At GLS, We Deliver Parcels to People We don’t just deliver parcels and freight from A to B, we deliver from Person to Person. When we look at our boxes we don’t see Parcels, we see People. When we think about what’s inside them, we don’t see objects, we see emotions. Inside the box are the dreams, ambitions, and hopes of every sender and receiver. Inside the box are stories of things that matter to real people. And if it matters to them, it matters to us. That’s why when it comes to delivery, we see things differently. We think inside the box. At GLS our core values consist of Integrity, People, Service, and Urgency. With those we provide a service that goes beyond just moving packages. We add a personal touch to every delivery we make and do this with unique services including
Picture Proof-of-Delivery at every doorstep, Same-Day OnDemand Pickup Options to meet your unique production needs whenever they occur, and Faster Ground Time-in-Transit to get your shipment to your customer sooner than they expected. Our hybrid service suite of Parcel, LTL, and Logistics services will help you streamline your delivery operation so that you have one source for all your delivery needs. The team at GLS is made up of individuals who are each passionate about servicing our customers, doing what is right by every shipper and recipient, and who run-to-the-fire when they see an opportunity to enhance a customer experience. We are customer-obsessed with how every aspect of the delivery process can improve the experience and meet the ever changing needs and demands of the logistics industry. Whether you have 1 shipment a month, or thousands per day, learn more about how GLS’s hybrid Parcel, LTL, and Logistics service offering can exceed your expectations. From first-mile to last-mile and every mile in between GLS takes equal care to see that Your Promises, are Our Priority.
email@example.com 800.322.5555 www.GLS-US.com
CONTENTS /// Volume 28 | Issue 7
06 EDITOR’S NOTE Starting 2022 Off Right By Amanda Armendariz
16 HOW TO NEGOTIATE YOUR CONTRACTS IN 2022 AND BEYOND By Josh Dunham
08 SPEND PERSPECTIVES Higher Shipping Costs and Staffing Issues Will Hasten the End of “Free Shipping” By John Haber
18 GETTING YOUR WAREHOUSE AGILE, LEAN, & FLEXIBLE IN 2022 By Ed Romaine
10 PARCEL COUNSEL Parcel Shippers and the FTC’s 30-Day Rule By Brent Wm. Primus, JD 11 GUEST COLUMN EU VAT Changes: What US Shippers Need to Know By Krish Iyer 12 PACKAGING COVID and Online Shopping: The Perfect Storm By Nicole DeJoris 14 THE PARCEL LANDSCAPE IN 2022: BACK TO NORMAL BUT NOT THE SAME? By Ravi Shanker
22 AVOIDING THE CARRIER CAPACITY CRUNCH WITH LAST-MILE OFFERINGS By Victor Zhou 24 PARCEL FORUM ‘21DC WAS TRULY A MONUMENTAL EVENT By Amanda Armendariz 26 WINNING THE WAR AGAINST RETURNS By Larry Lewis 28 ENHANCING CUSTOMER LOYALTY THROUGH SUSTAINABLE PACKAGING By Sean Webb
SPONSORED CONTENT 03 AT GLS, WE DELIVER PARCELS TO PEOPLE 07 WAREHOUSE SHIPPING, NEXT YEAR’S PROBLEM? 09 KNOWLEDGE IS POWER, ESPECIALLY WHEN IT COMES TO NEGOTIATING UPS & FEDEX CONTRACTS 20 CHOOSING A PARCEL CONSULTANT PARTNER 30 THE NEED FOR PARCEL INSURANCE
2022 EVENTS MODEX, MARCH 28-31, ATLANTA PARCEL FORUM ’22, OCTOBER 10-12, CHICAGO 4 PARCELindustry.com NOVEMBER-DECEMBER 2021
PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ firstname.lastname@example.org ]
AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ email@example.com ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ firstname.lastname@example.org ]
P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 2021 © 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.
NOVEMBER-DECEMBER 2021 PARCELindustry.com 5
STARTING 2022 OFF RIGHT
By Amanda Armendariz
nce again, this holiday season promises to be the perfect storm of labor shortages, supply chain delays, carrier capacity constraints, and increased consumer demand as more and more people continue to shop online (both due to issues caused by the pandemic and the sheer convenience of it). Thankfully, by the time this issue lands in your inbox or mailbox, you’ll be in the home stretch, with the Christmas holiday less than two weeks away. But while you should definitely breathe a well-deserved sigh of relief after the holiday rush is over, the beginning of the year isn’t a time to slack off. Rather, you should take advantage
of the slower pace of things and allow yourself to assess your parcel operation and how it handled peak season. What went well, and what could be improved? If there are areas in which you exceeded expectations, is there a way to apply those strategies to other areas of your supply chain? Likewise, if there is an area that fell short, how can you prevent that from happening again not just next peak season, but all year long? The parcel industry is constantly changing, and this change is only exacerbated by the demands caused by the current pandemic. It should be every shipper’s new year’s resolution to try to get a leg up on their competition by attempting to negotiate their carrier contracts to cut shipping costs as much as they can, explore alternative delivery methods that can help circumvent the current capacity issues, and examine more intangible ways to maintain customer loyalty in the face of growing competition. We hope that this issue of PARCEL helps you do just that, so that you can start 2022 out on the right foot. And if there’s anything you’d like to see us cover more in depth, please feel free to drop me a line at email@example.com. As always, thanks for reading PARCEL.
Warehouse Shipping, Next Year’s Problem? Warehouse Shipping, Next Year’s Problem? When the holiday season is in full swing and warehouse operations are stretched thin, there’s little time to focus on anything beyond getting orders out the door. Layer onto this busy season a mess of supply chain confusion, shipping delays, and labor shortages, and your hands are full. Even in the best of times, the crunch of the holidays makes planning for the coming year a challenge. And yet, this is the time of year when you can learn the most about your operations — what works well, what needs improvement — so take advantage of the opportunity in front of you this season. Take Stock During the Holidays The busy season may not be the time to make monumental changes to how you ship, but it’s worth the effort to pay close attention to the issues that crop up in this time. Document the bottlenecks and technological shortfalls you experience in the final months of the year. Pay close attention to the repetitive tasks, such as packing and shipping. Did you have enough team members to ship efficiently? Could some of that work be automated or batched? Did your customers get their orders as expected? This will give you a clear roadmap for things to improve in the new year, when the pace has slowed to normal. Shipping Technology Has Come a Long Way Focusing on the challenges your business faces, rather than a wishlist of features, will set you up for success when you begin to research options. Shipping technology has made huge
improvements in recent years, with more integrations with ERPs and other core technologies and improved automation functionality. For example, solutions like ShipWorks can route orders to specific warehouses based on inventory levels and proximity to destinations or show you detailed analytics about how your processes are running. The Best Time to Switch Solutions High-volume businesses know that adopting a new technology takes time, effort, and customization. Once you have a clear list of the issues your business faces, don’t wait to start looking for technology solutions to help. The best time to adopt a new technology is during your business’s slowest season. For many businesses, that’s after the holiday returns window has closed. Hit the Ground Running in 2022 Process and workflow changes inherently carry some risk during the implementation period, but don’t lose sight of the benefits technology can provide. Refer back to the documentation you created during the holiday season to ensure that the solutions you’re evaluating will make your next busy season run more smoothly. Give your team time to implement and practice with workflow changes before the next busy season. If the holidays are your busy season, that means the ideal time to get a new solution in place will be spring to summer. With the evolution of shipping technology, making the switch to an innovative solution can pay dividends down the road. If your company has been thinking about it for a few years, let 2022 be the year that you take action. Your business will thank you.
