WHAT’S IN THE 2020-2021 INNOVATION SHOWCASE? PAGE 17
NOVEMBER-DECEMBER 2020 PARCELindustry.com
FIVE CRITICAL COMPONENTS FOR A SUCCESSFUL RFP. P. 26
WHAT TO LOOK OUT FOR IN YOUR CARRIER CONTRACT EXPENDITURES IN THE NEW YEAR. P. 24
OPTIMIZING RETURNS MANAGEMENT: THE KEY TO SUCCESS? P. 12
THE CHANGING PARCEL LANDSCAPE: 2021 AND BEYOND PAGE 10
CONTENTS /// Volume 27 | Issue 6
10 24 26 28 06 EDITOR’S NOTE
15 GUEST COLUMN
Brighter Days Ahead By Amanda Armendariz
ICYMI: Wall Street’s View of the Carriers and the Impact of the Pandemic By Ravi Shanker
08 PACKAGING How GRIT Can Help Retailers Achieve Sustainable New Year’s Resolutions in 2021 By Clint Smith
16 GUEST COLUMN David vs. Goliath: How to Keep Loyal Customers, Even if You’re Not an Industry Giant By Valerie Metzker
10 SUPPLY CHAIN SUCCESS The Changing Parcel Landscape: 2021 and Beyond By Logan Mullen
12 SPEND PERSPECTIVES Optimizing Returns Management Is Key to Retailers’ Success By John Haber
13 TECH SPACE AI and the Small Parcel Market By Chase Flashman
14 OPERATIONAL EFFICIENCIES Making Automation Make Sense By Susan Rider
24 WHAT TO LOOK OUT FOR IN YOUR CARRIER CONTRACT EXPENDITURES IN THE NEW YEAR By Tim Sailor
26 A PARCEL RFP GUIDE: FIVE CRITICAL COMPONENTS TO CONSIDER By Cam Elliott
28 COULD THE PANDEMIC’S EFFECT ON YOUR WAREHOUSE HAVE A SILVER LINING?
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By Stephen T. Hopper, PE
30
30 AN ONLINE SELLER’S GUIDE TO ORDER FULFILLMENT SERVICES PRICING By Harry Drajpuch
32 PARCEL COUNSEL Negotiations: Three Observations of a Transportation Attorney By Brent Wm. Primus, JD
34 WRAP UP International “Express” Option By Michael J. Ryan
SPONSORED CONTENT 17 INNOVATION SHOWCASE
EDITOR’SNOTE
BRIGHTER DAYS AHEAD
By Amanda Armendariz
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020 was certainly a whirlwind, and I could not have foreseen the events of this past year when I wrote my editor’s note for the 2019 November/ December issue. As I penned the intro for the final issue of last year, I focused on the optimism that shippers and retailers were feeling as we headed into the new year. With e-commerce continuing to grow at an accelerated pace, the start of the new decade promised to be a profitable one for shippers of all sizes. And, in some sense, these projections weren’t wrong; if anything, the growth of e-commerce shipments far outpaced anyone’s expectations. Of course, as we all know, much of this increase was due to people sheltering in place during a deadly global pandemic, ordering online so as to reduce their exposure to stores and other places of business, and the increase in e-commerce orders and profits cannot compensate for the loss of lives and businesses all over the country. We at PARCEL offer our condolences to all those who have lost someone during this pandemic.
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While it will certainly take some time to come back from this unprecedented year that we’ve all just lived through, we are hopeful that brighter days may be ahead in 2021. News of a vaccine seems promising, and if case numbers go down, it’s likely that more people will be willing to venture out and support those businesses that are still around. The restaurant industry, I’m sure, is looking forward to that day! Of course, some changes are probably here to stay; I know that I, personally, won’t do in-person grocery shopping on a regular basis ever again — online ordering and curbside pickup has changed my family’s routine for the better! Likewise, there are many purchases that people have become accustomed to ordering online rather than buying in person, so I doubt that the number of online orders is going to go down, even as life returns to some semblance of normal. No one really knows what 2021 will bring in the grand scheme of things; so much depends on the availability of a vaccine and how the states are handling their cases. But one thing is certain: e-commerce orders are only going to continue to grow, and we at PARCEL will continue to be your industry partner as you navigate these ever-changing waters. Here’s to a better 2021. As always, thanks for reading PARCEL.
EDITOR’S PICK
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 Importance of Packaging in E-Commerce Delivery Experience By Jake Rheude
UPS Announces 2021 General Rate Increase: Key Facets for Domestic Shippers By Matt Weickert
Optimize Your Supply Chain Strategy with These Cross-Border Shipping Options By Kyle Toombs
PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ amanda.c@rbpub.com ]
AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ rachel@rbpub.com ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ ken.w@rbpub.com ]
PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 2020 © 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
NOVEMBER-DECEMBER 2020 PARCELindustry.com 7
PACKAGING
HOW GRIT CAN HELP RETAILERS ACHIEVE SUSTAINABLE NEW YEAR’S RESOLUTIONS IN 2021 By Clint Smith
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he end of the year is a time to reflect, recharge, and rechart your course for the next 12 months. No one imagined that 2020 was going to unfold the way it did. Understandably, most people are ready to tackle 2021 with a renewed vigor to make up for what happened this year. That’s true of the business community as well. As the year comes to an end, e-commerce and retail brands find themselves in a unique position: For many of these essential services, 2020 was busier than expected,
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with an unprecedented increase in online sales as consumers turned to digital more than ever before. FedEx and UPS each reported 20% surges in package volume back in July due to this shift to online shopping — and that’s before the peak season of shipping even began in Q4. This led to a massive increase in packaging materials, including cardboard boxes, plastic, and protective material. Industry experts have already started to discuss the negative impact this type of convenience will have on the environment in terms of carbon emissions, consumption of resources, and increased waste. However, research by Doddle Pulse found that 43% of consumers would purchase from a competitor if they offered a greater range of sustainable delivery options than their current brand. The percentage was even higher (56%) for the 18-to-24 consumer age demographic. It’s safe to assume this awareness in prioritizing sustainability is only going to grow. As we enter 2021, many consumers are creating New Year’s resolutions around mitigating waste and lessening their environmental impact. To maintain customer loyalty, brands should do the same. Stick to Your New Year’s Resolution with GRIT Lowering your company’s
carbon footprint or optimizing the design of your package might be a real challenge for your company, but it’s a New Year’s resolution worth committing to. To hold your brand accountable all year, it will take GRIT: Goal-setting for concrete and realistic resolutions Roadmap for a clear plan of attack Impact-focused action to drive real results Time limits and deadlines to remain accountable This versatile strategy can help create and sustain your personal, environmentally friendly New Year’s resolutions. Now let’s talk about how to apply this process to “greening” your shipping operation. The Goal The foundation of a successful New Year’s resolution is a goal that’s specific, realistic, and measurable. After all, to make your business operation more sustainable for the environment, the goals you set should be physically and financially sustainable. An example of a specific, realistic, and measurable goal would be: “We will reduce our customers’ damage claims by five percent, and measure and report the impact by January 2022.” Here’s a quick checklist to test the sustainability of your goal:
The goal is focused. Concentrate on a specific metric instead of spreading your effort across multiple areas. For example, reducing package volume while simultaneously introducing high quantities of recycled content might be too ambitious. Choose one or the other. The goal is specific and measurable. Make note: Your goal should be achievable. For example, you resolve to cut your company’s carbon emissions by 25% rather than end global warming. The goal is realistic. A smart place to start is to reduce plastic waste by one-third in one year instead of becoming a zero-waste company in that same time frame. The Roadmap With a specific goal clearly defined, the next step will be to develop the strategy for achieving it. Using the example, “We will reduce our customers’ damage claims by five percent by January 2022,” your roadmap will involve ways to modify your packaging solutions to ship more efficiently, such as optimizing the design of our package to reduce unnecessary empty space while providing proper cushioning or protection. Before settling on a specific solution, this will likely involve months of research, consulting with new vendors and experts, testing products, and conducting customer satisfaction surveys. You’ll want to spend time mapping out the project, so the team is clear about what steps need to be taken and what order to work toward the goal. Your roadmap will be successful if: It breaks down your goal into stages and lists specific action steps. It empowers individual team members with clarity about what tasks need to be completed and by who. There are review processes built into the roadmap, allowing your team to assess progress and make adjustments to the strategy. The Impact As you work toward your New Year’s resolution, it will be important to remember the environmental impact you intend your goal to have. For example, if you reduce customers’ damage claims
by five percent, that will lead to a significant reduction in the amount of material used for shipping and your company’s carbon footprint since less cargo space and fuel will be required to transport your deliveries. It’s important to be aware of this internally to keep your employees motivated and encourage more ambitious resolutions the following year. This is also incredibly valuable information to communicate to your customers. It will foster brand loyalty and inspire other companies to lower their environmental impact, too. Here’s how to measure the total impact of your resolution: How does it align with sustainability metrics, such as those outlined in the United Nations’ Sustainable Development Goals? How does it affect your operation — such as lowered or increased production costs, greater efficiency, less storage space, etc.? How does it impact sales or brand loyalty? How does it affect company culture? Timebound Results Nothing can truly be measured without time, and this inherent limit also demands accountability. The time aspect of the GRIT method will hang over every stage that precedes it.
