SELECT THE OPTIMAL PARCEL TMS FOR YOUR OPERATION PAGE 18
NOVEMBER-DECEMBER 2018 PARCELindustry.com
SHIPPERS, ARE YOU GETTING THE REFUNDS YOU DESERVE? PAGE 10 DIM WEIGHT CHARGES: UNDERSTANDING THE TRUE IMPACT ON YOUR SHIPPING SPEND. PAGE 14
WHAT DO CARRIERS SEE WHEN THEY LOOK AT YOUR PROFILE?
THE CHANGING FACE OF FULFILLMENT IN THIS AGE OF THE NEW CONSUMER. PAGE 24
CONTENTS /// Volume 25 | Issue 7
14 18 22 24 26 06 EDITOR’S NOTE As We Head into 2019… By Amanda Armendariz
07 OPERATIONAL EFFICIENCIES Making a List, Checking It Twice By Susan Rider
08 SPEND PERSPECTIVES Will Small-Package Providers Benefit from the New NAFTA? By John Haber
10 SUPPLY CHAIN SUCCESS Shippers, Are You Getting the Refunds You Deserve? By Kaitlyn Parsons
12 E-COMMERCE PACKAGING PROVIDES CHALLENGES AND OPPORTUNITIES FOR CPG PRODUCTS Brand owners have spent decades and millions of dollars on packaging their products to withstand conventional distribution channels, but with e-commerce, their strategies may need to change. By Clint Smith
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14 DIMENSIONAL WEIGHT AND YOUR PARCEL COSTS While we’ve all been aware of the changes in dimensional weight pricing in recent years, many shippers still don’t fully understand how these changes impact their parcel spend. By Dave Sullivan
22 WHAT DO THE CARRIERS SEE WHEN THEY LOOK AT YOUR DATA? The complexity involved with effectively utilizing your shipping profile data to achieve optimization can be daunting, but shippers can’t afford to ignore this issue. By Andrew Brueckner
24 REDEFINING FULFILLMENT IN THE AGE OF THE NEW CONSUMER With the continual growth of e-commerce, more and more merchants are turning to alternative fulfillment strategies in the quest for lower costs and increased customer satisfaction. By Terry Brown
26 PARCEL FORUM ‘18 WRAPUP Our successful annual event in Chicago was a hit… and we’re already preparing for next year’s show in Dallas! By Amanda Armendariz
29 PARCEL COUNSEL PARCEL Forum ’18: The Legal Takeaways By Brent Wm. Primus, JD
30 WRAP UP Parcel Delivery Optimization By Michael J. Ryan
SPONSORED CONTENT: 09 ENGINEERING INNOVATION EXPANDS ITS LIGHTSORT™ TECHNOLOGY WITH PICK-PUT APPLICATIONS 17 HYTROL IMPLEMENTS BOUTIQUE-STYLE E-COMMERCE CONVEYOR SYSTEM 18 WHAT CAN A PARCEL TMS DO FOR YOU? 21 IN A WORLD OF PARCEL GROWTH, IS A TMS ENOUGH?
PARCEL PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ firstname.lastname@example.org ]
EDITORIAL DIRECTOR ALLISON LLOYD [ email@example.com ]
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PARCEL (ISSN 1081-4035) is published 7 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2018 Â© by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949.702.5390, www.ReprintPros.com.
AS WE HEAD INTO 2019…
By Amanda Armendariz
ince we only publish seven issues a year (and, yes, I laugh to myself as I type the word “only,” given how much work goes into those seven issues!), it sometimes seems that the year is over in a flash. I distinctly remember writing my first editor’s note of 2018, and all of a sudden, the year has flown by, and I’m writing my final one. We’ve seen some pretty big changes this year. Some of them were more expected (FedEx and UPS general rate increases, anyone?), while others, such as the newly agreed upon U.S.-Mexico-Canada agreement and an increase in tariffs, were perhaps not as anticipated. Either way, one thing is certain: Shippers must be continually seeking to improve their processes to stay competitive in this age of constant change.
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As we head in 2019, it can seem daunting to keep up with the changes our industry is seeing on an almost-daily basis. From changing consumer expectations regarding delivery time and cost, to expanding into the international sector, today’s shippers are faced with a variety of challenges as they struggle to keep their brand relevant and expand their customer base. So what can you do? It may sound simplistic to say, but education continues to be of the utmost importance. Understanding what the carriers see when they look at your shipping profile allows you to more effectively negotiate the discounts you request from them. Fully grasping how dimensional weight surcharges affect your shipping spend enables you to make necessary changes to your packaging to reduce these surcharges or eliminate them altogether. And understanding the refunds that you are entitled to means that you are able to increase the amount of money that flows back to your bottom line. These are just a few examples that shippers should be aware of, but they are very important ones. And all of these topics are explored in this issue of PARCEL, so we hope that this final issue of the year helps you end 2018 on a high note and begin 2019 in the know. As always, thanks for staying connected with 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!
Prepping Your DC for the Busy Season By Susan Rider
FedEx 2019 General Rate Increase and Other Changes By Rebecca Lannon
Dimensional Weight: A Growing Issue By Jack Ampuja
MAKING A LIST, CHECKING IT TWICE By Susan Rider
opefully, many of you had the foresight to take stock of the “peak season readiness” items that would make the holiday season a little less chaotic. If you don’t have such a list, now is the time to develop one in order to make next year run more smoothly. Whether it’s things that are going wrong or things that should have been changed or shown some attention before the season began, be sure to add it to your list now. The following list is not all-inclusive, but it should give you a few ideas. For those of you that are strictly e-commerce, you know this season could be a crapshoot; you could end up with a blowout, and I’m not talking snow! If you are lucky enough to have the top toys or items for Christmas, how efficiently you can pick, pack, and ship will determine your success. 1. Check with your vendors. If all items are not barcoded, can you work with them to get everything barcoded before it arrives at your receiving dock? If your vendor system or your system doesn’t have the capability to send advanced
shipping notices (ASNs), discuss other options like an email notification of when a full truckload is going to arrive. 2. If you don’t already have crossdocking stations, set up these stations for the fast movers or high-volume/ high-demand items. Receive and ship in the same process. 3. One of the most common problems is that regular season replenishment cycles cannot keep up with the volume, so your order fillers are waiting for product or holding orders. The more orders that have to be held, the more confusion, chaos, and safety hazards. You may have to double up on the replenishment staff. 4. Speaking of staffing… Hopefully, months ago, you identified a potential source of ready workforce. Work with your local colleges or workforce development sources in your state; they may be able to help you even if you waited. Also, don’t forget social media; many stay-athome parents are looking to make some extra dollars during this season, especially if the hours are when the children are in school. 5. Check out all equipment! Have it maintained and peak season-ready before the season begins. 6. Have a backup plan if your system goes down or if your equipment stops working. Hopefully, you won’t need to utilize the plan, but having one may determine your success or failure if you do. 7. Review your temporary
employee training. Is it easy to understand? Temps often fail because the company’s training failed. Telling a new person once how to do it and expecting them to go do it correctly is a mistake ready to happen. Tools such as signage and portable step-by-step laminated cards may help. 8. Supplies like cartons, dunnage, and tape will be flying out the door. Instead of allowing supplies to block major aisles or premium storage spaces, you may want to pull up an extra trailer to store supplies close to the packing stations. 9. Ordinary pick-up times may not be sufficient for the e-commerce rush. Discuss extending the times or adding extra times into the process. 10. Don’t plan on extra meetings, implementations, or other company programs during your peak. Lastly, meet with your customer service department. Find out the top 10 complaints from the previous year and work with your team to eliminate the processes causing those complaints. And don’t forget to reward your team on December 26 if you survived the Christmas rush. They will remember your gratitude and will be even more likely to assist in making the next year successful.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at firstname.lastname@example.org.
