redundancy. Clients access SendSuite Live applications via a browser and systems can access Web Services via a SendSuite Live API. Pitney Bowes knows logistics. We’ve been helping customers determine the best way to manage their shipping operations for decades. We pride ourselves in our ability to work with each of our clients to solve unique requirements, creating solutions to make their business run more productively and profitably. Contact us at sendsuitelive@pb.com and check us out at www. pbsendsuitelive.com
Parcel Counsel By Brent Wm. Primus, J.D.
Bill of lading Pop Quiz am pleased to report that this installment of PARCEL Counsel marks the seventh anniversary for myself as a columnist for PARCEL magazine. On a personal note, I would like to thank all of the readers of this column for their ongoing support. And, just for the record, I would like to say that the PARCEL family — Amanda Armendariz, Editor; Marll Thiede, Publisher; as well as the other PARCEL columnists and writers — have been a great group of people to work with. During the last seven years, I have authored 39 columns covering a legal point or development of relevance to parcel shippers. For this anniversary column, I thought I would try something different and give the readers a chance to test their knowledge about Bills of Lading. So, here is a pop quiz with a multiple choice question, a true or false question, and an essay question.
1. Who issues the Bill of lading (or airbill)? £ £ £ £
A. The Shipper B. The Carrier C. The Broker/Intermediary D. None of the above
2. The Uniform Bill of lading is still uniformly used. £ True £ False
The answers for this pop quiz will be in the next installment of PARCEL Counsel… however, if you cannot wait that long, be sure to keep an eye on your email inbox to see the answers in a PARCEL e-update or exclusive e-blast.
All for now! p 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.
3. Why is this portion of the Uniform Bill of lading nicknamed “the section 7 box”?
FOr FreIGHT cOllecT SHIPMeNTS:
If this shipment is to be delivered to the consignee, without recourse on the consignor, the consignor shall sign the following statement: The carrier may decline to make delivery of this shipment without payment of freight and all other lawful charges.
_______________________________________ (Signature of Consignor)
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WRaP UP By Michael J. Ryan
change is in the air he world is USPS with DHL, FedEx, UPS, and the USPS. ever chang- The USPS is continually growing its The private carriers have invested subing. The Pope package business in the US. In 2012, stantially in their global networks and just announced the Shipping and Package business the USPS relies on its global postal partthat he is step- grew 8.7% (+$926 million) and $11.6 ners for deliveries. DHL continues to be ping down, the USPS billion in total sales. This group repre- the market leader around the world but is planning to stop sents 2.2% of the total USPS volume is a small player in the US. DHL has Saturday deliveries, and but 17.8% of the revenue. They are in returned to profitability in the US mara meteor hit Russia, caus- a “co-opetition” position with FedEx ket and is positioned to become a bigger ing many injuries. The supply (SmartPost), UPS (SurePost), and DHL player. As companies plan to re-shore in chain business is in the middle (GlobalMail) but compete with them too. the US, there will be more international of a transformation from sourcing The USPS has the largest residential parcel opportunities from the US as they in low-cost countries to a regional market delivery network in the US… and that is try to expand their international e-comstrategy. This will impact all partners in why FedEx, UPS, and DHL use it. The merce business from the most sophistithe commercial world. I would like to share “Parcel Consolidator” model has benefit- cated supply chain network in the world. some thoughts on the followIn all due time, we will ing areas: Re-Shoring, the have a new Pope, (who has USPS, and international paralready been selected!), no cel opportunities. Saturday deliveries from the USPS, and Russia will have recovered from the meteor. Re-ShoRing There is one thing for sure In a recent study conducted in the world: the parcel busiby the MIT Forum for Supply ness will continue to change Chain Innovation, 15.3% of and evolve. I’m sure you have US companies are “definibeen paying attention to the tively” planning to re-shore their manufacturing and another 33.6% ted everyone involved and is making the electric delivery vehicles that have been are considering bringing manufacturing e-commerce market a continued threat hitting the streets of some of our major citback to the US. This is being driven on to the brick and mortar retailers. As re- ies; five years from now, all parcels could the premise of having their manufactur- shoring continues to gain momentum, be delivered by electric powered vehicles. ing closer to the customer demand. Also, the USPS is well positioned for “great- Who would ever thought that would ever happen. What is your company doing to in a study conducted by Deloitte, many ness” in the parcel business. prepare for these “Changes in the Air” ? p executives are concerned about the
there is one thing for sure in the world: the parcel business will continue to change and evolve.
additional risks that their supply chains inteRnational PaRcel are encountering and this re-shoring This segment of the business seems to be approach is a way to minimize this risk. a bit more competitive. The international This re-shoring strategy will have a posi- remailers have been around for long time tive impact to the parcel business in the and provide a great service for low value parcels. However, the real battlefield is US (commercial and residential).
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Michael J. Ryan is Director, Business Development at DSC Logistics and has been in the parcel industry for over 25 years. He can be reached at 847.393.5862 or mike.ryan@dsc-logistics.com.