Since GRIT is for New Year’s resolutions, the goal you set must be one that can be achieved within 12 calendar months. It’s imperative to bring this into the roadmap phase and set numerous deadlines to achieve the goal. Time will also determine how to measure impact. A small change to package volume in 2021 might reduce your company’s greenhouse gas emissions by hundreds of thousands of tons by 2031. You can put time on your side by: Breaking down your resolution into smaller stages with deadlines. Measuring your impact over multiple years. Using your successes or failures to set more ambitious goals for 2022 and beyond.
Clint Smith is Director of Sustainable Packaging, Pregis LLC. Pregis is dedicated to working in a way that protects our planet, preserves natural resources, and “Inspyres” people to care about the future. We recently unveiled our ambitious Pregis Purpose 2K30 initiative, designed to eliminate one million preventable reships, drive the circular economy, and positively impact 25 million lives. You can learn more about our goals at www. Pregis.com/pregis-purpose.
NOVEMBER-DECEMBER 2020 PARCELindustry.com 9
SUPPLYCHAINSUCCESS
THE CHANGING PARCEL LANDSCAPE: 2021 AND BEYOND By Logan Mullen
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s the seemingly never-ending 2020 finally comes to an end, parcel carriers, customers, and anyone in the supply chain realm are all thinking about what the future holds. Can the national carriers continue to make the rules as they go along? Will customers finally be able to rationally negotiate in 2021? Or does 2021 continue to bring uncertainty and new challenges to everyone involved?
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UPS and FedEx have dominated the news in the parcel world in 2020. From the start of this pandemic, both national carriers have played by their own set of rules (such as each quickly enacting indefinite peak surcharges, impacting customers across all industries). That “indefinite” is still ongoing, and it would be a major surprise if it ended prior to the start of the new year. Additionally, both carriers began siphoning capacity from shippers of all sizes by capping the number of packages customers could ship and/or increasing rates, to guarantee packages get picked up. Despite all of this, FedEx and UPS continue to be the most viable options for shippers trying to get their products to consumers in most cases, paving the way for the rich to get richer. Annual and quarterly reports told a striking story in this regard: FedEx Ground’s average daily volume grew between six and seven percent in 2018 and 2019, but as of the fiscal year end had grown over 11% for 2020 FedEx Ground’s FYQ4 (March-May) revenue grew 10-12% YOY in 2018 and 2019, but over 20% in 2020. UPS reported Q2 2020 ADV increases (April-June) of over 22% YOY.
Most regional carriers have also suffered the same capacity constraints UPS and FedEx have, being unable to add additional volume into their networks. It has made for a turbulent and unprecedented year. National Carriers in 2021 As 2021 begins, something must give. The carriers cannot expect customers to continue to take rate hikes, pay non-agreed-upon accessorial fees, and have virtually no indication as to when it may end. One key component you should be asking your carrier about is how you can renegotiate your current contract to eliminate uncertainty now and in the future. Furthermore, regional carriers will continue to become a more viable option as UPS and FedEx change the rules and, in some instances, become unreliable. However, in the latter part of 2020, most regional carriers have stayed away from new volume due to capacity constraints. This may change in early 2021. One would assume UPS and FedEx plan to continue this growth as we head into 2021 and beyond. However, if UPS and FedEx plan to continue expanding their networks to accommodate further increases in e-commerce volume, they will need to get back to the negotiating environment that preceded
these current times. Otherwise, regional carriers will continue to be more and more attractive, specifically to the large shippers in the marketplace. As the market steadies, consumers get back to (some) in-store shopping, and volume becomes more predictable, regional carriers will be set up nicely to swoop in and take volume from national carriers that are unwilling to negotiate. The national carriers will be forced to “play ball” and make competitive offers once again.
By early spring of 2021, we could see a more favorable negotiating environment that has more bidders, more attractive offers, and an overall better solution for customers. The wildcard in all of this, however, is Amazon. As it expands to offer its services to new shippers, it is likely to try to take on FedEx and UPS head on. It will be wanting to take volume directly from the Big Two and may be willing to take a loss or break even on some of their services. The pandemic has allowed Amazon to continue to grow its e-commerce business as well, giving it the necessary capital to make such investments. While this is more likely to affect most shippers closer to 2022 or 2023, it is important to bear it in mind while negotiating. Customers in 2021 With all of that being said, the latter half of this year has been extremely hard on the average shipper in the marketplace, especially those trying to negotiate new transportation agreements in virtually any mode. By early spring of 2021, we could see a more favorable negotiating environment that has more bidders, more
attractive offers, and an overall better solution for customers. Early 2021 might be the right time to engage in discussions around launching a parcel RFP. 2020 has driven up costs, driven down shippers’ trust in carriers, and created discussion about what the most sustainable solutions are going forward, in transportation and all aspects of businesses across the globe. These conversations need to continue in 2021, as we try to adapt and return to a bit of normalcy. Creating Flexibility and Controlling Costs in 2021 As we move into the new year, the number one question likely to be asked of transportation leaders by executives is going to be something similar to, “How do we set up a sustainable shipping strategy that can drive through turbulence?” To make that a reality, the top two questions you should be asking your carrier rep are: How do we ensure new accessorials and surcharges have the least impact possible? How can we make sure that our capacity is never capped? These questions, if incorporated early on, will set the direction of all negotiations and allow customers to make
sure the carriers are aware of their intentions and reservations up front. They also set guidelines for the bare minimum in negotiations, such as, “We do not want to take new surcharges and we expect to have all of our packages picked up and delivered.” There will certainly be a “feeling out” time in the early stages of the new year. Are carriers going to be reluctant to give the same incentives customers have long expected out of their agreements? Are new, creative terms regarding capacity going to be put into new contracts by the national carriers? What does the general rate increase (GRI) mean for shippers in the new year? Where does Amazon play in all of this? These are important questions that need to be answered as soon as possible. An interesting 2021 is almost upon us and the transportation landscape is certain to continue to evolve.
Logan Mullen is a Consultant at enVista, a global consulting and software solutions firm. Logan’s role at enVista includes helping customers negotiate parcel agreements and the data analysis that comes with that. You can contact him at lmullen@ envistacorp.com.
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SPENDPERSPECTIVES
OPTIMIZING RETURNS MANAGEMENT IS KEY TO RETAILERS’ SUCCESS By John Haber
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n efficient, convenient, and cost-effective returns process is essential for retailers in today’s competitive environment. One poor returns experience can lead to a lost customer for life, especially when buying online. For online purchases, these percentages multiply as return rates range on average from 15% to 40%. Most of the higher rate of online returns is due to not seeing an item in person as well as not being able to try on the items prior to purchase. As a result, a consumer may order multiple sizes or colors to try on at home and then ship back what they do not want — often with shipping paid for by the retailer, according to the co-founder and CEO of Happy Returns. E-commerce as a percentage of total US retail sales has been on the rise, but COVID-19 accelerated the growth much faster than anyone had previously forecast. Based on US Census Bureau data, for the first half of 2020, e-commerce as a percentage of total retail sales averaged 13.95% compared to 10.65% for the same period in 2019.
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On a global basis, between $150 billion and $250 billion in returns were in flux to be processed when retail stores began to finally reopen after being closed due to COVID-19, according to IHL Group, a global research and advisory firm for the retail and hospitality industries. The lack of consistent standards for retailers to follow regarding returns has led to a broad spectrum of returns policies. Some retailers have temporarily stopped accepting returns altogether, while others have extended their standard return windows during the pandemic. On average, IHL Group has found that food, drug, and mass merchants lose five margin points on returns, and department and specialty stores lose six margin points. Companies may try to mitigate this loss by reselling the item, but that leads to another cost within the returns process — restocking. An employee has to sort, inspect, retag or repackage, and replace the item on the shelf for in-store returns. An online return is more costly. “Free shipping” has become expected by consumers. Retailers are often on the hook for this cost — shipping to the consumer at the initial purchase time and then back to the retailer/warehouse when it is returned. Consolidating returns at a store location is often less costly than paying to ship an item from a residence. Amazon partnered with Kohl’s in 2019 to help reduce returns shipments. Meanwhile, Staples announced a partnership with Optoro, a technology company that works with retailers and manufacturers to manage and resell their returned and excess merchandise. The service,
named Express Returns, allows consumers who purchase items from retailers that use the Optoro platform, such as Best Buy, Target, Bed Bath & Beyond, IKEA, American Eagle, BJs, and Under Armour, to obtain a QR code that is scanned when they return the item to a Staples store. Items can be returned loose, without packaging, and placed in a shipping pouch at Staples. Optoro plans to expand Express Returns to additional retail chains in the future. Another option is Happy Returns, which allows its retail partners to return products to FedEx Office stores without a box or label for an immediate refund or exchange. The customer receives a QR code before bringing both the item and the code to a FedEx Office store. FedEx then gathers the box-less goods from different companies into one shipment and sends them to one of Happy Returns’ two regional processing hubs. According to IHL, only about 40% of retailers had optimized their return processes before COVID-19. As e-commerce continues to become a greater percentage of total retail sales, it is critical for retailers to manage their returns both cost-effectively and most efficiently for customers — often two competing priorities. According to one recent market survey, almost 85% of survey respondents indicated that a positive returns experience encourages them to shop with a retailer again in the future.
