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MAY-JUNE 2022 NOVEMBER-DECEMBER 2021 PARCELindustry.com
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3 MAJOR SUPPLY CHAIN DISRUPTIONS TO WATCH. Page 24
THE RISING COSTS OF FUEL AND THE SUBSEQUENT IMPACT ON SHIPPERS. Page 8
AUTOMATION IN THE WAREHOUSE: A LOOK AT THE LATEST TRENDS. Page 30
CONTENTS /// Volume 29 | Issue 3
26 30 32 34 36 06 EDITOR’S NOTE Expanding Partnerships By Amanda Armendariz
08 SUPPLY CHAIN SUCCESS Liquid Gold: The Rising Costs of Fuel By Keegan Leisz
11 OPERATIONAL EFFICIENCIES Empowering Your Team By Susan Rider
12 REVERSE LOGISTICS Returns Costs Continue to Outpace Volumes By Tony Sciarrotta
14 PARCEL COUNSEL Marking Up the Freight: Lawful Revenue Center, or Illegal Fraud? By Brent Wm. Primus, JD
16 SPEND PERSPECTIVES Warehousing Options Grow as Capacity Tightens By John Haber
18 PACKAGING Small Businesses Stand Out with Custom Packaging By Emily Newton
4 PARCELindustry.com MAY-JUNE 2022
24 3 SUPPLY CHAIN DISRUPTIONS TO WATCH IN 2022 AND BEYOND By Brendan Heegan
26 5 OMNICHANNEL ORDER FULFILLMENT OPTIONS TO OPTIMIZE THE FINAL MILE By Kari Polson
28 HOW CARRIER VOLATILITY IS SHAKING UP THE PARCEL INDUSTRY… AND WHAT SHIPPERS CAN EXPECT NEXT By Justin Cramer
30 AUTOMATION — TIMING IS EVERYTHING By Norm Saenz, Jr.
32 ENVIRONMENTAL SUSTAINABILITY IN THE SUPPLY CHAIN: THE FUTURE HAS ARRIVED By Steve Beda
34 STREAMLINING YOUR WAREHOUSE CONFIGURATION: 5 CRITICAL ASPECTS TO TRACK By Jason Streitenberger
36 PROS AND CONS TO DIVERSIFYING YOUR CARRIER PORTFOLIO
By Thomas Andersen and Kenneth Moyer
SPONSORED CONTENT 13 A PROVEN ALTERNATIVE TO THE NATIONAL CARRIERS 15 AUTOMATION: THE NAME OF THE PACKAGING GAME 17 EVERY SHIPPER CAN LEVERAGE CARRIER AND AVOID FAILURE 20 SPECIAL: FINAL-MILE & REGIONAL CARRIERS A special sponsored section focused on 14 carriers offering alternatives for your shipping across the country
22 CARRIER MAP Find the regional and final-mile carriers in your area
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PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 2022 © by MadMen3. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, MadMen3 or its staff becomes the property of MadMen3. The articles in this magazine represent the views of the authors and not those of MadMen3 or PARCEL. MadMen3 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. P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
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EDITOR’S PICK EDITOR’SNOTE
EXPANDING PARTNERSHIPS By Amanda Armendariz
or many years, regional carriers have been a component of shippers’ portfolios to some extent, and their importance only increased with the e-commerce surge brought on by the COVID-19 pandemic. Especially when UPS and FedEx were sometimes no longer able to handle the enormous influx of packages that many shippers needed to get out the door, regional carriers played a critical part in keeping the supply chain moving. So while we’ve done this special focus on regional carriers in our May/June issue for quite a few years now, 2020-2022 have truly highlighted how important regional carriers can be to a shipper’s operation. If you’re not currently using them, it may be time to consider bringing them into your network, especially if the states that a certain carrier services are heavily populated by
6 PARCELindustry.com MAY-JUNE 2022
your customer base. Plus, it’s often easier to seek relief from surcharges with regional carriers than it is with the national carriers, and in this day and age of ever-tightening margins, shippers will take all the help they can get. Automation is another aspect we cover in-depth in this issue. With the national labor shortage, many distribution centers are having a hard time filling their openings or retaining workers. There are many automated offerings out there that could provide relief to a warehouse that is operating with fewer employees than normal, and it’s likely that the ROI would be realized relatively quickly given the lack of available workers in many areas. The COVID-19 pandemic has only accelerated the changes that the parcel industry was seeing with respect to the explosive growth of e-commerce. Whether shippers need to expand their automated offerings within the distribution center walls, or add some partnerships with regional carriers to their networks, the time is now to implement these changes in order to stay ahead of the competition. The industry waits for no one — and neither do your customers. We at PARCEL are happy to be your industry partner as you meet these challenges head-on. 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!
The Three Pillars of a Competitive and Streamlined Warehouse Configuration By Greg Meyne
Understanding New USPS Shipping Fees By Mikel Richardson
What Are Your Customers’ Delivery Expectations, and How Can You Ensure That You Meet Them? By Jim McLafferty
LIQUID GOLD: THE RISING COSTS OF FUEL By Keegan Leisz
nderstanding the dynamic nature of parcel costs can be a daunting task that can take years to truly comprehend. Fuel surcharges, however, seem to be conceptually understood by all. This can be deceptive. While fuel may seem like it should be straightforward, there are three dynamic variables that impact fuel costs. With fuel prices skyrocketing, it’s important for shippers to understand these variables, how those have changed over time, and how they will impact their fuel surcharge. Fuel Prices The first area that impacts the carrier’s fuel surcharge is often the most impactful: fuel prices. US carriers will typically use average fuel prices that are published by the Energy Information Agency. The EIA publishes both weekly and monthly averages of the fuel prices. Although some carriers still utilize monthly averages, most domestic carriers have transitioned in recent years to
leveraging weekly averages to realize changes in fuel prices more quickly. Figure 1 displays what the historical fuel prices look like for the indices utilized by FedEx and UPS. These indices are used to determine the Ground (National – On-Highway Diesel) and Express (National – Jet Fuel) fuel surcharges through March 14, 2022. As evidenced here, fuel prices have increased to record highs for diesel, and close to record highs for jet fuel. Even without further changes to the fuel surcharge calculation, this would lead to an increase in fuel surcharge costs for shippers. Unfortunately, there have been other changes that compound this price spike. Carrier Fuel Tables The second variable that Figure 1
8 PARCELindustry.com MAY-JUNE 2022
impacts fuel surcharges is the carrier fuel table. These fuel tables have bands of fuel prices that convert the fuel prices into a rate. For UPS and FedEx, this rate is a percentage that is applied to transportation rates as well as other select surcharges. Figure 2 shows a snapshot of the FedEx Ground fuel table that was in place from November 1, 2021, to April 3, 2022. These fuel tables are designed so that when fuel prices go up, so does the surcharge. Conventional wisdom might suggest that these tables would stay relatively static, but that is not the case. Using the fuel prices as of March 14, 2022 ($5.25 for diesel, $3.48 for jet fuel) as well as the fuel prices for the same time during 2021 ($3.19 for diesel, $1.73 for jet fuel), Figure 3 shows what the surcharge would have been since 2012 using the FedEx fuel tables in place at that time. We can also take the fuel prices from Figure 1 and the fuel tables that were in place at the time to map out the actual historical fuel surcharges, as seen in Figure 4. There are a few interesting things worth noting from each graph: 1. Changes to the fuel
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tables could have different implications depending on what the fuel price is. For example, the change in the fuel table from 2013 to 2015 decreased the fuel surcharge for the higher prices, but it increased the fuel surcharge at the lower prices.
2. The last two changes to the FedEx fuel surcharge tables represent much steeper increases than we’ve seen over the past 10 years.
3. With increasing fuel prices to go along with the fuel tables increasing, we are seeing fuel surcharges that are higher than any point in the last 10 years. Fuel Basis The last variable in the fuel calculation is the array of transportation and accessorial charges that the fuel surcharge will apply to, also known as the fuel basis. The most common reasons why the fuel basis would change are when carriers implement their general rate increases (GRIs) or if a shipper signs a new agreement or amend-
MAY-JUNE 2022 PARCELindustry.com 9
ment. In recent years, we’ve seen both new agreements and the GRIs come in with higher cost increases than years past. These changes would have a direct proportional impact to the fuel basis. Figure 5 shows how some of the surcharge changes from the 2022 rate increase would impact the fuel calculation. The Whole Fuel Picture Unfortunately for shippers, each piece of the fuel picture
10 PARCELindustry.com MAY-JUNE 2022
looks bleak right now. Fuel prices are going up, carriers are increasing their fuel tables, and the fuel basis is increasing faster than it has in recent years. However, that doesn’t mean shippers are powerless. There are many ways that shippers can keep
fuel costs under control. The most straightforward way is through contract negotiations. Shippers can negotiate discounts on fuel, discounts on the fuel basis, or some larger shippers can even negotiate custom fuel tables. Another common way for shippers to keep fuel costs down is through carrier diversification. Although UPS and FedEx tend to have similar fuel surcharges, that is not the case for all carriers. When looking at the recent published fuel surcharges in Figure 6, you can see that there is quite a bit of variability. USPS doesn’t charge fuel, DHL Ecommerce applies fuel on a per-pound basis, and Mail Innovations only has a four percent fuel surcharge for March. By utilizing carriers that apply fuel differently than UPS and FedEx, shippers can mitigate some of the cost increases that are being driven by fuel. Regardless of how shippers decide to tackle the rising fuel costs, understanding the impact and developing a mitigation plan should be a top priority for all shippers.
Keegan Leisz is a Project Manager at enVista, a global consulting and software solutions ﬁrm. In his role, Keegan is responsible for negotiating parcel carrier contracts and specializes in analytics. You can contact him at kleisz@ envistacorp.com.
