REIMAGINING YOUR PARCEL OPERATION FOR A POST-PANDEMIC WORLD
THE 6 MOST IMPORTANT QUESTIONS TO ASK PROSPECTIVE CARRIERS P. 14 HOW DO YOU DETERMINE THE BEST LOCATION FOR YOUR NEW WAREHOUSE? P. 32 KEEPING UP WITH THE DELIVERY JETSONS: CREATIVE ORDER FULFILLMENT STRATEGIES TO IMPLEMENT P. 28
SEE YOU IN DC
CONTENTS /// Volume 28 | Issue 5
20 24 28 36 40 06 EDITOR’S NOTE Gear Up Now for Peak By Amanda Armendariz
08 SPEND PERSPECTIVES B2B Volumes Compete with B2C Volumes for Available Capacity By John Haber
10 OPERATIONAL EFFICIENCIES Getting Your Warehouse the Tools You Need By Susan Rider
12 PARCEL COUNSEL A Look Ahead to PARCEL Forum 2021 By Brent Wm. Primus, JD
14 SUPPLY CHAIN SUCCESS The 6 Most Important Questions to Ask Prospective Carriers By Logan Mullen
16 SURVEY: HOW OUR READERS RATE THE CARRIERS By Amanda Armendariz
20 IS A MULTI-CARRIER SOLUTION RIGHT FOR YOU? Six factors to consider. By Thomas Andersen
4 PARCELindustry.com SEPTEMBER-OCTOBER 2021
22 NEGOTIATING PRICING IN AN ENVIRONMENT OF RATE INCREASES 3 best practices to make your mark. By Adi Karamcheti
24 OPTIMIZING RETURNS TO REDUCE MARGIN EROSION By Michael Foy
26 GAINING PRODUCTIVITY AND FLEXIBILITY THROUGH AUTOMATION
By Josh Duane and Ray DeMelfi
28 KEEPING UP WITH THE (DELIVERY) JETSONS Creative order fulfillment strategies from the pandemic. By Rebecca Wyatt and Cam Elliot
30 AFTER A GLOBAL PANDEMIC, THE FUTURE OF DELIVERY IS LOCAL By Marc Gorlin
32 WHERE’S THE BEST LOCATION FOR YOUR NEW WAREHOUSE? By Stephen T. Hopper, PE
36 KEY FACTORS TO MULTIPLE SOURCING WITH REGIONAL CARRIERS By Stephanie Martin
38 COMPLEX BUSINESS RULES: A house built for success By Justin Cramer
40 DOOR WARS: OVERCOMING THE “LAST STEP” IN PARCEL DELIVERY By John Callan
44 SHIPPING VISIBILITY CAN HELP BOOST THE CUSTOMER DELIVERY EXPERIENCE By Mark Picarello
SPONSORED CONTENT 35 HOW TO BEAT SHIPPING CARRIER DELAYS AND RISING COSTS 43 EXPECT THE UNEXPECTED
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 ]
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. P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
EDITOR’S PICK EDITOR’SNOTE
GEAR UP NOW FOR PEAK By Amanda Armendariz
or those people not in the industry, it probably comes as a surprise that companies start planning for their holiday shipping season in the middle (or even at the beginning) of the summer. Even to someone like me, who has spent more than a decade as the editor of this publication covering every conceivable supply chain topic, it’s sometimes difficult to make the mental shift to planning for editorial detailing preparing for peak season and the holiday rush as my kids and I are lounging at the pool in 90-degree weather. Even now, in the sweltering days of mid-August as we’re experiencing the excitement of getting ready for a new school year and the fun that fall brings, the winter holidays seem so far off. But as any shipper knows, if you haven’t started already preparing for peak season, you’re behind. No shipper wants to experience delays during the busiest time of year, and with the pandemic still in full swing, this year will likely shape up to be one of the most chaotic in recent memory.