John Haber is the Founder and CEO of Spend Management Experts and can be reached at solutions@spendmgmt.com.
TECHSPACE
AI AND THE SMALL PARCEL MARKET By Chase Flashman
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ccording to McKinsey’s consulting firm, 61% of executives reported decreased costs and 53% reported increased revenues due to introducing artificial intelligence (AI) into their supply chains. IT market research firm, Gartner, defines AI as “applying advanced analysis and logic-based techniques, including machine learning, to interpret events, support and automate decisions, and take action.” What does this mean for the small parcel market? Visibility, analytical insights, and improved decision making are among the benefits that AI offers the market. For example, UPS has embraced AI in a number of its systems, including ORION and Network Planning Tools. ORION, or On-Road Integrated Optimization and Navigation, is a route-optimization system that analyzes a collection of data points, including the day’s package deliveries, pickup times, and past route performance to create the most efficient daily route for drivers.
UPS’ Network Planning Tools provide many benefits, including visibility into UPS facilities and routing shipments to facilities with the most capacity. These tools can also give details on the packages in transit, including weight, volume, and delivery deadlines. FedEx is also utilizing AI in its management of parcels. Its partnership with Microsoft, announced in May of this year, helped introduce FedEx Surround, a package-tracking and logistics-intelligence service. The service, which runs on Microsoft’s Azure cloud service, provides new data levels about the fastest way to transport packages. With Surround, real-time information on weather, traffic, fires, natural disasters, and other factors are used to route shipments. According to FedEx and Microsoft, the platform also aggregates information from customers to generate intelligence about the global supply chain without sharing sensitive information with third parties. Routing efficiency improvements are a huge benefit to using AI, but perhaps even more valuable, particularly for retailers, is accurate forecasting. In today’s uncertain, volatile market, consumer buying behavior has changed. McKinsey found that convenience and availability are the most often cited top drivers of consumers’ decisions about where to shop. However, according to a CalAmp and Reuters Events survey, 51% of shippers consider the lack of clarity on consumer demand to be the most significant supply chain bottleneck they see due to the COVID-19 pandemic. Most
forecasting is based solely on historical data, failing to factor in real-time market trends. Strategies are, therefore, based on obsolete data. Investing in AI software will allow businesses to gather information from key market sources and incorporate real-time trends data into their actions. AI is also a significant factor behind the smart warehouse concept. A smart warehouse is defined as one in which machines and computers are used to complete everyday warehouse operations previously performed by humans. These operations include identifying and receiving orders, counting products, storing products, remembering where they are later, and sending orders to the correct place. According to a Redwood Logistics blog post, for example, AI can alert robots to the most efficient route for storing and picking products. It can even help determine the appropriate box size based on the package type, number, size, weight, and density. Also, with the assistance of IoT, artificial intelligence can gather data to create a holistic strategy for the warehouse. The use of artificial intelligence in parcel management will continue to grow. It will likely play an important role in determining real-time, dynamic parcel pricing and service level comparisons one day soon.
Chase Flashman is Co-founder and CEO of ShipSights, a developer of industry-leading supply chain data analytics software & producer of enterprise-level consulting solutions.
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OPERATIONALEFFICIENCIES
MAKING AUTOMATION MAKE SENSE By Susan Rider
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here’s a lot of talk about how we are going to respond to the effects of COVID-19 in the supply chain and, more specifically, in the distribution center. Automation would reduce the “human element” and therefore reduce the possibility for spreading the virus in your facilities. Automation is definitely applicable and easy to justify in areas that require a lot of human touches and strenuous work (for instance, case stacking on pallets or pallet loading). Another item to consider is the number of workers’ compensation claims on lifting and bending the heavy boxes. Sometimes you can justify a system with just a reduction of these claims. You can also look for high-volume areas where a lot of employees merge and congregate, areas that are accident prone or susceptible to workers’ comp claims, areas that are prone to mistakes, shipping areas, and areas that create a bottleneck causing the rest of the facility to have to slow down. Once these areas are identified for possibilities, it’s time to think out of the box and determine the best solutions.
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Would full automation be a good solution, or should you go with partial automation? It depends greatly on your specific operation and what you are trying to accomplish. One of the biggest cautions of choosing an automation decision is the concern of not turning back. If the automated system goes down, you are out of commission. Therefore, reliability and the right fit for your organization is extremely important. Always have a contingency plan. Determining the Right Path First, determine the area where automation would best fit and give you some huge benefits. It might be order picking, palletizing at the dock, movement from area to area, or other areas that create bottlenecks and slow the facility down. Next, determine all possible solutions. It is often beneficial to have a supply chain expert walk your facility and determine your needs and recommendations. At the same time, the consultant can point out some best practices that would increase your throughput and accuracy. However you determine the possibilities, it would then be beneficial to make a list of possible vendors of the chosen solution. If there are several vendors, it’s good to listen to each and get a budgetary price from all. Remember, there may be different levels of automation that would do the same thing. For instance, you might have the options of a basic install of a palletizer, the next level
with palletizer and conveyor monitoring automatic in and out, or a premium level with an entire mechanized system. Based on the budgetary numbers, you may think you can only justify the basic level, but that is when the vendors’ help becomes valuable. They are used to assisting customers with justifying systems. Just be sure to fact-check their information. If you don’t feel qualified to discern the appropriate system and put together the argument for purchase, a consultant or trusted advisor can assist with that effort. Some things to remember: Start slow and work your way through the project. Don’t rush through it because installation is usually where the problem occurs. Also, make the vendor show you a site where the same solution is deployed in the same kind of workflow. Bring in your IT team to assist. Integration to any kind of automation is critical. Make sure you have a good contingency plan in case the system goes down. Start with the project that will give you the biggest return; that way, subsequent projects will be easier to get approved and implemented. Lastly, never install an automation project during peak time. Above all, be sure. Automation is great, but only when you pick the right application for the right product from the right vendor!
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn.com.
GUESTCOLUMN
ICYMI: WALL STREET’S VIEW OF THE CARRIERS AND THE IMPACT OF THE PANDEMIC
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he parcel industry was already facing unprecedented disruption before COVID hit, which appears to have compressed three years of growth and disruption into a six-month period. The key question shippers are asking is, “Where do we go from here?” Ravi Shanker, Executive Director at Morgan Stanley, took “virtual” center stage during a PARCEL Forum Interact session at the end of October to share insights on the carriers from Wall Street’s perspective. E-Commerce Volumes Up Over 40% YOY With parcel volumes surpassing 100 billion worldwide and carriers such as UPS, FedEx, and USPS dealing with capacity issues, the need for shippers to understand what their options are have never been more important,
especially heading into the holiday season. “We have seen an enormous surge in e-commerce demand and e-commerce volume as a result of the pandemic. In 2020, Morgan Stanley’s Internet team expects e-commerce volumes to be up over 40% YOY coming off a mid-teens steady growth rate over the past four years,” explained Shanker. Additionally, he noted that the “bring-forward” levels of 40% e-commerce due to the pandemic will probably drop back down to the high single digits over the next two to three years as things start to normalize and in-store shopping comes back. UPS and FedEx Running at Peak Season Volumes Already Typically, the major carriers see a 20%-30% volume increase during peak holiday season. Shanker indicated that we do not yet know whether peak season volumes are already built in to current volumes or carriers will see more demand as we approach the holiday season. “Most retailers are trying to drag out peak season and make it more of a season than just a couple of days,” said Shanker. “The other approach the parcel companies have taken is to significantly increase their surcharges to try and make sure shippers manage their volume load,” he continued. Amazon Logistics Will Probably Be the Same Size as FedEx This Year and UPS in 2022 within the US Aside from the Big 3, Shanker shared his thoughts on Amazon and its foray into the delivery
side of the business as well as the role regional carriers can play going forward. “The world is a different place and probably very few other industries have seen the impact brought on by the pandemic as much as the parcel industry,” explained Shanker. He pointed to Amazon Logistics and the fact that it will be roughly the same size as FedEx in the US by 2020 and UPS by 2022. “In December of last year, we estimated that by the end of last year, Amazon was moving about half its own packages in-house. That was double a year before that and we’ve already seen a bunch of industry reports pointing to Amazon moving about two-thirds of its own volume in-house by July/August of this year,” he continued. He also discussed the role of the United States Postal Service and noted that it is still the most cost-effective delivery option for rural areas and has the largest delivery network in the country. You can access the entire virtual session on-demand by visiting https://www.parcelforum.com/page/1637943/ wall-streets-view.
