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PARCEL

MAY-JUNE 2013

www.PARCELindustry.com

Around the World or Across the States…..

The New World

of International Shipping: Optimization Page 24

Returns and

Refurbishment — There’s Gold in Them Hills! Page 28

SPECIAL SECTION:

Regional Carrier Profiles Starting on Page 14


PARCEL

CONTENTS MAY-JUNE 2013 | volume 20 | issue 4

Features

Departments 06 Editor’s Note

Around the World or Across the State... By Amanda Armendariz

08 Going Global

Small Package Export Shipping — A Short Review By Tom Stanton

09 Transportation ABCs

Supply Chain Solutions That Make Free Shipping Affordable By Tim Sailor

10 Operational Efficiencies 24 Exploring the New World of International Shipping: Optimization

Order Picking: Usually the Greatest Opportunity for Savings By Susan Rider

11 Supply Chain Pivot Space

By Rob Shirley

12 LTL Insights

A Look at LTL Carrier Dock Operations By Joe Heilig

13 Spend Perspectives

The Marketplace Fairness Act (Internet Tax) Looms: How Will It Impact Us? By John Haber

26 Parcel Spend

Management — A Thinking Person’s Game

By Mike Lambert

28 Returns and

Refurbishment – There’s Gold in Them Hills!

By Ayal Latz

SPECIAL SECTION Getting to Know the Regional Carriers Starts on Page 14!

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MAY-JUNE 2013 | www.PARCELindustry.com

Other 30 Application Article Re-engineering the Parcel Industry


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, ReprintPros, 949-702-5390, www.ReprintPros.com.


EDITOR’S NOTE AMANDA ARMENDARIZ

Around the World or Across the State... his issue is all about your small shipments—and, more specifically, how you move them. The world is getting ever smaller; international shipments were a relatively small blip on the radar 15 years ago or so, at least compared to today. Now, thanks in large part due to the explosive growth of e-commerce, they’re an increasingly common occurrence for a variety of organizations. But it’s not just international shipments that are growing in volume; with the aforementioned growth of e-commerce, people are placing online orders even if the exact product is one in the neighborhood store down the street. (I find that I, personally, spend a lot less at that beloved yet wallet-draining store known as Target when I buy, for example, boring household items like Swiffer WetJet refills directly from Target.com, even though I have two Target locations literally within four miles of my residence. Otherwise I tend to walk out with the WetJet refills, summer clothes for my daughter, new throw pillows... well, you get the picture.) And I know I’m not alone. So it’s no surprise a lot of businesses are looking for the most cost-effective ways to get their packages to their customers who are a lot closer to home. UPS and FedEx are amazingly well-run companies, and in many cases, they provide a viable, top-notch transportation strategy. But too often, people overlook the other options—and in doing so, leave money on the table. That’s why, in this issue, we strive to cover every option for you. Need to learn more about international shipment optimization? Our feature story is a great place to start. Thinking that maybe you need to expand your domestic transportation strategy to include regional carriers, but not sure how to go about it? Don’t miss the special section starting on page 14. We provide a wide variety of profiles of various regional carriers, so you’re sure to find the one (or more!) that fits best with your organization. Take a look, let us know what you think, and as always, thanks for reading PARCEL.

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going Global By tom stanton

Small Package Export Shipping — A Short Review receiving goods from the US he Obama due to lack of past cooperation administration with US laws or similar issues? set a goal in 2010 to make Is the product that you see export compliance restricted from importation into simpler by combining the destination country with agencies and reducing the permits, certificates of confornumber of controlled items mance, licensees or even specifiover the next several years. cally excluded from importation? Currently, the US departments of the Treasury (Office of Foreign Are the duties, taxes, and govAssets Control), Commerce (Bureau of ernment fees prohibitive? Industry and Security), State (Directorate What is the landed cost? of Defense Trade Controls), and Defense (Defense Technology Security Commodity restriCtions: Many comAdministration) all are involved in export modities are not restricted from export and controls and export licensing. This past can ship under general authorization as month, a number of munitions list items EAR99 No License Required. To confirm have been moved to the Commodity that your commodity is not restricted, you Control List, which is managed by the must review the Commodity Control List: Bureau of Industry and Security. Since it has been some time since I pubhttp://www.bis.doc.gov/policiesand lished an article reviewing export shipping regulations/ear/ccl_index.pdf. basics, I thought it might be worth a quick overview of exporting from a small pack- destination restriCtions: Generally age perspective. Many companies today only humanitarian aid is allowed shipreceive requests for their products over the ment to Iran, North Korea , Sudan, Syria, Internet for quantities that are commonly and Cuba. shipped as small package or weighing less than 70 lbs each. When an international Person/end user restriCtions: order is received, you should determine There are a number of restricted end the following five basic elements: user lists you should check prior to initiating an exportation: denied persons list, Is the commodity we sell a unspecified entity list, debarred list, sperestricted export commodity? cially designated national list, unverified list, entity list. You can find these lists at: Is the order/request from a country that the US does not http://www.bis.doc.gov/complianceand want to do business with? enforcement/liststocheck.htm

4. 5.

1. 2. 3.

8

Are the persons or entity ordering the goods restricted from

may-june 2013 | www.PARCELindustry.com

destination imPort restriCtions: All three major US small package carriers

offer website information on destination country import restrictions, such as import permits or certificates of conformance or goods that are not allowed importation at all. Restricted or prohibited items can be seized by the importing country so careful review of import restrictions and discussion with the consignee or an experienced customs broker is worth taking the time to do.

duties and taxes: Finally, you should consider the harmonized classification of the merchandise and the relative duties and taxes that the consignee will have to pay when importing the goods. In many cases, you can find the tariff schedules and the relative duties and taxes online. For example, you can find the relevant import tariffs for Canada at the following website: http://www.cbsa-asfc.gc.ca/tradecommerce/tariff-tarif/2013/01-99/ tblmod-02-eng.html Once you have answered the above questions and identified no restrictions, you can quote your Internet customer on the small package shipment rate, including the discounts and fuel surcharges and any accessorial fee that they may incur along with the duties and taxes to obtain the landed cost. In most countries, other than the US and Canada, the freight charges are part of the dutiable value of the merchandise being shipped and the taxable value includes the duties. p

Tom STAnTon, aFMS, llC, International analyst can be reached at 503.246.3521 or Tom.stanton@aFMS.com. Tom will be speaking on basics of exporting at the Parcel Forum in Chicago, October 7-9.