HIGHER SHIPPING COSTS AND STAFFING ISSUES WILL HASTEN THE END OF “FREE SHIPPING” By John Haber
taffing issues and rising costs to deliver parcels to residential locations are resulting in a number of last-mile carriers encouraging their customers to use other options, such as thirdparty pick-up and drop-off locations. By using these third-party locations, last-mile carriers are able to bundle parcels for pick-up and delivery and, thus, these parcels are treated as commercial deliveries — a less costly service for carriers. UPS’s program, Access Points, includes its UPS Stores, self-service lockers, and a number of retailers such as CVS Pharmacy, Advanced Auto Parts, and Michaels. In total, there are over 20,000 Access Points in the US and 29,000 globally. In addition, there are 279 locker locations. Meanwhile, FedEx’s Convenience Network has more than 62,000 retail locations in the US and includes retailers Walgreens, Dollar General, Office Depot/Office Max, Walmart, Target, Albertson’s, Randalls, Safeway, and more. In October, Amazon introduced its own twist, Amazon Local Selling, which allows Amazon sellers to offer items to local customers in designated areas for in-store pickup on the same day. Among the physical storefront retailer participants in Amazon’s Local Selling service are Mavis Discount Tire, Sears Hometown Store, 4 Wheel Parts, Electronic Express, Best Buy, Appliance Connection, Mattress Warehouse, Beach Camera, Adorama, DataVision, Exclusive Furniture, World Wide Stereo, MODIA, Focus Camera, and others. Amazon and FedEx, in particular, have struggled with staffing issues. According to FedEx’s president,
8 PARCELindustry.com NOVEMBER-DECEMBER 2021
Chief Operating Officer Raj Subramaniam, “the impact of labor shortages on our fiscal first quarter results, for the period ending August 30, was approximately $450 million.” Amazon noted in its third quarter earnings that, “labor became our primary capacity constraint, not storage space or fulfillment capacity. As a result, inventory placement was frequently redirected to fulfillment centers that had the labor to receive the products.” As a result, Amazon has offered online shoppers a $10 discount if they select a pick-up point to collect parcels instead of having them delivered to a residential location. In addition, Amazon Prime members are now having to pay a $9.95 delivery charge on orders from its Whole Foods subsidiary. Previously, this was a free Prime perk. To encourage the redirect of FedEx packages to Walgreens’ locations, a $5.00 Walgreens coupon is offered as a thank you. “Free shipping” to residential locations is under threat as carriers such as Amazon and FedEx struggle with staffing issues and parcel shipping costs rise. Storefront retailers, for example, will likely continue to encourage curbside pickups and buy online, pick-up in store (BOPIS) services as “free deliveries” and may charge a fee for all home deliveries. Many already charge for same-day deliveries.
As new entrants enter the last-mile market, there will be more options, perhaps even at lower or simpler rates. However, shippers will need to understand the services these entrants offer and how they may fit into shippers’ last-mile strategies. Convincing consumers to pick up or drop off parcels at third-party locations will be a challenge, particularly in locations that require consumers to drive to such a location. Coupons and delivery fees may incentivize consumers, but, ultimately, staffing shortages and higher shipping costs will likely hasten the end of “free shipping” as retailers and other shippers are forced to pass on shipping costs to consumers.
With over 25 years of supply chain experience, John Haber has helped some of the world’s leading brands drive greater efficiencies through their supply chain operations while reducing transportation, distribution, and fulfillment costs. After a successful UPS career, John founded Spend Management Experts, now part of Transportation Insight. He uses his finance background combined with decades of experience working with high-volume shippers to offer unique insights on strategic supply chain planning, including distribution model optimization, transportation cost analysis, and carrier contract optimization and compliance.
Knowledge Is Power
Especially When It Comes to Negotiating UPS & FedEx Contracts By Mike Erickson, AFMS CEO
Today’s UPS and FedEx contracts are more complicated and difficult to negotiate than ever before, while COVID and capacity issues have made it even more complex. Before we address the major issues affecting your carrier contracts today and how you can successfully negotiate the best rates possible for your company, I would like to give you a brief background on AFMS and why our advice is worth reading. Founded in 1992, AFMS is a transportation contract advisory and auditing firm, comprised of former VPs and directors from UPS, FedEx, DHL, and USPS. We specialize in showing companies of all sizes how to save money, improve service levels, and obtain better discounts. Our inside knowledge of the carriers’ pricing programs is unparalleled. With all the changes that are happening today with UPS and FedEx and the levels of complexity surrounding today’s contracts, we have compiled the following information to help you better manage your ongoing transportation pricing contracts and carrier negotiation strategies. Knowing what the carriers consider profitable freight and unprofitable freight as it relates to package characteristics will help you determine what discounts the carriers can offer you. The metrics surrounding these pricing variables are complex and need to be reviewed prior to sitting down with your carriers and negotiating a new agreement. 1. The carriers have dramatically improved their cost-to-serve pricing models, generating billions in new revenue annually through new accessorial fees. 2. What has created these pricing changes? Technology improvements and better data capture capabilities by the carriers. The data capture technology the carriers use has allowed them to bill for services and new accessorial fees they physically couldn’t charge for a few years ago. 3. For shippers in 2022, this translates into more hidden cost increases and higher accessorial charges. 4. What can a shipper do to offset these new charges? Start by gaining a better understanding of the impact these changes are going to have on your company. How much of your transpor-
tation spend is in accessorial charges, base rate charges, and what is the real impact of the annual general rate increase? It varies by shipper, but it is not the 5.9% you were told by the carriers last month. 5. Prior to negotiating, learn everything you can about your packages, shipping characteristics, box sizes, and ZIP Codes you ship to — DAS or Extended DAS. 6. Perhaps the most important thing to understand in the freight negotiation process is getting the carriers to see how valuable your shipments really are, based on package characteristic. Leverage your positive box characteristics to your advantage. Carriers thoroughly analyze your company’s shipping profile to determine profit margins and what discounts to offer. It’s critical to know in your freight carrier’s own terms how profitable your shipments are to them. Whether you’re a seasoned transportation manager or a director of purchasing, understanding the impact these new carrier accessorials have on your transportation costs is important. Knowledge is power; understanding the terms and details around your contracts and how they impact your business can make a big difference in the carriers you choose and how those carriers price your shipments. Negotiate with your package characteristics’ strengths. The lack of benchmarking data and analytical detail could cost you 15-25% in service discounts. Make sure you ask for competitive discounts on all the services you frequently use; even small volumes should be discounted. More than 50% of all US companies have outsourced some part of their distribution procurement process; many shippers use a consultant to help with the carrier selection, benchmarking, and negotiation strategies. As carrier shipping contracts change, so must a shipper’s knowledge.
www.afms.com firstname.lastname@example.org 800.246.3521
PARCEL SHIPPERS AND THE FTC’S 30-DAY RULE By Brent Wm. Primus, JD
n this installment of PARCEL Counsel, we will look at a Federal Trade Commission (FTC) regulation. Its title is “Mail, Internet, or Telephone Order Merchandise.” Its nickname is “the 30-day Rule.” The gist of this regulation is that when a seller of merchandise takes an order by mail, over the internet, or by telephone, the seller must ship the merchandise within the time period stated in its advertising or otherwise conveyed to the buyer. If no specific time period is stated, then the seller must ship the merchandise within 30 days. It should be noted that if your company is such a seller, it is very important that you know this regulation and be in compliance. If not, there can be very severe consequences. The FTC could seek civil penalties in excess of $40,000 per violation. The United States Postal Service also has authority to take action for non-delivery. Further, this federal rule does not preempt the ability of individual states to also enforce their own consumer protection laws. The second component of the regulation is that if the seller cannot ship the merchandise within the stated time period or the 30-day default period, then the seller must promptly refund the price of the merchandise without the buyer having to request the refund. The regulation is focused on when the merchandise is shipped, not when the merchandise is received by the buyer. The regulation states: “Shipment shall mean the act by which the merchandise is physically placed in the possession of the carrier.” If a seller is shipping merchandise from its own facility,
10 PARCELindustry.com NOVEMBER-DECEMBER 2021
it is fairly easy to know when the merchandise has been shipped. However, in this era of e-commerce, it is a very common practice for the merchandise to be given to the carrier for delivery by a fulfillment service or by a third-party vendor. In such a situation, what happens if the seller promptly notified the fulfillment service or thirdparty vendor with all of the necessary instructions for shipping… and then the fulfillment service or third-party vendor not only does not ship the merchandise within the required time period, but also does not tell the seller that the merchandise has not been timely shipped? The short answer is that the seller has the ultimate responsibility for following the regulation. By not making the refund, even though the seller did not know that a refund was due, the seller is in violation of the regulation. Accordingly, parcel shippers who are subject to this regulation must have in place a strategy to monitor the third parties with whom they have made arrangements to do the actual shipping. “Refund” is defined by the regulation as meaning “where the buyer tendered full payment for the unshipped merchandise in the form of cash, check, or money order, a return of the amount tendered in the form of cash, check, or money order sent to the buyer.”
