GETTING TO KNOW THE REGIONAL CARRIERS PAGE 14
5 KEY CARRIER CONTRACT NEGOTIATION LEVERAGE POINTS TO EMPLOY. P.30
EVOLVING TO KEEP UP WITH THE E-COMMERCE DEMAND. P.34
PRODUCT PACKAGING AND CONSUMER SATISFACTION â€” MORE CONNECTED THAN YOU MAY THINK. P.24
OPERATION IS GROWING! NOW WHAT?
CONTENTS /// Volume 25 | Issue 3
14 20 24 30 06 EDITOR’S NOTE Keeping Up with the Times By Amanda Armendariz
08 OPERATIONAL EFFICIENCIES I Spy with My Little Eye By Susan Rider
10 SPEND PERSPECTIVES E-Commerce Drives Air Cargo Volume Growth and Capacity Constraints By John Haber
20 AND THE AWARD GOES TO… GAP INC.! Congratulations to the folks at the Gallatin, TN campus for their selection as the 2017 game-changer of the year! Amanda Armendariz
24 PERCEPTION IS KEY A recent study shows that parcel packaging impacts consumers’ perceptions of product value by 45%. Here’s how to ensure you always make a good impression. Ryan Germann
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30 UNDERSTANDING 5 KEY CARRIER NEGOTIATION LEVERAGE POINTS You may think you are getting the best deal on your UPS or FedEx contract, but there is always the opportunity to drill even deeper. These five points are a great place to start. Brandon Staton
34 EVOLVING TO MEET THE E-COMMERCE DEMAND E-commerce only continues to grow, so retailers need to make sure their shipment operations are staying ahead of the curve. By Ayal Latz
36 PARCEL COUNSEL Long Ago... and Into the Future: the USPS and Last-Mile Delivery By Brent Wm. Primus, J.D.
38 WRAP UP Kitchen Table to Fulfillment Partner By Michael J. Ryan
SPONSORED CONTENT: 09 SHAPE YOUR SHIPPING STRATEGY WITH DIMENSIONAL WEIGHT CALCULATIONS 11 TOP 5 CARRIER-RELATED SHIPPING CONCERNS FOR TODAY’S RETAILERS 12 ARE YOU ON TOP OF YOUR SHIPPING COSTS? 13 HOW NEXGEN TECHNOLOGY WILL LEAP BEYOND TMS 14 THE VALUE OF REGIONAL CARRIERS 29 SIMPLIFY YOUR SUPPLY CHAIN 33 YOUR SHIPMENT IS OUR PRIORITY 37 REDEFINING CUSTOMIZED SERVICE
PARCEL PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ firstname.lastname@example.org ]
EDITORIAL DIRECTOR ALLISON LLOYD [ email@example.com ]
EDITORIAL INTERN KAYLYN GEIGER AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ firstname.lastname@example.org ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ email@example.com ]
P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2018 Â© 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.
KEEPING UP WITH THE TIMES By Amanda Armendariz
long time ago, it seemed that the shipping industry was fairly predictable. Consumers were happy with the fact that they could easily shop from the comfort of their own homes thanks to a variety of mail order catalogs, from which they would tear out the order form, write down the product numbers, and mail it back to the company. Sure, this process might take a few weeks from start to finish, but it was worth it to have the product(s) delivered straight to their doorsteps without ever having to leave the house. Oh, how times have changed. Now, not only do consumers expect — nay, demand — two-day (or less) delivery for most products (many of which are purchased on mobile devices), they also have definite opinions about how, when, and where these purchases should be delivered. The old model of
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dropping off the package on the doorstep doesn’t always cut it anymore. Today, consumers prefer a multitude of delivery options, such as in-store pickup or strategically placed, 24/7-accessible parcel lockers. Furthermore, the unboxing experience is quickly surpassing the in-store purchasing experience for many buyers, which can greatly impact post-purchase satisfaction and behavior. It’s a whole different ballgame than it was 20 or 30 years ago. This isn’t necessarily a bad thing, but to ignore the fact that this mindset shift can cause issues for shippers would be a mistake. It’s important for retailers to be aware of the constantly changing consumer preferences and tailor their delivery experiences accordingly. Yes, it can be tempting to just stick with the tried-and-true methods we’ve always used, but we then run the very real risk of losing our customers to a different company who will better tailor its strategies to today’s buyer. And with all the work that goes into attracting and retaining a customer, the last thing you want is to lose them because you didn’t alter your fulfillment experience to match their needs. Times are changing, and it’s important we change with them. I hope you find this issue — and every issue — of PARCEL helpful in your quest to optimize customer satisfaction with their e-commerce experiences. As always, thanks for reading PARCEL.
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
Amazon: Much Ado About Nothing? By Jerry Hempstead
Three Ways to Optimize Your E-Commerce Fulfillment to Satisfy Millennial Shoppers By Maria Haggerty
Keeping Up with the Speed of the Parcel Industry By Bob Malley
I SPY WITH MY LITTLE EYE By Susan Rider
ave you ever wondered what consultants look for when they come in and audit your facility to suggest better processes? Much like the “I spy” game when you were a child, the consultant looks at your operation with a curious eye. If you have deep distribution operational experience, you can do this yourself. Start at the beginning and step back as if you are seeing the operation for the first time. Try to avoid criticism or suggestions until the end of your review. While you’re there, take a look at how many people you have in each functional area as well as their job descriptions. It is common for the order entry or order management department to mushroom as your company adds customers, regions, or sales associates. Assigning one person to each customer is crazy if
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that person only has a threehour job during the day, or they are only busy for two months of the year and sit idle for the other 10. One facility I visited had a person each for Walmart, Target, and four other big box stores. They felt it necessary, but in the analysis, the workload that was given to six people could have been done by three. Oftentimes, companies will choose a consultant to come in and do the audit or analysis of processes not because they aren’t qualified or they can’t do it themselves, but because they want a fresh look. Or perhaps the management team knows what is wrong and what needs to be fixed but wants a third-party recommendation to validate the decisions. A consultant might also be brought in to agree with management’s decisions. Unfortunately, they don’t always agree, and that’s when management shoves the report in a drawer somewhere. Harsh, but true. Once you have your order process down to a succinct science, move on to receiving, putaway, location strategy, picking, packing, and shipping. If you have an area that is wreaking havoc on the rest of your operation, you may want to start there and then go to the beginning. Look for things that are no longer needed or processes added because a mistake happened once and a new process was created. What commonly happens is a problem or issue develops, and instead of going to the core problem and fixing it there, an added process is developed in hopes of catching the mistake
in case it ever happens again. Ask yourself if this process is still necessary. Also look for opportunities for small investments that will save a lot of money. For example, one facility I visited needed an inexpensive way to remove corrugate from the second floor. It was taking too much time and effort having people go up and down the stairs to remove it; therefore, it caused a lot of clutter that had to be walked over, etc. A maintenance guy bought a large black plastic drain culvert pipe, cut it in two, and created a slide for the corrugate. It was positioned next to the bailer, creating less handling and walk time. You would be surprised how small investments like this reduce the amount of search time, distractions, and walk time, as well as increase productivity. Cross-training is also very important. Most companies don’t exercise this practice and instead wait until the instrumental person leaves or gets sick to figure out how that job works. Cross-training also helps during vacations so that the person off doesn’t come back buried in work. Many that do participate in cross-training only do it within departments. But if you have groups that could work better together, cross-training across departments will help them appreciate the impact of certain operational requirements or processes.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at firstname.lastname@example.org.