TRANSPORTATION ABCs BY TIM SAILOR

Supply Chain Solutions That Make Free Shipping Affordable s we all The first step in effective transporknow, free tation management is to know exactly shipping where your shipping dollars are being offers aren’t spent. Key metrics include detailing free. Yet, most expenditures by service level, weight, shippers feel zone, accessorial spend, and realized compelled to incentives. This is readily available and extend free ship- one can access this information from ping to their cus- your carrier invoicing or thorough customers, especially tomized reporting. Once you do this preduring peak season liminary analysis, you will be able to and for promotional pur- establish baseline transportation costs. poses. The challenge then becomes The next step is to take this analysis how to balance the pressure of not los- and compare your usage to your carrier ing money on shipping and still respond agreements. In many cases, shippers will to the competitive pressures of today’s discover that their agreements are not marketplace. structured to reflect their actual usage. In order to be successful, shippers need In order to fix this disconnect, shippers to fully engage in effective transportation must engage in contract optimization spend management techniques. What does discussions with their carriers. this mean? It means that shippers have to Customizing carrier agreements is cruensure they have the lowest possible cost cial to effective transportation managebasis from their carriers. It also means ment. Some of the areas that you may want that shippers have to stay current with the to analyze are minimum shipment charges, marketplace and make sure that they are realized discounts, targeted incentives for taking advantage of all of the appropriate the most utilized weight breaks, and other carriers’ supply chain solutions. up front rating mechanisms. Today, shippers have more distribution Additionally, you should review the revservice offerings from the carriers than enue commitments of your carrier agreeever before. Both FedEx and UPS supply ments. Each and every carrier agreement chain solutions offer a range of services is customized, and the revenue tiers are that balance cost with transit times and theoretically based on your actual expenshipment visibility. ditures. However, many times these tiers Additionally, shippers can effectively uti- or earned discounts aren’t attainable and lize the USPS, regional carriers, and inter- don’t help shippers lower their net shipnational forwarders. So, instead of being ping costs. In some cases, not all expenforced to use one level of service, and try- ditures or services contribute to achieving ing to balance that fixed cost against free the additional revenue based discounts. shipping, shippers can pick and choose Another important area to manage is the service offering that is the most cost- accessorial spend. Most shippers incur effective for their customer base, while additional add-on charges of between achieving the service levels they require. 10-30%. It is important to break out the

impact of each of these charges and work with your carriers to mitigate the financial impact. Some of the areas to analyze are residential add-ons, delivery area surcharges, dimensional charges, and fuel surcharge. While it is impossible to customize each of the more than 80 surcharges that the carriers are imposing, it is possible to negotiate those charges that have the greatest impact on your organizations’ shipping expenditures. Committing the time and resources to transportation spend management and contract optimization will significantly reduce your net transportation expenses. With this lower cost basis, your company will have the opportunity to narrow the gap between actual costs and the free shipping programs the market is increasingly demanding. Once you have ensured that you have the lowest possible cost basis, then you need to make sure that you are strategically sourcing with your carriers’ total array of supply chain solutions. For UPS customers, make sure that you are evaluating all available service offerings including UPS Mail Innovations, UPS SurePost, as well as ground, air, ocean, and international services. For FedEx customers, make sure you are evaluating SmartPost, Home Delivery, commercial ground, air, ocean, brokerage, and international delivery. Additionally, consider utilizing USPS services as well as regional carriers. These offerings may reduce your costs and achieve your service goals. p

TIM SAILOR, DLP has been in the transportation industry for 25 years and founded Navigo Consulting Group in 1995. Tim can be reached at Tim@ NavigoInc.com or 562.621.0830. MAY-JUNE 2013 | www.PARCELindustry.com

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OperatiOnal EFFiCiEnCiES By SuSan RideR

Order picking: usually the Greatest Opportunity for Savings rder picking in most facilities is where all the action is, and with that being said, it is where usually the greatest opportunity is found. How do you improve your order picking process? Do you have room for improvement? Usually the answer is yes. One of the first thoughts is training. When was the last time an overall training program was completed? Do order pickers know why they are doing steps? If they don’t, many may find them irrelevant and skip the process, thinking there is no harm. A typical distribution center will experience between 50-60% turnover rate in this area per year (yes, I know many facilities have much higher rates, I was trying to be kind). With that kind of high turnover, a training program is not merely suggested, but instrumental in the success of productivity and accuracy. Especially if you have a WMS, pick to light, carousels, or any type of automation or software. If your system was installed more than three years ago, the odds are that not one person remains that was there during the initial training. Therefore, the nice bells and whistles that you paid good money for in the system you selected are probably not being utilized to the benefit that can be achieved. Another area of improvement is second or third shifts. Many times the productivity/accuracy rates are lower on these shifts and managers seem to be okay with the phenomena. Why? Your team should be as productive or accurate whether it’s light or dark. So work on building that 10

may-june 2013 | www.PARCELindustry.com

team. Each shift should set the other up for success. My favorite area is attitude. Okay, I see you rolling your eyes! But in many facilities I walk into there is this attitude about the order pickers like they are second class citizens, and that attitude promotes a complacency that is prevalent in the area. They think no one cares, so why should I bother to do a good job? This is a management issue that many Vice Presidents don’t even know exist. When was the last time you walked the floor or picked an order? Do you have a recognition or affirmation program? Seriously, do you spend more time catching people doing things right or do you focus on catching them doing things wrong? accountability is another gold nugget. In the early days of pick to light it was not uncommon to get at least a 50% increase in productivity. One of the tangible gains was from accountability. Accountability is why labor management systems are so popular. They give you total accountability and if employees know that you will know everything they have done, they have a different mindset. Whether you have a manual system or an automated system, accountability is a huge key for productivity and accuracy. If you don’t know who picked every order every time, start today with a manual system to accomplish accountability and down the road look to an automated system. Start a KPI (Key Performance Indicators) or benchmarking program it will pay dividends. Slotting is another nice-to-have product or system. Many people do a poor job reviewing their slotting needs and

just buy a product only to find it on the shelf a year later. What are your real slotting pains and what can you do to improve them? A great example is the golden zone. Do you need sophisticated slotting software to put your fast movers in the golden zone? No, a simple spreadsheet and a little management guidance will work fabulously. Review your slotting today. Look for fast movers on the bottom. Realize if you have a fast mover on the bottom of a gravity flow rack and you are making an order picker bend every time they pick it over a period of a couple of hours, productivity will go down over 10% and depending on volumes it could be more. Think about where that productivity is at the end of the shift. Do you have someone else slotting the product besides the order fillers? Is that person’s bonus based on the productivity of the order fillers? It should be! This is a common problem. Receiving usually slots the product and, quite frankly, many times they just do not care where they put the product because they aren’t the ones picking it. Lastly, don’t underestimate the value of another view. Your team gets so used to doing what they are doing they overlook the obvious. Have someone from the outside perform an operational audit, odds are you’ll find lots of gold nuggets! Happy Order Filling! p

SuSan rider is Owner, Rider & Associates and Logistics and Supply Chain Consultant, as well as a popular speaker at the PARCEL Forum. She can be reached at susanrider@msn.com.