“Prompt refund” is defined by the regulation as meaning “by any means at least as fast and reliable as first class mail within seven (7) working days of the date on which the buyer’s right to refund vests.” The regulation acknowledges the fact that situations can arise where shipment of the merchandise is delayed. Accordingly, the regulation allows a seller to notify the buyer that there will be a delay and to give the buyer the choice to either cancel the order or to consent to the delay. It is important to note that the notice of delay must be given within the time period required for the merchandise to be shipped... not afterwards. For PARCEL readers interested in learning more about this topic, the FTC has published a “BUSINESS GUIDE TO THE FTC’S MAIL, INTERNET, OR TELEPHONE ORDER MERCHANDISE RULE” at https://www.ftc.gov/tips-advice/ business-center/guidance/ business-guide-ftcs-mail-internet-or-telephone-order. In addition to a plain English explanation, the guide also includes sample wording for notices to be given by the seller to the buyer. 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 email@example.com.
EU VAT CHANGES: WHAT US SHIPPERS NEED TO KNOW By Krish Iyer
major change to shipping and customs clearance into the European Union (EU) occurred earlier this year, but it has, to a large extent, been obscured by COVID19 challenges in the supply chain. Still, it is something that US shippers who export into the EU do need to know. More importantly, with supply chain and inventory problems helping to put a premium price on products that consumers can actually receive, US shippers should take note of these changes to plan accordingly in order to sell to a consumer base that wants their products now and in the future. What Changed? On July 1 of this year, the European Union removed the de minimis value on products imported into the EU. De minimis is the minimum threshold value where duties and taxes are typically applied. Previously, there was a low value clearance threshold for products falling under a €22 (approximately $26) sale price, where no VAT (value added tax) was applied. After July 1, however, all products have begun to have a VAT assessed on imports into the EU. It is important to note a distinction here: an exemption from customs duty, a different concept, still applies to imported items less than €150 (approximately $174). Much like the UK with Brexit, the EU made this change in an attempt to collect taxes from sellers misrepresenting sale prices to skirt the tax and also to promote intra-EU trade. How can US shippers pay the VAT and/or ensure their shipments don’t get stopped at the border? 1. Sell on an E-Commerce Marketplace For shippers exporting their products into the EU AND
selling the product on an e-commerce marketplace, the marketplace is considered responsible for the collection of the VAT and remitting of it to the proper customs authority. 2. Special Arrangement with EU Posts For shippers exporting their goods under €150, they can make special arrangements on VAT collection and remittance with them directly, although this can be cumbersome and difficult to enact. 3. IOSS The Import One Stop Shop (IOSS) was created as a program to help export shippers from a foreign market outside of the EU facilitate and simplify the payment of the VAT on shipments, especially lower value ones. This will allow the shipper to collect the VAT from the buyer in the EU upon checkout and pay directly to the customs authority rather than forcing the buyer to pay for it when the product is imported or upon delivery. In other words, the shipment would then not be held up in customs until the VAT is paid; the shipper simply pays this directly to the EU customs authority. If an IOSS is the most practical way of paying the VAT, then how do I get one? If an exporter into the EU wishes to obtain an IOSS VAT Identification Number, the simplest way to do so is to register for one via the European Commission website
(https://vat-one-stop-shop. ec.europa.eu/index_en). Exporters are advised that, while the typical turnaround time for registration and acceptance of the IOSS number is supposed to be a relatively short period, due to high demand, some exporters are seeing it take several weeks. Are there any other considerations with the IOSS that I should keep in mind? Yes. An EU post must have a record of the IOSS VAT Identification Number on file to avoid double taxation or the shipment being held by customs. The simplest way to do this is to enter the IOSS VAT Identification Number into the USPS Shipping Services File (SSF), part of the electronic data tendered to the USPS. It is important to note that this information must be tendered to the USPS in the SSF at least two hours prior to the shipment’s induction to the USPS network. The changes to the EU VAT will have consequences that are felt for many years; yet, it represents a strong opportunity for US and Canadian shippers. Obtaining an IOSS VAT Identification Number is the most efficient way for a shipper to pay this tax while keeping shipping costs low enough to be competitive.
Krish Iyer is Vice President, Strategic Partnerships & Industry Relations, Auctane and serves as the Vice President, Package Shippers Association.
NOVEMBER-DECEMBER 2021 PARCELindustry.com 11
COVID AND ONLINE SHOPPING: THE PERFECT STORM By Nicole DeJoris
efore COVID, online shopping was on the rise, but once the pandemic hit, online shopping became a way of life for many. As a result, the demand for packaging so that products can be shipped to customers’ homes rose sharply, and today it remains at an all-time high. Those in need of packaging materials are hyperaware of the challenges in the current environment. Their suppliers are seeing shortages in raw materials used to make the products they rely on, which is exacerbated for small- to medium-sized companies who don’t have the purchasing power of large companies like Amazon, who get their orders fulfilled first. When challenges come together this way, it also drives up prices. Added to that are the increases in freight charges and a shortage of labor. Prices have gone up significantly over the past 18 months, and I anticipate an increase of seven to 14% in plastics, three to five percent
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its impact on brick-andmortar stores has resulted in many of them closing and moving to an online model only. It wasn’t long before businesses discovered that they could utilize online sales to drive profitability and reduce overhead.
in adhesives, and 10% for corrugated paper, which goes up about every two months. Prices rising are due to this perfect storm of shortages in labor and raw materials together with an increase in demand. For those struggling to get packaging, especially branded packaging, consider using plain boxes with tape that has your company branding. Regardless of which avenue you choose, it is advisable to order packaging supplies as soon as possible. Holiday packaging design should begin in January, while ordering for general supply should be done at least seven months ahead. It isn’t only our industry that is experiencing shortages in raw materials. Labor shortages continue to disrupt the supply chain as workers are out due to COVID. Through this, people are becoming more educated on how one area of the supply chain can affect everything down the line.
Adding to the challenge of manufacturing the volume of packaging supplies needed is the fact that there are a limited number of paper/box manufacturing facilities today.
How We Got Here Since its inception in the late 1990s, online shopping has continually grown to the point where today, people have changed their buying habits — and continue to do so. This has only increased the number of packages sent to consumers and has made a tremendous impact on the amount of packaging supplies needed to keep the supply chain moving. As the online shopping trend keeps its current pace,
Pressure and demand increased for online stores to meet consumers’ demands for goods, and it also affects their suppliers, who are struggling to hire the number of workers they need to keep up with demand and growth. When companies cannot produce even the minimum the industry needs, it becomes a snowball that grows as it rolls downhill. Because people were forced to stay home, they were, in a sense, forced to purchase
goods online instead of going to stores to buy them. This increased demand for shipping supplies globally, to a level we have never seen before. Today’s Trends Today’s trends are about the challenges that manufacturers and suppliers in our industry are dealing with. Adding to the challenge of manufacturing the volume of packaging supplies needed is the fact that there are a limited number of paper/box manufacturing facilities today. Thanks in part to newspapers and books going digital, many paper mills shut down years ago. There are also shortages in petroleum products used in manufacturing everything from adhesives for tapes to acrylic tape, poly bags, and other plastics. We have seen many suppliers struggling in one way or another as they work to meet demand. To top it off, consumers’ buying habits have changed drastically and, at least for the immediate future, we don’t see any changes to that. They have discovered that it is extremely convenient, they save time and can find a bigger selection, there are more options, and they often
find better pricing online than in local stores. Other trends that we are seeing include prolonged staffing shortages, shipping costs that continue to rise, new freight companies entering the market, huge increases in lag time to produce items such as plastic bags (from four weeks pre-COVID to six months today), and custom printing takes much longer. We have suggested customers use customized stickers with non-custom packaging supplies to get their products out the door faster. We’ve even had clients who couldn’t get plastic bottles, like the ones used for
spices, and it delayed their dreams of bringing a new product to market. The best advice I can offer is to plan far ahead and order earlier than you think you need to.
Nicole DeJoris is president of Pinnacle Packaging, Inc. in Lombard, Illinois. She believes that packaging is more than what’s on the outside; it’s what goes inside, too. Pinnacle Packaging makes sure customers are prepared and informed about the offerings available to their business so they can create a lasting impression through packaging. For more information, visit www.pinnaclepackaging.net.
NOVEMBER-DECEMBER 2021 PARCELindustry.com 13
THE PARCEL LANDSCAPE IN 2022: BACK TO NORMAL BUT NOT THE SAME?