Shape Your Shipping Strategy with Dimensional Weight Calculations How do you know if you are getting the best parcel rates for your goods? Simply follow a few rules of thumb, and gain confidence that you have truly captured the very best pricing available. MULTI-CARRIER SHIPPING Reaping the greatest savings on shipping requires a two-pronged tactic. Start by applying a multi-carrier approach to all of your business dealings. That way, you can pivot from one carrier to the next if it makes sense to do so. Or consider using a company like Visible Supply Chain Management that has adopted a multi-carrier approach from the beginning. Thanks to Visible’s carrier-agnostic strategies, coupled with its high-volume buying power, we can pass along deep savings to customers. DIMENSIONAL DISCOUNTS MATTER The multi-carrier hurdle is only half the battle. Dimensional discounts and surcharges must also be taken into account. These often times poorly understood concepts are vitally important to consider in order to secure the best pricing, no matter what you ship. Why does dimensional pricing even exist? Private carriers’ pricing structures were historically suited to large packages, and to high volumes of packages, traveling to one location. Now, with the rise of e-commerce shipping, more individual items are sent directly to people’s homes. To counter the rising cost of small residential shipments, carriers added a surcharge specifically to small packages — the dimensional pricing surcharge. USE DIMENSIONAL PRICING TO YOUR ADVANTAGE Dimensional pricing can work in your favor if you are highly aware of your packaging’s dimensions. Savvy business owners have already reduced package size to negate the impact of dimensional surcharges, but the latest dimensional divisor
reduction demands that shippers approach this problem with even more scrutiny. In many cases, shifting to an even slightly smaller box with less internal padding can make a difference. So can selecting the right carrier. Consider the following: Dimensional discounts with the USPS apply to packages that are lighter than 20 pounds and less than 50% of a cubic foot. To determine if one of your boxes applies, use the following formula: (Length” x Width” x Height”)/194 Further discounts apply if a package is 40%, 30%, 20% or 10% of a cubic foot. For example, car alternators can be expensive to ship because they are relatively heavy. But they are also small, usually around 7” x 7” x 7”. If an alternator is shipped via USPS, and it is charged based off the actual weight, the price could range between $9.50 and $43.50. When applying the dimensional discount formula, an alternator is 20% of one cubic foot, lowering the price range from $5.75 to $7.10. That’s a big difference and underscores the importance of matching your shipment with the right carrier. THE E-COMMERCE EFFECT As e-commerce’s popularity continues to rise, small parcel rules will only get more complicated. The importance of knowing the dimensions of your package cannot be overstated. Enlist a company with deep parcel experience, like Visible Supply Chain Management, to analyze your parcel needs. Dimensional surcharges present challenges, but don’t just sit back and absorb the extra costs. Take advantage of the rules where you can. Visible exists to optimize your shipping by finding ways to avoid expensive surcharges via multi-carrier solutions.
VisibleSCM.com/Parcel 877.728.5328 Sales@VisibleSCM.com
E-COMMERCE DRIVES AIR CARGO VOLUME GROWTH AND CAPACITY CONSTRAINTS By John Haber
raditional and digital worlds are colliding as commerce between B2C, C2C, and B2B blur. This collision is straining supply chains around the world as consumers and businesses alike are demanding end-to-end visibility, tracking and tracing, and faster delivery — and no mode of transport is immune. Several years ago, the air freight market was negatively impacted by low rates and excess capacity, often only utilized primarily for high-valued or just-in-time goods. However, in the past couple of years, new life has been breathed into the air cargo industry as global economic conditions have improved and cross-border e-commerce has been embraced. Market research firm Forrester anticipates cross-border e-commerce to grow at an annual rate of 17% between 2017 and 2022, with
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sales reaching $627 billion. According to the International Air Transport Association (IATA), 2017 global air freight volumes grew nine percent, the highest year-over-year increase since 2010. With the increasing demand, capacity and rates are now at a premium and have pushed up rates as changes in trade patterns, such as direct B2C and C2C transactions, gain traction. In addition, cross-border e-commerce has presented challenges in terms of safety, security, accurate and efficient collection of duties, and taxes. As the air freight market reacts to changing requirements and needs, IATA has issued a directive to the air freight market to proactively seek collaborative solutions to address not only the increased volumes but also solutions for end-to-end visibility, faster service, and reasonable costs for e-commerce customers. To address capacity concerns, logistics providers are chartering flights while express and other air cargo providers are ordering planes to update and expand fleets. However, there are still issues. For example, UPS has caught flak from its pilot union for using too many third-party cargo airlines to meet its freight demands. Under a contract with the Independent Pilots Association, UPS Airlines is allowed to subcontract flights for 45 days each calendar year outside of its peak season. According to UPS, it is adding 35 jets to its fleet over the next four years, including nine in 2018. UPS notes, “By 2022, we will be adding more than nine million pounds of cargo capacity to our global network of more than 580 owned
and leased aircraft.” But, the question is, how is the company planning for now vs. 2022? Meanwhile, additional airlines are adding capacity as fast as possible. Atlas Air has sourced six 747-400Fs on operating leases since late 2017, ANA has recently placed an order for two Boeing 777F freighters, and Amazon took delivery of its 30th plane. While capacity is tight, having enough pilots is becoming a problem. Both UPS and FedEx have introduced programs for new pilots. FedEx, for example, launched Purple Runway – A FedEx Pathways Program. FedEx Express, along with its feeder operators at Mountain Air Cargo and Empire Airlines, will offer programs to promote student interest in aviation careers at selected colleges and universities. In 2017, UPS and Ameriflight launched the UPS/ Ameriflight Gateway Program to get pilots the hours and skills required to operate UPS Airlines’ larger aircraft. Indeed, e-commerce will continue to be a main growth driver for air freight. IATA anticipates a 4.5% increase in global air freight volumes this year. However, rates are also expected to remain high and capacity will continue to be an issue. Are there options? Of course there are. Understanding the new solutions offered is key to success in the cross-border e-commerce race.
John Haber is the Founder and CEO of Spend Management Experts. Contact John at solutions@ spendmgmt.com.
Top 5 Carrier-Related Shipping Concerns for Today’s Retailers Shipping is a critical component of supply chain logistics. Not only does it deliver your orders, but it greatly impacts the customer experience, repeat purchasing, brand loyalty, and profitability. That’s why today’s e-commerce companies are finding ways to stay compliant with their carriers’ ongoing rules and requirements to ship successfully and without issue. Instead of crossing your fingers when a customer order is out for delivery or manually finding the best shipping method at the lowest cost, find out how shipping software addresses these top carrier-related shipping concerns. 1. Rate Changes. 51% of retailers agree that increasing rates is their number one carrierrelated concern. In order to stay ahead of rate changes, annual increases and surcharges, retailers are turning to shipping software tools. Shipping software is especially helpful in identifying complex DIM-weight charges, unexpected residential surcharges or additional costs for priority deliveries. It can also automatically rate shop and lower shipping costs to boost your bottom line. 2. Shipping Addresses Accuracy. If an address has two transposed numbers, an incorrect spelling or missing/obsolete address elements, most likely the parcel will be returned to sender. It’s mission critical for retailers to utilize shipping software that verifies addresses worldwide to boost customer confidence. 3. Reconciliation of Charges. Gone are the days when an e-tailer worked with just one carrier, so keeping up with ever-changing mandates and complex business policies can be a handful. Multi-carrier shipping software can automate shipping labels, packing lists, carrier manifests, manifest reporting, and bills of lading to ensure complete accuracy and compliance. Your customers receive their orders on time while you minimize or even eliminate carrier chargebacks. 4. International Services. Global e-commerce continues to grow, so now is the time to put your shipping and manifesting
software to work in finding reliable international carriers. Shipping software also helps manage import tariffs, packaging specifications, and customs rules and regulations by generating the required documentation for complete compliance. By going global, repeat purchases from customers around the world can exponentially increase your bottom line. 5. Customer Service. Did you know 94% of customers blame the retailer when shipping doesn’t go well? That means they are calling you the minute they don’t get their shipment, not the carrier. You can quickly turn an unhappy customer into a satisfied shopper by using your shipping software to create a complete user experience (UX) that allows customers to track orders, receive shipping updates, and streamline the returns and reverse logistics process.
When handled the right way, shipping can evolve from a necessary cost to a competitive advantage. An investment in shipping software is an investment in increasing customer satisfaction, building brand loyalty, and enhancing profitability. By conquering your shipping challenges, you’re free to focus on what you do best: fulfilling your customers’ orders and growing your business. ProShip, Inc., a Neopost company, is a global provider of logistics software and supply chain solutions, including enterprise-wide, multi-carrier shipping and manifesting software, automated packing solutions and intelligent parcel lockers. ProShip’s reputation for quality is backed by decades of IT and supply chain expertise. From packing to shipping to delivery, ProShip’s powerful solutions enable goods to be delivered faster, more efficiently and more cost-effectively than ever before. Go beyond the box with ProShip.