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WILL SMALL-PACKAGE PROVIDERS BENEFIT FROM THE NEW NAFTA? By John Haber
resident Trump has been extremely vocal in his displeasure with NAFTA and described it as the “worst trade deal in the history of the world.” He has followed through with his promise of a makeover, and it has now been restructured (in some cases) and renamed the U.S.-Mexico-Canada Agreement (USMCA). While much of the original NAFTA appears to remain intact, there are some potential changes that will impact small-package and express providers if all three countries approve the new agreement. The new agreement is expected to be signed by Trump and his Canadian and Mexican counterparts by the end of this year, with the US Congress likely to act on it next year. Perhaps one of the more interesting aspects of the revised NAFTA agreement is the increase in de minimis
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thresholds in Canada and Mexico. These thresholds are the maximum value for when a duty is required of foreign shoppers. Currently, Mexican shoppers pay a duty if they buy more than $50 of goods from US-based businesses, including online retailers. Canadians, however, only have to spend about $16 on US goods before incurring a tax on their purchases. The shoppers pay the tax to their home country. If the USMCA is approved, Canada and Mexico will see thresholds increase to $150 and $100, respectively. The US de minimis is $800. It’s transparent that the growth of e-commerce is a major driver for this increase in de minimis thresholds. According to estimates from PPRO, an online payment provider, the Mexican e-commerce market grew 59% in 2017. Canada’s e-commerce market grew over 40% in 2017, according to the Canadian government. Amazon could be a big winner as it continues to build out its network beyond the US borders. The e-commerce provider has invested in fulfillment facilities in Mexico and Canada as well as increased its presence on the US-Mexico border. DHL, FedEx, and UPS have also made major investments within all three countries as well as along the borders. Earlier in 2018, DHL Global Forwarding expanded its offices along the US and Mexican border, in San Diego; Nogales and Tucson, Arizona; and El Paso, Laredo, and
McAllen, Texas. Meanwhile, FedEx plans to increase its stores in Mexico by adding 1,200 new stores to its current network of 1,300 stores. UPS announced earlier in the year that it would invest $500 million in expanding Canadian facilities and creating 1,000 stores due to what it described as “unprecedented volume fueled by the rise of e-commerce and the growth of Canadian businesses.” One caveat relating to the de minimis requirements is that the higher thresholds apply to items delivered through “express shipments” — a term which is not explicitly defined. Regardless, while the name of the agreement between the three countries may be changing, many of the components remain the same but updated since the agreement was signed 24 years ago. To keep up with changes moving forward, the USMCA stipulates that the three nations will review the agreement after six years. If all parties agree it’s still good, the deal will then continue for the full 16-year period, when it will be reevaluated once again. Small-package providers should continue to benefit with increased volumes across the North America region as a result of the NAFTA changes.
John Haber is the Founder and CEO of Spend Management Experts. Contact John at email@example.com.
Engineering Innovation Expands Its LightSort™ Technology with Pick-Put Applications Engineering Innovation Inc. (Eii) initially designed the LightSort™ Sort-to-Light for the consolidator market to increase productivity and reduce errors while sorting lightweight parcels and poly bags for induction to the U.S. Postal Service. In 2017, Eii received the Mailing Innovation and Digital Award from the USPS for this solution. Continuing to improve this low-cost and easy-to-implement technology, Eii is adding functionality to accommodate “picking” and “putting” applications, benefiting the reverse logistics and fulfillment industries.
In order picking applications, bin locations can house up to 45 SKUs that can be quickly retrieved. Pickers scan the order sheet and the closest SKU locations lights up. After the merchandise is pulled, a barcode for the bin location is scanned; the light for that location switches off, and the next location lights up. When the last SKU for the order is picked, a print on demand label at the end of the line can be printed. For operations wanting to use two or three pickers, the racks can be fitted with dual or triple light displays with different colors.
The original LightSort™ Sort-to-Light uses a modular sorting rack with bin locations outfitted for sacks or shelf stacking. When the sorter scans the package barcode with a hands-free wireless ring scanner, the correct bin destination lights up. This eliminates guesswork so sorters can get the package to the right location every time. When a bag is full, the operator can quickly unhook it, push it out the back and lift the next one into place.
In order putting applications, each bin location on the cell represents an order. SKUs are retrieved from inventory and brough to the cell one at a time in hampers or a skid. At the Put cell, SKUs are then scanned individually and order locations light up one at a time until that SKU is depleted.
For returns processing, Eii business development specialist, Clark Cassell, says, “LightSort is a great fit for companies wanting to apply simple and cost effective automation to what can be a messy problem. You scan incoming package barcodes and quickly place them into a rack location for later re-location in the warehouse. The key is taking out the guesswork, reducing error, and sorting rapidly.” With the rapid rise of e-commerce, fulfillment operations are being challenged to handle ever-increasing returns volumes. To meet that need, Eii has enhanced its LightSort™ Technology for “picking” and “putting” scenarios, debuting LightSort™ PickTo-Light and LightSort™ Put-to-Light, designed for high volume orders comprised of smaller, lightweight products.
With LightSort™ Technology, Eii has once again shown that throwing more automation at a problem isn’t always the optimal approach, especially if that automation is prohibitively expensive. This system leverages low-cost technology, giving operators the opportunity to do their job more quickly with greatly reduced error and less stress. For more information and to see a short video, visit Eii’s website at: http://www.eii-online.com/products/lightsort You can also call 800.350.6450, extension 4110, or email Sales@eii-online.com
SUPPLYCHAINSUCCESS 4. Am I sure claims are filed in the most efficient process?
SHIPPERS, ARE YOU GETTING THE REFUNDS YOU DESERVE? By Kaitlyn Parsons
nderstanding the ins and outs of auditing parcel invoices can be very beneficial to your business, since this process provides valuable insight into your organization’s supply chain operations. A thorough parcel audit can generate significant cost reductions and improve operational efficiencies that will drive increased bottom line profits to your business. To better assess the cost-benefit relationship to your business, here are some questions to help you determine the potential for achieving these benefits. 1. Am I seeing the relevant discounts or incentives reflected in my pricing? 2. Are my shipments being delivered on time? 3. Am I aware of invalid adjustments?
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If you answered no to any of the above questions, there are potential savings opportunities for your organization. Here are several steps to help you better understand invoice auditing and how to realize cost savings arising from invalid charges, filing claims, and other operational improvements. UNDERSTANDING YOUR CONTRACT AND THE TERMS OF YOUR AGREEMENT It’s crucial to eliminate surprises within your invoice as well as charges you did not anticipate by identifying key terms of your agreement. For example, is your business eligible for submitting service failures, or are you shipping enough volume to meet thresholds aligned with specific incentives or discounts? A good audit starts with negotiating a contract with the carrier and agreeing to terms that are mutually beneficial for both parties involved. Making sure that you understand the terms you are agreeing to as well as the financial impact on the business is extremely important, and being able to connect the dots from a financial perspective back to your individual package is key. RECEIVING ELECTRONIC DATA Most small-package invoices include thousands of shipments, so receipt of electronic data is a must if you want to efficiently audit and analyze
your invoice data. Implementing electronic data interchange (EDI) with your small-package carriers is a great first step to ensure you have the granular, package-level visibility required to audit. Major small-package carriers can provide your data via EDI through online portals available for download — or other electronic formats. This adds value for your business because you will more easily be able to analyze the detail and identify invalid charges that were invoiced to your account. IDENTIFYING INVALID CHARGES Filing for a billing adjustment will require small-package carriers to invoice for adjustments that are made throughout the delivery process. To deal with these charges, you need tools to identify exceptions, such as: incorrect pricing, service failures, or duplicate shipments. Look for the following items in your data or invoice to ensure you are being billed properly: Pricing: Make sure that you are receiving the discounts and incentives specified in the contract with the carrier. Service Failures: Was the package delivered within the commitment time? Duplicate Billing: Were you billed for the same shipment twice? Other examples of invalid charges to be on the lookout for include: incorrect residential fees; manifested, not shipped packages; address corrections; dimensional weight charges; Saturday fees, etc.