BY RAVI SHANKER
fter two years of uncertainty, the parcel industry will be looking toward a more “normal” 2022 as the economy and society comes out of the pandemic. But the world is now a different place, and everyone will need to adapt. After the pandemic-induced chaos that was the year 2020, the parcel industry may have been hoping for a quieter 2021, but it was not to be. The caseload surge of Q1, the vaccine rollout and optimism of Q2, the Delta variant resurgence in Q3, and many more twists and turns in between have continued to keep us on our toes. This means that the optimism with which we entered 2021 now rolls forward into 2022. And from the current vantage point, the likelihood of this optimism being misplaced looks low. US case counts are dropping, vaccination drives continue with greater availability and eligibility, pills to treat COVID are imminent, domestic and international travel restrictions are being eased, and all this comes against a robust economic backdrop. However, a return to normal does not mean a return to business as usual or the same parcel delivery environment that we had prior to
the pandemic. The world has changed, and even if some behaviors and trends mean-revert to some extent, the parcel industry will have to grapple with a very new environment driven by structural changes in the last two years. We see six areas, in particular, where the market may need to adapt to a new normal. A much higher ongoing volume level. After running at a consistent 15% CAGR for several years, e-commerce grew 41% in 2020 and is on track for nine percent growth in 2021. Many industry observers believe that the pandemic pulled forward at least two to three years of e-commerce penetration with customers, and we agree. While some percentage of these new customers will likely return to stores as we reopen, the vast majority of these volumes are likely to be sticky. The parcel industry will have to learn to deal with significantly higher volumes going to many more addresses than we had seen prior to the pandemic. Significant capacity growth. With higher volumes will come higher capacity, and we have seen this occur in the parcel delivery space. There is perhaps no other industry in the world where capacity can be added as easily as in parcel delivery (think about it: Which other industry boosts capacity by 50%
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for one month every year?). Amazon Logistics has increased its capacity by over 60%, UPS/FedEx/USPS have all had to deal with the higher volumes, and several new “last-mile” players have entered the space. Despite the volume growth, this should restore normalized demand vs. supply to a similar dynamic as we had prior to the pandemic. The competitive dynamic in the parcel industry in 2022 and beyond will likely look materially different as well. A shifting pricing dynamic. The disruption caused by the pandemic has driven UPS and FedEx to push pricing to unprecedented levels. Both providers levied non-peak season surcharges for the first time ever, peak season surcharges soared to new heights, and, in certain markets (like International Express), capacity remains highly constrained and rates remain well above normal (as much as three times higher in some lanes). Our shipper surveys have seen sharp declines in UPS/FedEx’s “aggressiveness to win new business” and significant volatility in “value for money” and “discounts offered off base rates.” While some of this will normalize in 2022 (especially in International as passenger belly capacity returns to the skies), it remains to be seen how long UPS/FedEx and others will continue to push pricing
higher (and what the resulting impacts on volume/share dynamics might be). Service expectations continue to improve. 2020-21 was a disruptive enough period that consumers forgave the parcel industry for a severe deterioration in service standards, but that free pass will not last forever. In the meanwhile, Amazon (and many other players within retail) continues to push toward a same-day delivery model, which could be as disruptive — if not more so — than the move from two-day to one-day was in 2019. Cost inflation may be here to stay. The entire economy (perhaps globally) is seeing the impact of a cascading labor shortage and supply chain congestion, which makes it difficult to run a tight, on-time, well-oiled, point-to-point delivery machine. The parcel space is not immune as we saw with recent results at FedEx, Amazon, and others. While some of this may normalize in 2022, the
lack of visibility into the normalization of inflation and labor availability means that the parcel delivery industry will need to plan for this being the new normal and resource/price up accordingly. Relationship between online and brick-and-mortar is changing. The pandemic finally forced several traditional retailers to embrace omnichannel supply chains and leverage their existing brick-and-mortar footprint to deliver e-commerce packages out of stores. This may now be the new normal, especially with significant new “lastmile” capacity entering the market, enabling same-day delivery in a radius around existing store footprints. Any parcel-related company whose footprint is not optimized for this model may be challenged in 2022 and beyond. However, the more things change, the more they stay the same. The new normal for the parcel industry in 2022 may be quite different from the last
normal in 2019. However, this does not mean that everything has changed. In fact, some of the most fundamental aspects of the business remain largely unchanged — for better or worse. For better, e-commerce will likely remain a secular fast-growth sector for many years to come. For worse, it is unclear (and in our view, unlikely) that the end consumer is any more likely to pay for “free” shipping today than they were prior to the pandemic. The “negative flywheel” effect that we have seen for many years in the parcel space (pricing gains not keeping up with the rising cost of delivery) continues to spin into 2022. But on top of this foundation, change abounds. As we close the chapter on the pandemic (hopefully), the parcel space looks set to enter a brave new world.
Ravi Shanker is an Executive Director at Morgan Stanley covering the North American Transportation industry, including Freight and Airlines.
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HOW TO NEGOTIATE YOUR CONTRACTS IN 2022 AND BEYOND
BY JOSH DUNHAM
or carriers and shippers, the disruptive nature of the past year cannot be overstated. Faced with the heartbreaking impact of the pandemic, consumers embraced e-commerce like never before, with online purchases representing more than 20% of all retail sales in 2020. Those purchases, of course, created a significant and corresponding increase in parcel shipments, with both FedEx and UPS seeing unprecedented demand even as Amazon delivered more than twice as many parcels in 2020 as it did the year before. Simultaneously, numerous trends — some many years in the making — converged. In addition to embracing the obvious benefits of e-commerce during a pandemic, consumers quickly grew accustomed to second and next-day deliveries even as carriers experienced labor shortages at a level of severity never seen before. There were other issues as well. Ports closed amid outbreaks, maritime shipping rates saw exponential increases for ocean-bound containers, and supply chains slowed to a halt even as consumer demand skyrocketed. And all of this occurred as families found themselves working and studying from home as the horrific human toll of COVID-19 changed everything.
So it comes as no surprise to shippers that their contract negotiations with FedEx and UPS will be anything but routine going into 2022; however, that does not mean that carriers aren’t open to negotiation. What is different is that it has never been more important for shippers to be informed and prepared in order to secure the best rates and terms. And while there is no silver bullet or one generic approach that works for every organization, there are steps that all shippers should take now as they prepare for an unusual and, in many ways, unprecedented contract negotiation season. Know that it’s crucial to negotiate: Early in my career, while cutting my teeth as a sales representative, I learned that shipping contracts, if accepted on face value and without negotiation, rarely reflected the shipping profiles of the organizations involved. Companies that shipped large volumes often paid higher rates with less favorable terms than small clients who were savvy, and more importantly, informed. While this is a direct reflection of the lack of transparency that continues to plague the parcel delivery industry, the takeaway remains the same. You absolutely must negotiate your contract in order to avoid paying too much. Understand the carriers’ mindsets going into 2022: It is always important to understand the business imperatives not only of your carrier, but also their
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competition. This has never been more important than when seeking an agreement for 2022. Consider a few specifics related to the dominating Big Two: UPS: CEO Carol Tomé’s “better not bigger” strategy reflects UPS’s focus on expanding profit margins even if it means passing on the opportunity to gain shipping volume. This marks a significant reversal from past years when volume was the prime indicator of performance. Simultaneously, the company is expecting a capacity shortfall of some five million packages each day during peak season, with no sign of capacity constraints easing in the near future. At the same time, UPS is aggressively pushing to grow its global e-commerce delivery capabilities — an endeavor reflected in its recent acquisition of Roadie, Inc. and its crowdsourced delivery platform that will add additional small-package capacity and last-mile delivery capabilities. UPS is also aggressively pushing for growth in the small and mid-sized market and in key verticals like healthcare. FedEx: In September, FedEx released its 2022 rates. Perhaps not surprisingly, they marked the single greatest increase in more than a decade. Like UPS, FedEx too faces significant capacity constraints. President and COO Raj Subramaniam attributed lower than expected Q1 results to a highly constrained labor market and pointed to the company’s Portland, Oregon hub as an example. It has only 65% of the staff needed to handle its normal volume. Despite this, FedEx is going all in on e-commerce — expanding its infrastructure, adding additional weekend services, and growing its international capabilities. In December of last year, the company acquired the e-commerce platform ShopRunner, a move that many equate to a direct play to counter the impact of Amazon. Know what is negotiable and what is not: Generally speaking, everything is negotiable; however, shippers should expect to see — and are encountering — hard pushback at the beginning of the negotiation process this year. UPS’s guaranteed service refund (GSR) waivers were suspended in March and partially reinstated in April, and FedEx’s money-back guarantees were temporarily
suspended for all FedEx Express service until further notice in early October. Both carriers are also actively working to eliminate bulky and heavy items from their networks by charging dramatically higher prices. Shippers can also expect to see less flexibility on dimensional divisors and minimum reductions. Despite this, we have still seen universal success in efforts to lower rates and attain better terms when negotiating 2022 contracts. Audit your invoices: A thorough invoice audit will typically deliver savings of one to three percent. With some GSR waivers no longer in place, shippers are seeing slightly lower refunds following their audits; however, even a one percent return is significant. Know your shipping profile: Taking steps to know your shipping profile, and collecting all salient data, is the single most important step you can take to ensure that your negotiations are effective. You should have details on a variety of factors that enable you to point to specifics in the negotiation process, address any concerns the carrier will counter with, and demonstrate shared synergies.