Are you on top of your shipping costs? Big Data and Predictive Analytics: both terms sound great in concept when you’re standing in the boardroom clicking through your PowerPoint presentation, but most B2C shippers struggle to cope with the cost of free shipping. eCommerce growth continues unabated, and with it, the demand for parcel delivery. Consumer demand for fast and free delivery comes at a high cost to retailers, many resigned to the fact that meeting delivery expectations may mean eating shipping costs. How a business manages shipping costs at a time of diminished carrier capacity can mean the difference between turning a profit or realizing a loss. But it doesn’t have to be that way. Data, when mined strategically, can truly take a shipping operation to a whole new level of profitability. A parcel TMS platform will provide you with all the data and tools you need to manage your bottom line effectively. There are a few things to consider about how to use these tools to your advantage. THE MARGIN CHALLENGE Measuring what it costs to deliver products is one of the key components to understanding margins. Most B2C parcel shippers have a hard time calculating total cost of goods sold because costs are highly variable, depending on the details of the individual shipment. Distance to the customer, weight, cube, service level, and any number of surcharges and fees make it difficult to allocate the total cost of goods sold at a SKU level. Shipments with multiple products and orders only add to the complexity. But analytics can help. A parcel TMS system can collect order line item detail during the shipping process, along with related carrier costs. Analytic tools will allocate average transportation costs based on the relative weight of SKUs within shipments and determine the average cost of delivery over time for each of your products. This will help you rationally adjust your product pricing, factoring in transportation costs. Free shipping isn’t free, and guessing at what your margins are isn’t a good business strategy. Understanding how shipping costs impact margins will also help you understand how to profitably offer premium services, such as same-day delivery, to customers. Customers want choices and may be willing to pay for them.
SMART DECISIONS FOR PROPER SERVICE LEVELS Using analytics to pinpoint your transportation cost of goods sold by product is the first step. Reducing shipping costs is the next toward improving margins. There are three areas you can look at: 1. Cost Recovery: A parcel TMS solution can capture point of shipping data for all carriers across your enterprise and then match it against carrier invoices. You can measure expected costs vs. actual cost and determine how much can be recovered from carriers in the form of late delivery refunds, lost shipments, damaged shipments, residential/ commercial status disputes, and manifested but not shipped transactions. Auditors can help with cost recovery efforts, possibly reducing spend by as much as 2-3%. 2. Cost Reduction: Use analytics to discover cost savings in the form of recurring address correction fees, unexpected DIM fees, air to ground downgrades, and order consolidation opportunities. Modeling tools can perform “what if” analyses to measure the impact of alternative carrier services. Another 5% in savings can be realized. 3. Industry Benchmarking: How do you know if your rates are cost-competitive in your industry? The answer lies in the data and is key to leveling the playing field during contract negotiation time. Analytics will clarify costs by lane, by region, by mode, and the impact new rates will have compared to your competitors. Freight negotiators estimate that shippers can save an average of 18% with the right tools. TURN ANALYTICS INTO EXECUTION Best advice? Start with the end in mind by understanding what your actual shipping cost of sale needs to be for your business to remain competitive and profitable. Collecting and mining shipping data will help you reduce costs and achieve your objectives without sacrificing your customers’ delivery experience.
www.pierbridge.com 508.630.1220 email@example.com
How NexGen Technology Will Leap Beyond TMS The transportation management system (TMS) has entered a new era. A paradigm shift has occurred — and your old TMS, with its outdated business rules, is killing your company. The antiquated, table-based technology landscape cannot accommodate the real-time connectivity demanded by your growing customer base. When the late 1980s brought e-commerce to the United States, shippers were suddenly able to consider multiple carriers for the same lane and use basic technology to assign carriers to shipments. Born into what was a perfect storm for any industry, TMSs were created to execute one critical function: make a label to get the items shipped. Since their creation, TMSs have been focused on “static route planning” based on rules imputed by customers. But what if your TMS could do more than simply generate a label? What if your TMS wasn’t bound by the “rules” manually entered into a static table? What if your TMS could offer dynamic planning of proper shipping methods prior to the shipment and visibility after the shipping document is created? NextGen supply chains are deploying TMSs to move beyond the old business rules approach by harnessing the innovations of predictive analytics and Artificial Intelligence (AI). According to the 2018 MHI Annual Industry Report, “NextGen supply chains will leverage forward-looking analytics to explore new possibilities, produce data-driven insights and bold decisionmaking” to “generate breakthrough outcomes.” MHI reports that while only 19% of surveyed companies are currently utilizing predictive analytics, that number will jump to 82% within five years and that, “early adopters may have a significant opportunity to get ahead of the competition in this important area.” Predictive analytics and AI solutions streamline and automate processes to create continuous improvement, boosting value through automated decision making, carrier/ mode selection, and shipping error elimination. By utilizing AI technology, the optimization of deliveries is shifted to algorithms rather than tribal employee knowledge.
According to MHI, the current adoption rate for AI is only 6%, but is projected to reach 47% by 2023. Supply chain innovations like AI, “have a potential to disrupt the status quo and create a lasting competitive advantage for companies that embrace them.” Shipping errors caused by outdated TMSs that aren’t using these innovations are costing companies money. For instance, a Fortune 500 retailer used a market-leading TMS for e-commerce fulfillment, and the manually entered business rules selected non-optimal routing of a segment of shipments, resulting in a $1.6M overspend for one month. Furthermore, due to the on-premise nature of traditional TMS, huge restrictions exist for data collection, retention, and analysis. This same retailer requires 24 hours of processing time to collect data from all locations to be compiled into a database each night, which still did not bring the routing problems to light. Traditional TMSs dump their data at the end of the night, rendering them unable to learn from analytics. In our increasingly digital world, supply chains and TMSs are the backbone of a connected information ecosystem where every action must be tracked to maximize efficiency and meet demands for increased flexibility, visibility, and transparency to all departments in the organization. The old way of doing TMSs is inefficient. NextGen TMSs bring a level of efficiency and reliability unparalleled by the e-commerce technologies in place at most companies. Eliminate the confusion, streamline your shipping operations, and gain valuable insight. Stop letting your old TMS kill your company’s profits. Embrace the NextGen TMS, as it fills the functional gaps your on-premise TMS is not equipped to handle. Founded in 2013, SwanLeap, formerly ClearView Audit, is a leading transportation management systems, shipping technology, and freight payment and auditing firm specializing in supply chain best practices and shipping cost reduction strategies. In 2017, SwanLeap was listed by Inc. magazine as one of the fastest growing companies in the United States and the Fastest Growing Company in Wisconsin.
www.swanleap.com 855.737.3444 firstname.lastname@example.org
a THE VALUE OF REGIONAL CARRIERS 14 PARCELindustry.com ď€ł MAY-JUNE 2018
With the explosive growth of e-commerce, more and more companies are looking for the best way to optimize the delivery experience for their customers. For many organizations, incorporating regional carriers into their delivery mix is one of the best ways to achieve this goal. After all, since these companies are focused on a specific geographic region, their networks are optimized for fast transit times and efficient service, often at a lower cost. And isnâ€™t that what our customers want? Take a look at the regional carriers profiled here, reach out to them, and tell them you saw them in PARCEL.
and has recently become a part of the General Logistics Systems (GLS) group of companies. Because we focus on a specific geographical region, we are able to provide our customers with faster delivery over an extensive service area, with a massive next-day footprint. When you ship via our Ground service, you’ll get products into your customers’ hands more quickly; areas which would require 3-4 days with the national carriers can be reduced by at least a day with GSO. For your Freight shipments, you’ll get straightforward per-pallet pricing and none of the complicated shipping routines that come with using a traditional freight carrier. And for your priority shipments that need to arrive the next morning, you’ll save significantly when compared to the national carriers. Along with faster deliveries, we have fewer fees, a reasonable DIM weight policy, and dedicated account managers for specific accounts. When you work with a delivery provider who makes you their priority, you’re able to make your customers your priority. Learn more at www.gso.com or call our team at 888.744.7476.