Supply Chain pivot By RoB ShiRley

Space he next 100 in sight like an apple, but could extend years will much farther, for instance, to the moon. have as much Newton also defined three laws: impact as the last 200 on the A body at rest stays at rest (invenworld’s logistics. tory in your warehouse) The first steamship was in 1776, the original steam locomoA body in motion tends to stay in tive debuted in 1804, motion unless affected by outside the Wright brothers’ forces like gravity (shipping) first flight was in 1903, and the model T by Henry Ford went into production in 1908. This began the Every action creates an equal and major modes of transportation with innoopposite reaction (prices increase vation and improvements being made and volume drops) quickly ever since. On the plus side, we are witnesses to rapid advances in vehicles that don’t need Albert Einstein’s work on Special drivers, innovations in space, 3D printing Relativity concerning the Electrodynamics and numerous technology improvements. of Moving Bodies was published in 1905. On the minus side fuel is rising in cost, General Relativity that includes gravitation depleting in quantity, and has negative was essentially endorsed as the foundation implications on the ecology. The positives for physics since 1960. and negatives both provide ample invitations to ingenuity. The fuTure is incredibly brighT: In addition to here on earth, there are fortunes to be made out of this world. NASA served as a great seed starter and there are now dozens of space projects underway. Many are startups by entrepreneurs funded by venture capital. Some very well capitalized companies are involved: Boeing, Fokker, Ford, Hawker, Hughes, Mitsubishi, Northrup Clearly, our industry will change rapidly; Grumman, RCA, SpaceX (CEO is Elon the real question is, will it be incremental, Musk who started both PayPal and such as in hybrid vehicles, or massive, like Tesla), TRW and Virgin. a much less expensive energy source. There are at least 58 countries workFrictionless energy was first expressed ing various projects related to space. The in Sir Isaac Newton’s 1666 work defin- top 10 leaders all have at least a billion ing gravity as not limited to something dollars invested: USA, UK, China, Japan,

1.

2. 3.

Our world of geographic countries, laws, patents and even citizenship will all change rapidly.

Russia, European Space Agency, India, Germany, France and Italy. Countries like Iran and North Korea are also actively working on this. Space travel, communications, freight movement, mining and defense (against asteroids, meteors, terrorists — this world and others) are all strong growth industries. Companies will design, manufacture and sell vehicles, launchers and space stations. Rovers for new surfaces, technology for mining, space craft components and propulsion equipment are all at various stages. Manufacturing in space will begin to occur; we are seeing the beginnings of it with testing, mass production in a weightless environment will be beneficial for some products. Science, engineering, software, manufacturing and state incentives are all being worked on. Our world of geographic countries, laws, patents and even citizenship will all change rapidly. Logistics and its expansive umbrella, the supply chain, will be needed across the board. Do you think the work we will be doing out of this world will solve the problems we currently have here on earth? It will probably solve some and create others we have yet to anticipate. I just checked and GoDaddy wants $2500 for the domain name XPspace.com, so someone is very optimistic. Ingenuity comes in a lot of forms. Lead or hang on for the ride of your life. p

Rob ShiRley is President of ExpresShip, a consultancy in the inter-global supply chain. Contact rsxpship@gmail.com or www.xpship.com. may-june 2013 | www.PARCELindustry.com

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LTL InsIghts By Joe Heilig

A Look at LTL Carrier Dock Operations his month, in our series on primary LTL operational functions, we will address the next operational step after the P&D pickup, the dock operation. Carrier dock cost is one area where a shipper can have a significant impact on carrier cost. Key factors that affect dock cost include the handling units of the shipment (number of cartons/pieces or pallets) and the number of times a shipment must be transferred in its movement from shipper to consignee. For example, a shipment consisting of two pallets versus 300 loose cartons greatly reduces the actual shipment dock cost. In all dock operations, the primary objective is to minimize the shipment handling frequencies and the travel time/ distance of moving the shipment from the unloading trailer door to a loading trailer door. In most cases, the shipment will be transferred directly from the pickup unit at the origin terminal to the linehaul trailer, which is known as a cross-dock operation. However, if the shipment is of significant weight, cube, or handling units and the carrier has properly planned by picking up the shipment on a linehaul trailer and loading in the nose of the trailer, then a transfer of the shipment may not be required at the origin service center. In trucking lingo, this is known as a headload. The carrier

simply unloads the trailer down to the headload and then fills the trailer with other shipments for the linehaul movement. This is why it is critical that shippers provide accurate information when notifying carriers about a large shipment for pickup. Carriers have operational planning systems that develop linehaul trailer projections based on shipments tendered or picked up. Big shippers that load spotted trailers at their dock can also greatly assist carriers by doing what is known as breakbulk directional loading. The closed trailer is moved directly

possibly breakbulk. As mentioned earlier, outbound operations are typically a cross dock, but the inbound and breakbulk are usually a combination of cross dock and floor staging for freight rehandling. Inbound staging facilitates the sequence loading and routing of the P&D delivery unit, while staging in the breakbulk allows the dockman on long haul linehaul lanes to maximize trailer cube utilization. Carrier dock metrics include measurements as simple as shipments per hour, or industrial engineered time standards based on dock size, number of handling units, and average weight per piece. Dock operations at the major carriers utilize barcode scanners to process each shipment’s dock movement and trailer location. Consult your carrier representative for ways that you can help to reduce their dock cost and improve your pricing. In the next article I will discuss how twin trailers have revolutionized linehaul and provide operational flexibility. p

In all dock operations, the primary objective is to minimize the shipment handling frequencies and the travel time/distance of moving the shipment from the unloading trailer door to a loading trailer door.

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may-june 2013 | www.PARCELindustry.com

to the first breakbulk service center, which eliminates all origin dock cost. Breakbulk service centers are typically a carrier’s largest door facilities with many having over 100 doors. Old Dominion Freight Lines recently expanded their Indianapolis, IN breakbulk facility from 223 doors to 325. When you have a dock platform this large, reduced dock travel distance is imperative for an efficient operation. Carriers utilize planning tools that track each shipment’s next scheduled dock loading door location and strategically designate the unloading door for the inbound trailer in order to reduce the dock travel distance. Service center dock operations are made up of three types: inbound, outbound, and

JOE hEiLig is a senior transportation Analyst with enVista, a leading supply chain consulting and It services firm specializing in freight audit/payment and carrier contract analysis/negotiation services that delivers significant transportation savings to their clients. Joe as been with enVista for nine years and prior served in the LtL industry for over 30 years as Director of Industrial Engineer and in management for several major LtL carriers. he specializes in conducting shipper LtL rate analysis and RFP engagements. Joe can be contacted at 803.708.8657 and jheilig@envistacorp.com.