These factors include your service spend, surcharge spend, the average cost per shipment, details on the weight profile of your parcels — including billed weight and dimensional weight — the minimum impact, and specifics on your zone and lane profile. Ideally, you’ll be able to point to organizations that have a similar shipping profile and better rates. Follow the money in your negotiation: Focus on areas where you spend the most, looking at specific services, weight breaks, dimensional weight divisors, specific zones, lanes, and even individual countries if shipping internationally. Remember that from the carrier’s perspective, shipping volume does not necessarily equate to shipping spend. It’s also important to understand the impact of minimum charges. Increased discounts will not help if you’re already hitting the minimum charge. Remember that the general rate increase does not include surcharges: Never forget that the GRIs announced in the fall are merely one component of any shipper’s total costs. Surcharges are not included in the GRI, but their
impact can be dramatic. Typically, they represent 15 to 25% of total parcel spend and it’s crucial to negotiate them aggressively. Discounts on peak surcharges should also be pursued, since standard surcharge discounts do not apply to peak surcharges. Explore flat-rate shipping options and negotiate capacity guarantees: One Rate, Simple Rate, or USPS flat rate services have no surcharges and no surprises. Plan ahead with your carrier representative and get a volume guarantee as well. This year’s holiday peak will likely demonstrate the impact of the capacity constraints carriers are wrestling with, but those same issues will also likely be faced throughout 2022. Plan accordingly.
Josh Dunham is the CEO and co-founder of Reveel, founded in 2006. Reveel’s Shipping Intelligence Platform is a Software-as-a-Service based analytics, contract analysis, and negotiation solution that helps customers ensure they are always receiving the best parcel shipping rates.
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By Ed Romaine
GETTING YOUR WAREHOUSE AGILE, LEAN, & FLEXIBLE IN 2022
o, who had a supply chain plan for pandemics in their 2019 playbook? I know I wasn’t smart enough for that, but I’m sure someone did. The pandemic and subsequent “whack a mole” supply chain issues and spiking steel and oil prices have demonstrated the need to be able to re-emphasize agility in our supply chains. In order to solve today’s — and tomorrow’s — issues, what are the key areas to focus on to be able to react and thrive in these tumultuous times? There are many areas, but let’s take a look at some of the most critical ones. Just-in-Time (JIT) & Inventory Practices The intricate supply chain system that transports raw resources and finished goods throughout the world needs predictability and accuracy. Most organizations have honed their on-hand inventory and JIT practices to an art form. The attention given to creating a high-performance supply chain has been a requirement for organizations to compete in the global marketplace. As we have all learned, there is a direct cost for performance vs. agility. When you build a high-performance supply chain, you reduce your flexibility and agility. In “normal” times, performance has proven to be the benchmark organizations strive for.
When we consider some of the issues we face today, such as extreme weather, material scarcity, shipping and port chaos, shifting labor resources, trade tensions, spiking oil and steel prices, and changing consumer patterns from brick and mortar to e-commerce, BOPIS (buy online, pick-up in store), and omnichannel retail, it’s clear we need to redefine our inventory practices, benchmarks, and KPIs through the lens of uncertain conditions. If automotive manufacturers could go back in time, do you think any of them would not have stocked up on microchips? This retrospective view makes decisions easy, but looking forward and making decisions is now critical for most organizations. Increasing on-hand, safety, and JIT inventory along with “critical path” SKUs and items are a first step, which will impact storage and labor requirements. Reducing Labor Requirements In boardrooms around the country and worldwide we are hearing the mantra, “If we don’t fix our labor shortage, we won’t have to worry about the rest of the issues… there won’t be a business.” With paid bounties, higher wages, and programs to retain employees now common practices, the need to implement warehouse and order fulfillment systems that reduce head count is critical.
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The number one killer of worker productivity is walk and search time. In many non-automated facilities, workers searching through rows of rack and shelving looking for the “right part” is creating the huge demand for labor. Automation has historically been able to reduce labor by up to two-thirds. In the old days (in other words, a few years ago), when factoring in labor and space savings created, the go-no-go equation to determine the return on investment (ROI) would justify the investment. This equation today must add in employee cost (if you can find them), the variable cost of running shifts short on labor, the impact on those days’ orders, and customer satisfaction levels. Depending on the level of automation your operations utilize, it’s imperative to understand your “right fit” solution of basic supply chain and warehouse management techniques such as software-driven slotting, intelligent pick lists, one-touch returns, and existing space maximization. Goods to person technologies that bring inventory to the operator (eliminating the walk and search) and integrated pick to light have become critical in saving floor space while reducing labor. Agile & Flexible Technologies When looking at your next steps, it’s critical to realize that bolting steel on to
your floor today is problematic. Issues such as delayed delivery and implementation, inability to rapidly modify your system to meet your changing requirements, and the capital-intensive nature of purchasing equipment based on your three- to five-year growth projections are virtually eliminated by utilizing agile technologies. To keep agile, lean, and flexible, we look at systems that provide rapid deployment and growth capabilities. Let’s start with autonomous mobile robots (AMRs), which have exploded onto the scene for great reasons. 1. Wide Array of Applications – AMRs provide solutions for order picking, returns, high-density storage, multiple levels of sortation, and material transportation. 2. Performance – Many AMRs provide top level system performance with picking rates of up to 450 lines per hour per person. 3. Availability of AMRs – These bots are often in stock or can be delivered in under 90 days.
4. Financial – The beauty of AMRs is the ability to acquire a system that meets an organization’s daily requirements. Then to meet peak periods, additional AMRs can be leased monthly and then returned after the spikes in activity are done. This provides a fantastic level of flexibility. 5. Portability – AMRs can be quickly and easily moved and utilized in different facilities as change is required. 6. Optimization – Most AMR systems software comes with automatic slotting algorithms to constantly optimize the system’s performance and easily accept new and seasonal SKUs into the system without additional labor. 7. Labor Savings – Most AMR systems will save between 50 to 75% of your existing manual labor requirements. 8. Flexibility – Many AMR systems allow you to set up new or ad-hoc workstations for flexible receiving, QC, inventory, picking, and replenishment tasks. Combining multiple makes and models of AMRs allows organizations to
increase a system’s performance to even greater levels. Sorters are another agile and flexible technology. There are conveyor sortation systems that are available as modules. The pre-built modules are delivered and installed in as little as a day. Besides the agility of these systems, the rapid deployment, system speed, reduced cost, and high-performance levels makes them ideal for most operations. Likewise, the portability of these modules allows changes in the system’s design, performance levels, and even location based on an operation’s changing need. Today’s issues center around a pandemic and labor shortages, and tomorrow, who knows? But most organizations that prioritize flexibility and agility in their operations will always be prepared for the next challenge.
Ed Romaine is VP of Marketing and Business Development for Conveyco. He can be reached at firstname.lastname@example.org.
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CHOOSING A PARCEL CONSULTANT PARTNER Even prior to the pandemic, e-commerce and the associated parcel volume showed significant growth every year, and the surge of online ordering associated with COVID-19 pushed the small-package market into a whole new level. This growth can present new opportunities for shippers, but it can also introduce a host of new challenges. Navigating the ever-increasing number of surcharges and fees while simultaneously trying to cut down on delivery times in order to maintain customer loyalty is enough to make your head spin. Add in the current carrier capacity constraints, and you'll see why being in this industry is not exactly a low-stress position! Luckily, partnering with a good consultant can help you streamline your parcel shipping operation and maximize its effectiveness. Check out the 7 solution providers below, and when you reach out, be sure to tell them you saw them in PARCEL.