DICOM TRANSPORTATION GROUP
Dicom Transportation Group opened for business in 1968 as a courier company with a single car and driver. Today, celebrating 50 years in the business, Dicom now offers complete supply chain solutions with parcel, freight (LTL & TL), final mile, distribution, and dedicated logistics services. An extensive network of regional hubs enables Dicom to deliver next-day to most delivery points. This comprehensive network was constructed around the geographical needs of Dicom’s customers and continues to expand as the market evolves or as our customers’ requirements change. Dicom fulfills the shipping needs of customers across every major industry
including retail, medical, construction, and automotive in both Canada and the US. While primarily a B2B provider, Dicom’s B2C network emerged parallel to the growth of e-commerce. The flexibility to adapt to customers’ needs, cutting-edge technology, and a focus on innovating the customer experience give Dicom a competitive advantage in the market. www.dicom.com
At GSO, your shipment is always our priority. In business for over two decades, GSO is a West Coast regional carrier offering Priority, Ground, and LTL service
LaserShip is an e-commerce delivery company that provides last-mile parcel solutions for shippers that desire reduced transit times and increased flexibility within their supply chain. Founded in 1986, LaserShip is a leading provider of same-day and next-day delivery services for premier e-commerce and product-supply businesses, including five of the largest retailers in the US. Today, LaserShip reaches more than 140 million consumers across 20 states in the eastern and midwestern US. LaserShip continues to drive value for e-retailers through faster delivery options and increased flexibility. This year, LaserShip will expand its e-commerce delivery footprint by 28%. It will also be introducing its very-first chatbot, Codee, enabling consumers to get quick answers to questions regarding their deliveries on the LaserShip website. For more information, visit www.lasership.com. MAY-JUNE 2018 PARCELindustry.com 15
Companies, more than ever, need to focus on their bottom line. When it comes to parcel shipments, why pay up to 40% more for the same level of service? Companies have a choice — LSO. LSO is a leading provider of regional parcel shipping services primarily in seven states: Texas, Oklahoma, Louisiana, Arkansas, Alabama, Mississippi, and Tennessee. Services include LSO Same Day, Express Next Day, and 2nd day, as well as Final Mile. LSO provides the same level of service as the global providers at rates up to 40% less, with a money-back "no strings attached" guarantee. The others have scaled back or eliminated their service guarantees. And when you ship Express Air, your parcel stays within the region, not flown to an out-of-state centralized sorting facility. Fewer touches means fewer chances for damage. At LSO, we’re big enough for critical mass to operate efficiently, but small
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enough where every customer is important. Can the others say that? For over 25 years, companies have relied on LSO for hassle-free shipping. Reach us at 800.800.8984 or LSO.com.
PITT OHIO is a transportation solutions provider offering SUPPLY CHAIN, GROUND, Less-Than-Truckload and TRUCKLOAD SERVICES. At PITT OHIO, our focus is on creating customized solutions. In our GROUND service, these one-to-one customized solutions are a result of our flexibility and taking the time to understand our customers’ needs. We specialize in reliable and dependable cost-saving solutions in which we can conduct a free analysis of your parcel spend. We bring together our technology, partners, and service to formulate a complete parcel solution. www.PITTOHIO.com
SPEE DEE DELIVERY
Spee Dee Delivery was established in St. Cloud, MN in 1978, and we’re proudly celebrating 40 years of serving the Midwest! Our company started as a local delivery service and has since grown to include 35 locations, serving over 12,000 daily shippers throughout nine states. We pride ourselves on going the extra mile for our customers and tailoring our services to their unique needs. In an effort to satisfy customer requests, we continue to add to our portfolio of offerings, including Spee Dee On-Call, Spee Dee LTL, and most recently our warehousing and order fulfillment services. With our simplistic approach to pricing, Spee Dee Delivery makes it easier for shippers to understand and identify cost savings. Spee Dee Delivery does not charge a multitude of accessorial fees and surcharges — our pricing is as simple as black and white. And as a regional carrier, we bring a variety of benefits to the table, including lower
damage rates, more personal and timely responses to our customers, and often quicker transit times. From a package to a pallet… we deliver! www.speedeedelivery.com
UNITED DELIVERY SERVICE
United Delivery Service, a regional parcel carrier with over 45 years of delivery experience, has been a leader in providing final-mile delivery solutions for some of the largest pharmaceutical, payroll, retail, and e-commerce companies throughout the Midwest. UDS offers a same-day, next-day, and routed distribution service that has provided its customers incredible cost savings, improved transit times, and a better customer experience by utilizing our innovative technology and software. UDS provides VPOD (Visual Proof of Delivery) on every shipment. This technology, along with providing GPS/
geocode on each order, allows us to be more successful when making a delivery to your customer’s home or business. For more information about our services and coverage area, feel free to visit us at www.uniteddeliveryservice.com
FEATURED REGIONAL CARRIERS DICOM TRANSPORTATION GROUP
U.S. Cargo is a diversified ground services provider offering high-value, low-cost solutions for dedicated courier, final mile, pool distribution, multi-piece parcel and lightweight LTL opportunities. At U.S. Cargo, we offer a personalized approach and commitment to meeting and exceeding our customers’ needs. Since 1972, we have provided superior on-time service and optimal package handling with better shipment integrity that the competition. At U.S. Cargo, we stand ready in providing a solution to accommodate your needs. www.us-cargo.com
www.lasership.com LSO LSO.com PITT OHIO
www.PITTOHIO.com SPEE DEE DELIVERY
www.speedeedelivery.com UNITED DELIVERY SERVICE
www.uniteddeliveryservice.com U.S. CARGO
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REGIONAL CARRIER SERVICE MAP DON’T OVERLOOK YOUR OPTIONS. GET TO KNOW YOUR REGIONAL CARRIERS Your business is growing, and you need to know about your options to get your parcels delivered. It’s an exciting time, but it can also be a challenging one. To stay ahead of this growth, you’re going to want to look at your best options for expanding your carrier partners. This map can be your guide to show you who delivers where, so you can use that as a starting point when figuring out new partnerships. The article on pages 14-17 does a great job of introducing you to many of the leading players in this space.