Spend PersPectives By John haBer

The Marketplace Fairness Act (Internet Tax) Looms: How Will It Impact Us? n the first two Internet sales. With state and local govSpend Perspectives ernments in a drastic crunch for funding columns of 2013, I and plagued by massive debts, this legfocused heavily on islation is the most plausible means to how the health of the regaining financial stability. global economy was The Senate passage sets up a showdown impacting retailers. I in the Republican-held House, where the also discussed how lower bill is expected to pass by a narrow marshipping costs positively gin. If it ultimately passes the House, impact e-commerce sales how will the Internet tax impact consumand improve customer satis- ers, retailers (both online and brick and faction. What has been a dreary mortar) as well as the overall economy? Q1 2013 outlook showed signs of Who are the potential winners and losers improvement in March 2013 (retail should the bill pass in the House? trade sales were down 0.6% from The debate over Internet taxation is February 2013, but they were up 2.6% nothing new. Brick and mortar retailers over the same period last year). The UK have long argued that online retailers has avoided an unprecedented triple dip enjoy an uneven playing field. Consumers recession with encouraging retail sales in have been able to significantly reduce both March and April 2013. However, a the costs of retail purchases by shoplong debated and anticipated showdown ping online without incurring sales taxes over Internet taxation is reaching a criti- (generally range between 5% and 10%). cal juncture — and the impacts of pass- The news is a boon for brick and mortar ing this bill are far-reaching. retailers who have borne the brunt of the The Marketplace Fairness Act passed online retail explosion. Some have gone in the Senate on Monday, May 6, 2013 as far as to predict that the law could be by a huge margin — 69 to 27. This leg- an “Early Christmas” for big box retailers islation provides a practical way for state, such as Best Buy, Barnes & Noble, Walcounty, and local governments to collect Mart, and Target. The theory being that sales tax for goods sold on the Internet. consumers will reduce the practice of The law only applies to businesses with “show-rooming” and purchase less from more than $1 million a year in annual online retail and more from brick and sales. Currently, if you don’t have a brick mortar. Interestingly, and unlike E-Bay, and mortar location or distribution cen- Amazon has reversed course and is now ter in the state in which the purchase a proponent of passing the legislation. is made, you don’t have to pay sales tax This is largely due to Amazon’s increas(online retailers are actually supposed to ing statewide footprint with operations be collecting the taxes; however, very few in most states and a rumored impendare, and governments are not enforcing ing brick and mortar rollout. Small brick non-compliance). Recent estimates fore- and mortar retailers also stand to benefit cast almost $11.5 billion in 2012 uncol- greatly as they compete with niche online lected state and local sales taxes from retailers on a more level playing field.

Online retailers, current no tax states (Alaska, Delaware, Montana, New Hampshire, and Oregon), and most importantly consumers are the biggest losers if the legislation passes the House. Due to fierce competition in the online sector, many online retailers have been forced to move to a “free-shipping” model. Shipping is often the second largest cost element for an online retailer (after labor costs) and there’s no denying that free shipping squeezes margins. Online retailers stand to get hammered on several fronts: • As sales taxes increase, online sales are sure to decline. • The cost of compliance for online retailers will be a huge burden — there are over 9,000 state, county, and local taxing authorities. • Shipping costs will be harder to subsidize with decreased sales — most online retailers believe the cost of offering free or subsidized shipping is offset by higher profits as a result of higher sales volumes. A broad Internet taxation law is certain to damper Internet sales as well as make free shipping harder to sustain. Consumers are in a lose-lose situation as they could see a double punch, on both the taxation side as well as on increased shipping costs. 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. may-june 2013 | www.PARCELindustry.com

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Regional carriers are increasingly becoming the perfect fit for many small shipment organizations —but those organizations perhaps don’t know it yet. According to a survey conducted by Shipware and published in PARCEL’s 2012 September/ October issue, 18% of respondents deliver more than 50% of their shipments within 500 miles of origin, and another 30% deliver 31%-50% of their parcels within that same radius. Yet over a

third of our respondents (39%, to be exact) are either not very familiar with the services offered by regional carriers, or not familiar at all. And a full 70% of our respondents do not currently use regional carriers! Doesn’t this seem a bit... odd? Shippers could very well be leaving money (and excellent service) on the table by not utilizing regional carriers as part of their transportation strategy, especially since many shippers are

sending their packages within the very delivery area at which regional carriers excel. No one is denying that UPS and FedEx are very effective at getting shipments from Point A to Point B, and in some cases, they are the most cost-effective option for shippers. We’re certainly not suggesting they should be ignored as an option! But, in many cases, regional carriers could be a better fit for your small shipments, getting


Carriers

District of Columbia

them to your customers both more cheaply and more quickly. So we hope you enjoy these next few pages of profiles of some of the leading regional carriers in the country. And if you are one of the 70% of people who responded that regional carriers were currently not used as part of your transportation strategy... well, we think you’ll answer differently the next time we conduct such a survey!

Interested in reviewing the survey we referenced? CLICK here!


APPLICATION ARTICLE

The Vision of Ground Shipping has Changed You may have glanced at the possibility of a regional carrier handling your small packages in the past, but shippers are encouraged to take a second look at the regional option now more than ever. Regional carriers offer a choice that is flexible, cost-efficient and more personalized. This was PITT OHIO’s vision when they launched their small package service in 2009. They found shippers are looking for an alternative when they inevitably begin to feel pressured by the small package giants whose assessorial charges continue to climb. Flexibility and convenience were missing from the picture, so PITT OHIO put significant focus on offering flexible solutions based on a customer’s specific need. Shippers appreciate the wiggle room this company’s ground service offers. If it doesn’t fit, this regional powerhouse will still get it shipped. With an operation that doesn’t include conveyer belts, PITT OHIO is able to handle the hard-tohandle items such as pales, rakes and liquids and really anything you can imagine (envision).

When it comes to personal service, regional carriers offer more than you bargain for. Your package is more than a barcode scanned number because PITT OHIO focuses on providing a personalized customer service experience for every shipper, large or small. A recent survey shows regionals are approximately 20% more costeffective than the nationals for overnight and two-day deliveries. Where the nationals of the small package world have over 50 assessorials, regional shippers, including PITT OHIO have as few as 15. Organizing your small package shipping is a big job, but you don’t always need a giant to handle it. Take a second look at the regional option for your small package shipments. The choice is yours.