PARCEL Forum is the premier educational conference for logistics professionals specializing in small package delivery. Seminars cover the gambit of the outbound logistics process including warehousing, inventory control, material movement, pick-pack, packaging and delivery. The event has been lauded for its unique learning experience which places a premium on peer-to-peer engagement. For more information, visit PARCELForum.com.
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GUESTCOLUMN
DAVID VS. GOLIATH: HOW TO KEEP LOYAL CUSTOMERS, EVEN IF YOU’RE NOT AN INDUSTRY GIANT By Valerie Metzker
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he COVID-19 pandemic put a spotlight on the importance of meeting customer expectations for delivery of everything from toilet paper to patio sets. Amazon set the bar years ago, essentially training consumers to expect multiple options to fit their needs, from next-day to same-day to chooseyour-day. These changing expectations were already putting pressure on traditional brick-and-mortar retailers when the
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pandemic accelerated the retail reckoning and forced businesses to figure it out. It’s clear that more and more consumers across every demographic are emphatically embracing delivery. And it’s not just in the interest of social distancing. Having experienced the ease and convenience of on-demand delivery of anything, anytime, anywhere, it’s not likely they’ll ever go back. Shipping Plays a Big Part in Brand Loyalty A recent survey of 1,000 consumers by Lasership found that shopping behaviors have dramatically changed from pre-pandemic. Importantly, 99% of consumers surveyed believe that shipping impacts brand loyalty and 84% would be unlikely to buy from a retailer after just one negative shipping experience. In which case, brand-hopping is likely to increase: shipping satisfaction has dropped sharply during the pandemic, with just 67% satisfied compared with 80% previously. Late and slow deliveries are causing damage to retailers’ revenue, whether they’ve realized it or not. The demographics of e-commerce and delivery are shifting, too. Baby Boomers, who control almost 70% of disposable income, are shopping online more than ever. Pre-pandemic, 82% of Boomers made less than half their purchases online. Today, 47% of Boomers plan to increase their online buying.
When it comes to e-commerce and delivery, the pandemic is finishing what Amazon started, with explosive consumer demand for same-day and urgent delivery. For smaller, more traditional retailers, providing low-cost or no-cost same-day and urgent delivery will be essential to not just survive the pandemic’s existential threat, but to thrive on the other side of it.
Diversify your delivery infrastructure to improve the delivery experience. The Right Delivery Strategy Makes All the Difference What’s all that mean for a traditional retailer or small business? Bottom line, the delivery options you offer your customers make a big difference when it comes to loyalty. Fortunately, you don’t have to have a mountain of cash to devote to overhauling your supply chain. With the right strategy, David can compete and even win against Goliath. For starters, delivery “optionality” can help you punch above your weight.
A Capgemini study found that 73% of shoppers say receiving a delivery in a convenient time slot is even more important than receiving it quickly. Having a full menu of delivery options ensures you can deliver whenever a customer wants. By combining service levels, including those enabled by your internal delivery solution and those enabled by a third party, you ensure a repeatable, positive customer experience that can flex and scale to meet your customers’ needs, even during peak season. More than One Tool in Your Toolkit Survey after survey shows that consumers are most interested in one critical factor: consistency. Whether it’s same-day, next-day, or two-day, if that’s the service ordered, it has to be consistent each time. Diversify your delivery infrastructure to improve the delivery experience. Consider an on-demand delivery platform to augment your own fleet to ensure you’re ready to scale for peak, no matter how big the order or the SKU. Integrating a crowdsourced vehicle network with your e-commerce platform adds capacity without adding assets or headcount, making it the easiest, more flexible way to enhance your customer’s delivery experience — and ensure loyalty. Delivery isn’t a panacea to every retail problem brought on by these massive global forces — whether Amazon or the pandemic. But creating a great delivery experience is one of the most important ways to differentiate your brand, personalize the buying experience, and add value to make consumers “stickier” and more connected to your brand. Sure, Goliath may have deep pockets and his very own global supply chain, but when it comes to a personalized, one-to-one customer experience, David — and all the other small guys out there fighting to win their customers every day — has always had the advantage.
Valerie Metzker is Head of Enterprise Sales & Partnerships, Roadie. She has 20+ years of experience in sales and marketing. After beginning her career at the agency level, she held executive roles in banking and healthcare in the Philadelphia area before taking the plunge to join the Roadie team in 2014. Valerie’s role at Roadie includes enterprise sales and business development, where she helps retailers add speed, flexibility, and scalability into their logistics ecosystem. Valerie holds a bachelor’s degree in Marketing and an MBA from Bloomsburg University of Pennsylvania.
INNOVATION SHOWCASE 2020 has been a year unlike any other in recent memory, and as we head into 2021, we continue to face obstacles and challenges in our quest to succeed in the small-parcel market. On the bright side, e-commerce package volume is only going to continue to grow, but with that growth comes questions about how to best handle this surge. A successful partnership can make all the difference, so on the following six pages, be sure to check out the solution providers profiled. They cover a wide variety of industry solutions, and they could be exactly what you’re looking for as you head into the new year (and beyond). And when you reach out, be sure to tell them you saw them in PARCEL.
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2020-2021 INNOVATION SHOWCASE
Positioned for the Future of E-Commerce
2020-2021 INNOVATION SHOWCASE
Eliminate Guesswork with Quick and Easy Sorting
2020 has been a year of record-breaking growth for CDL Last Mile. Our business has grown tremendously as we’ve steadily met the challenges of handling additional volume to fulfill our customers’ needs. We continue to grow our presence within the e-commerce community by adding major e-commerce shippers who understand the value of adding regional carriers to their delivery options. These values include: Carrier that listens and creates solutions tailored to their needs. An expanding service footprint from Massachusetts to Virginia. Extended coverage of our weekend delivery footprint. Integration options with most shipping platforms. Updated tracking technologies, including VPOD’s (Visual Proof of Delivery), live GPS, SMS text communication with drivers and interactive opt-in notifications via email or SMS. Client Tracking Portal that provides access to detailed delivery information including VPOD, GPS, billing, and invoicing. Simplified per box pricing with minimal accessorial fees, including no surcharges for residential, delivery area surcharges and weekend delivery fees. CDL Last Mile, a family-run business for 65 years and counting, today has evolved into one of the premiere small parcel regional carriers servicing the Northeast and mid-Atlantic corridors. We’re excited about the future! We look forward to 2021, and helping our customers increase their business by providing seamless shipping and delivery services. For more information on how CDL can help you, contact us at sales@CDLdelivers.com.
www.CDLdelivers.com 212.243.5600 Sales@CDLdelivers.com
Engineering Innovation’s LightSort™ Sort-To-Light System is a low-cost and easily configurable technology that makes parcel sorting a quick and easy task. Utilizing light technology and programmable logic, the LightSort System provides an affordable solution that integrates with existing processes to improve accuracy, productivity, and data tracking. With modular racks and programmable destinations, the LightSort removes the guesswork from your employees on where packages should be sorted, decreasing mis sorts and time needed for manual lookups of destinations. Efficiently sort lightweight parcels and poly bags using the wireless ring scanner that allows for hands-free operation and scanning of barcodes from any angle. Low-maintenance, durable, and easy to move fixtures allow for quick reconfigurations and storage. Integrate any number of racks into the system to handle a large variety of packages, or retrofit existing racks with LightSort™ Technology. With parcel volumes continuing increased usage through the postal system, you will appreciate a solution that is intuitive and mobile to ensure you can meet your customers’ demands. With LightSort, Eii proves again that expensive automation is not always the optimal approach. We invite you to contact our Sales Team for further details and how Eii can help improve your logistics and save you time and money!
www.eii-online.com 765.250.4093 Lora.Patton@eii-online.com
2020-2021 INNOVATION SHOWCASE
Automation That Adapts to Your Environment
2020-2021 INNOVATION SHOWCASE
Flexible Sorting Solutions for an Uncertain Future
Engineering Innovation is proud to offer an adaptable parcel solution for customers looking for an edge in processing rates and accuracy. The Chameleon Parcel Processing Solution is designed to fit your needs and budget in the increasing parcel sorting business. The Chameleon Solution provides high speed processing of parcels for induction into both warehouse and shipping distribution networks. Its modular design gives you customizable options including sorting, dimensioning, labeling, barcode reading, OCR reading, and RFID capabilities. As your parcel operations grow, the Chameleon provides for an affordable automation solution that can shift or change according to volume or market requirements. No longer will you have to consider changing your facility to accommodate complicated parcel machines. This small package sorting system is fully adaptable to your changing environment and blends into your personal landscape without causing a fuss. Engineering Innovation will configure the most cost-effective solution based on your initial needs and footprint to enhance effectiveness while reducing shipping and operational expenses. Designed to integrate with your existing business systems, and to blend in with your operations, the Chameleon Parcel Processing Solution is your key to unlocking the value of high-volume parcel sorting in today’s shipping world.