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Spee Dee Delivery
AL, AR, CT, DE, FL, GA, IA, IL, IN, KY, LA, MA, MD, ME, MI, MN, MS, NC, ND, NE, NH, NJ, NY, OH, OK, PA, RI, SC, SD, TN, TX, VA, WI, and WV, and Washington DC
CT, DE, FL, GA, IN, KY, MA, MD, MI (not including the upper peninsula), NC, NH, NJ, NY, OH, PA, RI, SC, VA, WV, and Washington DC
IA, IL, MN, ND, SD, and WI as well as select cities and ZIP Codes in MO, NE, and MI
AZ, CA, ID, NM, NV, OR, and WA
AL, AK, LA, MS, OK, TN, and TX
United Delivery Service IA, IL, IN, and WI
US Cargo OH, PA, and WV
DE, IL, IN, KY, MD, MI, NC, NJ, NY, OH, PA, VA, and WV
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AND THE AWARD GOES TO… GAP INC. ! Congratulations to the folks at the Gallatin, TN campus for their selection as the 2017 game-changer of the year! By Amanda Armendariz
he first full day of the 2017 PARCEL Forum in Nashville had a special highlight during the keynote luncheon. Since 2015, we have conducted a search for the game-changer of the year in the months leading up to our fall conference. We look for those organizations who have identified a major hurdle or obstacle within their small-parcel operations and sought out innovative solutions. Reviewing the submissions is always an enjoyable experience, since it is so gratifying to see how many forward-thinking folks we have in our industry! But, as with most things, there can be only one winner, and in 2017, it was Gap Inc. The dedication to seeking out innovative solutions to optimize its growing e-commerce operation made it an excellent choice as our 2017 winner. THE PROBLEM Like many other retailers, the distribution
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center located in Gallatin, TN was facing an explosive growth of e-commerce orders. While this means good things for the bottom line, its current setup was not equipped to handle the influx. “With the emergence of e-commerce, Gap Inc. [had to] transition its distribution centers from a retail-central shipping network to one that has to manage retail (store replenishment) orders as well as e-commerce (direct-to-consumer) orders,” shares Kevin Releford, Senior Director at the Gallatin campus. “This transition required the company to convert an existing building in Gallatin that previously filled orders for retail stores to one that would fill orders directly to the consumer. The facility needed to be redesigned with a different configuration and infrastructure than it had before in order to handle e-commerce orders with the speed and accuracy that online customers have come to expect.” Reconfiguring an existing building to handle a large increase in orders is
certainly no easy task, especially when it is triggered by an organizational crisis. In August of 2016, the company experienced a fire in its Fishkill, NY distribution center, just prior to peak season. While no company wants to experience a disaster like this, there was, luckily, a silver lining. This fire activated the company’s business continuity plans, and within days, executives had optimized the US distribution network, allowing them to divert resources and product to other DCs, including Gallatin. Gap Inc. was able to leverage its existing facilities to meet peak retail and online demands through implementation of innovative new processes and technology. “We were overwhelmed by the outpouring of support from others in our industry to offer help and guidance after our Fishkill distribution center was impacted by the fire,” says Releford. “Our supply chain organization reviewed multiple options [regarding the best path for meeting the increase in orders]
but ultimately decided that converting our existing facilities was the best approach, both for our employees and in support of our long-term business.” And while the higher-ups at Gap Inc. agreed with this assessment, these changes still required a shift in mindset. “We didn’t feel any pushback [from executives], but it was a change in how we work. When you are fulfilling e-commerce orders, the shipments go straight to a customer and have a direct impact on their experience,” explains Releford. “That message was continually re-enforced with our teams and brought an even stronger focus on accuracy and quality in all our operations.” THE PROCESS As any logistics professional may guess, even when a redesign is approved, the actual implementation can be daunting. For Gap Inc., the redesign included adding a larger pick module that could handle three times as many product stock
Make sure you join us September 24-26 at the 2018 PARCEL Forum in Chicago, where Kevin Kuntz, Senior Vice President, Gap Inc. Global Supply Chain, will speak at Tuesday’s Keynote Luncheon. His speech on how the transformation to online fulfillment automation achieved success for Gap Inc. is sure to be a can’t-miss! And if you feel like your logistics operation has been implementing some truly game-changing methods, be sure to keep an eye out for announcements on the nomination process for this year’s award. We’d love to hear what you’ve been doing!
Joel Dunkel, President of EventEvolution (creator of the PARCEL Forum), poses with Senior Director Kevin Releford after the award presentation (and a huge thanks to our friends at Spend Management Experts for sponsoring the 2017 keynote luncheon and award ceremony).
MAY-JUNE 2018 PARCELindustry.com 21
keeping units (SKUs), which allowed the facility to service more volume and brands. The company also transitioned from a legacy warehouse management system (WMS) to a Manhattan warehouse management for open systems (WMoS), giving them more functionality. Executives also approved the implementation of a new warehouse execution system (WES) by VARGO to increase efficiency and processing speed. The automatic storage and retrieval system further drove increased efficiency with the replenishment operation. The redesign was completed in only eight months — six months of which were focused on physical changes to the site to create a new online facility. This isn’t to say it was all smooth sailing, of course. “In expanding our Gallatin facility to service online [orders] as well, we had to move to a more leveraged, highly flexible model,” Releford explains. “This included learning a new warehouse management system, continuous fulfillment system, and warehouse execution system to accommodate the shift. In just
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three months, we had to start and ramp up these systems to be fully operational before our peak season. This was our biggest challenge to ensure everyone was comfortable [with] the new systems and we were working efficiently to accommodate our ‘super peak’ volumes.”
THE RESULTS This automation has paid off; the facility went from shipping an average of 290,000 packages per month in 2016 to an expected 1.5 million packages per month this year. Executives also estimate that these improvements
translate to a 45% increase in productivity in terms of packages shipped per hour. And nowhere are these gains more evident than in the peak season forecast; Releford estimates that these improvements will allow the company to go from processing 50,000 units a day (the average during peak season two years ago) to processing 500,000 units a day in the same physical building much more efficiently. This efficient handling of growth is impressive, especially when one considers that managing an e-commerce operation and a retail operation comes with different requirements and challenges. “Store replenishment and e-commerce require very different demands of a fulfillment operation when it comes to speed, accuracy, and cost/labor content,” Releford explains. “When considering store replenishment, we measure success through store fulfillment service and cost, leveraging the natural efficiency you get in processing large numbers of units in a given store delivery carton and
large carton deliveries to a given store. E-commerce requires more individual unit handling throughout the process; [these orders] are packaged in unit/small batch sizes and delivered to the end customer with greater speed and flawless accuracy.” The redesign of the Gallatin building allowed the DC to leverage innovative new processes, staffing solutions, systems, and automation to execute at scale, helping them succeed at both the store and e-commerce level. Furthermore, executives faced unique challenges with a Cross-Channel Logistics Optimization (CCLO) facility. Making this shift required different staffing needs during peak to accommodate higher volumes. When servicing the retail stores, there is a steadier uptick in demand that is easier to plan for, but with online, the increase in demand is much steeper and more dramatic to accommodate. “Effectively leveraging our resources across retail and online requires expert planning and work flow management,” Releford notes.
“We strive every day to strike the right balance ensuring we have the required staffing and that they are optimally deployed to deliver the needed capacity, speed, and flexibility.” LOOKING AHEAD E-commerce continues to command a bigger percentage of purchases each year, and it’s no different at Gap Inc. But Releford and his team welcome this growth and treat it as an opportunity, not a challenge. “We are constantly learning new ways to efficiently grow and scale our business to meet the growing customer demand,” notes Releford. “We need to ensure the systems we use are easy to learn, easy to execute, and that our team members know what they need to do to be successful. As we grow, we want to continue to build an engaged workforce that is happy and excited to come to work every day and help us meet our goals to deliver amazing experiences and product to customers all over the country.”
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PERCEPTION IS KEY A recent study shows that parcel packaging impacts consumers’ perceptions of product value by 45%. Here’s how to ensure you always make a good impression.
hen you think about what type of packaging is needed to protect items during shipment, it’s a good bet that you factor in cost and, potentially, labor productivity. Without question, these are important considerations. But have you factored in how your choice of packaging impacts consumer perception of your company and customer lifetime value? You may be surprised by the answer.