PITT OHIO www.pittohio.com 800.366.7488


ApplicAtion Article

Save Time & Money with OnTrac OnTrac is proud to be the leader in regional overnight parcel delivery. Founded in 1991, as a division of Express Messenger Services Inc., OnTrac has the expertise to provide superior service and value in overnight delivery, distribution and logistics. We deliver to the eight largest Western states offering time-critical service to California, Arizona, Nevada, Oregon, Washington, Utah, Colorado and Idaho. With a delivery coverage area of more than 60 million consumers, our service area is comprised of almost 20% of the US economy. At OnTrac, we are committed to providing the highest quality service at the most competitive rates. OnTrac Ground provides faster time in transit to enhance your customer experience and provide an edge over your competitors. With fewer accessorial fees than the national delivery companies, we pass the savings on to you. OnTrac has a reputation for delivering excellent service and our “can do� attitude is the hallmark of our success. We understand the importance of flexibility and operating in time sensitive envi-

ronments. For this reason, OnTrac offers later pickup times, which increase your productivity by allowing you to process more packages each day. We routinely go the extra mile to get the job done for our customers. Our Money-Back Service Guarantee assures that we are committed to exceeding the expectations of our customers. For more information, call 1.800.334.5000 or visit www.ontrac.com.

OnTrac www.ontrac.com 800.334.5000


APPLICATION ARTICLE

The GSOVision Overnight of Ground Delivery Shipping to CA, NVhas & AZChanged Golden State Overnight (GSO) is a regional parcel delivery company, offering overnight delivery to every address in California, and metropolitan regions of Arizona and Nevada. GSO customers enjoy a premium level of service at a substantial cost savings, providing them with a strong regional alternative to the national carriers. GSO advantages include later pickups, earlier deliveries and unsurpassed customer service, as well as web-based shipping tools.

The GSO Advantage

• Next day delivery, with 8:00 PM pickups available in most areas • Customized point-of-delivery procedures and 100% signature capture • A full suite of Web and IT integration options for label production, tracking and data sharing Call or email a GSO sales representative to learn more.

• Savings on ground and priority overnight delivery costs • 100% employee-based delivery model (no independent contractors) • Reduced time in transit, elimination of split shipments and up to 99% delivery success • Fewer damages and returns

GSO www.GSO.com sales@gso.com 800.322.5555


APPLICATION ARTICLE

APPLICATION ARTICLE

For 22 years LSO, a leading regional small package carrier, has earned the highest reliability and lowest damage rates in the industry. Headquartered in Austin, Texas, LSO offers a full range of next-day, day-definite guaranteed deliveries. Extended pickup times, early morning delivery options and competitive rates make LSO the high-service, high-value shipping provider.

Spee Dee Delivery Service, Inc. is a regional transportation supplier that provides ground service for both parcel and LTL shipments. A combination of our competitive rates and transit times makes us a great alternative to the national carriers.

LSO’s service area covers Texas, Oklahoma, western Louisiana, southern New Mexico and, through partnerships, California, the western US and Mexico. Unlike other carriers, LSO ships packages point-to-point and doesn’t use conveyor belts that can damage shipments. Fewer miles and hand-offs mean packages arrive on time and in great shape. LSO also provides live customer support and flexible shipping solutions to help businesses grow more customers, more revenue and seize new opportunities. To find out how LSO can help your business, contact one of their friendly sales team members today.

Spee Dee Delivery Service www.speedeedelivery.com sales@speedeedelivery.com 800.862.5578

LSO www.lso.com 800.800.8984


APPLICATION ARTICLE

Still Driven to Deliver after 30 Years Eastern Connection, founded in 1983, is celebrating its 30th anniversary as it reflects on many milestones and announces plans to expand its service area and provide new delivery options. Based in Woburn, MA., Eastern Connection is the country’s longestoperating regional delivery service and the largest regional smallpackage overnight carrier on the East Coast, covering over 5,000 zip codes in the Northeast. And the company is still growing by extending its offerings beyond the East Coast, where companies receive next-day service. Eastern Connection is now providing two-day service in Western Pennsylvania (Pittsburgh), West Virginia (Charleston), Ohio (Cleveland, Columbus, Cincinnati), Kentucky (Lexington), Indiana (Indianapolis), and Michigan (Detroit). For three decades, the company has provided earlier deliveries and lower prices than its giant competitors for next-day services, and now that also applies to its deferred two and three-day ground service. Recently, Eastern Connection has also made major investments in technology, including hand-held digital scanners and a new overhead parcel scanner system. “A well-kept secret is that we are actually more reliable than UPS and FedEx,” according to company co-founders Jim Berluti (pictured)

and Ted Kauffman. “We have the best record in the industry for on-time delivery, the best safety record, and prices that average 20% below those of the giant carriers.” The company is open 7 days a week and 365 days a year. Services include Next-Day Ground for entire footprint, Priority Overnight, Second-Day, Same-Day, Logistics & Warehousing, Trucking, Expedited Mail, and Drop Boxes. For more information, visit www.easternconnection.com, call 800.877.4745, or email EC-sales@easternconnection.com.

Eastern Connection www.easternconnection.com EC-sales@easternconnection.com 800.877.4745


ApplicAtion Article

LaserShip is a regional parcel carrier facilitating last mile delivery to east coast markets for businesses that desire reduced transit times, greater flexibility, and the elimination of excess costs within their supply chain. Founded in 1986, LaserShip has evolved into a leading provider of regional same-day and next-day distribution services for premier e-commerce and product supply businesses. LaserShip also features specialized divisions that support timecritical delivery for healthcare logistics, routed delivery, and Global Next Flight Delivery. For more information, visit www.lasership. com or check LaserShip out on Facebook, Twitter, and LinkedIn.

LaserShip www.lasership.com LSadvantage@lasership.com 800.527.3764


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Exploring

the new world of international shipping:

OptimizatiOn

In 1492,

a global shipping “first” achieved by Christopher Columbus produced the stunning news that: 1) the world was not as flat as it appeared and 2) international transits weren’t as perilous as originally imagined.

Today, it seems the opposite is true, at least in terms of supply chain management. Globalization has leveled the competitive playing field between countries, turning the expression, “the world is flat,” into a fundamental economic truth. And as more businesses have begun transporting goods internationally, most have discovered they’re more — rather than less — prone to risk. The sources of this enhanced risk are easy to see, because the average international shipment involves multiple modes, varying infrastructures, thousands of additional miles, substantially increased lead time, more government agencies, increased regulation — and a product consumption landscape that can change dramatically between the time a product leaves the factory and the time it ultimately reaches its final destination. And any of these things can work a number on delivery reliability. By contrast, the remedies are harder to come by. “In the past, when supply chains were mainly domestic, companies could usually navigate through most shipping challenges by drawing from their years of experience and accumulated knowledge — knowing which combinations of routes, carriers and distribution center activities worked best for their particular supply chain. They also could use optimization. Or they could use a combination of the

two,” said Dr. Rajiv Saxena, vice president of global supply chain engineering at APL Logistics. “International shippers don’t have that history yet.” Nor, until recently, did they have powerful enough optimization tools. “Optimization at its core is a technique that is supposed to pick out the very best solution based on all of the potential options and constraints,” Saxena explained. “There are a lot of tools on the market that can do this domestically, because the universe of potential routes and carriers that companies can use is large but manageable. By contrast, the universe of potential international shipment options and techniques is far larger and more variable — and that’s been a problem for developers.”