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EMPOWERING YOUR TEAM By Susan Rider
ver wonder how relaxing and less stressful your life would be if your department or facility was on autopilot? How refreshing would it be to know your team had your back and anything that could be thrown at them would be handled with the utmost speed and accuracy? Certainly, that would bring a sense of relief. The first step in building a “team of execution” instead of team of “waiting for direction” is empowering them and trusting them to make good decisions because you have given them the necessary knowledge and training. Whether you have sent them to seminars, classes, or trained them yourself, empowering happens when you share the knowledge and teach them how to do their jobs, which means a good portion of your job is being an educator. The pandemic shook things up a bit and even people that had developed and trained their teams are having to do more because either they lost members of the team, team members moved on, or they just opted not to return to work. So many are just like you, starting all over again. I hear those brain cells churning; perhaps you are thinking, “I don’t have time to be a teacher!” Not a problem; it just means you need to delegate. Give your team opportunities to learn outside of your four walls by attending educational sessions at industry shows. It is a proven fact that many go back to their companies and save them millions of dollars from new ideas and concepts learned at these conferences. Last year at PARCEL Forum, there were several conversations from young up-and-comers attending for their second year because of the great ideas they learned the first time. Their bosses said it was well worth the investment to get more new, innovative ideas. If you are concerned that the person is
getting a few days out of town and all they will do is party, have them write a paper of all the sessions they attended and what they learned. Don’t let fear paralyze you from improving your operation. Another great concept of improving execution in your facility is developing a strategy in every department. When a problem or mistake happens (and it will, no matter how good you are), it’s imperative you also track the problem back to the core issue so that same problem doesn’t happen again. You would be surprised at the number of people who do not do this. By instituting this new behavior process, you will develop a team that will always look for the root cause of every problem while fixing the current issue in order to prevent it from happening again. For instance, one customer had shipping software that didn’t like special characters in addresses. Whenever a customer had special characters, the software would act in multiple different ways. It might kick out the order to never-never land, or it may duplicate the order multiple times, or it would replace characters, delete them, etc. This kept happening over and over again, until someone said, “Let’s write some software that checks for these characters before the order hits the system so we can clean it up or handle it outside the system.”
Another example is returns and the issues that developed over the last couple of years with much of the workforce working from home due to the pandemic. Customers kept placing orders with their current accounts, but they were working from home. So, carriers would go to the offices to deliver, and the doors were locked. Therefore, returns quadrupled. Instead of coming up with a process to verify the correct shipping address, the returns clerk kept quiet or didn’t share the problem, and these mistakes kept happening. Not fixing the root cause of a problem is like being in the movie Groundhog Day. Below are some tips on how to empower your team to handle and run your business efficiently, effectively, and error-free. 1. Give them as much training/knowledge as possible 2. Include them in the “why” of processes 3. Give them analytics to track and beat 4. Communicate with them 5. Be transparent and collaborative Having a team that executes is well worth the investment of time and effort.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at email@example.com.
MAY-JUNE 2022 PARCELindustry.com 11
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RETURNS COSTS CONTINUE TO OUTPACE VOLUMES By Tony Sciarrotta
he cost of returns is rising faster than volumes, according to the Reverse Logistics Association’s (RLA) surveys. In each of the quarterly surveys since they began last October, costs have been a concern to survey respondents, including during the holiday season, a time period in which returns volumes spike. Indeed, shippers ordered early and paid dearly to ensure inventory was available in stores and online for the holiday season. Transportation rates, including peak surcharges from parcel carriers, were elevated due to the demand and capacity tightness. According to the National Retail Federation (NRF), retail sales during 2021’s November-December holiday season grew 14.1% over 2020 to $886.7 billion. The number includes online and other non-store sales, up 11.3% at $218.9 billion. The amount spent and the growth rate are new records, topping the previous records of $777.3 billion spent in 2020 and 8.2% growth that year. Along with the record increase in holiday sales, the NRF noted that US consumers returned about $158 billion worth of goods purchased between November 1 and December 24, a 56% increase year-over-year, and represented 17.8% of purchases versus 13.3% in 2020. However, over 61% of the RLA survey respondents noted higher costs, while 34% indicated that costs stayed the same or did not increase during the fourth quarter.
12 PARCELindustry.com MAY-JUNE 2022
Among the survey commentary was: Increased costs “driven by cost of freight.” “Labor increases and required surge pay needed for lack of labor.” “Labor and inflation pressures.” A survey from RLA member ReverseLogix found that the biggest cost drivers in managing product returns were: Warehousing space Customer service team Labor Processing returns into inventory Unsellable returns In addition, a survey by global logistics service provider Pitney Bowes found that returns cost US online retailers an average of 21% of order value. More than two-thirds of retailers surveyed said that they were actively trying to lower the cost of returns by addressing transportation and/or processing costs. However, according to Pitney Bowes, this goal is complicated by shared accountability for returns strategies. The survey found that while 42% of retailers give their logistics/operations leaders final authority in selecting a returns transportation vendor, only 25% give operations leaders the same authority in determining returns technology vendors. This division of responsibility is more likely to create gridlock when it comes to decision-making.
Indeed, understanding and establishing reverse logistics processes are important to manage costs and volumes. Managing the known and the hidden costs of reverse logistics is important. An example of a hidden cost could be when a carrier shows up late for a pickup or delivery; it doesn’t change the cost of freight. True, a carrier may receive a markdown on their scorecard, but who pays for that? What is the opportunity cost of that product not making it to market? In addition, ReverseLogix notes that data visibility is a challenge for most companies trying to solve the reverse logistics problem. This lack of data visibility can be attributed to the fact that the management of returns and other reverse logistics operations is often done in various parts of an organization. As supply chain costs continue to increase, organizations need to identify their total reverse logistics costs, establishing clear processes and procedures in managing this part of the supply chain. Yes, reverse logistics is indeed a part of supply chains, and it needs to be integrated into supply chains to achieve cost savings and insights into new ways to improve customers’ experiences.
Tony Sciarrotta is Executive Director of the Reverse Logistics Association.
A Proven Alternative to the National Carriers LaserShip and OnTrac to Launch Transcontinental Last-Mile Parcel Delivery in Summer 2022 The duopoly has been prioritizing profits over partnership. Over the last two years, retailers have had to balance surcharges, rate increases, and capacity constraints with consumers’ demands for free and fast home delivery. Meanwhile, the duopoly has generated billions of dollars in profits due to the e-commerce volume surge and has prioritized high margin customers. Many parcel shippers have accepted increasing rates as the cost of doing business in a capacity-constrained, inflationary environment, but what if retailers had another option?
LaserShip and OnTrac announced that the two companies will merge to form the first pure-play, transcontinental partner of choice for last-mile e-commerce deliveries. The combined delivery networks will bring together two complementary operating footprints to provide retailers with fast, reliable, costeffective home delivery that acquires customers, builds brand loyalty, and creates supply chain flexibility. The LaserShip and OnTrac merger is a huge win for retailers. The combined network will reach 74% of the U.S. population across 30 states and Washington D.C. in two days or less. Starting in summer 2022, the two companies will launch transcontinental deliveries to move packages across the country in three days, creating a coast-to-coast alternative to the national carriers. LaserShip and OnTrac are also expanding their network to Texas in 2023 in the fast-growing urban megaregion of Austin, Dallas-Fort Worth, Houston, and San Antonio. Retailers that continue to rely exclusively on the national carriers put themselves at a competitive disadvantage. Learn how a combined LaserShip and OnTrac delivery network can help you meet your customers’ expectations of faster delivery while protecting your margins. Visit lasership.com or email us at firstname.lastname@example.org.
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MARKING UP THE FREIGHT: LAWFUL REVENUE CENTER, OR ILLEGAL FRAUD? By Brent Wm. Primus, J.D.
or this installment of PARCEL Counsel, we combed the archives and decided to feature a column from December of 2010. I have now had the privilege of authoring more than 50 PARCEL Counsel columns. Over the years, this one in particular has led to more phone calls and e-mails to me than any of the others. So, I thought it would be a good topic to revisit. Terms such as “Freight Prepaid and Charged Back,” “Freight Prepaid and Add,” “Freight Collect and Allowed” and other payment term modifiers are not defined in either the Uniform Commercial Code (UCC) or the National Motor Freight Classification (NMFC). Rather, they originate from industry practice and custom and have never been codified into law. The phrases “F.O.B. Origin, Freight Prepaid and Charged Back” and “F.O.B. Origin, Freight Prepaid and Add” mean that the seller pays the freight charges to the carrier but then collects from the buyer by adding the amount to the seller’s invoice. Similarly, the phrase “F.O.B. Destination, Freight Collect and Allowed” means that the freight charges are paid to the carrier by the buyer who then deducts the amount paid for the freight from the seller’s invoice. The term “F.O.B. Destination, Freight Prepaid & Add” means that the freight charges are paid to the carrier by the seller, who then adds the amount paid to the carrier to the seller’s invoice. Care must be exercised by a seller when prepaying and adding freight charges to the invoice to the buyer to avoid violating state laws prohibiting deceptive or fraudulent business practices. A seller would be susceptible to such a charge if it adds to an invoice more than it actually paid
14 PARCELindustry.com MAY-JUNE 2022
the carrier. Such a practice is colloquially referred to as “marking-up the freight.” Similarly, a buyer would be in violation of such a state law if it were to misrepresent to the seller the amount the buyer actually paid to the carrier. While a thorough discussion of this issue is beyond the scope of this column, an example of such a violation of a state law would be when either the buyer or seller submits the carrier’s original invoice for freight charges to the other party, but then later receives an “off-bill discount” from the carrier. An example of such an “off-bill discount” would be when the carrier issues a credit based on a volume incentive which cannot be determined until the end of a given period of time. Such a credit effectively retroactively lowers the freight charges for all shipments subject to the volume incentive. As between the carrier and its customer, such discounts are perfectly legitimate. What is not legitimate is for one party to a sales transaction to misrepresent or artificially inflate the amount (i.e. by failing to include the discount) that it tells the other party it paid for freight charges. Having said that, there are perfectly legitimate reasons why the party paying the freight may be entitled to an extra amount. For instance, the party paying the carrier may be in a position to obtain much lower rates based on higher volumes of freight than the other party could negotiate for themselves. Additionally,
the party who negotiated the rates, arranged for the carriage and paid the freight bills no doubt incurred administrative costs to do so. There is nothing inherently unlawful about marking up freight charges; it just must be done in a non-deceptive manner. A similar analysis applies when a seller quotes a product at a given price plus “shipping.” If the seller is “marking up the freight,” this would be a deceptive trade practice. In this situation, the problem is easily resolved by using the phrase “shipping and handling.” Accordingly, if one party to a sales transaction wants to be paid something more than the amount paid to the carrier, an agreement needs to be reached with the other party. For example, the parties could agree in a separate writing that the term “freight” means “the freight charges actually paid to the carrier plus 20%” or “the freight charges actually paid to the carrier plus $20.” Failure to have such an agreement exposes the party “marking-up the freight” to both civil and criminal liability.