Alexandretta is the global leader in parcel spend management for shippers spending between $1mm-$500mm+ on parcel annually. Our expertise allows us to review every aspect of parcel data and optimize spend via detailed analytics, negotiations support, contract optimization, strategy, regional carrier optimization, and business intelligence. Our dedicated team of parcel experts brings over 80 years of carrier pricing and sales expertise to our clients in the US, Canada, and Europe. Given current capacity issues, significant upward pressure on rates, as well as wholesale changes within shippers’ omni-channel fulfillment, there are many areas to consider for cost mitigation, cost reduction, service, transit and carrier mix. Alexandretta provides package, network, carrier and contract optimization, and advisory solutions as a trusted partner in unprecedented times. www.alexandrettaconsulting.com | email@example.com | 714.777.3377
CT Logistics will celebrate 99 years of supply chain management services in 2022. Since 1923, companies have leveraged CT for freight audit and payment and TMS solutions worldwide. CT customizes all solutions for our clients, supporting all modes, including parcel. CT's services will reduce your supply chain costs. CT audits every shipment to recover money from your total parcel, package, and freight expenditures. Rates and cost items are calculated, including bundled pricing, hundred weight, and dimensional pricing. Shipments are reviewed for address, account number, COD, dangerous or restricted goods, declared value, and oversize. Shipments, including third-party, are reviewed for inside, residential, dimensional, Saturday pickup or delivery, as well as GSRs. CT's services also include supply chain management, TMS solutions, LTL and Truckload shipment execution, bid management, shipment planning and execution software, as well as professional services for consulting and advising. CT's BI platform provides global supply chain visibility for benchmarking and trending, with graphical dashboards for management information. CT is SOCII and ISO 9001:2015 certified. www.ctlogistics.com | firstname.lastname@example.org | 216.267.2000, Ext. 2190 20 PARCELindustry.com NOVEMBER-DECEMBER 2021
Prolann Group Inc. Your mechanical engineering installation drawing development partner for parcel handling systems. For conveyor equipment plans, elevations & cross-sections including structural support systems, platforms, catwalks, access & safety c/w bills of material to your or your customer’s specifications & standards. Engineering expertise down to the final detail. Parcel conveyor consulting for development of concepts for new, reworked and sort added to systems.
www.prolann.com | email@example.com | 519.944.7824 Ext. 202
Get the best deal — guaranteed. To get the best deal in a carrier agreement negotiation, it's essential you know two things: what you can ask for and how to ask for it. Our expert team of former FedEx, UPS, and DHL pricing analysts have seen thousands of carrier agreements — plus, they’re backed by millions of benchmarking data points from our analytics platform. They’ll tell you which discounts you can negotiate, and how you can get the absolute best deal on your agreement — guaranteed. Reveelgroup.com | firstname.lastname@example.org | 877.421.4994
Many shippers have been running into the same difficulties lately — measuring unexpected rate increases, working to diversify their carrier mixes to mitigate risk, and overcoming this extremely competitive carrier pricing environment to secure better rates, to name a few. Shipware provides strategic support for high-volume parcel shippers to address those challenges — and many more — while helping reduce shipping & fulfillment costs an average of 21.5% without any hiccups to current operations. Our team will simplify the process of diversifying your carrier mix through Carrier Mix Optimization. In addition, we’ll procure best-inclass discounts and terms from your shipping carriers with our blend of deep domain expertise, data mining, bid analysis technology, rate benchmarking, and competitive bidding process. Contact Shipware today to learn more! www.shipware.com | email@example.com | 858.879.2020 |
The ability to not only identify the emerging problems in today’s evolving parcel market, but also solve them, can be a huge challenge. Higher shipping costs, delivery delays, last-minute delivery capacity cuts, and a lack of realtime visibility are among a growing number of concerns for shippers as many of them focus on e-commerce and multichannel strategies. Shippers are juggling a number of tasks while trying to push forward technology investments, new ideas, and strategies. Transportation Insight understands this fast-paced and ever-changing market. Its consultants have years of experience across supply chains and serves as a trusted partner for its clients. Having an experienced and neutral supply chain partner benefits shippers of all sizes and across all industries by providing shippers with practical and measurable solutions that result in agile and flexible supply chains, a requirement in today’s environment. Partner with Transportation Insight to gain a competitive edge. www.transportationinsight.com | firstname.lastname@example.org | 877.226.9950 NOVEMBER-DECEMBER 2021 PARCELindustry.com 21
AVOIDING THE CARRIER CAPACITY CRUNCH WITH LAST-MILE OFFERINGS
By Victor Zhou
ince the start of the pandemic and the associated influx of e-commerce, the shipping landscape has tilted heavily in favor of the carriers. Faced with record breaking volume and limited capacity, UPS, FedEx, and even regional or niche carriers such as OnTrac or Shipt are no longer pursuing revenue (and customers) as eagerly as in the pre-pandemic environment. While each local situation (and each local carrier rep) is different, this operational inflexibility has enhanced the flexibility of the carriers in selecting what kind of customers they prefer, as evidenced in Q4 2020 when both UPS and FedEx issued ultimatums and forced major rate increases of up to 20-50% upon some of their least profitable — and even optimal — clients. Looking forward, industry analysts are projecting a daily shortfall of five to 10 million packages to exceed carrier capacity for the current holiday season. When all is said and done, 2021’s peak season will likely be as bad or worse than 2020 in terms of higher costs,
increased service delays, and carrier capacity quotas. Will the logistics landscape ever improve again to one that is more favorable to shippers? The answer is yes and no. Both UPS and FedEx are investing millions of dollars to expand their capacity to catch up with the current market, but shippers will not likely see the benefits for years to come. The recently announced merger of OnTrac and LaserShip might eventually mean we see a “regional” carrier operating as a viable national competitor to UPS, FedEx, and USPS (and Amazon, if and when it ever launches its own propriety carrier). However, while we always recommend utilizing regionals as part of a multi-carrier solution where practical, this option is unfortunately no longer immediately available for many shippers as most regionals face the same capacity constraints as the major carriers, and are no longer taking new customers until 2022. But even as the ongoing supply chain crisis of 2020-2021 has exposed the depths of the vulnerabilities shippers face, it has also revealed the
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non-omnipotence of the UPS/FedEx duopoly in their failure to meet current market demands and challenges. There are market inefficiencies to exploit, and players from Europe to Silicon Valley to America’s heartland have been hard at work for years now materializing the next era of supply chain solutions. For many of these new companies (as well as Amazon), the opportunity lies in the least profitable and desirable space for UPS and FedEx: last-mile delivery. Two of the top trends surfacing in the marketplace are not new concepts by any means. Neither the gig economy nor drones and robotics represent new terms to the general public, but the integration of these technologies into the current supply chain has been expedited by the pandemic. Amazon has been making headlines for years, whether touting its drones as the future of package delivery or continuing to grow subsidiaries such as Amazon Flex. Since 2015, Amazon Flex has been crowdsourcing deliveries via individual ‘contractors’ driving their own personal vehicles (or bicycles, in some cases), not dissimilar to food and grocery delivery services such as Postmates or Fresh Direct. But Amazon is far from the only player in the same-day delivery game. UPS’s September acquisition of Roadie, a courier delivery company already utilized by major retailers such as Best Buy, shows that the major carriers themselves see the need to move beyond their traditional models. Because UPS’s union-based labor model serves as basically the antithesis of Roadie’s gig-based drivers, most expect Roadie to operate semi-independently from its new parent company, meaning that it will remain a viable “alternative” for shippers with a local presence in urban and suburban markets. Many brick and mortar retailers such as Best Buy and Home Depot have long been utilizing companies such as Roadie for their own direct to consumer needs. The latter has additionally just announced a partnership with GoLocal, a third-party delivery service launched by fellow retailer (and competitor) Walmart. Meanwhile, the Bentonville giant’s largest traditional competitor hasn’t been standing still either. 2017 saw Target acquiring both Grand Junction’s
proprietary routing technologies along with Shipt, a local delivery service that labels their drivers as “shoppers” and emphasizes a more personalized store to customer experience — essentially last-mile delivery with a personal touch. Driven by growth of 240% in delivery volume last year, Target followed up its strategy by acquiring Deliv in 2020, yet another third-party delivery company actively used by numerous retailers. Long story short, as quickly as these local delivery services are popping up, they are being snapped up by retail and carrier giants for their workforce, technology, or some combination of the two. If you’re a shipper with a geographically diverse footprint of physical locations, the option of leveraging your stores as micro-fulfillment centers (MFCs) is becoming essential in being able to fulfill customer expectations while avoiding the current major carrier logjam. A local store location would both facilitate the usage of flexible third-party services such as couriers and other crowdsourced options, when necessary, while also providing your
customers with a convenient hub for both curbside pickup and/or return drop-offs. If you don’t have a national footprint, now might be the time to prioritize the consideration of partnering with a 3PL. Pop-up distribution centers, once utilized by major retailers for the holiday season, might become a year-round necessity for large and small shippers, and companies like ShipBob or Ware2Go, the latter also owned by UPS, could allow you to come close to replicating a brick-and-mortar presence for better proximity to your customers. Do your due diligence and choose the 3PL(s) who are already utilizing all the modes mentioned above to deliver your product in an expedient and reliable manner. At the end of the day, the future isn’t quite here just yet. While the concept of crowdsourced or drone delivery methods sounds great, you still have to depend on the traditional carriers for most of your shipping needs. Local governments are still debating how to classify and regulate the gig workers powering many of these carrier alternatives. Traditional workplaces
such as UPS warehouses are suffering the same labor shortage as rideshare services such as Uber or Lyft, so today’s courier prices may see increases in parallel with those of the major carriers. While the supply chain crisis is indeed expediting resources and capital into developing tomorrow’s shipping world, your goal as a shipper is still to get through today… and yesterday’s backlog. Although regional carriers, courier services, and MFCs will become increasingly essential to your overall shipping strategy, the realistic goal for most shippers is still to complement these alternatives alongside their major carrier(s) of choice, not to replace them altogether.