How InternatIonal SHIppIng optImIzatIon addS Up Saxena doesn’t exaggerate. Today there are: • Approximately 50,000 merchant ships carrying international trade cargo • 8,200 seaports worldwide • 1,000 cargo airports worldwide • More than 400 liner services providing regularly scheduled sailings • Several international modal considerations such as air, air-sea, sea-air, all water, water combined with a transload or water plus mini-land-bridge • Five standard ocean container sizes ranging from 20 to 53 feet


• And many additional land transportation shipping requirements that must be met before and after global shipments sail or fly.

shippers alsO must decide: • Whether to use full containers or opt for less-than-containerload • How to load containers at origin — single-country consolidation, multicountry consolidation, co-loading or premium/expedited shipping • And how to unload containers at their destination. “Plus even these lists grossly oversimplify the challenges at hand, because each company also has its own complicated production schedules, vendor policies, and supply chain rules to consider,” commented Saxena. The net effect is a staggering number of potential shipping permutations and scenarios to consider — and too much information for even the most robust of traditional optimization tools to fully accommodate.

the imprOving state Of OptimizatiOn This is not to suggest that international shippers haven’t done their best to apply optimization — or that they haven’t succeeded, at least to a degree. In fact, many frequently have used it to empower decisions such as how to make a preferred delivery date, maximize loading efficiency or minimize door-to-door shipping costs. But the emphasis is on the word “or.” “For a very long time, international shippers could achieve one of these objectives with an optimization tool or perhaps two if they were very fortunate. But they couldn’t quickly and easily achieve all three,” said Saxena. Fortunately this scenario changed in 2011, when a team of engineers from a large global third-party logistics provider and a major software company made a breakthrough. By using a column generation algorithm platform instead of the linear algorithm that fuels most logistics optimization tools, they were able to develop ShipmentOptimizer, an optimization product that could handle a far larger number and variety of inputs

— and crack the challenge of simultaneous optimization. The tool, which was introduced in 2012, can concurrently identify all possibilities for a company’s global shipment, rule out several of these possibilities by weighing them against that company’s business rules, and prioritize the rest to arrive at the ideal reliable mode, load, carrier, route and booking recommendation, all within a couple of hours. It also has the capability to immediately update and re-optimize this recommendation at any time in the life of the shipment just in case any element of the shipment’s scenario changes — which is a big advantage.

Other OptiOns But even this new-and-improved form of optimization isn’t a panacea for every potential international shipping risk. “The most successful international supply chains start with the kinds of good supply chain plans and decisions that optimization enables. But they’re also just as reliant on world-class execution — and the strategic use of things like visibility tools, premium services, and available supply chain expertise,” Saxena advised. For example: • By routinely checking on scheduled production milestones and comparing them against overseas vendors’ confirmed purchase orders to ensure things are happening on schedule, a company can learn about international orders that won’t be ready to ship even before they finish being manufactured — while there’s still ample time to come up with a Plan B or manage recipients’ expectations accordingly. • By occasionally engaging in diversification — bringing goods into a different port, using a different carrier or mode or trying out a different supplier on a limited level — companies not only can become more familiar with available back-up resources, they’ll also be able to deploy them more readily should an issue like weather or labor dispute arise, because they’ll already have an established relationship with those entities. • By proactively allotting some budget funds for expedited transportation

options — thinking in terms of “when” such options will be needed rather than “if”— companies can elect to spend the money on time-definite ocean shipping, air shipments, or expedited land transportation when a shipment’s prompt delivery date is essential. • And by working with logistics providers or consultants that already have a footprint in certain global markets, companies can essentially give themselves the benefits of years of experience in those markets — and enhance their ability to make experience-based decisions about shipments to or from those markets — almost overnight. “No one single tactic, tool or technique can guarantee a company smooth sailing through an international supply chain each and every time,” said Saxena. “But many of them working in concert can certainly bring them much closer to that goal.”

sailing the Ocean Blue Like Columbus’s voyage, the story of globalization has the potential to travel in any number of exciting directions as it continues to unfold. We know for instance, that nearsourcing has begun to gain traction with many North American companies, that many thriving manufacturing venues like China and India have become equally burgeoning consumer markets, and that imminent events like the Panama Canal expansion could change the game on many levels. We also have seen that any number of events ranging from the meteorological to the manmade can alter the efficacy of even the best-designed global shipping plans in the blink of an eye. However we also know that the practice of supply chain management is also in a state of continuous change — and it often is change for the better. “Whether it’s a more robust optimization tool or a new genre of service, everyone from carriers to 3PLs to systems developers alike is working toward creating solutions that will help companies more confidently and capably navigate what are still unfamiliar waters to many,” Saxena said. In other words, stay tuned. Because easier and more reliable shipping is already on the horizon. p may-june 2013 | www.PARCELindustry.com

25


Parcel Spend Management — It’s a Thinking Person’s Game! Mike Lambert ow that spring has arrived, I’ve been spending a lot of time at the ball fields watching my 10-year-old son play baseball. At the end of every game, his coach offers up some words of wisdom as a takeaway from their performance. Often he enthusiastically says, “Boys! Remember, it’s a thinking person’s game!” He follows this up with some specific example, such as, “When fielding, understand your current situation and what your options are before the ball is hit.” For the boys, it’s easy to forget the importance of evaluating these scenarios and thinking strategically in the excitement of the game. Baseball appears to be a simple game, but when you evaluate the seemingly infinite scenarios that can occur, one realizes it’s actually a very complex and strategic game. Typically the team that prepares the best and outthinks the other wins the game! The same can be said for managing your company’s parcel spend. On the surface, the casual observer may think it’s a piece of cake. This person tends to reason, “Just negotiate some good rates with a carrier” and let them handle the rest. It’s easy to put parcel shipping on autopilot with your carrier. Unfortunately, to effectively manage and optimize a large parcel network, it’s not that simple. Today when time and cost matter more than ever, logistics has become a key component to an organization’s survival. Any shipper in the retail world can relate to this, with Amazon changing the entire