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 in the “Content Library” on PARCELindustry.com. Your questions are welcome at email@example.com.
Automation: The Name of the Packaging Game How fit-to-size auto-boxing is streamlining the packaging process Most people are familiar with the current e-commerce environment, where everyone is clicking to buy. This has created an exciting yet challenging business environment for a lot of distribution centers. For example, what used to be a DC’s peak season is now the “new normal,” with peak season layered on top of that. This and other realities have made fulfilling and shipping orders a major operational challenge. In the past, companies would add more labor resources to solve the problem, but that doesn’t work in this environment. Instead, more and more companies are turning to automated packaging to maximize efficiency, improve the customer experience, and reduce their overall dependence on labor. Because packaging hasn’t necessarily always been automated, there are some real opportunities to create an integrated, streamlined process. Efficiency Is Key Packaging an order is a time-consuming process. When you consider the number of packages that go through a DC in a single day, the inefficiencies of manual packing can result in many hours lost. A fit-to-size automated system will measure, construct, seal, weigh, and label an order in a matter of seconds while eliminating the need for void fill materials. Additionally, with right-sized boxes being smaller, companies will fit more parcels on a truck, saving time and fuel. Reduce Dependency on Labor Establishing a sense of consistency in your operations is critical to improving efficiency as labor is becoming more difficult to source and retain. Companies that use fit-to-size automated packaging can count on consistent throughput to better support their warehouses’ needs, navigate peak seasons, and support future growth. Improve the Customer Experience For many customers, their only touch point with a company,
besides browsing the website, is the unboxing experience. Right-sized automated packaging creates environmentally friendly packaging that is easy to reuse or recycle and free of void fill. By making every box a brand ambassador, you will leave a lasting impression on the customer. Create the Perfect Packaging, Every Time Fit-to-size automated packaging can improve the customer experience while solving many of today’s shippers’ biggest pain points. Solutions like the CVP Impack and CVP Everest from Sparck Technologies make order fulfillment more flexible and efficient, solve labor challenges, and reduce package volume by up to 50%. With only one or two operators required, both autoboxing systems measure, construct, seal, weigh, and label each variable dimension single- and multi-item order of either hard or soft goods in a custom fit-to-size box while eliminating or reducing the need for void fill materials. The CVP Impack creates a rightsized box every seven seconds, while the CVP Everest creates a right-sized box every three seconds. They help you operate lean, use less materials and void fill, and ship parcels efficiently. In fact, some customers see a full return on investment in as little as 18 months or less depending on parcel volume. Contact Sparck Technologies for more information about automated packaging and how a right-sized box can save you labor, material, and shipping costs to achieve the best ROI possible.
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WAREHOUSING OPTIONS GROW AS CAPACITY TIGHTENS By John Haber
S warehousing space is at the tightest it’s ever been as shippers import record amounts of inventory to satisfy existing customer demand and have on hand “just in case.” Real estate investment trust, Prologis, ended the first quarter (the period ending March 31) at a 97.4% occupancy, flat to the fourth quarter of 2021, counter to the typical first-quarter decline. Prologis CFO Tim Arndt said on its April 19 earnings call, “supply chains have yet to return to normal as measured by in-stock rates, equipment lead times, and active dialogue with our customers. While the flow of goods has improved, the inventory to sales ratio remains more than 10% below pre-pandemic levels, and inventories need to make up for this 10% and build an incremental 10% in safety stock.” As shippers rebuild and stock up on inventories, where to store the goods is becoming an issue — warehouses across the US are full. Expanding warehouse networks is expensive and available land is often at a premium as shippers desire to move closer to customers for faster last-mile deliveries. Instead of building out, some shippers are building up. Multilevel warehouses are common in densely populated areas of Asia, and they are now gaining popularity in the US. This is partly because property developers are challenged with providing industrial real estate in some of the biggest consumer markets in the country. In 2018, the first multistory warehouse was built in the US, located in Seattle for Amazon. Since then, Amazon has announced plans to build up to 11 multistory robotics warehouses in such locations as Colorado Springs, Nashville, and California’s Inland Empire. But multilevel warehouses may be cost-prohibitive for small and medium-sized shippers. Flexible warehousing is another option for shippers. Third-party logistics providers often provide such a service on behalf of their customers and a growing number of startups such as STORD, Flexe, ShipHero, and ShipBob.
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Flexible warehousing solutions often include a host of technology solutions that allow shippers to manage their inventories by smartphone and/or computer. In addition, a growing number of these solutions are also offering last-mile delivery services. Speed is often an important part of these providers, many of which focus on e-commerce fulfillment. Microfulfillment facilities are small-scale warehouse facilities in densely populated urban locations closer to the consumer to improve delivery times. According to research from Interact Analysis, about 7,300 automated microfulfillment centers (MFCs) will be installed by 2030, up from just under 86 installed at the end of 2021. Instacart and Walmart have recently announced they would add MFCs to their networks. Walmart will utilize some of its stores as MFCs, and in other locations, the fulfillment centers will be added to stores. Its first market fulfillment center opened in Salem, New Hampshire, in late 2019. According to Walmart, inventory is kept separate from the rest of the store, with automated bots retrieving items within the fulfillment center. The items are then brought to a picking workstation, where the order can be assembled with speed. Empty storefronts are also turning into MFC space as shippers move closer and closer to customers, particularly in densely
populated locations. However, one interesting example, typically not associated with densely populated areas, is Tanger Factory Outlet Centers’ partnership with Fillogic, a logistics-as-a-service platform. In 2021, the two teamed up to create what is described as tech-enabled micro-distribution hubs to drive convenient delivery and return processes. These hubs offer various shipping services, including same-day delivery for local residents and one-stop shopping, allowing customers to drop online returns on-site. The need for inventory space will not disappear anytime soon. “Even if retail sales declined 5% as consumers shift their spending to experiences versus goods, we project that the market will still require an incremental 800 million sq ft of space in the US alone,” Prologis’ Arndt said. Utilizing existing space will be an important part of shippers’ strategies and other creative ideas to keep the flow of inventories moving in supply chains and to consumers’ front doors.
With over 25 years of supply chain experience, John Haber has helped some of the world’s leading brands drive greater efficiencies through their supply chain operations while reducing transportation, distribution, and fulfillment costs. After a successful UPS career, John founded Spend Management Experts, now part of Transportation Insight.
used two carriers, but the format was primarily relying on one of FedEx or UPS, then using the Postal Service for P.O. Boxes only.
Every Shipper Can Leverage Carrier Flexibility and Avoid Failure
By Jason Murray, CEO & Co-founder, Shipium
Customers want their items fast, free, and on time. It’s your job as a modern operator to put their needs and desires first and use the best carrier for the job, not just the one you are locked into. I learned the value of this lesson in the early 2000s when helping Amazon switch from solo dependency on UPS to a multi-carrier mix to drive shipping speed and cost improvements. The power of flexibility is available to everyone and starts by ditching the single carrier relationship model you’ve been reliant on for years. It’s not getting better — in fact, the performance of each of the three national carriers has steadily declined due to structural issues including poor earnings, supply chain issues, and constrained labor. Despite the threat of inflation, consumer spending online is on track to hit the $1 Trillion mark in 2022. To take advantage, every retailer should adopt a multi-carrier model to put the customer experience first. Single Carrier? Single Failure What’s wrong with the single carrier model? To find out, we indexed the top 750 e-commerce retailers by annual online revenue based on the industry data provided by EcommerceDB. com. We investigated their online shipping policies and went through the buying process to view shipping options at checkout. We then cold cross-referenced whether or not a given retailer used a single carrier. We found 22%, or 165 retailers, stated or demonstrated that they used a single carrier. An additional 17%, or 127 retailers,
Combined, 39%, or 292 of the top 750 online retailers, relied on a single carrier. That’s a lot of assumed risk during peak shopping seasons. Moving from a single to multiple carrier strategy helps you get out from under the thumb of carrier limits or poor performance. It also provides the modern operations leader the ability to arbitrage services to drive the best rate. This is the fastest way to reduce costs while ensuring performance remains acceptable. Carrier Flexibility = Customer Loyalty Fixing this problem in time for peak requires both a business strategy and a technology solution working in partnership. The business portion is logically simple: secure more contracts, like regional carriers, specific to your shipping profile either directly or through a third-party logistics provider. The technical solution has historically been complex, requiring multi-month TMS integration and lots of manual analysis to configure for fast or low-cost shipping options (but typically not both). This painful work is the reason why 39% of the top 750 retailers still rely on a single carrier solution; change has been too painful. Enter Shipium. We help retail businesses put logistics management technology at the center of their growth strategy. Retailers can plug in carriers and optimize their last mile instantly to improve delivery speed and reduce shipping costs. The resulting carrier flexibility delivers shipping speed, which makes online shoppers very, very happy. Jason Murray is co-founder and CEO of Shipium, a venturefunded supply chain technology platform based in Seattle, Washington. Before starting Shipium, he spent 19 years at Amazon as the VP of Retail Systems and VP of Forecasting & Supply Chain where he owned the global software and operations group that powered Prime.