www.eii-online.com 765.250.4093 Lora.Patton@eii-online.com
With over 400 sorters in operation today, you can trust that a EuroSort shipping sorter will be there for you day in and day out. Whether you need automatic in-line weighing and dimensioning, award winning flexibility, or throughputs from 1,000 – 30,000 items/hour, EuroSort has a sorter for your operation. Our unbeatable sort accuracy and our efficient, space saving designs, come at a higher quality for a lower price than other automated sortation technology on the market. Call EuroSort today to see how we can improve your parcel or package sorting operation!
www.eurosort.com 216.408.2552 sales@eurosort.com
2020-2021 INNOVATION SHOWCASE
Our Solution: FirstMile’s Xparcel
2020-2021 INNOVATION SHOWCASE
2021’s Most Critical Deliveries
Multi-Carrier eCommerce all with one company? What if you had a company that could shop each of your packages across all these modes and drive the right label to your shipping software for each order? How about a company that could pick all the packages up on the same truck, run it through sort operations, and linehaul it into the right carrier network each day? FirstMile is just that company. We’ve been helping companies of every size and market optimize their shipping in order to reduce costs, save time, and provide the best possible experience for every customer. Our system makes it easy and fast for you to access the best carrier for the job, selecting from a range of national, regional, and local parcel and mail carriers, including First Class and Priority Mail. FirstMile is a multi-carrier e-commerce parcel carrier. Our unique approach allows small, medium, and even large e-commerce shippers to get the best combination of price and service across a wide range of USPS workshare and parcel carrier partners–including our own network. We do this all with one API connection, one pickup via our FirstMile owned and operated vehicles, one invoice, and one point of contact. We even handle claims. Need 5 day or less service? No Problem. Need 2-4 day service? No Problem. Just want the lowest priced service possible for every package? No Problem. If you are tired of the headaches from trying to navigate the ecommerce shipping labyrinth, let FirstMile help. Oh, and our systems integrate seamlessly into common shipping platforms like ShipStation, Order Cup, ShipRush, Ship Hero, and many more.
Everyone loves countdowns, including us! But rather than dwell on 2020, we’re making bold predictions for the most critical 2021 parcel deliveries. (Spoiler alert: we handle each one.) 1. The first critical delivery for the parcel industry is innovation, which at GLS-US drives stand-out capabilities like visual POD for each shipment and scalable capacity. 2. We also deliver on-time performance. Our 100% ground network enables shipping up to a day faster than national carriers. 3. We’ll keep delivering flexibility that’s crucial in uncertain times. Despite a global presence and 40+ year history, customers enjoy a personalized, thoroughly modern experience. Email us at sales@gls-us.com to learn more!
https://firstmile.com 888.993.8594 Sales@firstmile.com
www.gls-us.com 800.322.5555, ext. 4 info@gls-us.com
2020-2021 INNOVATION SHOWCASE
Intelligent Audit for Actionable Insights The COVID-19 crisis highlighted the necessity of complete visibility to transportation data. This year, parcel carriers changed the game on shippers. At a time when shippers could least afford cost increases, carriers greatly increased rates with little warning and even flat out refused to move shipments. The sudden change in behavior made it more complicated than ever to cost-effectively manage logistics operations. Large parcel carriers acted swiftly to flex pricing power, a trend that will likely continue until others add capacity to bring supply and demand into balance. And these problems have trickled into other modes as shippers adjust strategies to cope with the new reality. Intelligent Audit’s COO, Hannah Testani, recently told the WSJ, “It seemed like there was always a way where you could buy more capacity. Now, that doesn’t exist.” The current environment means one thing: shippers need to proactively manage and adjust operations using data to inform decisions and guide strategy. Advanced analytics empower shippers to: Optimize operations for cost, service, and transit time. Model network changes to understand the ability to utilize regional carriers when possible to reduce costs and ensure uninterrupted capacity. Maximize the use of multimodal and single-mode moves to capture savings. Simulate true cost impact of carrier rate proposals using actual shipment data. Leverage carrier scorecards to track performance and KPIs to hold carriers accountable. The new normal of logistics requires new tools for shippers to employ a disruption-proof strategy. Intelligent Audit provides just that.
www.intelligentaudit.com 201.880.1110 ext 121 htestani@intelligentaudit.com (Hannah Testani)
2020-2021 INNOVATION SHOWCASE
NPI Semi-automated Parcels Singulation Module
Converting bulk into singulated flow has always been one of the most challenging aspects of automated parcel sortation. Historically, there have been two options; either a manual (time-consuming) approach or an automated solution with an associated price tag. Enter NPI’s semi-automated parcels singulation module (patent pending), capable of induction of up-to 8,000 PPH* and handling a wide array of product types from polybags to boxes. The NPI induction module includes a semi-automatic induction table, independent power control panel, PLC, and NPI’s touch screen operator control panel. Additional options include a dumper and hopper to discharge gaylords, pallets, carts. It can be used to feed a single induction lane or split the load between two induction lanes by smart-sensing available space on each lane and directing product flow appropriately. The module can run in a variety of different modes that allow for optimum induction, based on product type. This can include combinations of fast automatic induction, slow automatic induction, and a manual pull mode. Programmable options on the touch screen operator control panel allow employees to easily switch between modes based on product type to optimize flow.
www.NPIsorters.com 214.634.2288 sales@npisorters.com
*Assumes 6” average package length and NPI sortation equipment
2020-2021 INNOVATION SHOWCASE
Next-Day Delivery at Ground Rates
2020-2021 INNOVATION SHOWCASE
Multi-Carrier Shipping Software
OnTrac provides an affordable logistics network that speeds up ground delivery so companies can delight shoppers with world-class service and save money on shipping. The OnTrac service area can reach 65 million consumers and includes all of California and the major cities of the Western United States. E-commerce companies choose OnTrac because of their better prices and faster residential Ground delivery services. They offer the features and tracking tools you expect from big companies while still focusing on small-company customer service. OnTrac is a SmartWay Transport Partner, a USPS Workshare Partner, is SOC 2-certified, and integrates with over 30 leading multi-carrier software providers. Adding the OnTrac logistics network to your cross-channel strategy gives your business a chance to reach more customers with overnight delivery. That means faster service, happy customers, and repeat orders. Plus, OnTrac has fewer fees and lower surcharges than the national companies, which means more profit to your bottom line.
With strained volume capacities, carrier surcharges, and inflexible technology, the challenges facing shippers during the 2020 peak season and in 2021 will be substantial. Your parcel shipping solution will need to be reliable, fast, well-supported, and flexible, and ProShip is here to help make your complex parcel shipping challenges simple and cost-effective. With ProShip multi-carrier shipping software, you will find the best delivery method at the lowest cost from any fulfillment location and print a compliant carrier label seamlessly thanks the most advanced rate shopping technology in the industry. Contact ProShip to help with parcel maximum volume concerns, carrier diversification, carrier updates and new surcharges, business rule roadblocks, and implementing ship-from-store and other omnichannel fulfillment initiatives.
ontrac.com 800.334.5000 salesweb@ontrac.com
www.proshipinc.com 800.353.7774 sales@proshipinc.com
2020-2021 INNOVATION SHOWCASE
2020-2021 INNOVATION SHOWCASE
Fulfillment Software Built for Volume
Accountable. Reliable. Configurable.
Is your fulfillment process slowing you down? With ShipWorks, you ship faster, smarter, and cheaper. For over 20 years, ShipWorks has been the leader in high-volume shipping fulfillment software by listening to shippers like you. ShipWorks empowers you to run your shipping flow your way.