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BY RYAN GERMANN In the first-ever study of its kind, Pregis partnered with the University of Wisconsin to understand the link between consumers’ unboxing experience and the perception of product value. The objective was to understand how different protective packaging mediums influenced pricing perception and emotions experienced when unboxing. So, why is this important? As retail continues to shift from physical stores to digital, the unboxing experience in consumers’ homes is replacing the store
experience. Over the years, the retail store experience has become a science that includes branding, placement, merchandising, personalized service, music, and even scent. But many retailers have failed to replicate that euphoric in-store experience with home delivery — which puts customer lifetime value at risk. The study results demonstrate how parcel packaging choices are major influencers in delivering a customer experience that elevates the value of the product and brand. STUDY METHODOLOGY The study was conducted at the University of Wisconsin in consultation
with Page Moreau, a professor of marketing. There were 60 participants, split into two cells of 30 each. The study participants ranged in age from mid-20s to late 30s — a desirable demographic for online retailers. Each participant was instructed to unbox the same product. We selected a bamboo bowl because its pricing can vary considerably. The bowl used in the study had a retail price of $25, but a simple online search shows results ranging from $15 to $200. The participants were unaware of the actual bowl cost. You’ll see why, shortly. It’s important to note that the participants focused on the product itself at this stage; it was imperative to not precondition them to factor in the packaging components this early in the study. Here’s where things get interesting. While both groups of 30 unboxed the same product, each group had different packaging. Participants only saw their own packaging and were not aware of a different option. One package is best described as “economy” — a plain brown box with white polystyrene foam for inside protection and clear carton sealing tape. The other packaging would be considered “premium,” with a white box; clear, inflated, hybrid cushioning featuring a square pattern to protect the contents; soft white foam wrapped around the bowl with a “thank you” sticker; and white carton sealing tape on the exterior. After the unboxing experience, participants were asked to complete a survey that focused on the following areas: price expectations, likelihood to gift, unboxing emotions, and packaging description. After completing the exercise, the data revealed some very compelling truths. Let’s look at each survey section separately. PRICE EXPECTATIONS The statistics powerfully reflect the difference between receiving the same bowl in premium vs. economy packaging. The premium group was willing to pay $27.77 for the bowl,
but they expected the retail price to be even higher at an average of $49.07. The willingness to pay reflected by the economy packaging participants was only $21.30, a 30% lower price point! The expected retail price of $33.83 that they identified was 45% lower than the premium group’s expectations. As consumers generally are more accurate at predicting behavior of others than themselves, we phrased the price expectation question both ways. Further, in answering the question of, “How likely would you be to gift this bowl to a friend?”, the premium group recorded 4.2 on a seven-point scale, while the economy group response came in at 3.6. EMOTIONS As consumers, we intuitively know that emotions are connected with a buying experience. But for the most part, companies rarely factor them into protective packaging decisions. The emotional responses make it crystal clear why we need to pay more attention. We asked, “Think back to when you first unboxed the product and describe your feelings on the following scale.”
Again, we used a seven-point scale, with one indicating “not at all” for that particular emotion and seven indicating “very much.” Let’s look at each emotion individually. Trust. The premium package ranked 4.4 for trust, with the economy package logging 3.7. Participants in the premium packaging group gave “their” package a 19% higher score. Excitement. The premium folks averaged 4.8 points for excitement, compared to 4.1 for the economy group. The premium packaging recipients were 15% more excited to receive their package. Frustration. There was a 25% higher indication of frustration from the economy group (2.4 points) vs. the premium group (1.8 points). Joy. The point scale results were closer for this attribute, with the premium packaging respondents logging five percent more joy. Letdown. There was a significant 31% higher letdown emotion identified by the economy group over the premium group. The key takeaway from this section is that parcel packaging choices significantly impact consumers’ unboxing emotions.
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in expenses must be economically feasible to implement. The last chart on this page provides an itemized list for each packaging component used for both the premium and economy packages. As you can see, the upgrade costs are minimal. PARCEL PACKAGING: THE NEW MERCHANDISER Only 19¢, or 8.7%, is the difference in cost between the premium and economy components used to conduct this study. However, as noted in the other data points listed (emotional response, value perception, willingness to pay, and so on), the additional 19¢ per package has a dramatic impact on what the consumer thinks of your products and brand. Moreau points out, “There is strong evidence that the unboxing experience impacts customers’ emotions and their perceptions of product value. When a retailer gets the unboxing experience right, they demonstrate that the product is valuable and worth protecting. Consumers recognize that signal, and it influences their perception of quality. As e-commerce continues to be the growth engine for retail, retailers and brands must understand their new showplace is the parcel packaging.” We previously mentioned the science involved in the consumer experience at physical retail stores. It’s time to start constructing a similar experience in consumers’ homes.
PACKAGING DESCRIPTION What kind of vibe does the package give? Is it attractive and prestigious, or does it just look cheap? Here is what the study uncovered. Attractive. Premium packaging blew the economy type right out of the water, scoring 76% higher on the attractive scale. Prestigious. Premium also scored an 26 PARCELindustry.com MAY-JUNE 2018
impressive 56% higher than economy on the “prestigious” attribute. Cheap. Predictably, the economy package was perceived to be cheaper by 32%. ECONOMICS What’s the cost to upgrade to premium packaging from economy? The increase
Ryan Germann is eCommerce Segment Manager at Pregis, a leading provider of innovative protective packaging materials, equipment systems, and surface protection. The company provides solutions for a wide variety of consumer and industrial market segments including food, beverage, healthcare, medical devices, agricultural, e-commerce, retail, automotive, furniture, electronics, construction, and military/aerospace. For more information, visit www.pregis.com. To download the complete study, please visit www.pregis.com/knowledge-hub/.
Simplify Your Supply Chain In the shipping world, it is no longer just about getting a product from point A to point B the fastest. Carriers are becoming a resource for shippers, offering more services in different modes to optimize service and cost. Working with a carrier who understands your business needs and is flexible enough to think outside of the box makes all of this possible. PITT OHIO takes a strategic approach to understanding our shipperâ€™s environment and develops solutions that simplify their supply chain. This approach starts with an in-depth conversation designed to produce valuable, clear, and meaningful dialogue through an interactive process geared towards a shared understanding of the problem. The result? A creative one-to-one solution tailored around our best-in-class technology, partners, and service.
Ideally, these conversations are not a linear discussion with a beginning, middle, and end, but are instead an interactive process that enables us to pinpoint the opportune moments of real impact. Our free analysis of your parcel spend will uncover characteristics and cost drivers in your company and results in a unique, complete parcel solution driven by your data. Great strategic conversations generate breakthrough insights by combining the best ideas of the people involved. These shared insights will result in a spark of creativity that formulates a solution not previously identified on your own. We use our leading-edge technology to enhance your parcel shipping with a non-intrusive, performance-based approach. The best conversation you have this week could be with PITT OHIO. Share with us your pain points and explain what challenges you face every day. We use these essential conversations to uncover the challenges youâ€™re facing and we excel at turning these opportunities into customized small package solutions. Together we will discover a unique, opportune moment to make a real impact on your business and simplify your supply chain.
By Brandon Staton
UNDERSTANDING 5 KEY CARRIER NEGOTIATION LEVERAGE POINTS
You may think you are getting the best deal on your UPS or FedEx contract, but there is always the opportunity to drill even deeper. These five points are a great place to start.
ne of the most frustrating occurrences in our industry is realizing that there is often a large gap between a great solution and someone who doesn’t even know they need it. When asked about their current carrier contracts, far too many executives respond with, “I’ve checked with my team and they are pleased with
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our current provider’s level of service and the savings we’re receiving, so we’re not in a position to consider any changes.” This line of thinking is a mistake. If cost containment is important to your organization, then it must be negotiated. For that, you’ll need leverage — and leverage doesn’t just appear when you need it. Here are five times when executives
may want to consider whether the return on investment (ROI) of other priorities will outweigh the opportunity to negotiate competitive carrier discounts. SHAREHOLDER MEETINGS A conversation with investors is decidedly different than a conversation with customers. As such, study of either carrier’s financial statements to
shareholders will lay bare the positive impact rate increases have on FedEx’s and UPS’s bottom lines. In its 2017 annual report, UPS repeatedly attributes growth in revenue per piece — a key carrier metric that measures how much money the carrier makes per shipment — foremost to “changes in base rates, customer and product mix, and fuel surcharge rates.” Similarly, FedEx points to improved base yields due to “higher rates, package weights, and fuel surcharges” in its latest annual report. A common complaint among shippers is the fact that the small-package industry is one of the few where rates continually increase on an annual basis. Moving inventory is necessary for businesses, making partnerships with FedEx and UPS essential. Most decision makers acknowledge the important role each carrier plays and the reliability with which they perform. The rub, however,
is that they can’t raise prices on their customers at the same rate the carriers increase theirs. The base rate for the average domestic parcel is 50% higher today than it was in 2010. That presents a problem, especially for retailers, who face constant pressure to move their own prices in the opposite direction. Effective carrier negotiation strategies are based upon facts, and there is no better place than a carrier’s financial filings to dive into the details. Whenever a carrier proudly announces strong earnings, there is a strong chance that it is due in no small part to higher prices, and it will be stated plainly there. That means the customer is ultimately padding the pockets of investors at the expense of its own interests. Pay close attention when these announcements are made, and take advantage of this natural leverage point to build your case for lower rates.