FILING FOR CLAIMS Filing for those claims is dependent on the type of claim. Both FedEx and UPS provide online tools and have dedicated credit recovery specialists who can help validate the claim. For incorrect pricing issues, there are additional steps that are required to submit the claim, such as involving your carrier representative on the account. Depending on the scope of the claim, it may not be approved for several weeks. It is also important to understand the timeline for submitting a claim. Generally, there are between 15 and 180 days to submit a claim, depending on the type of claim and carrier. How a claim is awarded is also dependent on the carrier, type of claim that was submitted, and level of detail required. Some carriers require the claim process takes place prior to payment of the invoice, and others require that claims are issued on a subsequent invoice. Each carrier has a different process for applying refunds on your account. Knowing the differences and following the proper process is crucial. RECEIVING REFUNDS FOR PRICING ERRORS When charges are misapplied, what steps should you take
to obtain a refund? First off, validate that the rates reflect your contract and that all concessions in the agreement are accounted for in your invoice data. Second, quantify the error and the timeframe in which the error is occurring to ensure your claim is within the eligible filing period. Third, notify your representative at the respective carrier that there are issues with your account, outlining the specific shipments that are billed incorrectly per the terms in your agreement. Fourth, receive verification from your account representative that the claim amount is valid and, most important, that the pricing issue is corrected
moving forward. Finally, identify the next steps for application of the refund (dependent on the carrier) and follow up to ensure proper resolution for both parties. While rating errors are less common, if missed, they can have a material impact on your transportation budget.
Kaitlyn Parsons is a Manager of Parcel Audit at enVista and is responsible for preparing audit metrics both internally and externally, in addition to overseeing the analyst team responsible for auditing billions of dollars in enVista’s customers’ small-parcel spend.
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E-COMMERCE PACKAGING PROVIDES CHALLENGES AND OPPORTUNITIES FOR CPG PRODUCTS Brand owners have spent decades and millions of dollars on packaging their products to withstand conventional distribution channels, but with e-commerce, their strategies may need to change. By Clint Smith
ith the explosive growth of online ordering for everything from toilet paper to TVs, consumers and manufacturers alike are eyeballing the next frontier: fast-moving consumer goods, also known as consumer packaged goods (CPGs). CPGs are typically products with shorter lifespans that are sold on retail shelves in grocery stores and big box outlets. Brand owners have spent decades and millions of dollars on packaging their products to withstand conventional distribution channels. But how will these primary packages fare in an e-commerce world? What design changes or dramatic structural overhauls are needed for damage-free delivery? THE TRADITIONAL RETAIL EXPERIENCE Traditionally, CPGs have engineered their primary product packaging to attract attention to the product on the store shelf. Marketers know that they
only have a second or two to grab the consumer’s eye with the hope that the product ends up in the shopping cart. Consumers are drawn to distinctive shapes, colors, powerful label graphics, unique dispensing options, ergonomics, and other attributes that enhance the experience and facilitate the purchase. A positive experience with the product after it makes it to the home will determine whether or not a repeat purchase takes place. However, what works well in a traditional retail environment may not hold up to an e-commerce scenario. If a cereal box, for example, is shipped to you by itself via a parcel carrier, it will likely end up being tossed, dropped, and shaken all about as it makes its way through sorting, distribution hubs, and delivery trucks, a much different scenario from those cereal boxes that arrive at physical stores in groups of pallets and, therefore, in much better condition. The experience upon arrival of that crushed cereal box will likely leave you
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hungry for the store-bought version. Now imagine that your cereal was shipped with your favorite soda or detergent. You have the recipe for a big mess if not properly packed. SHIFTING BEHAVIOR With households and the growing population of millennial moms and dads juggling an increasing number of tasks, the amount of free time for shopping has been compressed. Today’s household is more likely to order items for e-commerce delivery while watching television at night or commanding a virtual assistant such as Alexa to do so while preparing a meal kit dinner. With 10,000 Baby Boomers reaching retirement age every day, and more people living into their 90s and beyond, our aging population is another factor that is driving the increase (and convenience) of e-commerce orders. The environment is another important factor that cannot be overlooked. Consumers are more vocal now about the
packaging choices that companies make, and they are willing to share their opinions on social media. CPG companies need to take the packaging lifecycle into consideration, the sustainability of the materials selected, and the ability for consumers to conveniently recycle their packaging components via curbside or store drop-off. ATTENTION, BRAND OWNERS Margins for CPG products are being compressed. Your dilemma now becomes how to add room in the profit margin for additional packaging cost in order for products to survive parcel network distribution and maintain control of the brand. The need for brand control in situations where the product is being fulfilled by a third party is a growing challenge. The loss of distribution control may reduce the likelihood that your product arrives at its destination in the desired condition. There are two paths that CPG companies can take — short-term and long-term. As the demand for CPG products via e-commerce delivery grows,
companies are likely to consider their existing package to see how “parcel-ready” it is. Some might fare well, while others will simply not be suited for this distribution channel. Companies should consider the addition of different types of protective packaging to bridge the gap between the need for speed and convenience (e-commerce) and the desire to create the same beloved brand experience previously known within the retail store. However, the long-term path will likely involve a package redesign. Companies have already started behind-the-scenes development. This approach will likely have significant upfront development costs, but it may save the company money in the long term. An example of this could be a significantly lighter weight bottle for a shampoo or cleaning product that is designed to be a refillable container. Depending on the product, it is also conceivable that the new e-commerce package might also double as the new retail shelf package. Utopia, anyone?
CREATING CUSTOMERS FOR LIFE The critical thing across all delivery platforms is to protect and capitalize on brand equity while growing lifetime value. This will require a packaging solution that is both low-cost and low-risk. It needs to provide the most protection for the application at the lowest overall cost, which means factoring in damage and returns. What is certain is that the e-commerce distribution platform has already significantly impacted our purchasing habits. The door is wide open for CPG companies to come up with creative and differentiating solutions for e-commerce delivery. Consumers need to be visually, tangibly, and emotionally rewarded during that first encounter, whether at home or at the store, and the product must arrive in pristine condition in order to lead to repeat purchases.
Clint Smith is product manager, Pregis. He has a degree in Packaging Science from Clemson University.
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DIMENSIONAL WEIGHT AND YOUR PARCEL COSTS While we’ve all been aware of the changes in dimensional weight pricing in recent years, many shippers still don’t fully understand how these changes impact their parcel spend. Here’s an in-depth look.
f you ship small parcels with either of the national parcel carriers and you’ve been paying attention to the changes in their dimensional weight (DIM) pricing strategies, you probably have at least a working knowledge of how these changes impact your parcel spend. You hopefully understand the formula that the carriers use to calculate the DIM
BY DAVE SULLIVAN weight of your packages, and you most likely understand how the carriers use that weight to determine the appropriate billable weight. You’re probably also painfully aware of how changes to the carriers’ DIM formula over the past few years have caused your shipping costs to rise dramatically. And you likely can recite from memory the carriers’ current DIM factor (or divisor),
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which they use as part of their DIM weight calculation for each service. But how much do you know beyond that? Considering that the move to a 139 DIM divisor in 2017, coupled with the carriers’ standard general rate increase, amounted to what many experts believe to be the carriers’ largest ever single-year rate increase, it’s probably worth your time to become as educated as you can about the topic. The more you know, the more you can use that knowledge to make targeted requests for concessions from the carriers.