6 PARCELindustry.com SEPTEMBER-OCTOBER 2021
Since you are reading this publication, I’m betting that you are probably a shipper who has been through the peak season many times and therefore already started preparing for the rush. Even so, you may be a little nervous for this holiday shopping season. After all, last year was plagued with delivery delays, missing packages, and volume restrictions. No one wants to repeat that, but with COVID-19 still impacting every aspect of the economy, it’s pretty much inevitable that this year is going to be a repeat of 2020. But, lest I sound like the bearer of doom and gloom, rest assured that I think shippers are better equipped this year to handle these uncertainties. We at PARCEL are committed, as always, to being your informational partner as you navigate these ever-changing waters. The information contained in this issue and at our upcoming PARCEL Forum will help novice and veteran shippers alike as they strive to optimize their supply chain operations. You’ll notice that many of the articles in this issue have a PARCEL Forum speaker badge, so those pieces should give you a preview of what you can expect if you attend this year’s show. We hope to see you in Washington DC September 14-16, and you can get more information on the conference by visiting PARCELforum.com. We wish you a successful peak season, and as always, thanks for reading PARCEL.
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
UPS vs. FedEx Differences in Published vs Actual Time-in-Transit By Karl Wheeler
Amazon’s Speed Delivery Targets: Are They Reasonable for Merchants? 5 Tips on Meeting Them Regardless By Jarrett Streebin
Rethinking Last-Mile Delivery Solutions to Beat the Driver Shortage By Aaron Hageman
More Ecommerce Shipping Solutions for Less. More Transit Options More Delivery Choices More Integration Partners More Optimization
Less Expensive Less API Connections Less Invoicing Less Set Up Time
If you’d like to simplify your shipping with Firstmile contact us today! Oh, and our eCommerce shipping solutions are integrated with the most popular shipping and label creation platforms like ShipStation.
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www.firstmile.com | 888-993-8594
B2B VOLUMES COMPETE WITH B2C VOLUMES FOR AVAILABLE CAPACITY By John Haber
usiness-to-business (B2B) parcels are recovering and are competing with business-to-consumer (B2C) parcels for available last-mile capacity. According to UPS, B2C volumes are expected to remain a larger portion of its total US volume mix for the foreseeable future. However, during the second quarter, UPS’s B2C volumes declined 15.8% while B2B volumes increased 25.7% year-over-year. The B2B increase was attributed to retailers’ need for inventory replenishment. According to May data from the US Census Bureau, retail sales were up 24.5% year-over-year while retail inventories only increased 0.2% compared to May 2020. As a result, the inventories-to-sales ratio was 1.09 for May 2021, a significant decline compared to 1.34 for May 2020, when many retail stores were closed due to COVID-19. May’s ratio is also lower than the beginning of this year with January’s retail inventories-to-sales ratio at 1.19. Inventories can not keep up with sales, and a number of retail brands, such as Steve Madden, are noting in earnings calls that despite healthy year-over-year revenue gains, if they had more inventory, they could have increased revenue further. As such, there is pressure on the first and middle miles of supply chains to quickly move available inventories to warehouses, directly to stores, or direct to consumers which, in turn, is impacting trucking, rail, intermodal, domestic air, and parcel networks. As one can imagine, the impacts are resulting in higher rates, surcharges, and stretching capacity availability across all modes. As we head into the traditional holiday peak season, a battle for space on package cars, vans, and trucks may occur as retailers replenish inventories (B2B volumes) and consumers purchase the goods (B2C volumes). It’s likely
8 PARCELindustry.com SEPTEMBER-OCTOBER 2021
that B2B volumes will win out, particularly since they have historically been more profitable for FedEx and UPS. Indeed, retailers are expected to pay significantly more for their inventories and will pass those costs onto consumers. CRM software provider Salesforce expects retailers will pay $223 billion extra for goods in the second half of the year, a 62% increase compared to last year. It comprises an additional $12 billion spend with suppliers, $48 billion more in wage expenses, and $163 billion extra in logistics costs. Retailers will likely offset some of their last-mile shipping costs by emphasizing curbside pickups and buy online, pick-up in store (BOPIS) while FedEx and UPS will likely encourage consumers to utilize thirdparty pick-up and drop-off locations (B2B volumes) such as Dollar General, Michael’s, and FedEx and UPS stores instead of opting for residential delivery (B2C volumes). Regardless, this year’s holiday season is looking to be similar to last year’s holiday season. FedEx noted it is preparing for another “Shipathon” and is adding more capacity ahead of the season. The United States Postal Service (USPS) is in the midst of adding capacity as well. However, how much inventory is really needed is the big question. Forecasting inventory needs has become almost impossible in today’s environment. Many retailers
are trying to stockpile inventories but instead are seeing much of their inventories fly off of shelves. As a result, inventory replenishments are creating a huge tidal wave across supply chains as suppliers and manufacturers battle COVID, lack of ocean freight containers in the right locations, port congestion, higher spot rates, and more, which, in turn, is impacting all transportation modes downstream in supply chains. The issue is not likely to be resolved anytime soon. “The shipping challenges that home-related industries are experiencing have caused major delays for furniture, which we believe will be problems until the spring of 2022. We’re working to increase our inventories as the production and product flow improves,” said furniture retailer, Haverty’s, CEO Clarence Smith during the company’s second quarter earnings call. As such, the battle for capacity between B2B volumes and B2C volumes will likely persist for some time and will result in creative last-mile alternative solutions, such as curbside pickups, and also an increasing dependence on regional small parcel providers and other regional and local providers.