Tritek has been providing leading-edge mail and parcel processing solutions for over 36 years
Ship Faster and Smarter Get the speed only a desktop solution can provide. Gone are the worries that come with online-only solutions: internet downtime, batching limits, and slow label speed. Get the speed you need to keep your business going and growing. Connect Anywhere With over 100 built-in integrations, native API, and robust ODBC capabilities, ShipWorks connects to any system, including your ERP or WMS. Any carrier, any channel, any system! Reduce Costs From intelligent routing to barcode quality control, we do more than just print labels. But... yup, we do that too! Automatically get the best carrier rate on every shipment, and exclusive carrier discounts. Customers save 10%+ on carrier costs. Customer Testimonial: “We needed a solution that could handle big volume and integrate all our channels and systems... Without ShipWorks, I’d need hundreds of people here.” - Brian, Warehouse Manager, 1st Phorm
shipworks.com/parcel 417.283.8548 sales@shipworks.com
The Tritek Parcel Sorter has been designed and developed to process high volumes of e-commerce packets and small parcels. The Tritek Parcel Sorter offers a broad range of options and configurations to ensure every system meets each customer’s specific requirements. The Tritek Parcel Sorter key features: Small Footprint Sorter Able to process minimum 3,600 items per hour Minimum Item Size – 4 inches x 4 inches x .5 inches Maximum Item Size – 15 inches x 15 inches x 12 inches Minimum & Maximum Item Weight: .25 pounds – 40 pounds Barcode Reading and Dimensioning Fully modular system compatible with future systems upgrades. Additional options: induction feeders, bin hampers, OCR reading, and labeling options. All Tritek sorting solutions use proven technology that has continued to evolve since 1984. The Tritek Parcel Sorter is the latest product to address the needs of customers who desire to lower their processing costs and increase operational capacity.
www.tritektech.com 302.239.1638 info@tritektech.com
BY TIM SAILOR
WHAT TO LOOK OUT FOR IN YOUR CARRIER CONTRACT EXPENDITURES IN THE NEW YEAR
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hile most shippers have become accustomed to the carriers announcing record general rate increases (GRIs) and new surcharges, 2021 will be in a class of its own. More than any other year, it is especially important for shippers to take a forward-looking view. Not only have the carriers already announced significant 2021 rate increases, they have also fundamentally changed how they view the current marketplace. And, none of these factors will help shippers in their efforts to control costs. In our current COVID-19 environment, the carriers have been handling a record number of e-commerce shipments, turning every month into a Q4 peak shipping environment. Not only has this strained their operational capacities, but it has forced the carriers into evaluating the profitability of every shipper’s agreement and has put more emphasis on margin improvement over volume growth. We have seen a lot of evidence of the new carrier approach in the current Q4. Shippers are complaining of peak season surcharge waivers being revoked as well as carrier discussions on limiting volumes between mid-November and the end of the year. Additionally, the carriers are being very strict in applying all peak season surcharges to the vast majority of shippers. Against this backdrop, shippers are also finding it difficult to renegotiate current agreements or explore options with non-incumbent carriers. There have been many instances of the carriers walking away from new opportunities and freezing any new or incremental volumes during the fourth quarter. One carrier executive was quoted as saying that their role has
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“moved from VP of Business Development to VP of Business Deferment.” A Look Ahead What should shippers do to prepare for 2021? Well, beginning now, most companies should budget for potentially increased shipping expenses. In order to mitigate these hits to your shipping budget and overall costs, you should take a close look at your current agreement to ensure that it is aligned with this current environment. While all shippers will be impacted by these challenges, some shippers will be especially affected by the current environment. If you are a primarily a residential shipper, or a seasonal shipper, or have large and/or oversize shipments, you will have to be even more vigilant in your oversight. Our top recommendations for shippers are to work with their carriers on the most effective residential services, initiate 2021 peak season projections, and focus all aspects of their current shipping characteristics where costs have been exponentially rising. Although it has not been officially announced as of the time of this writing, there is a lot of evidence that FedEx will be moving away from offering shippers a cost-efficient SmartPost service. Residential shippers need to look at their reliance on SmartPost as the lowest cost way to deliver shipments to their customers. Any new or existing agreements need to incorporate aggressive residential ground rates with the lowest possible residential surcharges. Historically, the cost differential between SmartPost and Home Delivery has been
between 10-30%. Most of this difference is attributed to higher surcharges like residential add-on and higher Delivery Area Surcharges. When negotiating or comparing residential rates, focus on upfront discounts, minimum charge costs, and achieving the lowest possible surcharges. This may also be an ideal time to explore alternative carriers and sourcing options. Regional carriers often offer lower rates and more competitive surcharge discounts. And, if you have any existing relationship and volume history with these carriers, they could be an excellent option in the Q4 if UPS and FedEx try again to implement volume restrictions in 2021. One note of caution to this approach. Make sure that any volume or revenue that would move to an alternative carrier does not impact your overall shipping costs. Most primary carrier contracts have volume incentives, which may penalize shippers if they fall below projected tiers. We have also seen carrier agreements with significant monetary claw backs for discounts during prior years of an existing agreement if volumes move away from the primary incumbent carrier. Additionally, shippers should have peak season discussions with their carriers at the beginning of the year. In 2020, most volume shippers were caught off guard with the way carriers calculated volume commitments as well as the additional costs if they exceeded prior history or expected volumes. Not only will early commitments from the carriers help shippers with operational planning, but they can be critical to forecasting and budgeting. While the carriers look at the overall characteristic of a shipper’s profile, they have been increasingly focused on shippers with large, oversized, or dimensional shipments. Since 2019, the carriers have increased costs of additional handling by 18.5-27.5%, oversize shipments by 44.4%, and have been resistant to extending better dimensional concessions. Additionally, these surcharges have become especially costly during the Q4 peak season. Shippers can challenge the carriers on these issues by pointing out that these large increases do not necessarily correspond to the increase in the carriers’ cost to serve. Also, it is important to put these increases in the context of overall surcharge costs, which have also been steadily rising as much as or more than base tariff increases. Over the years, we have seen many market ebbs and flows and witnessed the impact to shippers. Today’s environment is no different. There will be opportunities for shippers that do their homework, understand their shipping characteristics and data, and actively engage the carriers to provide incentives and agreements that promote long-term relationships. Good luck!
Tim Sailor is the founder of Navigo Consulting Group, which specializes in contract optimization, distribution analytics, and strategic sourcing. Since 1995, Navigo has reduced its clients’ shipping costs by 20- 30%. Tim has been recognized as a Distinguished Logistics Professional by the American Society of Transportation and Logistics, Inc. and has contributed to the transportation industry for over 30 years. You can reach Tim at Tim@NavigoInc.com. NOVEMBER-DECEMBER 2020 PARCELindustry.com 25
A PARCEL RFP GUIDE: FIVE CRITICAL COMPONENTS TO CONSIDER
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s a shipper entering a parcel carrier bid process, you are subject to a great deal of doubt and risk from the unknown. A successful RFP often begins by considering two critical questions — both of which should be evaluated before ever entering the RFP: what is the likelihood of success, and is a contract extension more advisable to the health of my parcel network (and my parcel carrier relationships)?
BY CAM ELLIOTT This is not to say that an RFP is not a successful cost avoidance or cost mitigation tactic, but rather an endeavor that will greatly impact your parcel network, and thus deserves thorough consideration. In those circumstances when it is most clear that your brand and parcel network would be better served through the means of an RFP, there are typically five critical components to consider in order to achieve a positive and rewarding RFP outcome. Today, we’re providing a
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summary of those five components to help you as you enter a future RFP — or possibly change the course of a current RFP. Develop a strong RFP strategy that helps you identify your key savings objectives. Ask yourself, “What is the point of entering the RFP?” Is it a cost goal, a carrier relationship goal, or something else that your brand is trying to reach through the RFP? Consider key questions like: What about your past experience is motivating your RFP? What are the challenges your parcel
network faces during peak season or, perhaps even more specifically, during a pandemic, that you would like to see addressed in the RFP? Are you frequently impacted by GRIs? This seems obvious, but as with most tasks easier said than done — and worth doing — success often means constantly reminding yourself of the purpose in order to stay on track. Through such questions, you’re working to define a clear path of success. For example, by understanding the exact savings objectives you’re attempting to solve, you can more easily identify components of your parcel contract(s) to target, like: is there a specific carrier better aligned to meet your need, will a GRI cap assist your savings objectives more than a specific rebate percentage or vice versa, etc. Remember that your RFP is not a battle, but a prospective partnership. It’s important to keep in mind that you’re attempting to enter a new agreement with a carrier(s) that is beneficial to all parties involved. Understanding the prospective carriers and their needs (just as well as you understand your savings objectives above) will undoubtedly serve you well in finding success in your RFP. By understanding the needs and wants of your prospective carrier(s), you’re better equipped to find compromises that also serve you and your parcel network simultaneously. However, as with all relationships, direct communication about a past experience is sometimes necessary in order to move forward. In these rare circumstances, we advise that you rely on data to help assert any misgivings or negative experiences you may have had with a carrier in order to move forward. Just be sure that this communication is necessary to the savings objectives of your RFP strategy and will not hinder the current RFP or a future one. As you consider the objectives and questions above, prepare to think creatively and to work collectively to create solutions.
contract. Such a thorough strategy provides you both peace of mind and the ability to compare apples to oranges, literally.