RATE INCREASE ANNOUNCEMENTS This one isn’t exactly breaking news, but it’s surprising how few organizations prioritize rate negotiations in the time surrounding these annual announcements. Admittedly, the timing can be tough. While each carrier will generally make an announcement of its intention to raise rates mid-year, FedEx and UPS typically wait until closer to the fourth quarter — the busiest time of year for many businesses — to provide any details. Understandably, those details can be daunting. The theme is generally the same — a 4.9% average increase, changes to surcharges, etc. — but there are usually a few new rules that companies wouldn’t be able to predict. Still, from a planning standpoint, companies would be wise to expect the announcement and allocate time to understanding the implications
ARE YOUR COLLEAGUES There are undoubtedly people in your organization who need this information as much as you do. So if they are not already a subscriber,have them sign up for a FREE subscription today!
PARCEL PARCELindustry.com/subscribe MAY-JUNE 2018 PARCELindustry.com 31
that higher costs will have on their businesses. In years past, dimensional weight, additional handling, and oversize changes were the things that most affected companies have been reactive about. It’s important to be proactive about addressing the rate changes with your carrier as soon as they happen. To do this effectively, be proactive early in the year. Improve your agility by scheduling time and earmarking resources during the period when price hikes are traditionally announced. Doing this will give your company a solid three to four months to stop the issue before the higher rates go into effect. RATE INCREASE IMPLEMENTATION It’s obvious that you should tackle rate negotiations as soon as the carrier announces them, but companies don’t typically leverage the actual implementation of higher prices to obtain better rates. The first carrier invoice you receive during the new year represents a great time to evaluate how price changes have impacted the organization. For smaller businesses, this exercise could be as simple as comparing yearover-year costs. For larger, more dynamic companies, this may require the help of analysts. In either scenario, it’s obviously important to weigh all facets of what’s going on within the organization. In the end, though, shipping gets more expensive when carriers increase their prices. It’s worth the time to conduct a thorough cost analysis, even for companies who have rate cap clauses in their agreements. As most executives know, carrier pricing is something of a feat in engineering. Costs and fees are buried among a litany of revenue tiers, rate tables, custom formulas, and fine print. Understanding how the new rates are showing up on your bill will highlight areas where costs have increased beyond what you were expecting. This 32 PARCELindustry.com MAY-JUNE 2018
presents another great opportunity for leveraging your position to pull your costs back in line with the market. CHANGES TO YOUR BUSINESS In addition to the expected, relatively standardized events listed above, organic changes to your business can mark opportune times to seize negotiation leverage. Any time your organization experiences turnover in the C-suite, for example, there is a golden opportunity to address costs with your carrier. It’s well-known that executive turnover can result in tectonic shifts in business strategy and vision. Often, new executives come in and want to put their stamp on the organization. Cutting costs is a common place for them to start. Carriers are acutely aware of this phenomenon. Like any other business, they aren’t interested in losing revenue. Therefore — so long as your small-package business still provides profitability — no carrier is going to walk away from the deal. Negotiations can be inherently uncomfortable, especially if you have a good working relationship with your carrier and carrier reps. New executives provide an avenue for savvy decision makers to shift the blame. Higher-ups handing down mandates is logical, and the personnel are disconnected from the relationship. This establishes the foundation for a classic “good guy, bad guy” strategy — a tried-and-true method for successfully getting stronger pricing concessions. Other significant changes like acquisition, strong growth, and product launches and breakthroughs represent great times to capitalize. LABOR NEGOTIATIONS OR ADVERSE PRESS Every few years, a few national news articles concerning FedEx or UPS hit the headlines. For UPS, this typically has to do with its labor negotiation with the Teamsters, the union organization
that represents much of the UPS labor force. While UPS hasn’t experienced a work stoppage in years (and there’s little chance it will going forward), the mere possibility of it presents opportunity for the shipper to apply pressure. As discussed earlier, carriers are vital to business. A work stoppage, no matter how rare, is a frightening prospect for an organization that would have no control over the situation. Many shippers refuse to single source for this reason. Of course, FedEx workers aren’t unionized, but that doesn’t mean there aren’t similar opportunities to push the envelope with UPS’s Memphis-based counterpart. Earlier this year, when CEO Fred Smith made headlines regarding the financial windfall that would be created by changes to federal tax codes, many took exception to the very public announcement that the change would save FedEx about $1.5 billion. Smart shippers undoubtedly took advantage of this opportunity to have a talk with the carrier about how they could work together to restructure their rates. LET’S RECAP In today’s economy, top companies in every industry are refusing to settle for the status quo. Costs are high and competition is fierce. Success in this environment is as much about managing expenses better as it is about superior products and services. Parity exists everywhere. It’s important to remember that FedEx and UPS are no different. Be on the lookout for good times to take advantage. Carpe diem.
Brandon Staton is an MBA candidate at The University of North Carolina Kenan-Flagler Business School and President and CEO of Shipmint, Inc., which helps corporate decision makers quickly connect with the industry’s top shipping consultants to save time and money.
Your Shipment Is Our Priority In business for over two decades, GSO is a West Coast regional carrier offering Priority, Ground, and LTL service and has recently become a part of the General Logistics Systems (GLS) Group. Because we focus on a specific geographical region, we are able to provide our customers with faster delivery over an extensive service area, with a massive next-day footprint, so with our Ground service, you’ll get products into your customers’ hands more quickly. For your Freight shipments, you’ll get straightforward per-pallet pricing and none of the complicated shipping routines that come with using a traditional freight carrier. Along with faster deliveries, you’ll enjoy fewer fees, a reasonable DIM weight policy, and dedicated account managers when needed.
www.gso.com 888.744.7476 email@example.com
EVOLVING TO MEET THE E-COMMERCE DEMAND E-commerce only continues to grow, so retailers need to make sure their shipment operations are staying ahead of the curve.
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emember the shopping experience of old? Make yourself presentable, get in the car, drive to multiple locations — maybe even try on a few things — and then make your way to a line of people waiting to reach the cash register. Fast forward to today. While still in your PJs, you can tap a screen or give a verbal command (“Hey Google — order me those shoes I searched yesterday, and make it snappy!”), and a retail order will be heading to your doorstep in less than two days. No need to change clothes, start the car, or even get out of bed (well, that is technically true… but let’s not get carried away).
POSITIONING Companies must be able to adapt to multichannel sales while also getting product out the door quickly and cost-effectively. Retail supply chains must process orders rapidly, and their locations should fall within close range to the majority of their customers in order to lower transit time, which in turn also reduces shipping costs. Most merchants simply don’t have enough distribution centers (DCs) to cover a large geography. Having multiple, strategically located DCs allows merchants to reach the majority of their customers within an acceptable amount of time (although even this is subjective and varies). For example, incorporating just two facilities in optimal locations can achieve a two-day ground transit to over 90% of US households. Those without enough DCs (or with sub-optimally positioned DCs) will be burdened with the costs of express and priority shipping if they are to meet the demands of today’s consumer.
Few people stop to give any thought as to how this “magic” process occurs, but for those of us behind the scenes, we know it’s complicated. And now, thanks to the rapid growth in technology, consumers are gaining even more power, while ironically making less and less effort. As expectations rise, so too do the challenges in the fulfillment process. So, what are brands, e-commerce retailers, and multichannel marketers to do in order to keep up with the Joneses? Unfortunately, there’s no one-size-fits-all approach. Here are a few trends to keep an eye on as the retail supply chain continues to chase the ever-growing demand of the multichannel buyer.