landscape of retailing and distribution as we know it! As a result, it is not just about negotiating good rates with your favored carrier. Today, managing a large parcel network requires shippers to develop and implement carrier, service, and cost strategies that collectively keep their firms in a competitive position. It’s not uncommon that a shipper jumps straight to tactical execution of a parcel solution without first fully understanding their strategy. It’s easy to fall into this trap when the requirements of transportation managers’ jobs are many and resources are limited. Slowing down to work on strategy can be difficult to do and often an afterthought. Unfortunately, boiling down a parcel strategy to just negotiating better rates with a carrier often leads to suboptimal performance. To be effective, a shipper must develop a parcel strategy that clearly defines their goals and objectives pertaining to service, carriers, and cost. This process requires thoughtful evaluation of the current state and assessment of a multitude of options in order to create a roadmap leading to optimal results. Let’s start with carrier strategy. Carrier strategy can vary from shipper to shipper and many factors such as volume, service requirements, shipper constraints, and even carrier relationships can drive carrier utilization decisions. Therefore, a shipper should clearly assess their situation and understand the market to develop a carrier strategy. Assessment of the current situation should involve the following: • Evaluation of parcel profile — volume & spend by service, weight, and zone across relevant business segments and origins • Review of competitors’ service offerings and shipping policies • Analysis of opportunities for optimization


• Identification of rate and contract opportunities with current carrier(s) Shippers must also understand the current market and carrier solutions available. There are a multitude of national, regional, and local carriers in addition to FedEx and UPS that may provide an optimal solution in terms of both price and service. There is a good chance that these carriers can meet shippers’ particular needs based on their volume profile, optimization, and rate opportunities. Best of all, these carriers are eager to win shippers’ business by partnering with them to meet their strategic goals. Consider this example of carrier strategy development. You may be a high volume shipper benefitting from the booming growth of e-commerce year over year. You have a single carrier that you have built a relationship with over the last ten years. Your contract has been extended several times without testing the market through a bid process. You’ve implemented some of your carrier’s new service solutions to improve transit time and maintain cost. Chances are if you assess your current situation and the market, you would find a lot has changed. Your competition may be offering faster service at lower costs to consumers. Your distribution network may not be capable of supporting your volume profile and the needs of your customers. And more than likely, there are other carriers with solutions that outperform some of the services you are using with your current carrier. If you find yourself in this situation, you may set the following carrier-related Goals and Objectives for the current year.

Goals: • Strategically engage with multiple carriers to optimize the parcel network • Become carrier independent from a systems and technology perspective

objectives: • Implement a best-in-class returns process • Implement niche carriers for low weight and heavy weight outbound DC shipments • Evaluate use of regional & local carriers to gain a strategic advantage in specific markets

From these goals and objectives, tactical and strategic projects can be developed. For this example, the projects might include: • Execute a bid process with parcel and postal consolidation carriers • Implement required system changes to support multiple carriers • Conduct an RFI with regional and local carriers Service is the second component in outlining an overall parcel strategy. Shippers must evaluate service level requirements for their customers, create a service strategy, and develop a cost effective parcel solution to support the strategy. The process of developing a solution is complex, with a multitude of distribution network and carrier service options to consider. Ultimately, once a shipper aligns to a distribution footprint that can be supported, they should seek carriers that can provide service solutions to complete the puzzle. Outlining a specific service strategy is important so that optimal solutions can be engineered. For example, you may have a goal to improve transit time in line with your competition. Based on this goal, you can now develop a clear set of objectives for yourself and seek carriers to attain this goal. Examples of potential service-related goals and objectives include the following:

Goals: • Implement a 2 day transit network to compete with e-commerce market leaders • Minimize backorders

objectives: • Implement ability to rate shop for optimal service selection • Assign inventory to optimal DCs based on transit and cost opportunity • Leverage inventory from other distribution channels (stores) Tactical and strategic projects that may result from these goals and objectives include: • Implement required system changes to support optimization of multiple services • Identify root causes for shipping from the least optimal DC • Test ability to ship from stores

Developing cost objectives is the last component in outlining an overall parcel strategy. Obviously all shippers want to reduce cost. However, a strategic plan is required to do so. Primarily, shippers can reduce cost through optimization and rate reductions. As a result, cost-related goals and objectives tend to equate to projects that the shippers can implement themselves, in addition to partnership with their carriers. Common cost-related goals and objectives include:

Goals: • Optimize carrier contracts • Reduce wasteful practices and avoidable expense

objectives: • • • • •

Implement best in class carrier agreements Identify non-optimal use of carriers and services Reduce billed weight of packages Reduce controllable accessorial expenses Leverage processes to consolidate packages for an order to reduce split shipments

The tactical and strategic activities to meet these goals require a great deal of analytic power and resources. Shippers should ensure they remove any constraints and challenges to producing powerful business intelligence. In summary, developing and executing carrier, service, and cost strategies are fundamental to executing an optimal parcel network. Business demands, competitive threats, new solutions, and evolving technology require shippers to continually evaluate their parcel strategies to stay on top of their game. The pace of business will only continue to increase, and leaving a parcel network on autopilot will lead to sub-optimal network. Shippers must be “aware of their current situation and what their options are” at all times. It’s a thinking person’s game, and the most strategic players will win! p

Mike LaMbert is Vice President of Consulting Services for Green Mountain Consulting. In this role, Mike is responsible for the development and execution of all strategic Parcel Spend Management solutions which include spend analysis, network optimization and contract management. Mike can be reached at mlambert@gmcps.com. may-june 2013 | www.PARCELindustry.com

27


By Ayal Latz

Returns and Refurbishment – There’s

Gold in Them Hills!

R

eturns have always been a part of retail business. And each business has created policies and procedures that work for them. E-commerce is not different. In fact, the e-commerce trend is for increased returns. Ultimately this will be as high, if not higher, than retail, depending on product category. Our experience is that a well-managed returns and refurbishment program can save the marketer in the long run — the proverbial ‘Gold in Them Hills’. In this article we examine the reasons for returns, key elements of a return strategy, program cost elements, and our preferred method to minimize costs and maximize revenues. What causes returns in the first place? This occurs for several reasons. First, e-commerce businesses aggressively position themselves as customer friendly. Well-defined and communicated 28

MAY-JUNE 2013 | www.PARCELindustry.com

policies and procedures is a selling tool. Our “Amazon World” environment is fast becoming the norm. Second, the very nature of e-commerce creates situations where the consumer does not have the same touch and feel experience that exists at retail. The absolute need for returning items might be greater. Apparel has always experienced high rates of return compared to many other types of products. This could easily be higher with e-commerce than at retail. Third, the ease of returning, and even the anonymity of returning goods could be greater for the e-commerce customer. Whereas a consumer may feel uncomfortable returning an item to a retail store, and explaining the reason(s) for the return, who has a problem popping something into the mail? These market forces and trends motivate businesses to have well-established plans for returns. The key objectives of any return policy and procedure should:

1) Be based on a sustainable financial model associated with the returns — this varies with each business and product line. 2) Have a well-organized mechanism for feedback and improvement leading to goals for on-going process improvement to reduce costs. 3) Create and maintain satisfied and loyal customers. Let’s review these key objectives. 1) Setting up a return and refurbishment process starts with calculating all costs. This is important because it ties back to your sustainable financial model. If you under-estimate your true costs, you may think that you can sustain a higher level of returns, and still achieve your financial goals. You will deceive yourself until a more detailed financial audit reveals the additional costs. If you over-estimate your costs, you might be presenting a less friendly customer service level, which could result in lower sales. What


are the cost elements for a returns and refurbishment program? a. Customer service. This is mostly a function of agent phone time. There are multiple touch points with the customer including when they call to make a return, follow up on the status of their return (and credit), and any proactive programs implemented to communicate with the customer. b. Shipping costs. This is one of the highest cost categories. Who pays for the shipping? What method is used for shipping? How fast is it returned? Our preferred solution helps to reduce this. c. Receiving costs for the returns. d. Processing of returned goods. A well-designed program to open, inspect and evaluate will help to reduce costs. e. Refurbishing of the returns includes cleaning, adjusting, rebuilding, repackaging. This is a big opportunity for many companies. Any product or component that can be saved will result in cost savings. All operate under the protocols that you design. Definitely ‘Gold in Them Hills’ here. f. Recycling of product or even components. There are many different approaches to this function. Refurbished items can be returned to the manufacturer or re-injected into the inventory stream at the processing center. g. Disposal of returned items and components, including environmental issues associated with disposal. h. Storage of returned items, components and space for performing return-related activities. 2) Next, a good feedback mechanism must include three critical functions to capture information on the reasons for returns. Your customer service department, order management system, and your fulfillment/returns center are uniquely situated to collect and compile information. Accurate and timely information gives you the ability to take the next step. Ideally the

information is as detailed as possible, i.e. by product category and item level. The basis of a returns program must incorporate an understanding of why returns occur. Buyer’s remorse is always a contributing factor. Often, products do not meet the customer’s expectations. This is more common in e-commerce than at retail, because the buyer does not have the same opportunity to experience the product. Examples are product not fitting properly or the customer doesn’t like it. There may be product quality issues, such as damaged goods or missing components. Now that you understand the reasons for the returns, you have the tools to address the rate and ultimately make a financial impact. What expectations did you set with the customer? This includes product promises, item availability, order processing time, and shipping and delivery time. Your business can refine the product promise message to more accurately shape the customer’s expectation. A good order management system allows the customer service agent and consumer using the shopping cart to know whether or not the product is in stock. A fulfillment center capable of processing orders quickly reduces time from order to delivery. Geographic location can reduce time in transit, and lower shipping costs. Where are your customers located? Can you position your fulfillment so that the majority of the customers can be reached within, say, two days via ground service? 3) The level of customer satisfaction and loyalty are key elements in a returns strategy and start with your strategic intent. What is the profile and message that you wish to project to your customer? Along a wide continuum of possibilities, where will your program fall? Will returns be a friendly action, with an easy process for the customer? Or, do you wish to make it more difficult, by raising various barriers for the customer? There is no right or wrong answer. Each business has to have a starting point. For example, for one product category the goal might be to have a return threshold at 10% of orders. Another product category might be 35%. Whatever level you select should tie to your sustainable financial model. There are several options for handling customer return requests. For low cost/

low value items, it may be cheaper to allow the customer to retain the item, avoiding physical returns. This greatly simplifies the process. Cost functions incurred are customer service time and issuing of the refund/credit. In another model the customer pays the cost of the return. This is through a return fee and/or payment of shipping. This model is less costly for the retailer, but can create bad feeling with the customer resulting in a lost customer, as well as negative publicity via social media. This is especially detrimental to branded products, which rely on customer loyalty and good social media. Our preferred model is one in which the customer is given options. This puts them in charge with choices and tradeoffs based on their needs. The customer may select from a range of options allowing them to return the product with varying degrees of hassle by paying a portion, or all of the shipping cost. This results in good customer relations and can reduce the cost to the retailer by eliminating or reducing the shipping cost category. How does this work? The customer pays the return postage but the marketer makes the process convenient (at a price). Marketers offer prepaid labels by email or mail at discounted postage rates. This allows the customer to skip the post office lines and simply drop the package in their own mailbox. Or even schedule a free pick up! And many customers are willing to pay for this convenience. This is a ‘Gold in Them Hills’ option because everyone is happy and the marketer can introduce it only after the Savethe-Sale attempts have failed. p

Ayal Latz is President and founder of a2b Fulfillment, Inc. The company evolved from Ayal’s family toy business, which affiliated with other toy companies, becoming their distributor. Today, a2b is a leading provider of fulfillment, customer service, warehouse and logistics services for Consumer Direct and e-commerce. Contact him at 866.843.3827 x 118, ayal@a2bf.com, or www.a2bf.com.

Want to read the full article? CLICK here! may-june 2013 | www.PARCELindustry.com

29


ApplicAtion Article

Re-engineering the Parcel Industry The parcel shipping industry was becoming motionless and in need of a new vision to go beyond the static way that parcel (business to consumer) distribution has been conducted in the past. Parcel shippers are tired of vendors blaming the USPS for their failures and bringing nothing to the table but a lower cost that is usually eaten up by accessorial charges. Unfortunately, some Parcel shippers are losing sales and some of their major customers (millions of dollars) because of misrouted packages, late delivery, inaccurate billing and lack of management reporting. Parcel distributors need to step up and support customers and the United States Postal Service with creative vision, passion, innovation, better quality controls, industry expertise and overall customer care. BestWay Parcel Services (BWPS) was created to be an extension of our customers, the USPS and our DDU partners. The BWP model allows their customers to have more control of their processing and distribution, enhance their branding and not be locked in to a one of a kind take it or leave it methodology that exists today. We have eliminated excessive costs, wasteful processing and built a new network that accelerates delivery, enhances security, corrects misroutes, reduces reships, empowers the customer and puts them in a position

to never have to settle with status quo again. Every application is different and custom designed to meet and exceed our customer’s economic, management services and delivery expectations. Our innovations over the years have and will continue to assist the USPS to regain and keep customers while increasing market share and revenue. Our new methodologies will assist them greatly in becoming a dominant player in the parcel industry...especially the e-commerce arena. BWP is partnering with the USPS and the premier Regional Carriers to bring the fastest delivery and the ultimate management experience to our customers and their delivery supply chain.

BestWay Parcel Services sonnysmith@bestwayparcel.com 404.788.7864 seansmith@bestwayparcel.com 770.335.2542


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