Before you can fully understand the carriers’ current DIM programs, it’s important to understand how they got to this point. As recently as 2006, the carriers used OS1, 2, and 3 designations for ground shipments and dimensional weight for express and international shipments. In 2007, OS designations were phased out entirely in favor of DIM. With the changes, the landscape in 2007 looked like this: UPS Ground: Charged DIM using divisor of 194 on packages greater than 5,184 cubic inches Domestic Air: Charged DIM using a divisor of 194 regardless of cubic size International Air: Charged DIM using a divisor of 166 regardless of cubic size FedEx Ground: Charged DIM using a divisor 194 on packages greater than 5,184 cubic inches Domestic Express: Charged DIM using a divisor of 194 regardless of cubic size
International Express: Charged DIM using a divisor of 166 regardless of cubic size Since then, the carriers have continued to modify their dimensional weight pricing structure by lowering the divisor and/or the cubic inch threshold until we arrived where we are today, which is that both UPS and FedEx packages use a 139 divisor, regardless of size. A LOOK AT THE IMPACT OF BILLABLE WEIGHT So now that we know the history, let’s look at what dimensional weight really means and why the carriers use it to determine the billable weight of a package. At the risk of sounding like your high school physics teacher, the dimensional weight of a package measures the theoretical weight of that package at a minimum density predetermined by the carriers. “Density” in the world of parcel shipping means “pounds per cubic foot.” To arrive at their minimum package density, the carriers apply a dimensional factor that is equal to a pre-determined
number of cubic inches per pound. That cubic inch per pound number is equivalent to a certain number of pounds per cubic foot… or density. Confusing, I know, but hang in there. In 2007, both carriers used a dimensional weight divisor (or factor) of 194 for certain types of shipments. That factor wasn’t pulled out of thin air. Going into 2007, the carriers had determined that the minimum package density that they were willing to carry was 8.9 lbs./ ft3 (or 8.9 pounds per cubic foot.) The number of cubic inches per pound that equals 8.9 lbs./ft3 is 194. See what they did there? Similarly, the following holds true: 166 in3/lb. (cubic inches per pound) =10.4 lbs./ft3 139 in3/lb. = 12.4 lbs./ft3 So, in 2018, by using a DIM divisor of 139, the carriers are saying that the minimum package density they’re willing to carry is 12.4 lbs./ft3, or 12.4 pounds per cubic foot. To better understand this, let’s look at an example of how the DIM divisor allows
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the carrier to achieve their minimum package density. As previously noted, both carriers are using a DIM divisor of 139 and, per our notes above, this means that they’re trying to achieve a minimum package density of 12.4 lbs./ft3. Our hypothetical package measures 25”x25”x25” and weighs 12 pounds. The actual density of the package is calculated as follows: 25x25x25/1,728 cubic inches = 9.04 cubic feet. 9.04 cubic feet is the volume of the package. 12 lbs. (actual weight)/9.04 cubic feet = 1.33 lbs./cubic foot. 1.33 lbs./ft3 is the actual density of our package. (Remember, they’ve said that 12.4 lbs./ft3 is the minimum package density that they’ll carry.) The dimensional weight calculation (at 139) for that same package is as follows: 25x25x25/139 = 112.41 lbs. (This new weight represents the theoretical weight of the package at the carrier’s minimum package density.)
This theoretical weight (112.41 lbs.) divided by the actual volume of the package (9.04 cubic feet as calculated above) gives the carrier their predetermined minimum package density of 12.4 lbs./ft3. (112.41/9.04 = 12.4 lbs. per cubic foot.) Voilà! While this is an extreme example due to the package size and the relatively low weight, for the carrier to achieve their minimum package density on a 12-pound package that measures 25x25x25, they need to bill it at the 113-pound rate! Now that you hopefully know more about DIM than you did before reading this piece, how can you use this knowledge to your advantage when attempting to mitigate the impact of DIM on your parcel costs? Remember, knowledge is power! When discussing possible contract concessions with the carriers, make sure they know that you’ve done your homework. Let them know that you understand what they’re trying to accomplish via dimensional weight pricing and the use of a certain divisor.
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Let them know that you understand the disconnect (if there is any) between the density of your packages and the minimum density that they’re trying to achieve. If you’ve done things from a package perspective to increase your package density, share that with them. There is contractual relief to be had in this area. And showing the carriers that you’ve done your homework will go a long way toward putting you in a much better position when the time comes to negotiate your next pricing agreement. Good luck!
Dave Sullivan is the Director of Pricing and Analytics for Shipware, LLC, a San Diego-based parcel consulting ﬁrm. Dave has over 18 years of experience in logistics and transportation with a keen understanding for how the carriers structure margin-based parcel contracts. Dave also has extensive experience in LTL contract and rate structure, parcel network design, and contract negotiation. Dave has dedicated his career to assisting well-known companies dramatically reduce their shipping costs.
Hytrol Implements Boutique-Style e-Commerce Conveyor System Hytrol Conveyor Company, Inc. helped a strategic e-commerce logistics partner implement a versatile material handling system capable of handling a wide range of products with an accuracy rate of 99.5%. The customer focuses on serving B2B and B2C multichannel operations through statement packaging, fast fulfillment, and freight management services. Their facility provides sameday shipping for most clients, including electronics, healthcare products, clothing, and pet supplies. Hytrol and its integration partner collaborated to produce an automated material handling system capable of meeting the customer’s current business needs while also allowing for future growth. The new system accommodated increased capacity, accuracy, and speed, while creating a significant reduction in labor. The customer CIO said that the relationship with their integration partner was a large factor in the choice for a material handling provider. “Similar to the way we do business, we look for a relationship that we can trust, and we found that during the bidding process,” he said. That customer needed the solution to be both cost-effective and do everything that they take pride in as a business. “[Our company] sells customization. We sell ‘unique.’ We sell the ability for our clients to create exactly the presentation they want their end customers to receive,” said the CIO. “With the new system, for all boxes, we’re automatically capturing dimensions, weight, and applying those shipping labels, so we’ve eliminated a lot of human touch. We’ve also added the capability to capture and use that dimensional information, so decisions can be made in real-time to route that package the most cost-effective way.”
The system incorporates unique applications of Hytrol equipment, including the use of E24™ and EZLogic® to pull gaps between products prior to entering the scanning station. This customized process allows the system an energy-efficient and simplified means for accumulation. Hytrol’s material handling system integrated seamlessly with the customer’s warehouse management system, shipping sorter, and PLC-based control system. Prior to implementation, the customer was limited by proprietary software, which restricted throughput capacity and future system development. By working with their integration partner, the customer was able to install an open software solution, allowing for flexibility and expansion of the system. Now, orders are batch picked to a cart and brought to packing benches, where each product is placed into a designated shipping carton. From this point, the carton is placed on a take-away conveyor and delivered to Hytrol’s Gapper-L, where an overhead scanner reads the carton ID and an in-motion scale captures the weight and dimensions. This information is sent directly to the warehouse management system, and the cartons are then sorted, based on destination. By fully understanding the customer’s business requirements, Hytrol and the integration partner were able to design the most efficient system for the customer’s boutique-style strategy.
a WHAT CAN A PARCEL TMS DO FOR YOU? 18 PARCELindustry.com ď€ł NOVEMBER-DECEMBER 2018
Choosing the correct transportation management system (TMS) is crucial, as this decision can often make or break the effectiveness of your logistics operation. A TMS platform allows organizations to design, execute, and optimize the physical movements of their shipments in the supply chain. While each shipperâ€™s aim may differ, the most common goals regarding a TMS are to reduce costs and improve real-time visibility within the supply chain, thereby enhancing the customer experience.