Jason Murray, CEO, Shipium firstname.lastname@example.org
SMALL BUSINESSES STAND OUT WITH CUSTOM PACKAGING By Emily Newton
t can be challenging for smaller enterprises to compete with the world’s most established brands. However, usually, the goal is not for them to become as well-known as those entities. Instead, it’s to fill a niche in the marketplace and show potential consumers there are appealing reasons to buy from enterprises that are not as large. Small- to medium-sized business custom packaging offers an excellent way for such organizations to get noticed for all the right reasons. Also, when packaging specialists provide it, they could grow their companies by catering to a new market segment. It Can Help Businesses Evolve for the Future Custom packaging can become a useful way for businesses to adapt to changing consumer preferences and trends. Such was the case with Caurnie Soaperie, a Scottish small business with nearly a century of history behind it. The company has several standout aspects associated with it, including that it only sources locally grown or foraged plants to produce products in small batches with antique equipment. The leaders of Caurnie Soaperie want to turn it into a globally recognized brand. Some of the things representatives did to work towards that goal involved improving the company’s website and removing the second word of the brand name. However, packaging also played a major role. Decision-makers wanted to revamp it by focusing on sustainable, locally sourced materials to fit its overall ethos. However, they also wanted economical packaging that was reusable, if possible. Stuart Gilmour, owner of the communications agency Stand, was part of the team overseeing these changes.
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He noted, “Going back to basics, it was about making the packaging easy, pre-made, and inexpensive, but stickered in a way that is very clean and clear. It was absolutely about consistency but with enough differentiation between the range of products.” Another part of the plan was to turn products into storytelling vehicles by putting QR codes on the packaging. Scanning one would take customers to a dedicated media channel that facilitates repurchasing an item, learning more about it, or accessing social media feeds. These options are examples of how a revamp of small business packaging can show customers that the brand is in touch with its current and future consumers. It Can Help Shipped Items Arrive Safely It’s frustrating for everyone involved if products sent through the mail to a customer’s doorstep arrive in an unusable condition. That problem adds costs for a small business and could make the recipient think twice about buying from the company again. However, small business custom packaging options can help prevent breakage or other unwanted issues during shipment. The underside of the box might feature a phrase such as, “If you can read this, I’m upside down!” Alternatively, if a company offers perishable food, such as meal kits, the messaging could say, “Delicious meals have arrived! Please refrigerate promptly.”
It’s common to see generic labeling that warns items inside a package are fragile or otherwise need special handling. However, sometimes, that content on packaging is too small or it blends in with aspects like the address label so that people miss it. Focusing on custom packaging that makes people more aware of the contents could help reduce costly problems during shipping. It also gives you opportunities to catch attention in other ways, such as by using specific colors or a logo in the packaging design. These elements can make branding stronger and people will get the impression that company representatives have shown the necessary foresight to stop products from arriving damaged. Statistics indicate that returning customers spend an average of 67% more than those buying for the first time. With that in mind, you want to do everything you can to ensure people are delighted with every order. Custom packaging that features handling instructions supports that goal. It Can Cut Packaging Waste It’s often difficult to ensure a package is durable enough to serve its intended purpose and design it so the materials used are not excessive. Even the world’s most successful businesses sometimes struggle with that challenge. Amazon took in $11.19 billion during the 48-hour Prime Days event in 2021. However, during a survey that same year of adults in the United Kingdom, 48% of
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respondents felt Amazon topped the list of companies that use too much packaging. Consider how a small business might make some packaging-related decisions to reduce how much material people have to throw away after they get the product. Maybe a company sells gift sets that were initially packaged in cardboard boxes with shaped plastic inserts. A different approach that targets waste would be to put the items in containers people can reuse, such as those made out of metal or even cloth. If a small business has the infrastructure to support such a decision, another possibility is to offer customers the option to refill the product packages they have or send in their empty ones to have full containers returned to them. A growing number of small businesses, particularly those selling cleaning and personal care products, have such programs in place. Some of them even provide postage-paid envelopes so that sending back the packaging is hassle-free for consumers. Small business custom packaging could also include reusable elements, such as ribbons. Then, there’s a higher likelihood of people finding creative ways to repurpose them. Think about how a small business might encourage them while also driving traffic to social media
profiles. The packaging might say, “We love seeing how you use our packaging in your life. Show us on our socials!” Custom Packaging Can Be Scalable A final thing to remember is that there is a huge number of possibilities for utilizing customized packaging. Suppose a small business has limited resources and wants to see a strong return on investment before committing more money. Then, leaders might begin with something relatively minor, such as printing a company’s name on a cardboard shipping box or using branded packaging tape on it. However, if packaging companies offer arrangements that don’t require minimum order quantities
(MOQ), it’s easier for them to attract the owners of small businesses and show them what’s possible. That could be the beginning of a fruitful customer-supplier partnership that lasts for years. Many people associated with small businesses may feel curious about packaging options but not know where to start. Exploring the different avenues with a packaging provider could help them discover how a package can promote the company and its values.
Emily Newton is the Editor-in-Chief of Revolutionized (www.Revolutionized.com). She regularly covers trends in the industrial sector.
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Over these last number of years, regional and final-mile carriers have continued to be an effective and efficient alternative for parcel shippers across the country. Please take a good look at each of these 14 carriers and check out their service map on the following pages. One or more of these carriers may be just the change you need for delivering your products and becoming more competitive.
Puerto Rico US Territories
Associated Couriers is built on a foundation of delivering life-saving radiopharmaceuticals and medications. We have proudly carried the same commitment and urgency to a variety of industries including: life sciences, pharmaceutical, healthcare, and more. When you need a courier to get your shipment RIGHT, choose the courier that has set the standard in transportation services since 1977.
| www.associated-couriers.com | email@example.com | 800.325.4946
Capital Express, LLC & ADL Delivery have been in business for 35 years. Recently, they have become one company now servicing 16 states with over 45 hubs! They have large regional footprints in the Midwest and Southeast United States. Capital Express specializes in pharmaceutical, distribution, critical parts, and e-commerce final-mile while ADL Delivery has one of the largest overnight delivery networks, providing parcel delivery and fleet replacement for the automotive distributor industry. www.adldelivery.com | 877.423.3741 | www.capitalexpress.biz | 800.895.3583
FirstMile has been helping companies of every size optimize their shipping to reduce costs and improve transits on every order. Our system makes it easy for you to access the best carrier, selecting from a range of national, regional, and local parcel and mail carriers, including First Class. Our unique approach allows e-commerce shippers to get the best combination of price and service on every order, every day. We do this all with a single API connection and pick up.
www.firstmile.com | firstname.lastname@example.org | 888.993.8594
GLS provides parcel and freight delivery services in California, Nevada, Arizona, New Mexico, Oregon, Washington, Idaho, and Utah. The business needs of our customers are constantly shifting and changing to adapt to ever-changing work environments. To help with this, we offer convenient delivery options for your Ground and Freight shipments, as well as Priority delivery at significantly less cost when compared to the national carriers.
gls-us.com | email@example.com Specializing in last-mile delivery, Hackbarth Delivery Service, Inc. is your regional, single-source connection for large and small parcel distribution and e-commerce shipments. Established in 1975, Hackbarth currently has 41 terminal/cross dock locations across 11 states, delivers 110,000+ packages/day, completing 4+ million final-mile deliveries/year across the Southeast, Midwest and MidAtlantic regions. Contact us 24/7/365, a privately held, certified woman-owned corporation and SmartWay Partner, providing real-time scanning/delivery updates, GPS tracking and customized solutions for all transportation, distribution, logistics and warehousing needs. | www.hackbarthdelivery.com | firstname.lastname@example.org / email@example.com | 251.478.1401
In 1999, International Bridge introduced non-continental, regionalized delivery with services to Alaska, Hawaii, and Puerto Rico. With a continual investment in technology and in optimizing our delivery network, we progressively expanded our services to include the lower 48 states while keeping our core philosophy of great rates, consistent reliability, and fast transit times. From small online sellers to the largest e-commerce retailers, we build value throughout the supply chain. Contact us to find out how we deliver more with less. Myib.com | firstname.lastname@example.org | 877.727.2354 20 PARCELindustry.com MAY-JUNE JANUARY-FEBRUARY 2022 2022
LaserShip helps leading retailers and businesses with faster, reliable, cost-efficient last-mile delivery that acquires customers, builds brand loyalty, and creates supply chain flexibility. Since 1986, LaserShip has innovated to stay ahead of the evolving e-commerce landscape through investments in technology, automation, and machine learning. LaserShip recently announced its merger with OnTrac to create the first pure-play, transcontinental last-mile e-commerce delivery network that reaches 74% of the U.S. population across 30 states and enhances shippers’ ability to meet growing delivery demand. | www.lasership.com | email@example.com
OnTrac offers fast, affordable ground delivery that helps shippers lower their costs and provide customers with world-class service. Founded in 1991, OnTrac has become a top choice for e-commerce companies looking to speed up parcel distribution without the additional costs associated with national carriers. OnTrac recently announced its merger with LaserShip to create the first pure-play, transcontinental last-mile e-commerce delivery network that reaches 74% of the U.S. population across 30 states and enhances shippers’ ability to meet growing delivery demand. ontrac.com | firstname.lastname@example.org
Optima Overnight’s expedited ground delivery network offers unmatched service throughout New England. With over 40 years experience meeting the delivery needs of our customers, Optima continues to grow as the first choice in final-mile delivery for e-commerce, retail, meal kits, medical, and more! Our customized solutions can get you to your customers faster, with more consistent service and more cost-effectively than the competition. To learn more, please visit our website below or give us a call. We deliver, on-time, every time! www.shipoptima.com | email@example.com | 781.328.0081
For 25 years, Pace has been your go-to final-mile provider for the Southeast. Our 18 facilities effectively serve customers in endeavors including e-commerce, retail, automotive, healthcare, business and industrial supply, and hospitality. Our services for these customers feature final-mile, pool distribution, scheduled courier routes, and linehaul. Pace’s transportation solutions range from small vehicles, cargo vans, straight trucks, to tractor trailers. Pace is excited to fulfill our mission with you of Solving Logistics Together! | www.pace-usa.com | firstname.lastname@example.org | 866.410.7222
Sonic Transportation & Logistics was founded in 1976 providing final-mile, statewide, next-day delivery in Florida. Sonic provides the tools to enable your company to track your shipments in real time. Sonic provides VPOD & VPOA for all shipments. Whether you’re shipping payroll, e-commerce, retail, or any small package to Florida, Sonic Transportation and Logistics is your trusted source to get the job done. For more information, please contact us at email@example.com / 800-627-6642 ext. 203. www.sonictl.com | firstname.lastname@example.org | 800.627.6642 ext. 203.