John Haber is the Founder and CEO of Spend Management Experts and can be reached at email@example.com.
GETTING YOUR WAREHOUSE THE TOOLS YOU NEED By Susan Rider
any times, in the distribution world, we supply chain professionals identify products that will enhance productivity, throughput, and accuracy, but there’s not a budget for those tools. When you do decide to ask for a tool that will enhance your productivity or reduce bottlenecks or manual labor, it’s important to put your “case” for the new item together. In today’s world, it is more and more difficult to find qualified workers; therefore, automation that you may not have been able to justify in the past could be justified now because of lack of qualified workers. Know the Audience and What Is Important to Them Remember who you are presenting to so you don’t get caught off guard. If you are presenting to the CFO, this person will be all about the return on investment and numbers. Because some CFOs don’t understand supply chain lingo, make sure you present your case in a way that he/she can understand the information. For example, if you are presenting a PTL (pick to light) system for order picking, it may be beneficial to give a brief statement to counteract the “We are doing just fine the way we are, so why invest?” mindset. A good argument for this example would be, “Well, if our volumes increase by 10%, we are out of room, and without increasing headcount by 20%, we will not be able to ship same day.” Arguments in terms they understand will help get their attention. Focus on dollars and percentages. Deal in Facts and Proof Points Executives want to hear about valid claims on return, so saying that the system will give between 10-40% gain probably will not be accepted. There may be case studies
10 PARCELindustry.com SEPTEMBER-OCTOBER 2021
from similar operations that would prove the return. Ask the vendor to partner with you on the information, but ensure the information is accurate. When presenting the “as is” and the “to be” case to executives, use factual information. Most executives do not want to hear about all the implementation details or the installation details. They want to know the high-level scope and return on investment, whether monetary or customer service-oriented. Stay out of the weeds, which could send your presentation off topic. Make sure you have the detail available should questions be asked, but don’t focus the presentation on the details.
distribution center doesn’t have a system that can keep up with lot codes, a total recall of defective product is not possible. Therefore, all orders must be recalled. But if the system was able to narrow it down to a lot, then only the lot would need to be recalled, and the system could tell you exactly where that lot shipped.
Introduce the Problem and Opportunities Before you jump right into the project, introduce the problem. For example, if you start by saying, “We are running out of space, and if there is not a redesign within the next 12 months, we won’t be able to ship the volumes projected for this year,” ears will definitely perk up. Once you present the problem, you can then focus on explaining the solution or opportunity for improvement.
Summarize the Request and Need At the end, give a summarization of the total presentation and finish with an investment strategy. Spread the cost out on a spreadsheet; many people do not get the project approved because they do not show the cash outlay when it happens. They just say it’s a $500,000 project, instead of that the cost of the project over two years will be X. Visit the show floor at PARCEL Forum ‘21 and check out all the tools and automation the exhibitors have displayed to increase the throughput, accuracy, and productivity in your facility.
Explain the Hazard or Risk if Investment Is not Made Sometimes, investments are made not to be able to keep up with orders today or to reduce cost today, but to be able to keep up with projected volumes or budget. A good example of risk or hazard to the company’s bottom line is in the pharmaceutical and food verticals. If the
Don’t Forget the Intangibles Often when presenting a case of return on investment, the intangibles (such as better customer service, better picking accuracy, and more inventory availability) are forgotten. However, these could be a compelling reason to invest, so don’t leave them out.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at firstname.lastname@example.org.