FUNCTIONALITIES Transportation management systems control four key processes of transportation management: 1. Planning and decision making 2. Transportation execution 3. Transport follow-up 4. Measurement of key performance indicators (KPI) These functionalities allow shippers to cost-effectively move both inbound and outbound shipments by using tools such as route planning/optimization, freight
audit and payment capabilities, real-time order visibility, and the management of multiple carriers. Allan J. Miner, President of CT Logistics, notes that, “Partnering with a TMS provider can streamline operations and ensure tendering compliance. Additionally, it can guarantee the capacity your firm requires,” which is always a concern for shippers. HOW IT WORKS Transportation management is, quite naturally, a relatively complicated issue that must take into account various factors, but overall, the process works like this. A TMS usually "sits," so to speak, between an enterprise resource planning (ERP) system and a warehouse/distribution module. Generally, these systems handle both inbound and outbound orders, which allows the TMS module to offer various routing solutions. Once a routing solution is selected by the user, the solution is passed along to the transportation provider analysis module to select the best mode and lowest cost provider. After this selection takes place, the system generates electronic load tendering and tracking/ tracing capabilities to send the optimized shipment with the chosen carrier. Later, the system can also support the freight audit and payment process to ensure the accuracy of costs incurred. Not surprisingly, growth in the TMS sector has increased sharply in recent years, in large part due to the booming international e-commerce industry, as noted by Transportation Insight Vice President of Parcel Operations Todd Benge. “Operating within an integrated ecoscape where shippers can leverage class-leading, rapidly deployable technologies to obtain port-to-door line of sight and multi-modal optimization can position companies to manage high-velocity transformational change,” he explains. “This can be especially impactful at a time when e-commerce demands are driving consumers, B-to-C, and B-to-B players to the convenience of online buying and selling.” Whatever challenge you are looking to mitigate, these systems help shippers achieve effective global trade and logistics management, no matter where the end customer resides. Whether your shipment operation is focused on the domestic market or the global one, choosing the correct TMS is one of the biggest steps you can take to ensure your success.
BluJay Solutions delivers supply chain software and services to the world’s most progressive retailers, distributors, freight forwarders, manufacturers, and logistics service providers. Transforming supply chain logistics with the BluJay Global Trade Network, we enable customers to unlock the power of more than 40,000 universally connected partners. With BluJay, companies can achieve greater trade velocity, transform their supply chain economics for disruptive advantage, and see beyond the horizon to optimize their future in the global economy. The BluJay Global Trade Network is a fundamentally new model that goes beyond automation to harness the full power of the global supply chain ecosystem. At the heart of this powerful network is BluJay’s comprehensive and integrated portfolio of logistics applications, analytics, and services, all delivered through a scalable, single instance multi-tenant cloud. With rich domain expertise in all areas vital to global trade — transportation, parcel, freight forwarding, warehouse, customs and compliance — along with four decades of experience, BluJay is the trusted choice of over 7,500 customers in more than 100 countries. Customer success is the standard by which BluJay measures success. Over 1,000 motivated employees worldwide, 20% of whom have 15+ years of experience with the company, are committed to delivering on this promise. www.blujaysolutions.com
CT Logistics is celebrating 95 years of supply chain management services in 2018. Since 1923, companies have leveraged CT for freight audit, payment, and TMS solutions worldwide. CT customizes all our solutions to support all modes and currencies. CT will reduce your costs and save your company money. CT’s services include supply chain management, TMS solutions, LTL and full truckload shipment execution, bid management, shipment planning and execution software, as well as professional services for consulting and advising. CT’s business intelligent platform provides global supply chain visibility for benchmark-
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ing and trending, with graphical dashboards. CT is SOCII and ISO 9001:2008 certified. www.CTlogistics.com
Shipping becomes more complicated each year, as customer demands increase and parcel volume continues to grow exponentially. Carriers are also raising shipping rates and updating surcharges annually, and carrier compliance is becoming a bigger issue as e-commerce turns global. This is why now is the time to add the right multi-carrier shipping software into your shipping strategy. While companies who ship utilize different software systems to manage warehouse operations and freight, these solutions can only go so far. ProShip’s enterprise-wide, multi-carrier shipping and manifesting software allows retailers, manufacturers, 3PLs, and healthcare companies to automate their parcel shipping processes. This flexible solution rate shops from a variety of carriers and their services to find the best shipping method for both cost and transit time in the quickest way possible and in one single platform. It also uses custom business rules for a seamless and automated shipping process unique to each shipping environment. As shippers begin to ship internationally, ProShip’s multi-carrier shipping software offers cross-border shipping capabilities to ensure compliance on every order. This unique shipping solution also features robust reporting capabilities to monitor cost savings and efficiencies. ProShip, Inc., a Neopost company and leader in logistics software and supply chain solutions, can help you fuel automation, enhance speed, master carrier compliance, and cut shipping costs with its multi-carrier shipping software. Pair this solution with ProShip’s automated packaging solution and Packcity intelligent parcel lockers for an even greater cost savings. www.proshipinc.com
Lengthy spreadsheet rate tables, set-itand-forget-it decision making, and archaic
TMSs make the sheer volume and complexity of shipment data insurmountable. These legacy solutions fail to deliver the data necessary to ensure businesses can make the best decision for every shipment. SwanLeap brings unprecedented clarity and control to a fragmented shipping market through a machine learning platform that curates cost-effective and personalized supply chain recommendations in real time. SwanLeap simplifies supply chain management with an artificial intelligence platform that saves money, optimizes visibility, and increases control. Companies plagued by inefficiencies and overspending due to antiquated methods (such as static routing guides, low visibility into rate changes, manual input, etc.) suffer missed savings and waste their employees’ valuable time and energy. SwanLeap jettisons antiquated rule-based routing and legacy processes in favor of automated, customized, and real-time shipping options, delivering thousands of dollars of savings within months. Ranked #1 on both the Inc. 5000 Fastest Growing Companies and the Deloitte Technology Fast 500 in 2018, SwanLeap is a solution you can trust. Leverage SwanLeap’s live carrier connectivity and eliminate the costly human errors present in your legacy manifest system. www.swanleap.com
a TRANSPORTATION INSIGHT Transportation Insight offers shippers a technology platform that meshes proprietary and industry-leading commercial applications into an Enterprise Logistics ecosystem that provides multi-modal (LTL, Parcel, and TL) optimization, freight and parcel invoice audit and payment, advanced analytics, and business intelligence reporting. Insight TMS®, the supply chain strategist’s customizable, web-based Transportation Management System, combined with any 3PL’s WMS, provides total shipment visibility from foreign factory floor to the customer’s door through one interface. Insight TMS users can rate shop and select carriers across multiple modes, create shipping documents, tender shipments, and track
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shipments to their destination. Eliminating the need for significant capital investment, Insight TMS is hosted, flexible, scalable, and easily adaptable to changing technology needs in an e-commerce-driven economy that demands increased speed to market and a frictionless experience for end customers. The combination of Insight Parcel® small-package technology (audit, engineering, advanced analytics) and the Insight TMS platform’s powerful multi-modal capabilities enables manufacturers, retailers, e-tailers, and distributors to link customer orders placed through e-commerce service portals to the most effective, efficient transportation mode and carrier. After shipment execution, Transportation Insight’s proprietary Insight Freight® auditing system and Insight Fusion® business intelligence interface deliver clients accurate and meaningful business intelligence reporting on all modes within one operating environment — a true integrated Enterprise Logistics solution. Underpinned by data-driven insights from LTL and small package shipping experts, the Transportation Insight suite of technology and digital tools supports better decision-making, accelerates e-commerce performance, and enables shippers to deliver a five-star customer service experience. www.TransportationInsight.com
FEATURED PARCEL TMS PROVIDERS BLUJAY SOLUTIONS
www.blujaysolutions.com CT LOGISTICS
www.swanleap.com TRANSPORTATION INSIGHT
In a World of Parcel Growth, Is a TMS Enough? It is no surprise shipping has become more efficient with transportation management systems (TMS). This software solution allows shippers to select the optimal route and carrier, and plan freight movement and freight rating. Once the shipment is delivered, shippers can then manage freight bills and payment, all through the TMS. While this may seem like the ultimate shipping solution, most TMS providers do not specialize in parcel capability and lack the features many retailers, manufacturers, third-party logistics providers, and healthcare companies need in order to provide their customers with a value-add solution. As e-commerce continues to reign supreme and warehouses take on new roles, it is vital shippers have the software that is up for the task. Enter multi-carrier shipping software. This unique solution seamlessly integrates with a TMS to create a full shipping strategy — from freight to small parcels. In addition to offering multiple shipping methods, multi-carrier shipping software also offers a variety of benefits to shippers and companies alike. Increases sales. Multi-carrier shipping software offers more shipping options at checkout, which 86% of retailers agree boosts profits. Expands the shipper’s carrier portfolio. Shippers can take advantage of the software vendor’s relationships with major and regional carriers to ensure the best cost and type of carrier for any parcel. This includes rail, freight forwarders, LTL, and hyperlocal carriers. Ensures carrier compliance. Using multi-carrier shipping software allows shippers to generate carrier-compliant labels, manifests, and other required documentation to avoid additional fees, delays and returned deliveries. Shippers can also better manage complex import tariffs, packaging specifications, customs rules and regulations for international markets. Decreases shipping costs. Multi-carrier shipping software automatically rate shops carriers to find the lowest cost, fastest transit, cost-plus time in transit or advanced date
shopping options to customers. This can create a 30% reduction in shipping costs. Optimizes shipping strategies. Shippers can use the multicarrier shipping software’s built-in reporting and analytics. These reports analyze by carrier, division, location, department, customer, and more to allow shippers to monitor trends and identify unnecessary usage of premium services. Provides complete order visibility for a better customer experience. Customers can receive automatic notifications with real-time parcel status, delivery updates and e-notifications for end-to-end tracking. This not only reduces customer service calls but increases customer satisfaction and loyalty. With parcel growth set to rise at a rate of 17 to 28% each year through 2021, the need for a unique shipping solution is clear. Same-day delivery is also estimated to increase logistics cost revenue by 50% by 2020. TMS solutions alone cannot keep up with this increased parcel volume and the need for same-day delivery, especially with peak shipping season thrown into the mix. Shippers must stay ahead of these shipping challenges and turn to multi-carrier shipping software. This solution can be the answer to a superior shipping strategy.