Typically, it’s helpful to break down your parcel contract(s) into its base components. For example, consider the following: 1. General Rate Increases (GRIs) 2. Termination Clause/Fee 3. DIM Divisor 4. Minimums 5. Rebate and Bonuses 6. Major Accessorial Discounts Consider how can these components be targeted and/or blended to meet the savings objectives of your RFP strategy? Is one prospective carrier more inclined to meet that component or offer a compromise over another? It’s not uncommon for shippers and carriers to meet in the middle when it comes to these components, such as forfeiting a rebate percentage for capped GRIs or specific accessorial discounts. Read the terms and conditions of each RFP round thoroughly and, even better, model the proposed networks that arise within each round. Understanding the terms and conditions of the proposed parcel contracts in their fullest terms is probably the most crucial step in awarding your parcel spend to the right parcel carrier. For example, if you receive multiple proposed carrier contracts with varying terms and conditions, how do you know which is the best contract to meet your savings objectives without comparing the proposed parcel contracts down to their exact savings and expenses? Through parcel contract modeling, you model your network’s activities and expenses as if they were operating under each proposed parcel contract iteration, so that you can directly compare the activities and expenses of your parcel network as it exists today, and how it would exist under those new contracts. An experienced parcel contract modeler will be able to replicate and visualize each proposed parcel contract down to the penny, so you have a complete understanding of what you are or are not agreeing to with the proposed parcel
Consult with an experienced parcel spend management partner to gauge the level of service you’re receiving from your parcel carrier and the contract(s) you would like to bid. Seeking guidance from someone familiar with a wide range of shippers with complex parcel networks and parcel contracts will help you identify answers to questions like: Are you receiving average, sub-average, or best-in-class service? What kind of prices, requests, and bonuses are feasible for brands like yours? Are there particular accessorials or rebates that tend to be prevalent or on the rise in your industry that should be considered throughout the RFP? Partnering with someone that has a variety of experience and industry awareness is another confidence builder when undergoing and entering such a vulnerable and stressful event. Though RFPs can be a stressful and vulnerable period for your brand and parcel network strategy, they are also often a uniquely rewarding and cost saving measure for your parcel network when applied correctly. Understanding when to implement an RFP is just as important as how you implement an RFP. Applying considerable research, creativity, and flexibility throughout the process will likely serve your brand well and help build lasting parcel carrier relationships that will no doubt affect future RFP events.
Cam Elliott is the Brand Manager at Green Mountain Technology (GMT), a Parcel Spend Management service provider for shippers with over 10 million parcels per year. Visit the GMT Knowledge Center (https://resources.greenmountaintechnology.com/gmt-rfp-checklist) to download our RFP Checklist to learn more about how GMT supports our customers through RFPs.
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but can also serve the greater good of the business itself? Grab a dab of hand sanitizer, and let’s look at some ways the pandemic might have a positive effect on warehouse operations.
COULD THE PANDEMIC’S EFFECT ON YOUR WAREHOUSE HAVE A
SILVER LINING?
T
By Stephen T. Hopper, PE
hese are trying times. COVID-19 has considerably affected every one of us, and most of us believe it will change the world forever. The supply chain industry, along with all other major industries, is experiencing and attempting to manage during — dare I say it — the “new normal.” And, after all, trying times are for trying. Warehouses are generally considered “essential businesses” because supply chains can’t just stop supplying items, no matter what is going on in the world outside. Pandemic safety protocols have taken precedence over warehouse efficiency, as they should, and notable delays have occurred, but the warehouses of most businesses have adapted so they can continue to serve their customers. This warehouse evolution has been a necessary but painful process. But what if there an upside? Is it possible that this pandemic has forced businesses to take steps that can not only reduce the risk of viral infections among their warehouse workforces,
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Mitigation of Risks Supply chain risk management has been a hot topic in the industry in recent years. In context, most businesses have focused primarily on potential risks associated with their supply chain networks at a high level (sourcing, suppliers, customers, transportation, inventory positions, etc.). Until now, due to this 30,000-foot view of the supply chain, it hasn’t been common for businesses to consider and evaluate risks within the “four walls” of their supply chain facilities. This began changing when the pandemic unfolded. Businesses are now taking a keen interest in facility-level risks as they find and implement ways to prevent the spread of the virus in their warehouses. The general approach to identifying possible risks — assessing the likelihood of occurrence, evaluating the potential impact of an occurrence, mitigating the risk, and good planning (developing contingency plans, disaster-recovery plans, communication plans, etc.) — is generally the same for all kinds of risks, whether viruses or otherwise. This means many businesses that are proactively addressing virus risks now have the pieces in place to roll out an effective risk-management program at the warehouse level. And that’s a good thing. Better Ways of Getting the Work Done Prior to the pandemic, far too many businesses ignored their warehouses for far too long, simply maintaining the status quo and avoiding meaningful improvements and innovations that could enhance service levels and add value to the bottom line. Old habits truly do die hard. To paraphrase Grace Hopper (no known relation), the famous computer pioneer and Rear Admiral in the US Navy, the most dangerous phrase for a business is, “We’ve always done it that way.” The pandemic, while clearly tragic, has resulted in a wake-up call for warehouses. The necessity of complying with government regulations and heeding the safety recommendations of the Centers for Disease Control (CDC) and the World Health Organization (WHO) have forced businesses to rethink how they operate their warehouses and to make positive changes to how their work is done (the process known as kaizen among Lean practitioners). It has also heightened their interest in automation and mechanization, which not only can keep their workers safe during a pandemic, but also can help their businesses be more flexible, resilient, and agile, so they can satisfy the demands of the ever-changing marketplace long after the pandemic subsides. Improved Workforce Performance Like so many other employers, warehouse managers have faced dramatic workforce challenges during the pandemic. Warehouse workers have been consistently inconsistent in showing up for work for various reasons, such as forced quarantine, childcare needs while schools are closed, fears of infection, and, of course, becoming ill with COVID-19. It hasn’t been unusual for employers to hire twice the number of
workers they would otherwise need to ensure they have enough people working in their warehouses during the pandemic, but not all businesses have that luxury. And as a practical matter, warehouse workers can’t easily work from home. There are fundamentally two ways for a business to get work done when not enough workers are available: Employ automation and mechanization, as mentioned previously, or find ways to get more productivity from its available workforce. Whether during a pandemic or otherwise, both approaches can be good strategies. Interestingly, some of the policies strongly recommended by virology experts to prevent the spread of SARS-CoV-2 can also have a positive impact on worker productivity. For example, social-distancing practices discourage warehouse workers from working in groups (sometimes referred to as “processing by committee”), which has been shown to have a negative effect on worker productivity. On the other hand, when workers perform tasks independently while properly socially distanced, they tend to perform better, while the risk of infection from coworkers also decreases. And let’s not forget that in any business, including warehouses, unnecessary or longer-than-necessary meetings have a negative impact on productivity while increasing infection risk because they compromise social distancing. As another example, adopting a “touch free” warehouse operation, or at least minimizing the number of touches
required to get the work done, can mitigate the spread of the virus. Plus, it reduces the amount of handling, which industrial engineers have identified as a major killer of worker productivity in warehouses. Fewer touches (inventory, equipment, computers, paper, etc.) result in both lower infection risks and higher productivity — a win-win for the warehouse. Looking to the Future As Friedrich Nietzsche said, “That which does not kill us makes us stronger.” Long overdue in some cases, the actions many businesses have been taking in their warehouses in response to the pandemic will result in lasting positive effects that might not have been experienced otherwise. The dark cloud of the COVID-19 pandemic can have a silver lining in your warehouse when approached with the right attitude and efforts.
Stephen T. Hopper, PE is Founder & Principal of Inviscid Consulting, whose mission is to help businesses plan and streamline their warehousing, logistics, manufacturing, and distribution operations to drive down operating costs, boost capacity, improve service levels, and mitigate risk. He can be reached at steve.hopper@inviscidconsulting. com or 404.832.5326.
NOVEMBER-DECEMBER 2020 PARCELindustry.com 29
By Harry Drajpuch
AN ONLINE SELLER’S GUIDE TO ORDER FULFILLMENT SERVICES PRICING
I
f you’re in the market for order fulfillment services, there’s one question that’s probably at the top of your list: What’s it going to cost? As is often the case, the answer is, “it depends” — on lots of things One sign that you’re dealing with a top-quality fulfillment company is the depth of fact gathering they go into as part of the pricing process. Yes, it creates some work for you. But it results in the most accurate order fulfillment services pricing. Better to nail an accurate estimate from the start than to have to explain to the boss three months in that the price is going up 25%. The following chart includes questions your potential fulfillment partner
should be asking — all presented in a convenient table format that explains the rationale behind each question. Embrace the Detail in the Pricing Process With the right data in hand, 3PLs can usually knock out an accurate price estimate pretty quickly. The data gathering may take a little time on your side, but it’s well worth it if the goal is accurate order fulfillment services pricing. You want a 3PL partner that is thorough. Generic pricing does not work in the fulfillment industry, as each account has nuances that will impact pricing. If you are asking for price estimates from multiple providers, remember
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to provide each with the same set of data or it will be hard to make an apples-to-apples comparison. Order fulfillment is a detail business, so embrace that detail. The more data a provider has, the better its ability to design a solution that completes pick/ pack/ship tasks in less time using the least amount of space.