Victor Zhou has served as a Senior Analyst for LJM Group since 2016 and has held similar roles in the parcel industry since 2011. He serves as the company’s lead analyst for Parcel Optimization Services, having played a key role in developing pricing agreements for many of the largest shippers in the United States.
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WAS TRULY A MONUMENTAL EVENT By Amanda Armendariz
irtual meeting options like Zoom certainly helped us all navigate the pandemic, both in our personal lives and our professional ones, but there’s nothing like gathering face to face to network, learn, and share knowledge. So, saying that it was good to be back in person this year for the 2021 PARCEL Forum would be a huge understatement. We at EventEvolution Management and PARCEL are thrilled to report that our first in-person event since the start of the pandemic was a huge success, and we thank our attendees, exhibitors, sponsors, and speakers for helping us put on another top-notch show. As always, one of the major topics of discussion was UPS and FedEx, but this time with a slightly different spin. This year, a lot of the talk focused on carrier capacity issues and how the shipper experience is no longer as seamless as it used to be. Now, due to the explosive growth in package volume, many shippers are finding that the carriers are not able to pick up some of their packages — sometimes without any advanced notice. And regional carriers, often seen as a trusty complement to the Big Two, are slammed with volume as well
(with many not accepting new clients until 2022), meaning that even those shippers who thought they would fall back on the regional carriers in a pinch found themselves scrambling as peak season approached. One solution that was being suggested quite a bit was to make sure that there were multiple avenues of getting the product to the consumer, whether that is implementing a ship-from-store policy or encouraging a buy online, pick-up in store (BOPIS) model. It should be noted that while these alternative delivery options are especially important during the holiday peak season, they really are something that should be available year-round, since the issues with carrier capacity are throwing the traditional delivery model in flux. As I made the rounds at the networking events and the exhibit hall, it was so encouraging to hear information and ideas like this being shared amongst attendees. Once again, we are so grateful to our sponsors, our exhibitors, our speakers, and those of you who attended and made the first post-COVID in-person event a huge success. We look forward to seeing you in Chicago for our 20th anniversary show next year, October 10-12! For more information, visit www.PARCELforum.com.
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Platinum Reception sponsored by TransImpact
Keynote Luncheon featuring Jim Cochrane, CEO, Package Shippers Association
Back to Business in the Exhibit Hall
The Conference Received a 4.5 out of 5 Star Rating
“Honestly, this is the best conference I've attended in terms of relevant content, overall value, and actionable take-aways.” - Tim Hogan, VP Inventory & Operations, Carbon2Cobalt
Thank you to our corporate partners!
Customer Experience Partner
Global Logistics Technology Partner
Material Handling Partner
Logistics Optimization Partner
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WINNING THE WAR AGAINST RETURNS
By Larry Lewis
rands of all sizes continue to work closely with logistics partners to overcome a seemingly never-ending series of obstacles to fulfill orders of essential and everyday consumer goods. From difficulty sourcing materials and transportation disruptions to port congestion and labor shortages, it is no secret that the past 18 months have proven difficult for global supply chains. Despite the unprecedented supply chain challenges and economic uncertainty, consumers continue to accelerate the use of online ordering. As consumer demand increases ahead of the holiday shopping season and online sales continue to gain momentum, brands are left determining how to get products out the door in a timely fashion while also facing a growing challenge: navigating the entire process in reverse. Success in the new year will be contingent on solving this critical issue because today’s shoppers expect returning a product to be as effortless as making the initial purchase. Examining the Situation Before identifying solutions to the seemingly daunting returns process, it is important to examine the complexities that make the problem unique.
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The returns process can be frustrating under even the best circumstances and is made only more challenging by the surge in e-commerce purchasing. As consumers were locked down, the demand for online retail exponentially increased, leaving retailers to scramble for solutions. Amazon noted a 27% year-over-year increase between October 2019-2020 largely due to the pandemic. With increased orders comes an uptick in returns. Customers may return items for various reasons, including receiving the wrong product, having a bad experience when ordering, or feeling buyer’s remorse. In other cases, the product does not meet expectations as it may be the wrong fit or poor quality. Sometimes the customer simply has a change of mind or finds the product for a lower price elsewhere. While the concept of returns isn’t new, constant, instantaneous buying through e-commerce channels has transformed the returns process. In a world where consumers can order a product and have it appear on their doorstep within hours, one might think that the returns process is similarly efficient. With various moving parts, however, this is simply not the case. Returns can complicate logistics processes, disrupt inventory management, make forecasting difficult, and eat into profit margins. The impact of multiple buying channels has added complexity to commerce, and online purchasing is pushing return rates higher. This, coupled with a new generation of consumers that has grown up accustomed to the convenience of e-commerce, places additional pressure on brands to deliver an excellent customer experience. According to the 2019 UPS Pulse of the Online Shopper, 42% of modern consumers look for free returns shipping when online shopping. Free returns ultimately drive a positive customer experience, and customers value companies that prioritize customer ease. By accurately managing expectations on how returns might affect the logistics process, suppliers can better prepare to manage returns. Streamlining with Shipping Labels After setting expectations, the first thing for suppliers to ask
themselves when navigating returns is, “Do I want to think about returns prior to shipping the item or after?” It is best to be prudent when thinking through the returns process, as time spent creating solutions on the front end results in long-term customer satisfaction. From there, companies can accurately prepare for the returns process before it begins. First, retailers must decide how they prefer to handle providing shipping labels. For customer convenience, suppliers can include a pre-paid, pre-addressed label in the shipment. While this may be tedious on the front end, it makes the process easier on the consumer as they don’t have to go out of their way to initiate a return. Alternatively, customers can download a digital return code upon dropping off the product being sent back. To go a step further, some companies offer direct return pick-ups, leaving the customer to complete the process with ease. At the very least, suppliers are wise to include a link to a PDF return label in their confirmation correspondence so that the customer may print it on their own. While there are many different approaches to shipping labels, be sure to prioritize the customer by making the returns process well-executed and easy to understand. Regardless of how you might handle the return shipment process, it is important to approach it with the same care as the rest of the outbound shipping experience. Investing in the Right Technology Up-to-date and accurate technology is crucial across today’s supply chain. Technology can provide greater visibility across your supply chain operation — from inventory to product tracking, to multi-modal shipping options, to customer status. This, in turn, will increase your efficiency, lower your operational costs and help ensure you give customers accurate, up-to-date information. By deploying technology, you can focus on personal relationships and making meaningful connections with suppliers, partners, and customers. Aside from the technology used to update the returns process, you can also utilize analytics technology to uncover trends in returns data, helping you tailor the returns process based on the target customer. Knowing the types of customers most likely to return items, which products are returned most often, and what reasons are most cited for returns can help brands implement stronger returns-prevention strategies. To win the war on returns this holiday season and beyond, brands need to prioritize setting realistic expectations for how your company approaches initiating returns. No matter how you handle the returns process, be sure to keep the customer experience in mind at each step. From prepaid shipping labels to pick-up returns, your company can create a loyal customer based upon how it handles the reverse logistics process. It is imperative to implement updated technologies into the supply chain process so that you can focus on aiding the consumer and determining why they might be returning their items. By learning more about customer patterns in returns, you can better tailor your inventory to build customer loyalty and prevent frequent returns in the future.