WHAT DO THE CARRIERS SEE WHEN THEY LOOK AT YOUR DATA? The complexity involved with effectively utilizing your shipping profile data to achieve optimization can be daunting, but shippers can’t afford to ignore this issue.
By Andrew Brueckner
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hipping profile? Check. We received it from our carrier representative at our last account review.” No, really, do you know what your shipping profile actually looked like last year? Has it remained consistent in 2018? Is your parcel shipping profile expected to be similar in 2019? What about 2020? Don’t scoff; after all, the year 2020 is just 13 months away. That means that elements of your shipping profile may change twice by 2020, thanks to the carriers’ annual general rate increase (GRI). What about your carrier agreement? Was it negotiated with your shipping profile in mind? I will accurately answer that for you, and I don’t even need your response. That is because the carriers understand your shipping profile, and they absolutely use their data-driven analytics machine to ensure your “unique” discounts and terms maintain their historically strong profit margins. Do you have a data-driven
analytics machine? I imagine I can answer that question for you, too. Even if you wanted to utilize a data-driven approach to understanding and resolving your parcel pain, do you really want to invest the time and resources to building the necessary structure to do so? Understanding your shipping profile is a key element in so many of your organization’s strategical and tactical planning. From financial forecasting to raw material procurement to customer experience, your shipping profile more than likely impacts more facets of your operation than you even realize. WHAT’S INCLUDED IN YOUR PROFILE? So, what is typically meant by the term, “shipping profile”? Simply put, your shipping profile classifies the characteristics of your shipments and identifies trends within those shipments. What is not so simple is identifying and translating the millions of meaningful data points within the carriers’ invoices, pricing agree-
ments, and service guides to construct that shipping profile. Service types, package weights, package dimensions, pick-up location(s), delivery location(s), as well as other specific shipment characteristics the carriers target by leveraging steep surcharges are all common elements of a shipping profile. For shippers, this significantly complicates the challenge of identifying and organizing (not to mention making sense of) how the elements of the shipping profile interact with and impact one another. Furthermore, a shipping profile delivers descriptive data, but most shippers are interested in reducing costs and implementing operational efficiencies. In order to do that, shippers need to utilize data science methodologies to conduct predictive and prescriptive parcel analytics. Since most shippers focus their time and resources on areas of their business out of necessity, they are left to trust the carrier to identify and resolve shipping behaviors that are specifically causing the shipper parcel pain. As I alluded to earlier, understanding the shipping profile is vital to an organization’s ability to operate efficiently and effectively. I have been shocked over the years to learn how many shippers attempt to negotiate their own parcel shipping rates and terms without a complete understanding of their shipping profile. (Insert your perfect analogy here, such as baking without a recipe, or without even the ingredients, for that matter.) FedEx and UPS spend billions of dollars every year on their ability to use data-driven tools as their competitive edge when negotiating with shippers like you. While it is unlikely that many shippers have the resources to invest like the carriers do, there are third-party partners committed to datadriven analytics and parcel shipping that have leveled the playing field.
not primarily based on the size of shipper you are. While your shipment volume trend may be part of your carrier representative’s positioning when approached about reducing costs, it actually plays far less of a role than you might think. That is why as a shipper’s package volume increases, their pricing does not incrementally improve as well. That said, you may have earned tier discounts in your carrier agreement that provide additional discount incentives based on spend, but take a look at the downside as well as the upside. Growth into the next volume tier and beyond is typically rewarded with a one to two percent discount increase, while dropping just one volume tier can result in five to 10% of your discount being stripped away. This is common practice with each carrier. Carriers view your shipping data through more of a microscopic lens than shippers traditionally do. The carriers slice and dice the data to identify common shipment characteristics to define a shipper’s standard shipment. The carriers then model how that standard shipment will likely move through their network, and identify what the predictive network touchpoints are, which are often viewed as risks by the carriers. Once the carrier calculates the cost and risk associated with handling your shipments, the carrier will consider other factors like their own network capacity, the competitive environment, potential ancillary service attachment, and the shipper’s opportunity for growth. The complexity involved with identifying and effectively utilizing your shipping profile to drive carrier optimization, contract optimization, and operational optimization can be daunting, but shippers can no longer kick this issue down the road. The urgency to resolve this gap will only continue to grow exponentially as more and more shippers aim to absorb the rising cost of shipping.
HOW DO THE CARRIERS UTILIZE YOUR INFO? Both UPS and FedEx have a rather simplistic method of constructing your custom discounts and terms. No, it’s
Andrew Brueckner is VeriShip’s Chief Customer Officer. Backed by a team of data scientists and 13+ years of benchmarking data, Andy and his team work with shippers to understand and optimize their carrier contracts. NOVEMBER-DECEMBER 2018 PARCELindustry.com 23
REDEFINING FULFILLMENT IN THE AGE OF THE NEW CONSUMER With the continual growth of e-commerce, more and more merchants are turning to alternative fulfillment strategies in the quest for lower costs and increased customer satisfaction.