Spee-Dee Delivery Service, Inc. was established in St. Cloud, MN in 1978. Our company has grown over the past 44 years to include 35 locations, serving over 12,000 daily shippers throughout 9 states. We continue to add to our menu of service offerings including Spee-Dee On-Call, Spee-Dee LTL, and most recently Spee-Dee Logistics, which provides warehousing and fulfillment services. With our simplistic approach to pricing, Spee-Dee Delivery makes it easier for shippers to understand and identify cost savings. www.speedeedelivery.com | email@example.com | 800.862.5578
TForce Logistics, a wholly owned operating company of TFI International Inc., is a leading same-day final-mile transportation solutions provider, successfully delivering over 100 million shipments per year. An integrated network deploys more than 70 operating facilities, leading technologies, and a fleet of more than 6,700 final-mile delivery partners and equipment. TForce Logistics is purpose-designed for the demands of final-mile, B2B, and e-commerce-generated shipping with coverage across all the major metropolitan communities in the U.S. and Canada. www.tforcelogistics.com | firstname.lastname@example.org | 855.396.2639
United Delivery Service, a regional parcel carrier with 50 years experience, is a leader in providing final-mile delivery solutions for 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. UDS also provides VPOD and GPS/geocode on each order, allowing us to perform at a very high level. www.uniteddeliveryservice.com | email@example.com | 630.930.5201 JANUARY-FEBRUARY MAY-JUNE 2022 PARCELindustry.com 21
FEATURED REGIONAL & FINAL-MILE CARRIER SERVICE MAP
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Associated Couriers AL, AR, AZ, CA, CO, FL, GA, ID, IL, IN, KS, MA, MD, MI, MN, MO, MS, NC, ND, NE, NJ, NY, OH, OK, OR, PA, SD, TN, TX, VA, and WA
Capital Express / ADL Delivery AL, FL, GA, IA, KS, MI (UP), MN, MO, NC, ND, NE, SC, SD, TN, TX, UT, and WI
FirstMile CA, CO, FL, IL, NJ, NV, NY, TX, and UT
GLS AR, CA, CO, ID, NM, NV, OR, UT, and WA
Hackbarth AL, AR, FL, GA, LA, MS, MO, OH, OK, TN, TX, and WV
International Bridge AL, AZ, CA, CO, CT, ID, IL, HI, IN, KY, MA, MD, MO, NJ, NM, NY, NV, OH, OR, PA, TX, UT, VA, WA, WV and PR and the US Territories
LaserShip AR, CT, DE, FL, GA, IN, KY, MA, MD, MI, MS, NC, NH, NJ, NY, OH, PA, RI, SC, TN, VA, WV, and Washington DC
OnTrac AZ, CA, CO, ID, NV, OR, UT, and WA
Optima Overnight CT, MA, NH, and RI
Pace AL, AR, GA, LA, MS, NC, TN, Dallas, TX and upper FL
Spee-Dee Delivery Service IA, IL, MN, ND, SD, WI and select ZIP Codes in MI, MO, and NE
TForce Logistics AZ, CA, CO, CT, FL, GA, IA, IL, IN, MA, MD, MI, MN, NC, NJ, NM, NV, NY, OH, OR, PA, TX, UT, VA, and WA
United Delivery Service IL, IN and WI MAY-JUNE 2021 PARCELindustry.com 23
By Brendan Heegan
3 SUPPLY CHAIN DISRUPTIONS TO WATCH IN 2022 AND BEYOND
ou can’t get through a workday without hearing the word “disruption.” While business is ever-changing, we’ve all seen how the rate of change since early 2020 has disrupted and accelerated the evolution of business. Let’s explore three of the most prevalent disruptions that all companies throughout the supply chain must face and overcome.
The Need to Improve All Human and Automated Labor People will always be the core of every company’s success. The past two years have taught us the importance of labor retention. For long-term success with your company’s talent, you must offer competitive wages, enhanced benefits, as well as a strong culture and work environment to take care of your permanent employees and ensure high retention rates. And, the continued growth of robotics and automation will provide a key 24 PARCELindustry.com MAY-JUNE 2022
supplement to your labor to help boost overall productivity and efficiency. No longer solely for the domain of large companies, the price of robots for distribution centers and warehouses of all sizes can start under $10,000 for some models. Advancing artificial intelligence, lowering replacement part costs, and other factors have contributed to making robotics a near-term cost-effective option. The prevalence of more lower-cost robotic options has caused the recent surge in sales. The Association for Advancing Automation reported that the North American industrial robotics market had a 37% increase in units sold during the third quarter 2021, with the food and consumer goods segment seeing a 43% increase. In addition, warehousing is one of the segments that A3 President Jeff Burnstein noted is an “emerging” market for robotics. Retail operations also have high robotic adoption rates, taking advantage of benefits such as better cube utiliza-
tion and improved facility redundancy. Automation also saves time. In non-automated warehouses that approach one million square feet, up to 30% of employees’ time is spent simply traveling between work areas within the facility to do their jobs. Retail, health care, and high-tech and other industries that have incorporated robots for picking and taking items to packing locations use what’s called a “goods-to-person” application, where people finish the process. This approach streamlines the overall logistics process. And those investments in robots and automation are paying off for many. For example, Brazil, Dafiti Group’s LEAP 581,250 square-foot (54,000 square-meter) fashion and lifestyle warehouse for e-commerce operations has seen great process improvement by adding automation and the software to run it. For the automotive portion and its 500,000 SKUs, approximately 300 robots are incorporated into its automation system, which has made process picking time three times faster while increasing throughput per hour by 400%. Sustainability Will Be Key Consumers’ awareness of and concern about social issues, driven in large part by Generation Z, is spurring a focus on sustainability in every business; it’s no longer just a “nice to have” aspect. For a consumer focus, sustainable packaging is growing at a compound annual growth rate of 10.3% in the US through 2027 to top $305.31 billion, says Market Research Future. The industries driving this growth are expected to be in food & beverage packaging, personal care, and medicines. Warehouse design is another area where companies can be sustainable, as energy costs often account for 15% of the operating budget. Renewable energy can help minimize those costs and boost building efficiency, such as by installing solar panels on roofs and using renewables for heating and even power forklift trucks. Adding Virtual to Your Digital Transformation While digital transformation
SUBSCRIBE FOR FREE! is not new to the supply chain, many are still struggling to integrate their warehouse management and other legacy systems with current technologies to offer true end-to-end visibility for real-time decision-making. Today’s digital supply systems need to focus on customers and be flexible to anticipate — let alone react to — changing consumer habits, government regulations, and other ongoing disruptions. A lot of this flexibility will come from having a WMS that integrates with cloud technology. Your digital supply chain system must also be adaptable to the coming virtual realm: the metaverse. Many may simply view the metaverse as nothing more than an immersive, 3D gaming opportunity. However, metaverse technologies — transforming physical worlds into digital, virtual ones — will offer 3D representations of how products are produced, maintained and distributed, sold and delivered.
Rather than traveling for meetings or waiting your turn for quotes and input into a manufacturer’s new product, you will meet virtually directly with your upstream and downstream supply chain collaborators. The metaverse will ensure trust and transparency among all stakeholders as they will be able to collaborate and be aware of need-to-know details such as lead times, transit times, any shipping delays, and even real-time shipping costs. And, for that next distribution center you need to build to accommodate growth, the 3D metaverse will enable more efficient design, with collaboration from internal employees, sustainability, logistics, and other key groups. The metaverse will enable you to “build” your new center in an immersive, 3D model before ever breaking real dirt. If recent years have taught us anything, it is that change is constant. But change is also exciting and offers fertile ground for innovation and the reminder that each
of our own successes is dependent upon the need for teamwork up and down the supply chain. After all, a well-oiled supply chain will ensure your long-term success. And that is the only way we can disrupt the forthcoming disruptions.
Brendan Heegan is the Founder of Boxzooka Fulﬁllment. He has over 20 years of experience in transportation and 3PL distribution. Brendan started his career in logistics with Airborne Express, rising through the ranks from sales in New York City’s Fashion District, to directing international trade lanes for DHL Express between the US, Europe, Mexico and Canada. In 2014, he founded Boxzooka, a technology-focused 3PL specializing in online apparel and wholesale consumer product distribution, with a top tier warehouse management system it also licenses. Brendan started Boxzooka because he saw a need for better solutions to solve the complex problems faced by online and retail sellers.