MEETING CUSTOMER EXPECTATIONS We all know that treating the customer right doesn’t just fall on the merchandising and marketing teams. The fulfillment of the orders and consumer trust in the performance of this process often trumps price. Tools, including order management systems (OMS), warehouse management systems (WMS), shipping execution systems (SES), and the integration of them all play a vital role in a successful order experience. It’s important to realize that these tools are ever-changing and evolving. Merchants (or their 3PLs) must continuously reinvest in these technologies to maximize the potential. THE RISE OF THE ROBOTS As costs and the availability of labor continue to challenge fulfillment operators, mechanization, automation, and artificial intelligence (AI) will play an ever-increasing role in the future
distribution center. A quick web search of supply chain technology trends will lead you to headlines regarding automated trucks, delivery drones, 3D printers, and robots that pick and pack. While these are all exciting technologies, many are still in their infancy and will both improve and become less expensive over time. Merchants, and especially their 3PLs, should be following these technologies closely and be ready to act when the numbers pencil out. This being said, caution should be exercised not to lose focus on the fundamental technology functions like having a good OMS, WMS, and SES/TMS. BUSINESS INTELLIGENCE TOOLS ARE CRUCIAL Information is critical to making good decisions and improving the execution of order fulfillment. To stay ahead of the curve, merchants and their 3PLs need to leverage the data. This can be done with business intelligence (BI) tools that allow the merchant to slice and dice data in order to learn about their customers, order trends, operational metrics, and so much more. The more sophisticated the toolset, the more empowered the decision makers will be. The growth of e-commerce has been explosive and shows no signs of slowing down in the near future. Support for this growth means that merchants and fulfillment providers have to remain responsive, flexible, and willing and able to meet the changing demands of the marketplace. It’s definitely an exciting time to be involved in this industry.
Ayal Latz is President of a2b Fulfillment, a third-party logistics service whose solutions are designed to improve the customer experience while reducing operating costs through a variable model. Visit www.a2bf.com for more information. MAY-JUNE 2018 PARCELindustry.com 35
LONG AGO... AND INTO THE FUTURE: THE USPS AND LAST-MILE DELIVERY By Brent Wm. Primus, J.D.
n the last installment of PARCEL Counsel (Deregulation of the Airline Industry: FedEx and Last-Mile Delivery), we explored how changes in the law greatly enhanced FedEx’s ability to make parcel deliveries from origin to destination. In the column before that (Back to the Future: UPS and Last-Mile Delivery), we saw how UPS, a motor carrier, turned to the railroads to accomplish nationwide door-to-door delivery. Before the United States Postal Service (USPS) was established in 1971, there was the United States Post Office Department (USPOD), which was established in 1792. Then, as now, the first mile and the last mile were operational challenges. While a three-cent stamp could take a letter across the country from one city to another, an additional one- or two-cent stamp was required if the sender wished to
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have the post office deliver the letter to final destination. The Siegel Auction Galleries website notes, “At a time when mail delivery between one’s door and the post office was a premium service, the government and scores of enterprising individuals vied for this business. The men hired by the Post Office Department were the Carriers. The private firms carrying mail within city limits were the Local Posts.” “Local mail posts were private enterprises that operated mainly in cities. Locals provided services the USPOD did not offer. Frequent daily deliveries and collections of mail, including parcels, as well as mail boxes at convenient locations were among the services they provided, while the USPOD delivered mail only between and among post offices,” according to the Smithsonian National Postal Museum Library website. “Although [private] inter-city mail routes were suppressed [by the USPOD] in 1845, the local posts operating within city limits continued to carry letters to and from the post office and between local correspondents. They were able to avoid government interference as long as city streets were not declared post roads closed to private mail carriers. The feebased carrier system, dating back to 1836, ended on June 30, 1863, when the government Post Office Department began paying carriers a salary, in lieu of compensating them for each letter,” the Siegel website continues.
While getting mail and packages to and from the post office was an inconvenience for people living in cities and towns, the situation was even worse for rural farm families. It took a “trip to town” or having to pay a private carrier. Then, in 1893, rural free delivery was mandated by an act of Congress. It took some time to fully implement it; however, rural delivery service eventually spread across the country. Thus it is, although it took nearly 70 years to accomplish, that the USPOD expanded its services to provide nationwide door-to-door service — and without a premium charge for last-mile delivery. To conclude, I had shared the previous two columns regarding UPS, FedEx, and last-mile delivery with our own mail carrier. When I then asked him what he thought of the articles, he said, “You know, we do the last-mile delivery for FedEx and UPS. It is the cheapest way for them to do it. We go to every house every day, so why should they send a truck 15 miles to make one delivery?” Why, indeed. All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found on the PARCEL website at http://parcelindustry.com/by-author-1130-1. html. Your questions are welcome at firstname.lastname@example.org.
Redefining Customized Service A customized solution is only valuable when coupled with reliable service you can count on and an answer that doesn’t break the budget. U.S. Cargo is built on the idea of creating flexible logistics solutions for specific shipping needs. We didn’t create the concept; we’re just perfecting it by redefining what it means to benefit from complete, customized service. At U.S. Cargo, we pride ourselves on our commitment to develop transportation services and logistical systems to meet the needs of our customers, and our personalized delivery services and solutions create sustainable, long-term value for our customers, business partners, and employees. U.S. Cargo respects that every business has different needs, and our pricing methods reflect that. We don’t let schedules or
systems get in the way of servicing you with the highest priority. No business need is too small. Whether the requirements are standard or unique, our personalized commitment to meeting our customers’ transportation and logistical needs exceeds that of the competition. While our core business is standard parcel and lightweight LTL, we also leverage our assets in various ways to create solutions based on customer specific needs. U.S. Cargo is a diversified ground services provider that offers high-value, lowcost premium services, tailored to unique market demands. The customized solution must work for you and your business; otherwise we didn’t do our job. A successful collaboration is possible by teaming up with the right carrier. Team up with U.S. Cargo and benefit from a much needed redefined approach to customized service. You deserve customized solutions, consistent service, and cost-effective answers for you and your customer.
KITCHEN TABLE TO FULFILLMENT PARTNER Michael J. Ryan
ave you ever had one of those “a-ha!” ideas that you knew would change everything? You were absolutely convinced that this product would take off, but you may not have realized just what a big undertaking it would be. As you traveled through your journey of putting together the initial funding and prototypes, you realized that you could start this from your kitchen table. However, the prototype development was your first surprise in this process… hello, time and cost. (As a side note to future entrepreneurs, there is an organization in Chicago called the mHUB — www.mhub. com — that provides support in developing prototypes and new products.) As you progressed through the first stage of having a website, a prototype, and funding to produce your first production run, you decided to go from the kitchen table
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to the basement, which would give you more room for product storage and order processing. As you went from five orders a day to 50 orders a day, you decided you needed even more space. In order to keep operating expenses low, you chose to move your operation to the garage (and still have the basement for office space and overflow). Your dream was becoming reality, and soon, you were processing 100 orders per day. While exciting, this growth ultimately hampered your ability to both keep up with processing orders and to keep your marketing efforts at a high level. You came to the conclusion that you needed a small office and warehouse. At this stage, you thought you were an entrepreneur but have since realized that you were the receiving clerk, picker, packer, shipping clerk, warehouse manager, maintenance manager, security manager, and the “everything else manager.” In the meantime, your growth was beginning to slow because you weren’t able to spend more time developing your business. You decided to take a day off to reflect where you were and where you were going. You had an epiphany and decided to find a fulfillment partner that would help you focus on the commercial side of the business. Your initial thoughts were that you would never find a fulfillment partner that could do it as well as you. However, there are many small- to midsized fulfillment companies that are highly competent in the e-commerce arena. Some
critical qualities are: 1. Culture fit 2. Dedicated team 3. Location(s) 4. Flexibility 5. Customized/personalized approach 6. Technology (OMS/WMS) 7. Parcel optimization 8. Simple agreement 9. Expansion capabilities 10. Commitment to improvement Ten years ago, online retailers rarely considered fulfillment partners. Today, fulfillment services have evolved, and cost savings and advantages to the entrepreneur (both hard costs and opportunity costs) often exceed fulfillment rates. There are hundreds of small- to mid-sized fulfillment companies in the US. They fully understand what it takes for merchants to be successful. As the merchant focuses on growing the business, the fulfillment company will continue to drive operational value by keeping its costs low at a high performance level. Merchants are continually challenged by the “fast and free” model that Amazon has developed in the market. Utilizing a cost-effective and flexible fulfillment partner approach that saves transportation and fulfillment costs may be the answer for many merchants.
Michael J. Ryan is the Executive Vice President at Preferred Parcel Solutions and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@ preferredship.com.
PARCEL May/June 2018