Harry Drajpuch is CEO of Amware Fulfillment, a national logistics company that helps brands scale direct-to-consumer fulfillment operations to keep pace with business growth. With fulfillment centers in every region of the country, Amware enables one- to two-day delivery to 98% of the US.
What 3PLs need to know
Why we need to know it
Describe the products — number, dimensions, weights, etc.
Your 3PL’s engineers will need this data to determine how much storage and picking space will be needed, how to store the product, and how large a pick front is required.
What’s the ratio of palletized vs. floor-loaded inbound shipments?
In order to get an accurate read on the labor, time, and space required to receive shipments, a 3PL needs to know as much as possible about how efficiently goods were packed and staged by suppliers and vendors farther up the supply chain.
What is the SKU makeup of your inbound shipments?
The more individual SKUs you have per shipment — and the less stratified those SKUs are — the longer it will take your 3PL to offload them properly. Detailed responses to this question will help prevent unexpected dock delays and unwanted sticker shock later.
Do you have any products that require special storage (temp-controlled), stock rotation (FIFO, FEFO) or handling processes?
Your response could impact everything from where a 3PL proposes to store your product (and storage cost) to what capital improvements will be needed before a go-live date.
What is the average weight of your standard pallet or carton? Can pallets be stacked? If so, how high?
The most-effective storage configuration depends on information like this. For example, the weight of a product may lead to the use of different, more durable racking than currently used.
How many unique SKUs will be in storage?
Unless it’s going straight from the dock to your pick line, each SKU you sell must have its own unique slot or bin in a fulfillment center. More SKUs equal more space requirements (and expense). Precise data here will ensure accurate order fulfillment pricing.
Are there any value-added services your orders require — for example, tasks like kitting or carton/unit labeling?
One of the most common reasons for inaccurate fulfillment pricing is failing to account for all of the work needed before an order ships, especially work that is considered beyond the scope of standard order picking.
Does your company have seasonal or fluctuating demand that causes sharp order spikes?
The more information your 3PL has about your peaks and valleys, the better it will be able to protect you from unnecessary extra expenses such as expedited shipping, last-minute temporary staffing, or overtime.
Describe the current process for order packout. Be specific!
Whether you respond with a verbal description or decide to supply pictures or videos instead, this is probably one of the most important questions you need to answer in detail, because the packout stage is usually when the most product touches (and fulfillment expenses) occur. Complete input here will result in accurate pick and pack pricing.
Please describe your current process for returns (volume, RMA requirements, damaged inventory processes, etc.)
Your 3PL needs to ensure that it has properly estimated the space and staffing required to process returns, which are typically more work and systems-intensive.
What is the monthly velocity of each SKU?
This detail will enable your 3PL’s engineers to design a warehouse layout that maximizes picking efficiency for your most popular products.
Describe your ideal method of integrating your order flow with a 3PL’s systems?
Seamless order flow is critical to a successful onboarding process. You absolutely don’t want to give short shrift to systems integration and how data will flow between your systems and your 3PL’s systems. Start early, test, and re-test. Systems requirements may impact order fulfillment pricing, so the quicker you address any issues, the better. NOVEMBER-DECEMBER 2020 PARCELindustry.com 31
PARCELCOUNSEL
NEGOTIATIONS: THREE OBSERVATIONS OF A TRANSPORTATION ATTORNEY By Brent Wm. Primus, J.D.
O
ver the last few years, there have been several installments of PARCEL Counsel relating to transportation contracts. Other columns have discussed issues relating to loss or damage to cargo. Generally speaking, these columns have focused on particular legal issues relating to these topics as opposed to the process of negotiating a contract or the process of recovering or defending a cargo claim. In this installment of PARCEL Counsel, I
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would like to share with the readers three observations from the 50,000-foot level, to use a current phrase. My father, Lee B. Primus, was an attorney. He used to say, “The practice of law is a very inexact science.” The same can be said of contract negotiations or trying to resolve a dispute over freight charges or trying to resolve a claim for loss and damage. In all of the houses in which my family lived when I was growing up, there was a small dime store plaster plaque roughly resembling a scroll. It read, “It’s what you learn after you know it all that counts.” I can remember as a young child staring up at it and contemplating what it meant, given its obvious illogical nature. I knew it must have meant something, but I wasn’t sure quite what. Now, as an adult, its meaning is pretty obvious. Over the course of the last few years, there are three observations or conclusions that I have come to that I would like to share with you. The first is that it is very important to resist the temptation to demonize the other party… even when the other party might be one of the world’s largest corporations transporting parcels around the globe. The other party can also include those people who I believe have adopted as a deliberate tactic being as
obnoxious and irritating as possible… just so you will make any concessions necessary to get the deal closed or dispute resolved so you don’t have to deal with them anymore. Nevertheless, the emotional drain and the diversion of focus and resources associated with impugning the characteristics or motives of “the other side” does little, if anything, to get to the desired result. The second observation is that at some point it occurred to me that the other side is never going to agree with your position… even if they do. To put this in context, over the years I would often find myself exasperated when talking on the telephone to another attorney who simply refused to concede that such and such a statute or such and such a case holding would control. In these situations, I used to find myself speaking louder and louder which, at least on some occasions, would end up in a shouting match with someone hanging up the telephone. While this observation may seem obvious to the reader, it took me literally years to realize that of course they are not going to admit they are wrong or to agree with me — even if they do — since they are representing a business organization whose position they are duty bound to advocate. In other words, state your position — be it in a phone
conversation, a letter, or an email — and let it be. For disputes, save the debate until you are in a structured negotiation or mediation or, worst case scenario, in court. In the meantime, hopefully the other party will have been listening to what you said and take it into account in the next round of proposals and counter-proposals. And speaking of listening, the third observation that I would like to share with you is an adage that was related in a meeting by a seasoned school teacher’s union representative: “Listen to understand, not to respond.” In thinking about this afterwards, I realized that in conversations with opposing attorneys, I was doing exactly the opposite. In other words, rather than really “listening,” I was just waiting my turn to speak so that I could rebut or refute everything that he or she had just said. I have come to realize that to get a favorable resolution, it takes
more than to simply announce one’s position to whoever is listening. This is particularly true in the area of contract negotiations where a lot of money can be on the table. Professional reputations can also be at stake. Be that as it may, a successful negotiation depends at least as much on knowing and understanding the other side’s position as it does on understanding that of yourself or your company.
To sum up, I would just like to say that I do realize that it is easier to preach than to practice. All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found on the PARCEL website (PARCELindustry. com). Your questions are welcome at brent@primuslawoffice.com.
Freight Audit & Payment since 1923
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NOVEMBER-DECEMBER 2020 PARCELindustry.com 33
WRAPUP
INTERNATIONAL “EXPRESS” OPTION Michael J. Ryan
A
s the world of global e-commerce continues to grow, there is an increasing interest in having an “express” service option available for international shipments. The major carriers (DHL, Fed Ex, and UPS) dominate this space. However, DHL has the largest network outside of the US and a strong brand recognition of speed and reliability. The global postal authorities are struggling with limited flights that are available for international shipments. This is slowing down their service and creating inconsistencies in their networks. Let’s take a close look at the global e-commerce world:
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1. 95% of the world’s population lives outside the US 2. 2.1 billion online shoppers by 2021 3. $4.9 trillion on global e-commerce sales 4. 81% increase in e-commerce sales (May 2020 vs May 2019) This peak season will accentuate the true need for faster, consistent, and reliable delivery. Most consumers are making purchases from their mobile phones, which creates a world where they can buy anything… any time. They also want to buy items in their local currency, which allows them to ascertain the true value of the item, especially if they are comparing it to an Amazon price. In 2019, DHL Express conducted research on consumer behaviors and revealed that the speed of delivery can be valued greater than the cost of goods. It also discovered that retailers that offer a premium international option grow 60% more than those that do not offer this option. In a separate study conducted by Metapack, 58% of global consumers would choose a retailer solely because of its delivery options. In addition to having an “international express option,” it is critical to have a clear and concise shipping policy listed on the website. It should include free shipping options on certain
order sizes, flat rate shipping cost, estimated delivery times, carrier used, duties/ taxes implications, countries served, returns, insurance, and tracking.
In addition to having an “international express option,” it is critical to have a clear and concise shipping policy listed on the website. We all know that global e-commerce is more complicated than a domestic order, but they are usually larger orders with higher margins. With 95% of the world’s population at your fingertips, this is a great opportunity to expand your business exponentially. What are you waiting for? Just set up that “express option” for your international customers and watch your orders continue to increase.
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.
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