-commerce sales in North America will continue to climb over the next five years, with some projections showing an average growth rate of nearly 15% annually on the way to $821 billion by 2021, according to figures from eMarketer. Online retailers have spent the past five years building up capacity for this age of the new consumer, but the parcel industry is now playing catch-up in its ability to efficiently move the onslaught
BY TERRY BROWN
of online orders through courier and postal networks. While there has been significant investment in speed by e-commerce fulfillment centers, a changing parcel stream with an increasing number of smalls and incompatibles is having an adverse effect on operations. Consumer expectations are also affecting delivery services as online buyers seek greater flexibility, such as order consolidation and vast delivery times. Couple that with online retailers who want to take orders as late in the day
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as possible and still make same-day shipping, and the picture of a parcel industry faced with how to manage continuing service-level demands becomes clear. Labor shortages, a lack of available land for facility expansions, and market disruptors such as UberRUSH have fulfillment centers turning to new and, sometimes, nontraditional strategies to increase capacity and improve throughput. PROCESS SMARTER One way to combat challenges in the parcel industry is to process smarter by pursuing technologies that provide dynamic order processing and fulfillment. For example, new software technology
tracks the location of a picker to allow automatic order updates. Inputs can change dynamically as automated systems are in operation, making it possible to consolidate orders and fulfill late orders. Enhanced software creates a dynamic environment that reacts to what is happening in real time. Parcel operations may also benefit from alternative sortation systems, such as loop sortation instead of line sortation. Let’s examine this in greater detail. LOOP VS. LINE SORTATION One of the biggest benefits of loop sorters is that they can greatly exceed the capacity of a line sorter. There are inherent features built into a loop sorter that don’t exist with a line sorter, and one is recirculation. As an example, a facility has a line sorter that is feeding 45 trailer doors. If a carton on the sorter is assigned to go to door 23, and door 23 is blocked when the carton arrives, that item must start the process again. The weight and orientation of the carton, its identification number, and other pertinent information all must be inducted into the system a second time. With a loop sorter, that carton can ride the loop until door 23 becomes available. Loop sortation allows better control of items with the ability to physically track where any given item is at any moment in time. If a facility temporarily loses power, for example, a loop sorter will resume operation where it stopped at the loss of power. With a line sorter, items must be discharged with reacquisition of data and recirculation required to resume operations; a time-consuming process. Loop sortation can handle a wider variety of product types from cartons to polybags with consistent capacity
and throughput efficiencies. With line sortation, throughput decreases with larger items and increases with smaller items. Fewer touches and lower labor requirements are other natural benefits of loop sortation. High-speed loop sortation also offers greater flexibility, enabling operations to process direct-to-consumer, store, wholesale, returns, receiving, and kitting/sequencing on the same piece of capital equipment. To determine whether your facility can benefit from high-speed loop sortation, consider these key questions: Are there bottlenecks in your facility that prevent you from reaching your throughput requirements and service levels? Do your systems lack features that would better align them to your business needs? Is manual sortation leading to increased labor costs? Is adding headcount having minimal effect or even making the problem worse? Are your current systems or processes stifling your growth, preventing you from being as flexible and responsive as today’s marketplace demands? Are increased inaccuracies leading to customer dissatisfaction? A loop sorter typically will perform at a greater capacity and higher throughput than a line sorter in the same amount of physical space. While the cost differential can be significant, loop sortation is a sound investment for a facility receiving, sorting, and shipping more than 5,000 units per hour. ALTERNATIVE FULFILLMENT STRATEGIES Traditionally a small part of parcel volume, incompatibles such as big screen
televisions and tires today are a growing and profitable part of the fulfillment business. But these oversized items are creating tremendous challenges that have parcel companies considering everything from building a facility dedicated to handling incompatibles to fulfilling orders directly from the manufacturer. Another alternative is a dual fulfillment strategy, whereby two items from a single order might be shipped from a distribution warehouse and a third pulled and shipped from a local retailer. At least one home improvement company is experimenting with placing mini-warehouses in stores where inventory is closer to the customer base. Software that would allow dynamic decision making regarding the most efficient location from which to fulfill online orders is currently being developed. PLANNING IS CRITICAL Automated systems and software are readily available to help parcel companies compete in the race for capacity and fulfillment efficiency, but planning is crucial. As more consumers connect online through mobile devices, demands on e-commerce fulfillment accuracy and speed will continue to rise.
Terry Brown is Director of Sales, Sortation & Distribution at BEUMER Corporation, where his responsibilities include solution selling, marketing, engineering, project management, and customer satisfaction. He earned a BS in Mechanical Engineering from the University of Wisconsin and a Masters – Business Administration from Keller Graduate School of Management.
High-speed loop sortation also offers greater flexibility, enabling operations to process direct-to-consumer, store, wholesale, returns, receiving, and kitting/sequencing on the same piece of capital equipment. NOVEMBER-DECEMBER 2018 PARCELindustry.com 25
PARCEL FORUM '18
WRAP UP By Amanda Armendariz
Keynote Luncheon that featured Kevin Kuntz, Senior VP, Gap, Inc. Global Supply Chain Congratulations to the Anixter team for being our 2018 Game Changer of the Year Recipient.
On Tuesday, we presented our Game Changer of the Year Award to Anixter for the innovation demonstrated in their processes. Look for a full profile on Anixter’s award-winning operation in our January/February issue!
From L-R: Bob Beck, Dean Shirkman, Orlando McGee, Gene Holmes
nlike the past couple of years, news of the UPS and FedEx general rate increases (GRI) didn’t hit during the Forum, but that didn’t mean there wasn’t plenty to talk about. One of the most gratifying things about our annual conference is discussing industry issues with fellow professionals and generating problem-solving ideas that can be implemented upon return to the office. The parcel professionals who attend this yearly show are some of the best in the business, so networking activities prove to be invaluable. Let’s take a peek into the vast knowledge that these shippers were exposed to over the course of our three-day event. ALL-DAY WORKSHOPS AND TOURS On Monday, attendees were able to choose between a variety of workshops focusing on such topics as mastering
carrier contract negotiations, understanding and mitigating legal issues affecting parcel shippers, and implementing lean fundamentals in one’s operation. We also offered a variety of tours (UPS CACH, Daifuku, and Anixter), which allowed our attendees to see some of the operational principles discussed in action. UPS CACH is a 1.5-million-squarefoot distribution hub that can efficiently process millions of packages each day through a NASA-like command center that directs 80,000 separate systems, moving the packages through 65 miles of conveyors and rollers before ending up at one of 1,000 doors. As my fellow tour guide, Susan Rider, noted, “The tour allowed shippers to realize what actually happens to their packages once they leave their facility. Additionally, the automation and processes developed for different-sized packages and the sheer volume running through the UPS facility
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was interesting and enlightening.” Truly a sight to behold! The tour of Anixter’s distribution center was no less impressive. The Fortune 500 company, which supplies communications and security products, as well as electrical and electronic wire and cable, boasts a 238,000-square-foot distribution center that is equipped with voice-activated technology and intelligent conveyors, enabling them to move their products into the network faster. Finally, those attendees who visited the Daifuku Innovation Center were indeed able to see industry innovation in action, such as guided floor vehicles and robotic depalletizing solutions. Rider said that one of her favorite parts of the tour was the application expert who explained the pros and cons of the different technologies being presented. After all, even if one is not currently looking to make changes to their distribution center in
Packed Exhibit Hall Featured 103 Industry-Leading Companies
Visit www.PARCELforum.com for 2019 info.
KEY TAKEAWAYS FROM PARCEL FORUM ‘18 The closing session of every show focuses on the top takeaways of the conference. Throughout the three-day show, we encouraged our attendees to post their favorite tips or takeaways on our PARCEL Forum mobile app. John Haber, CEO, Spend Management Experts, and Susan Rider, President, Rider & Associates, selected and presented the 20 Top Takeaways from the Conference as the final session of the show. While we didn’t have room to list every tip here, we do hope you enjoy this peek into what your colleagues and peers found valuable.
Great Networking on the Exhibit Floor the near future (and even if one doesn’t have responsibility for that part of the supply chain!), it’s still amazing to see all the innovation that exists in our industry, and how these technologies are being put to use. THE MAIN EVENT As I paged through the conference brochure in an attempt to decide which sessions to attend on Tuesday and Wednesday (always a hard task, by the way, when there are so many good ones happening all at once!), there were a few major topics that stuck out to me, and in my discussions with fellow attendees, it seems that these topics are challenges for them, as well. As an example, we had an entire Learning Pod designed for Last-Mile Logistics. In a lively discussion, our last-mile experts answered questions faced by professionals in this sphere. Our attendees wanted to know how you
1. The ability to cube your parcels will save money and make you more efficient. 2. Collaborate with manufacturers about beefing up packaging to reduce your internal packaging cost. 3. Negotiating the discount wording of accessorial and getting it in the details of your contract will save money. 4. Managing the process of packing your orders is just as important as the order-picking process. 5. Mobility can push back data to the customer in the form of a photo of a delivered item or signature. This allows you to enhance your brand and tailor the experience for language differences, etc. 6. Drivers and delivery staff are taking a customer-facing role in e-commerce when a product is delivered, thus becoming an extension of a brand and an important role in the overall customer experience. Focus on recruitment and training with a customer-oriented mindset to ensure that last-mile service results in a positive consumer experience. Additionally, overcome crowdsourced drivers’ lengthy learning curve with simplified and standardized delivery tasks. 7. If your WMS/TMS software is over eight years old, you need to replace or update. Warning: It may be better to replace than update. 8. Regional players are expected to see the most growth. Nationally, the market is still basically a duopoly. 9. Two-thirds of the global population is expected to reside in cities by 2050, making urban last-mile delivery vital to serving customers. 10. A central question e-commerce merchants need to address is whether to outsource their last-mile logistics, handle it in-house, or combine the two models.