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5 OMNICHANNEL ORDER FULFILLMENT OPTIONS TO OPTIMIZE THE FINAL MILE
BY KARI POLSON
ith gas prices at record highs, unending supply chain disruptions, and increased pressure to deliver e-commerce orders quickly, brands must get creative when it comes to reducing the strain of the final mile. If they aren’t careful, having the wrong processes and technology in place could cost them a fortune and hurt their customer relationships. Luckily, omnichannel technologies can help reduce that burden by offering some “self-fulfillment” options. Here are five order fulfillment options that not only increase store revenue but also help offset final-mile costs. Curbside Pickup While consumers shop online for the convenience of not having to go into a store, the tradeoff is that they have to wait a few days to receive their product. Enter curbside pickup. Curbside pickup allows customers to order their products online, get their items the same day, and they don’t even have to enter the store. Curbside pickup blends the convenience of online shopping while also moving local store inventory off the floor. When foot traffic is low, it provides another way to encourage local shopping, keep store employees busy, and contribute to the
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store’s revenue goals. Plus, it offsets transportation costs as the consumer is the one doing their own “final-mile” delivery. While curbside pickup really took off in popularity during the pandemic, many consumers say they expect it to stay even as things get back to normal. Buy Online, Pick-up in Store (BOPIS) Similar to curbside pickup and part of the “click and collect” family, BOPIS allows customers to skip the delivery fees and wait times and pick up their item in the store. While they are in the store, the customer can try on the item, exchange it if they see a different color they like, or return it on the spot. For the retailer, offering BOPIS is a great way to increase individual store revenue because 49% of shoppers say they buy additional items when picking up their BOPIS order. BOPIS is a win-win for retailers, and it helps increase order value as well as reduces transportation costs. Ship-to-Store Ship-to-store does exactly as its name suggests. It allows a customer to purchase something from a brand’s online store and have the item shipped to their local store for pickup. These are typically items that the local store does not regularly keep in stock.
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The perk for the consumer? Most ship-to-store options are free to the consumer as they must pick up the item in store. The perk for the retailer? Like with BOPIS, it is always a benefit when a customer walks through the front door, providing store associates with an upsell opportunity. (“This bag would look so great with those jeans you are picking up.”) Ship-to-store allows retailers to put some e-commerce orders on the same truck as the pallets they are sending to retail stores, both saving money and reducing carbon emissions. Ship-from-Store Even when foot traffic is slow, brick-and-mortar stores can continue to bring in revenue with the right technology in place. With prebuilt workflows in an order management system, brick-and-mortar stores can easily double as micro-distribution centers to process e-commerce orders — protecting revenues, moving store inventory, preventing overwhelmed distribution centers, and keeping store associates busy. Stores are turned on as a node in the retailer’s distribution network, identifying what inventory is available, and sending local orders to be fulfilled by the individual store. Buy Online, Return in Store (BORIS) While not technically part of the “final mile,” returns still
contribute to high transportation costs for brands. Though they may be inevitable, returns don’t have to be a liability for retailers. In fact, handled correctly, returns can become a competitive advantage. Almost 80% of shoppers expect retailers to offer free returns shipping — which comes at a hefty cost for retailers. Offering BORIS options alleviates some of the costs associated with the returns process. Plus, when the customer is in-store returning an item, there is a higher chance they will opt to exchange the item or make another purchase in store. Pro tip: To seamlessly offer BORIS, retailers need to ensure they have easy access to cross-channel inventory and order information. Optimizing the final mile in this economic climate is imperative for retailers. With the help of a dedicated order management system, retailers can offer a variety of omnichannel order fulfillment options that delight their customers, increase store revenue, and reduce strain on the final mile.
Kari Polson is the Sr. Marketing Manager at Deck Commerce, the leading order management system for direct-to-consumer retailers.
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and shipping options for customers. Many shippers grew to the point where they used both UPS and FedEx, along with USPS, as their national carriers. Regional carriers were also added, but often only in the regions that a shipper had the most end-customers. Handling these additional carriers increased the need for integrated technology that could handle multi-carrier rate shopping, increased parcel throughput, and compliance. Shippers that took advantage of this opportunity to install sophisticated multi-carrier shipping software gave themselves a leg up on their competitors at the beginning of the pandemic.
HOW CARRIER VOLATILITY IS SHAKING UP THE PARCEL INDUSTRY… AND WHAT SHIPPERS CAN EXPECT NEXT By Justin Cramer
s retailers, manufacturers, 3PLs, and other shippers bring on new carriers to meet their ever-growing shipment capacity constraints, they need to be wary of the volatility they are exposing themselves to in the market. Gone are the days of only having one or two carriers. In its place, we now have the potential for volatility. Twenty years ago, there were only a few choices that a shipper could make. You picked UPS or FedEx as your carrier, and maybe added the United States Postal Service, and you were done. If you shipped a robust amount internationally, you might have gotten fancy and added
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DHL to your list — but that was about it. For a smart enterprise shipper, there was good reason to do this, as consolidating your shipping with a single carrier meant that you received the best rates, biggest discounts, and highest service levels for your customers. However, in time, e-commerce increased the demand for small parcel shipping and opened the door for the general acceptance of regional carriers like OnTrac, LaserShip, LSO, and Spee-Dee Delivery. In turn, shippers quickly found that they needed more sophisticated shipment execution plans that added flexibility in terms of carrier rates, omnichannel fulfillment,
The Pandemic Capacity Panic The near overnight increase in small parcel demand in early 2020 sent nearly every shipper into the market looking for additional capacity. Within months, the national carriers and the “established” regional carriers had their entire capacity for the year booked out. Some even announced that they would stop taking on new customers. Because of this, funding began to pour into small parcel shipping companies. Some of this was to expand niche players into larger carriers, and others to start companies from scratch. Some of those investments included: ShipHero - $50 million Sendle - $35 million AxleHire - $20 million Better Trucks - $3 million But not all of this investment meant that every company was going to expand. For example, PCF Final Mile, an existing logistics company that operated in the Northeast of the US, tested the small-parcel delivery market and exited rather quickly. As expected, mergers and partnerships started happening due to the influx of cash flow. LaserShip’s $1.3 billion purchase of OnTrac signaled the first and largest known merger. Their plans to expand to the center of the US will have a material effect on the small-parcel delivery market. The consolidations don’t stop there. UPS purchased Roadie to expand into crowdsourced same-day shipping.
SUBSCRIBE FOR FREE! Target’s Shipt has purchased several companies, including all of Deliv’s assets, to further expand its logistics capability. American Eagle Outfitters, Walmart, and Staples have all purchased or created their own small-parcel carriers to help alleviate their capacity constraints. As new and old delivery networks expand, they will have efficiencies of scale. These efficiencies will allow them to use less labor per thousand shipments than other carriers. Carriers that cannot procure labor or automate to do more with the labor they can procure will struggle. National carriers are not sitting still, either. Though UPS, FedEx, and all of the established players have become “selective” as to the contracts they will accept, they continue to accelerate plans for network capacity expansion, meaning they will eventually catch up and exceed demand again. Once network capacity exceeds demand, what is going to happen? Which companies will be purchased and merged? Which may just go out
of business? More importantly, will shippers be prepared to respond? What will a shipper do if they have a temporary interruption in shipping capacity due to a labor issue, merger, or cash flow issues? Which carrier will be the first to go if capacity exceeds their needs? Will shippers have the flexibility in their software stack to move that volume to a new or existing carrier? Will shippers have the contacts to add an additional carrier if needed? There are plenty of strategies that a shipper can and should be doing to be fully flexible and equipped. Here are some steps that are strongly recommended to be prepared for upcoming carrier volatility: Make a list of all your current and potential carriers. Note the capacity they have allotted for you this year. Note their coverage area. Ask them about their expansion plans, as well as how and when this might allow you to increase capacity with them.
Determine if you have carriers that could take over the capacity you expect to ship with said carrier if that carrier is no longer in business or provides a set of rates that would make it impossible to do business with them. Ensure your software stack is ready to quickly add AND remove carriers. Specifically, ensure you have a robust shipping software with proper isolation from your ERP, OMS, WMS, and POS as this is key to allow changes to occur quickly and with little to no operational impact.
Justin Cramer is Co-Founder of ProShip, where he has deployed, designed, or consulted on over 300 customer solutions within 4 continents and has designed shipping solutions executing more than 3 million labels a day. Listed as one of Supply & Demand Chain Executive’s 200 “Pros to Know” in 2019, Justin has been on the IT side of shipping since 2001.
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BY NORM SAENZ, JR.
AUTOMATION – TIMING IS EVERYTHING
t seems everyone is interested in considering automation, and there are plenty of enticing reasons. Distribution and fulfillment center managers are dealing with a tightening labor pool, rising labor wages, and increasing market competition. These issues have placed an even larger emphasis on improving the productivity and throughput of labor-intensive operations. And, with lengthening lead times and escalating capital costs, the pressure is intensifying to start your automation journey. With decades of automation development and recent innovations, the industry is exploding with alternatives. This expanding interest in automation is driving some companies to lower their minimum rate of return and increase capital budgets. With longer equipment lead times and other supply chain risks, management is also expecting investments to last longer than typical planning horizons. As a result, there is increased importance on the design process, including the use of quality data, accurate growth projections, and detailed evaluation of automated solutions. The good news is, there are many automation/technology alternatives to retrofit an existing building and/or use in a new building. Planning Comes First Before getting enamored with reviewing technology, it is critical to develop planning requirements. And, while some are pushing hurdle rates lower, it is still important to understand the return on investment. The automation journey begins with collecting data and future operational business changes and projections, including item dimensions and weight, units of measures (each, case, pallet), inventory levels, and inbound/outbound volumes. With a future state data model complete, the focus shifts to identifying the functional areas to evaluate for automation. The use for automation exists throughout a facility, including receiving, storage, order processing, packaging, and shipping. The question is, where does automation make the biggest impact on the operation to reach your objectives?