Larry Lewis is Director, Solutions Consulting, BluJay Solutions, now part of E2open.
Our Solution: FirstMile’s Xparcel Multi-Carrier E-Commerce 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.
https://firstmile.com 888.993.8594 Sales@firstmile.com
ENHANCING CUSTOMER LOYALTY THROUGH SUSTAINABLE PACKAGING
BY SEAN WEBB
ustainability has never been more top-of-mind for consumers than it is today. Now, they’re motivated to act on environmental sustainability and support companies that are investing in green solutions. Sustainability isn’t a ticket to heaven for companies anymore; rather, it’s a ticket to ride. In previous years, companies who invested and prioritized sustainability efforts were the first of their kind. In 2021, companies who have established environmentally focused goals are perceived as normal and expected. However, if a company has not already developed a sustainability plan, it negatively impacts
a customer’s perception of them. With that said, there are two groups of consumers that companies are trying to reach when it comes to communication about their sustainability efforts: the people that expect you to incorporate eco-friendly practices in everything that you do, and those that are happily surprised when they find out a company is implementing a new sustainable practice. As a result of a growing emphasis on sustainable practices, businesses must look at all parts of order fulfillment to reduce their carbon footprint. One developing focus for companies has been on eco-friendly packaging. According to a McKinsey & Company survey, more than half of US consumers are concerned about the environmental impact of packaging. These findings present companies with
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a great opportunity to identify their consumers’ sustainability preferences and act on what is important to them. For example, more than half of US consumers are concerned about a wide range of environmental issues pertaining to packaging and not just one single factor, such as plastic waste. By recognizing these shared values, it allows companies to genuinely connect with their customers and create positive, lasting relationships. Sustainable packaging is the first step to enhance customer loyalty. While that business strategy can’t act alone, its significance cannot be ignored. Packaging is the first thing that consumers look at when an item arrives at their doorstep and is the first criteria by which the item itself is judged. As the most outward testament to a brand and its commitment to sustainability,
packaging should not entail an oversized cardboard box full of void fill for a small item ordered. Instead, when their package arrives, consumers should receive a sustainable, fit-to-size box to make a worthwhile impression when they open it. Unboxing is a rapidly growing video trend that points to the importance of this step in the process. The New York Times reports that there are 74 million unboxing videos on various social media channels that showcase the good, the bad, and the ugly of online order packaging. Some videos feature the excitement of a consumer receiving their order, while others take a more critical point of view with them speaking out against online retailers. These negative videos show the amount of added void fill used for the order and the use of non-recyclable packaging. With the company name or branding visible to the whole world, it is critical that every package leaving the warehouse is made just right; otherwise, one bad experience can dissuade customers from returning the next time they shop online. Not only is there a growing pressure on companies to intentionally focus on sustainability, but they’re also plagued with ongoing labor shortages, increased shipping costs, and customers demanding faster delivery. To alleviate any customer woes, many retailers are turning to automated packaging systems for every order. These state-of-the-art auto-boxing systems measure, construct, seal, weigh, and label each variable dimension single- or multi-item order of either hard or soft goods in a custom-fit parcel while eliminating or reducing the need for void-fill material. Some solutions can auto-box up to 1,100 parcels per hour using only one or two operators. Due to fit-to-size packaging, they also offer an average of 50% reduction in shipping volume, resulting in fewer truckloads and reducing CO2 emissions. These technologies generate highly effective packaging and optimize all steps of parcel fulfillment while saving on labor, shipping, and material costs. With automated packaging solutions, sustainable packaging is no longer a pain point. These solutions allow shippers to create better warehouse efficiencies while keeping up with customer demand for sustainable packaging. In addition to sustainability, customers will enjoy these fit-to-size parcels as this type of packaging has been found to cause less damage to orders while in transit. By creating the smallest parcel necessary, businesses can lessen their environmental impact and lower shipping material costs for a more environmentally friendly parcel. With a more efficient, eco-friendly order fulfillment made possible, it will ultimately increase customer loyalty and satisfaction.
With 2022 almost upon us, planning your engineering resources for the next year is crucial. Prolann can help. Partnering with OEM’s, system integrators & end users as their mechanical engineering resource, Prolann assists with concept development & system modifications w/ complete installation drawings, BOM’s, plans, elevations & critical cross-sections, created in AutoCAD 3D & Inventor. Drawing development includes conveyors, structures, support steel, KIP loads & beam sizing with platforms, catwalks & access, to your & your customer’s specifications. Prolann also conducts on-site field checks and laser scanning of buildings for point cloud development & clash detection. Contact us to find out more.
519.944.7824 Ext 202 | www.prolann.com | email@example.com
Sean Webb is the Director of Automated Packaging Solutions NA at Sparck Technologies, a leading provider of automated packaging solutions. He can be reached at firstname.lastname@example.org. For more information, visit https://sparcktechnologies.com/us/.
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THE NEED FOR PARCEL INSURANCE If you are reading PARCEL, chances are, you probably have the need for parcel insurance. Today’s carriers do a phenomenal job of getting packages to their ultimate destinations, but it’s impossible to ensure that every package will arrive, intact, every single time — and for the customer who is on the receiving end of this lost or damaged package, their perception of your operation could quickly change, and not for the better. So it goes without saying that parcel insurance is a must for any shipper. If you are looking into getting or changing companies for parcel insurance, make sure to check out all of the following companies. Each one will answer your questions to help you find out which one fits best with your shipping need. And, as always, make sure to tell them you saw their details in PARCEL.
Parcel Insurance Plan has specialized in insuring packages since 1966. All policies are underwritten by Allianz Global Corporate & Specialty rated A+ Excellent by A.M. Best. Instead of using the carrier’s insurance or declared value, we invite you to choose PIP for your parcel insurance needs. We offer low rates, exceptional customer service, and claims are paid in 7-10 business days. To qualify, your company must ship insured packages over $100 in value on a daily basis or spend at least $1000 annually on declared value charges. Request a quote at www.pipinsure.com/parcelmedia/ today to see how much your company can save. www.pipinsure.com/parcelmedia | email@example.com | 800.325.7390
Ship with your carriers and insure with U-PIC! Customers typically save 50% - 90% off of carrier insurance rates and enjoy a simple online claims experience. Our insurance works with all major carriers on shipments originating in the US and Canada. Save time, save money, and ship with peace of mind!
ShipWorks Insurance is 100% hassle-free and cheaper than carrier insurance. There is no application process or forms to fill out. Simply select “ShipWorks Insurance” within ShipWorks for each shipment you want insured. Using ShipWorks Insurance will: Save money on insurance rates (up to 70% off carrier insurance rates) Save time insuring shipments and making claims Make your shipping experience easier ShipWorks logs each insured shipment to your online account. Browse and search shipments, view your balance, and make a claim easily, right within ShipWorks. www.shipworks.com | firstname.lastname@example.org
You work hard to provide a great customer experience. Don’t let a shipping loss or damage get in the way. InsureShield™ shipping insurance keeps you at the top of your game with claims paid fast through an online claims process, empowering you with best-inclass post-purchase experiences. Get affordable, multi-carrier coverage today. Visit upscapital.com or call 877.242.7930. The UPS Capital Insurance Agency, Inc [“UPSCIA”] Insurance Disclosure may be found at http://www.upscapital.com/disclosure. © 2021 United Parcel Service of America, Inc, UPS, UPS Capital, and InsureShield, are trademarks of United Parcel Service of America, Inc. All rights reserved
www.u-pic.com | email@example.com | 800.955.4623 | 30 PARCELindustry.com NOVEMBER-DECEMBER 2021
upscapital.com | 877.242.7930