optimize the customer delivery experience by providing fast and low-cost (or even free) delivery, in a timeframe that is acceptable to the consumer, while still maintaining your bottom line. Is a strategy that would allow you to ship from more than one distribution center, thereby bringing you closer to the end customer, the answer, or is the current number of DCs adequate? And when it comes to the literal final mile itself, some pros discussed the importance of alternative delivery strategies, such as an Uber-type model of independent contractors. Other sessions focused on the optimization of the global supply chain — definitely a major focus for many shippers, as the e-commerce arena continues to expand across borders! — while other sessions were more focused on the operational aspects of the supply chain (packaging, warehousing, etc.). No matter what your job responsibilities are within the parcel industry, we ensured that we had dedicated industry experts available to present and educate on these topics. Of course, it would be impossible for
me to catalog every session topic within the three pages allotted for this article, but I hope to give you a glimpse into the types of information shared at the show. After all, these types of discussions are one of the things I love most about PARCEL Forum. I’ve been with PARCEL media for 13 years now, which means that I’ve attended 12 of these shows. It’s so gratifying that our content continues to evolve with the industry (thanks in large part to input from our Advisory Board
members!), ensuring that our attendees are able to discuss the most pressing issues facing them in their professional lives. So for those of you who attended this year, thank you, and we hope to see you next year in Dallas from October 28-30. For those of you who have not yet attended (or have not attended for awhile), we hope that this article gave you an idea of what we’re all about: making the lives of parcel shippers easier through education, networking, and innovation.
A HUGE THANK YOU TO OUR PARTNERS AND SPONSORS!
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Global Logistics Technology Partner
Regional Carrier Partner
Shipping Systems Technology Partner
Transportation Management Partner
Material Handling Partner
Keynote & Game Changer Awards Luncheon Sponsor Platinum Networking Reception at the Punchbowl Social
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PARCEL PARCELindustry.com/subscribe 28 PARCELindustry.com NOVEMBER-DECEMBER 2018
PARCEL FORUM ‘18: THE LEGAL TAKEAWAYS By Brent Wm. Primus, J.D.
s always, PARCEL Forum ‘18 was a great event. It was especially enjoyable for me, since I got to meet and visit with the fans — or at least regular readers — of this column. I had the opportunity to once again present the “Transportation, Logistics, and the Law for Parcel Shippers” as a full-day workshop. I have presented this course several times before at the PARCEL Forum. In recent years, the emphasis has been on identifying and minimizing legal and financial risks in the supply chain. At the conclusion of the course, the attendees are asked to complete a critique sheet, which included this question: “Did you learn anything that you will be able to use at your job in the next 30 days?” Several attendees answered “Yes,” so I would like to summarize those takeaways for this installment of PARCEL Counsel. One attendee said that she would be more closely reviewing upcoming contracts with regard to two specific points. Her
first takeaway relates to a motor carrier’s limits of liability for loss and damage to cargo. While the governing federal statute, known as the Carmack Amendment, calls for full liability of the carrier, carriers are also allowed by statute to limit their liability… and they usually do. Sometimes these limits are clearly stated in the contract, but other times, they may not be contained within the contract itself but in some other document that is “incorporated by reference.” Her second takeaway related to the fact that the pricing for less-than-truckload (LTL) shipments is often expressed in discounts from a base rate. These discounts are usually substantial, in the 60% or 80% range. What is not as well known is that when the pricing includes a discount, there is often a parallel provision limiting the claims by a corresponding percent. For example, if an LTL carrier were to offer an 80% discount, they limit their liability for cargo claims to 20% of the claim. Several attendees noted they were becoming more aware of the nature of the National Motor Freight Traffic Association (NMFTA) and its primary publication, the National Motor Freight Classification (NMFC). While these attendees were aware of the basic purpose of the NMFC, that is, to classify various types of products in order to determine the rate to be charged, the NMFC contains much more. Examples of this would include (1) rules for packaging
— which, if not followed, would set the stage for an insufficient packaging defense by the carrier in the event of a claim, (2) limiting the time period to seek a refund of a duplicate payment, which does not appear in any federal statute or regulation and (3) mandatory arbitration — whether you like arbitration or not. Unless a shipper contracts out of these provisions through an individually negotiated contract, they will apply to that shipper’s freight if the carrier is a participant in the NMFC. My favorite takeaway was this: “The PARCEL Counsel archive resource of Brent’s articles.” To explain, since the first installment of this column in May of 2007, there have been more than 50 others. All of these articles, as well as my predecessor’s, William Augello, are listed on the transportlawtexts.com website (http://www.transportlawtexts. com/parcel-magazine.php) with links to the full article on the PARCEL website. If one were to read all of these articles — after all, they are only a few hundred words each — they would come away with an enhanced knowledge base equivalent to a college course. All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Your questions are welcome at firstname.lastname@example.org.
NOVEMBER-DECEMBER 2018 PARCELindustry.com 29
PARCEL DELIVERY OPTIMIZATION Michael J. Ryan
ll merchants are challenged to meet or exceed the two-day (or sooner!) delivery expectations that Amazon has established in the market. “Fast and free” is a common phrase heard in the industry. These two words should never be used in the same sentence; however, today’s consumers expect this. (Yes, even I admit to this expectation, and I’m sure all of you can, too!) How are small- and medium-sized merchants to compete here? Let’s explore some strategies for your own operation. 1. Close to Consumer: One of the best ways to reduce your parcel cost is to get the majority of your shipments into Zone 2. This can be accomplished by utilizing a 3PL/fulfillment organization with three to five locations. If you are a national retailer, you can utilize your stores
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as shipping points, à la the ship-from-store model. If you do not have enough orders for a national distribution model, then pick a 3PL that is closest to your customer base. 2. Utilize the USPS: I am continually amazed at the number of merchants who still use FedEx and UPS for shipments under five pounds for a residential delivery! I recently had a delivery to my house that was sent via UPS. The merchant could have saved over 60% by using the USPS… and it would have been delivered a day sooner. The USPS delivers to every address in America six days a week, a feat that is unmatched by any other competitor. The USPS has recently announced one of the largest price increases in the history of the organization, but it is much needed by them; hats off to Dennis Nicoski and his team. Even with this increase, the USPS is a key delivery network for e-commerce. In fact, the USPS has proposed a five to 11% increase to Amazon (a $400 million-$1.1 billion increase), since they move 40-50% of their deliveries via the USPS. 3. Partner Pricing Programs: Most large shippers have enough volume to keep their shipping cost low. However, smaller shippers need to take advantage of their partner’s shipping programs. These partners pull together hundreds or thousands of customers to get lower shipping costs, and
most partners share these savings with their customers. 4. Technology: Many of the multi-carrier shipping platforms offer “rate shopping” features built into their system. This allows for an automated system to pick the best shipping solution at the best cost. It is critical in this process to have multiple carriers as part of your strategy. There are many small- to medium-sized fulfillment companies in the US that are building their networks to be competitive with Amazon on a lower price point. This is creating a more profitable price point for start-ups and early growth stage companies. As we all know, competition is healthy for everyone… even Amazon. As we continue to meet the “fast and free” expectation, it is critical to keep your costs in line. Remember, Amazon subsidizes their shipping cost with a membership fee ($12.99/ month). They have built this model similar to the insurance industry, which just raises the premiums when costs go up. This model can be challenged with an effective parcel delivery optimization strategy.
Michael J. Ryan is the Executive Vice President at Preferred Parcel Solutions and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@ preferredship.com.
PARCEL Nov/Dec 2018