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The receiving area is overcome with manual labor, including operators unloading trailers, checking in receipts, and sorting items onto pallets. The use of conveyor technologies is a typical option for unloading and sorting parcel/ less-than-truckload trailers. Robotics is making a push into unloading floor-loaded trailers and has the technology to grab cases from a trailer and place them onto pallets and/ or load conveyor. For unloading full pallet trailers, there are automated truck unloading systems that move an entire trailer load onto the dock with a press of a button. However, enabling this technology typically means the received trailer is equipped with special equipment. The auto loading/ unloading of trailers is more common for manufacturers, where entire trailers are loaded at the plants and unloaded at their distribution centers. The other option for automating the unloading pallets is using autonomous forklifts or fork-equipped AGVs (automated guided vehicles). These same solutions are applicable for the shipping dock, while it is more common for case/tote conveyors and sorters to be used for loading directly into trailers. The warehouse storage footprint is the largest area within a distribution center. As a result, transporting pallet loads throughout the warehouse consumes a high amount of labor and is one of the simplest to automate. Within an average facility size (250,000 sq. ft.) a material handler can travel thousands of feet per day moving pallets to/from the dock. These material handling functions typically require operator-driven forklifts within a facility. The use of unit-load AGVs, autonomous mobile robotics (AMRs), and autonomous forklifts eliminates these labor requirements. Another benefit with AGVs/AMRs is they can be installed in a modular way to manage volume growth and capital spend. The labor required within a manual warehouse can also be eliminated with the use of automated storage and retrieval systems (AS/RS). Unit-load (pallet) AS/RS systems have been in use since the early 1900s and are typically designed more
SUBSCRIBE FOR FREE! than 100-foot-high using single- or double-deep pallet rack structures. The cost for these systems is driven by the number of cranes, which can be reduced with higher and more dense storage designs (3+ deep storage lanes). The multi-shuttle solution hit the market around 2010, as an alternative to the single crane per aisle AS/RS designs. The tote-based multi-shuttle system is popular for smaller items full case, inner-pack, and/or each order fulfillment. It is also commonly used as a buffer storage system between picking and consolidation, packing and shipping, and the shipping dock. Shuttles can access locations on multiple levels within the same aisle simultaneously. A tote-based system is often compared to the mini-load AS/RS and may provide higher throughput and flexibility. The full pallet multi-shuttle is an option for higher volume, larger case, or full pallet order volumes to compete with the unit-load/pallet AS/RS. There is an increasing number of suppliers and design concepts for shuttle systems. The typical shuttle design is 32 to 82 feet high and includes multiple shuttles per aisle moving vertically and horizonal to retrieve/stock totes. It may come as a surprise, but a popular use for shuttle technology is to consolidate and reduce the labor handling slower moving items. AMRs hit the distribution industry more than 20 years ago, and today, they are one of the trendiest technologies evaluated for reducing labor within the order pick area. One application for an AMR concept is to move shelving units stocked with products to pack stations for order picking and
packaging. This application requires the set-up of an area with shelving units for multiple AMRs to access for fulfilling orders. To leverage building clear heights and reduce the floor space requirements, many AMR systems are designed with mezzanines. Other AMR applications have the mobile robots navigating within a fixed pick storage area and replace traditional push carts. The mobile robot moves order totes through the pick path to reduce the operator travel time. The operator interacts with the robots by picking the required items into the totes. The added benefit for mobile robotics is they can be added into existing operations with little disruption. There are also AMR-lift designs that act as mobile shuttles to retrieve totes for picking/packing, and the innovations continue. Other popular piece pick technologies include automated put-walls, automated case pickers, unit sorters — and don’t forget about drones. The evaluation and adoption of automation and related technologies is continuing to grow and shows no signs of slowing down. The pandemic created a wake-up call for the dependence on labor within larger conventional warehouses. And, with warehouse labor harder to find and at a premium to keep, the rise of automation is here to stay. If you are not already considering adding automation to your future plans, the journey starts now.
Norm Saenz, Jr. is Partner and Managing Director, St. Onge Company.
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BY STEVE BEDA
ENVIRONMENTAL SUSTAINABILITY IN THE SUPPLY CHAIN: THE FUTURE HAS ARRIVED
n the world of streamlining, optimizing, expanding, and trying to lead the way in supply chain operations, it’s easy to see environmental sustainability as a “nice to have” or a “someday” consideration. But the truth is that the pressure is mounting. The SEC issued a statement on March 21 delineating a proposed mandate on climate-risk disclosures, applicable to public companies. A briefing explains, “if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions and would provide consistent and clear reporting obligations for issuers.” It’s important for every business to take seriously the call to evolve practices to meet new environmental sustainability standards. Who Cares About Environmental Sustainability? Back in 2016, experts predicted that carbon emissions, air pollution, deforestation, water shortages, and other outcomes of environmentally unsustainable practices would diminish value and create a state of vulnerability for the supply chain. In 2021, through a partnership with SAP, analysts at Oxford Economics surveyed 1,000 supply chain executives around the world. They found that 73% of companies identified environmental sustainability as a “major concern” that would impact every stage of the supply chain. Leaders in this space face a dynamic imperative and bear a significant responsibility to enact change for the good of the environment. Keys to Moving Toward Sustainability There are several challenges to building a supply chain with environmental sustainability in mind. So, what will it take for supply chain companies to enact environmentally sound practices?
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A first component is how to operationalize environmentally sustainable practices, especially when many of the foundational functions in the supply chain aren’t green. Toxic waste, air quality, energy use, land use: all of this is tied into what it takes to transport goods, and the use of non-renewable resources may feel like a Titanic-sized course correction. But it is one that can be achieved through strategic, consistent shifts like the following. Make a realistic plan. “Carbon neutrality” is the battle cry of many companies, and they peg a 10-, 20-, even 50-year timeline to achieve it. But to get even close, strategic thinkers in the supply chain are pushing “lower carbon intensity” as a realistic move that can start as soon as today. This simply means lowering the amount of greenhouse gas per unit of output. It’s measurable, it’s doable, and it won’t upend current operations. Find a starting point like that, then create a plan. Create a roadmap. There is no supply chain company in the world that can afford to shut down operations for a full-scale rework. Nor can you realistically swap out all equipment, machines, components of infrastructure, etc. This change has to be incremental, and you need to roadmap it out. Start with leadership, gain buy-in, create a structured plan, attach it to a timeline, and assign areas of responsibility. Collect and report on the right data. Leaders should have readily available reports that relay current GHG emissions and where they come from. This means coordinating the collection and organization of reliable data on supply vendors, transportation activities, physical plants/warehouses, and more. Then, this data should be used to set KPIs and benchmarks that support practices for consistent reduction over time. Celebrate success along the way. Small or big, every move
SUBSCRIBE FOR FREE! toward more environmentally sustainable practices counts and should be celebrated. This hedges against the natural decline in velocity after the novelty wears off. Environmental sustainability in supply chain operations is likely to be a significant course correction, and one that will take time. Keep the wins front and center to maintain momentum. Paradigm Shifts Permeating every link in the chain are paradigms that drive practices. Changing these is a big lift, but one that any conscientious leader must undertake if real transformation can occur. Being environmentally conscientious stems from belief systems and culture. These are already embedded, and hopefully you are tuned in enough to your people to know who they are and what they think is important. Now, you have to enlist their alliance to a common cause. Here are some tips to do that: Embed environmentalism into everything else. It may be time to revisit mission/vision/values. Or perhaps you need to remap your chain of command, adding in a new role. Whatever it takes to assess and evolve your deeply embedded cultural dynamics, do it. It is mission-critical if you hope to achieve environmental sustainability in your company. Get as many people on board as early as possible. Efforts toward environmental sustainability shouldn’t feel like “yet another top-down initiative.” There is a lot of power in grassroots effort here, with identified ambassadors in departments and an overcommunication of the mission. Think strategically from day one about how to achieve that and authentically communicate your ideals and goals. Reward engagement. Incentivizing people to be involved is a standard practice with varying degrees of success, but one that you can’t ignore if you are really going to capture and keep awareness company-wide. Work closely with HR to understand what’s worked best in the past, and how you can publicly reward great performers.
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What’s Good for the Environment Is Good for Us All The United Nations’ Guide for Continuous Improvement in Supply Chain Sustainability speaks to a myriad of factors, including the environmental impact of supply chain operations. It describes a multi-phased approach, beginning with establishing expectations and ending with tracking and communicating performance. The idea is to create an open (albeit mandatory) invitation, where every stakeholder, employee, partner, and vendor sees the important role they play in achieving environmental sustainability in the supply chain. When everyone is on board, change can happen a lot faster. And that’s good for business, good for the earth, and good for us all.
Steve Beda is Executive Vice President at Trax Group. With a long history of supply chain automation and transportation logistics experience, he works closely with numerous Trax clients across the globe to aid in their success enabled by maximizing the use of services offered by Trax. Additionally, Mr. Beda heads the Advisory practice at Trax. MAY-JUNE 2022 PARCELindustry.com 33
STREAMLINING YOUR WAREHOUSE CONFIGURATION: 5 CRITICAL ASPECTS TO TRACK
By Jason Streitenberger
upply chain performance is built on efficient, responsive, and safe warehouse operations. That is why optimal warehouse configurations are both essential and unique. Each warehouse is different and must be optimized individually. Cost controls, layout design, automation, and labor utilization are necessary factors to maximize warehouse efficiency. Analyzing one input in a vacuum will not represent the complete picture, so a detailed data review is required to optimize the entire facility. Here are five things to consider when optimizing warehouse operations to drive value to your supply chain. Key Performance Indicators: KPIs are the lifeblood of a successful operation and should be your benchmark for measuring the performance of each operation. Focusing on the following key metrics can help point you in the right
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direction to identify bottlenecks in processes that are critical in a specific warehouse. Dock to Stock (DTS) — Having product available in inventory quickly to sell to customers can’t be overlooked. A low value in DTS can be an indicator of dock efficiency, yard performance, and inventory utilization. On-Time Shipping (OTS) — Are orders shipping by the required deadlines? OTS impacts customer experience and drives loyalty. It can also have a direct effect on the bottom line with penalties assessed by customers. OTS can be impacted by other KPIs in this list, so it can be used many times as the initial sign of an issue within the operation. Inventory Accuracy — There are many ways to measure this, from net unit accuracy, absolute unit, accuracy by inventory value, location accuracy, and many others. Critical information can be taken from all the above to indicate where processes are not being followed or need to be revisited and altered. Cost Per Unit Shipped — This a critical category that can quickly provide a high-level indicator to where there may be a problem. Once identified, further analysis will be needed to identify the specific issue or issues that are driving up costs. Order Accuracy — A dip in quality can be a sign that a change in process is needed. Productivity by Activity — It is critical to monitor the ebbs and flows within a warehouse, since this will reveal trends in data over time. This KPI should also be used as a method of giving feedback to the floor staff, so a broader group can be looking for changes that may cause suboptimal performance.
Technology: Review all the critical technology tools in use at a facility, especially the warehouse management system (WMS). An effective WMS should allow you to set up order batching, zone picking, consolidation, put away, cross docking, interleaving, workflow management, and many other guardrails to maintain efficiency in the overall warehouse configuration. Seek all opportunities to reduce cost without
SUBSCRIBE FOR FREE! sacrificing safety or quality when designing every WMS process. Investing in a WMS that allows flexibility to improve processes over time without significant additional funding will be vital to ongoing success. Product Location: Are your fast-moving SKUs located to limit movement and travel in your warehouse? Are they also far enough apart to prevent bottlenecks within the outbound product flow? Heat maps of pick activity can be a great indicator of busy zones and those that can be optimized for reduced cost. Slotting of SKUs should be done in a cadence that is representative of the life cycle(s) of your inventory.
Labor: Is your labor flexible to meet the demands of your orders? Upon review, it might be apparent that you don’t need one of your shifts. Utilization of labor in warehousing isn’t necessarily a Monday through Friday, 8 AM to 4 PM job. Shuffling labor resources to meet the demands of order volumes can help prioritize and increase efficiency. Using part-time labor on consistently heavy days or changing schedules to have overlapping shifts can make short work of daily volatility.
Automation: Managers might be inclined to jump into an automated solution to improve warehouse operations, but move cautiously to ensure the investment covers the needs of specific operations. Keep in mind that automation is a powerful accelerator, both of effective and ineffective processes. Automating a process that isn’t optimized can quickly eat away at profits. Automation can also require a long time to realize ROI expectations, which need to be considered in the plan to avoid additional short-term costs. In its 2021 State of Logistics Report, A.T. Kearney supports an active exploration of warehouse automation, but with some cautions. “Warehouse flows,” the report says, “are becoming more complicated, especially with e-commerce returns. Thus, as labor conditions remain tight, many warehouses are increasingly looking at automation. Indeed, the emergence of robotics as a service (RaaS) provides financial flexibility that should boost adoption of automation across a wider variety of companies. With shifting demand and inventory mix, and increasing need for visibility, the future of warehousing presents fascinating strategic challenges.” Once these critical variables are analyzed and understood, the complex — yet essential — process of warehouse optimization is possible. There is no “silver bullet” to ensure an efficient movement of products through one or more warehouses. Only by optimizing the layout, labor use, and the costs unique to each facility can a supply chain function properly. Take these steps to meet the ultimate goals of any business — safe operations and customer satisfaction.
Jason Streitenberger is Senior Director of Solution Design, ODW Logistics. MAY-JUNE 2022 PARCELindustry.com 35
PROS AND CONS TO DIVERSIFYING YOUR CARRIER PORTFOLIO
n the current environment of restricted carrier capacity, ongoing changes to carrier pricing practices, and evolving consumer expectations, it may be time to reconsider your single-carrier approach to delivering product to your customers. That said, dual or multi-sourcing is not the right solution for everyone. In fact, there are a myriad of advantages and disadvantages that should be considered. A multi-carrier model can offer significant advantages and disadvantages over a more traditional single-carrier solution. These effects can permeate the organization and impact multiple aspects of the business, including operations, marketing, and finance. Many aspects of this model have both advantages that can be leveraged, and challenges that must be mitigated.
savings with each carrier, optimizing what they do best and lowering your costs by always choosing the best option. These cost savings need to be balanced with consideration that there can be several cost implications. First, most carrier agreements have a “self-regulating” element to them, which bases discount levels on spend with the carrier — therefore, diverting spend to other carriers may trigger cost increases with the incumbent carriers. Second, some carrier agreements even contain “minimum commitment language” or “primary carrier language,” which may risk invalidating the contract if a diversion is made. Third, considering that volume is the primary driver when negotiating most carrier agreements, splitting volumes between carriers will dilute your purchasing power. Next, there may be additional costs tied to investments in technology to manage shipment processing. Finally, multiple carriers will require multiple shipping processes, which may add to labor hours in both training and processing times.
Savings vs. Cost There are several cost-saving opportunities that can often be experienced. First, regional carriers, consolidators, and others can be substantially more cost-effective than national carriers based on service, zone, weight, or applicable accessorial charges. Second, having a stable of carriers inherently creates a competitive environment for your business, motivating carriers to offer aggressive pricing. Third, a robust rate-shopping solution will allow you to take advantage of areas of
Operational Implications Having operational flexibility is becoming more important than ever. With capacity constraints during peak being the new normal, having additional carrier options is not only a nice alternative, but often critical to a long-term successful supply chain model. This “capacity overlap” can also aid when: One carrier is delayed by weather Needed equipment is scarce Operating hours/pick-up time conflicts arise
BY THOMAS ANDERSEN AND KENNETH MOYER
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SUBSCRIBE FOR FREE! One should weigh this against the operational complexity that may be caused by adding carriers to the mix. With multiple carriers come multiple processes, and this creates hurdles to clear with employee training, dock space, distribution center floor space (i.e. package staging areas for each carrier), multiple returns and claims processes, multiple carrier invoices to audit, GL code and pay, different carrier policies (i.e., HAZMAT, adult signatures, size restrictions, etc.), and more. In fact, there are “deal-breakers” to creating a multi-carrier environment, such as: Inability to implement a multi-carrier shipping system Lack of dock or floor space to accommodate multiple carriers Remote location with limited carrier options Lack of effective incentive agreements from multiple carriers If any of these barriers exist, a multi-carrier solution is potentially not feasible. Customer Experience and Expectations There are several benefits to the customer in offering a multi-carrier solution. By optimizing the strengths of each available carrier, many customers may be serviced faster than what was previously the case. Overall shipping rates may be reduced, allowing for customer cost savings either on direct shipping costs (if these are passed on) or on delayed price increases on products that are needed to subsidize reduced or free shipping rates. It is easier to avoid service disruptions such as weather delays, equipment breakdowns, technology outages, labor strikes, etc. when there are multiple carrier options. On the other hand, customers may now have to navigate multiple carrier websites in order to track their orders or get status updates. Customers may need to understand and process different carrier policies with regards to signatures, returns, damages, pick-up options, etc., which may create confusion and dissatisfaction. For some goods, a “premium carrier” delivery experience may add to overall customer satisfaction, an advantage that may be lost when an alternate carrier is used. It may also take longer for internal customer service personnel to diagnose a carrier issue if they must manage multiple carrier sites and processes.
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Technology There are also technological opportunities and challenges associated with utilizing multiple carriers. A shipping platform that supports multiple carriers allows one to implement agreements from all applicable carriers, which then allows for rate shopping and optimizing the cost for every shipment. These shipping solutions can also solve for the most effective delivery time based on customer needs, allowing informed choices on the cost vs. delivery time continuum. Some sophisticated solutions perform a “load-balancing” function, monitoring carrier volumes in an attempt to meet contractual volume levels Technological challenges can include the implementation of a carrier-agnostic system, which can be an expensive endeavor, though not always, depending upon shipper needs. There may be some significant integration work needed with a shipper’s ERP, WMS, CRM, and other platforms, which can MAY-JUNE 2022 PARCELindustry.com 37
SUBSCRIBE FOR FREE! be costly and time-consuming. System users may also need training on the new software, incurring costs and leading to potential growing pains So, how does one effectively evaluate the best solution and mix of carriers for their organization? Consider the following: What metrics are relevant Does your current carrier pricing agreement allow for any level of package diversion? Does your current shipment profile overlap the delivery footprint of the various regional and local parcel carriers? Are the cost and flexibility benefits worth the operational and technological hurdles that must be overcome?
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Where can you find this information? Your current carrier pricing agreements contain specific pricing based on volume, as well as language related to terms and conditions that must be met. You can review to determine how much volume you can divert to other carriers without losing discounts or invalidating the agreement. You should then review the delivery areas for potential regional and local parcel carriers; these can be found on the carrier websites or reputable third-party sites such as PARCELindustry.com. An evaluation of your current and potential technology platforms with your IT team may then be appropriate. This should establish if your existing system is capable, or whether a new direction must be taken. If a new system is needed, shows such as PARCEL Forum are an excellent venue for getting demonstrations of possible solutions. Once some finalists are chosen, talking with shippers who currently use the platform is encouraged. You can also query current customers to get their feelings on whether the potential gains outweigh the potential drawbacks. How do you use the information once it’s compiled? Create a simple S.W.O.T analysis on the project to determine if it is a good fit for your organization. Use a year’s worth of shipping data to “model” the potential new solution. This should give you accurate figures such as time-in-transit gains, shipping cost savings, contract impacts, etc. to aid in the decision-making process. Once all the data is compiled and the options are clear, recommendations to the business can be made. In summary, a multi-carrier environment presents both significant hurdles and benefits. Involve the entire business in the decision-making process as multiple departments will feel the impact. Seek key customer input when possible. Will the proposed changes improve or erode the customer experience? Do your homework on your agreements and the carriers’ capabilities. Be flexible, communicate with your carriers, and make mid-course corrections when needed.
Thomas Andersen and Kenneth Moyer are both Partners at LJM Group and were previously pricing managers with DHL Express and UPS, respectively. LJM Group has been helping shippers save time and improve proﬁtability with expert UPS, FedEx, DHL Express, and regional carrier shipping consulting services focused on reporting, analytics, auditing, and cost management since 1998. More information can be found at www.myLJM. com. To speak with Thomas or Kenneth, please call 631.844.9500. 38 PARCELindustry.com MAY-JUNE 2022