A LOOK AHEAD TO PARCEL FORUM 2021 By Brent Wm. Primus, J.D.
n this installment of PARCEL Counsel, we will take a “sneak preview” of two of the presentations at this year’s PARCEL Forum. For the first time in many years, I will not be attending the Forum; however, my colleague, Andrew Danas, a Washington DC attorney, will be presenting in my stead. His presentation will be, “Avoid These Top Four Legal Issues,” and he will also be participating in the “Navigating International Parcel Shipping” panel. As transportation attorneys, we are frequently asked to identify the major legal issues that pose risks to parcel shippers when shipping domestically and internationally. The short answer is that these risks fall into four categories: Not knowing your contract parties. Not knowing the terms of the contracts affecting your transactions. Not knowing the rules and regulations that govern your shipment. Not having a compliance program that will minimize or avoid these risks. Not Knowing Your Contract Parties. Too often, shippers do not fully evaluate either their customers or their transportation providers. There are multiple risks in not having sufficient background information.
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For example, is your contract counterparty authorized to do business and credit worthy? Is it on any domestic or international government sanctions lists? Does the engaged transportation provider have proper licenses and operating authorities? Is it actually a carrier or is it in fact a non-carrier intermediary? If an intermediary, do you know the identity of the actual carrier? What assurance do you have that if you pay the intermediary, the intermediary will pay the carrier? Not Knowing Your Contract Terms. It is very common for parties to engage in commercial transactions over a long period of time without paying attention to “boilerplate” contract terms, only to discover, to their surprise, at the time a dispute arises the binding legal terms of the relationship. Have you actually received and reviewed the terms and conditions of all contracts? Are there any terms that are incorporated by reference contained in a carrier’s tariff or on a website? If you signed a credit agreement or another document, did that document incorporate terms and conditions by reference… and give the issuing party the right to change those terms at any time? Not Knowing the Rules and Regulations Governing Your Shipment. There are many rules and regulations creating legal obligations for shippers. Do you know these obliga-
tions when tendering goods in domestic or international surface, air, or ocean transport? Do you know a shipper’s obligations under the federal HAZMAT regulations and under US import and export laws, including US sanctions laws? What about US anti-terrorist laws? Not Having a Legal Compliance Program. By now, it should be clear that taking pro-active steps to adopt procedures to address these risks is a key component to minimizing them in shipping goods whether internationally or domestically. Having a basic legal compliance program, with a checklist of dos and don’ts in various transactions, is the first step that any shipper of parcel goods can take in mitigating legal risk. To sum up, while these topics will be addressed at PARCEL Forum, for readers not attending the Forum, it should be noted that these topics have been discussed in previous PARCEL Counsel columns and we will continue to do so in the future. 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 in the “Content Library” on the PARCEL website (PARCELindustry.com). Your questions are welcome at email@example.com.
THE 6 MOST IMPORTANT QUESTIONS TO ASK PROSPECTIVE CARRIERS By Logan Mullen
s the summer of 2021 has seen a reduction in the COVID-19 lockdowns, what certainly has not been reduced are the capacity issues facing the parcel marketplace. While engaging with new partners in any space always involves a feeling-out process, doing so with a partner who has almost all the leverage, such as parcel carriers in 2021, is a slippery slope. For that reason, these are the top six things you should be asking your new prospective parcel partners. 1. When are you able to begin taking new business? As FedEx and UPS have begun putting caps on numbers of trailers at many large- and medium-sized shipping operations, shippers have needed to transition that volume as soon as possible to meet customer needs. While cost is important, the fact of the matter is, if you want to make money, you have to be able to deliver to your customer, no matter how much that costs. This is likely the most important question when talking about capacity in 2021. 2. Is your capacity able to scale with us? E-commerce shipping is growing, and that growth is expected to continue. As brands grow, it will most certainly be because of a growth in online shopping and e-commerce shipping. Therefore, if the business goes up 10%, it will coincide with a similar growth in package count in direct-to-consumer shipping. As you are having conversations with your new or prospective partners, you want to make sure they are going to be pushing initiatives to support growth in their network as well as yours. 3. What is your policy on adding new surcharges mid-year, and are these surcharges negotiable?
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When it comes to new and increased surcharges, it is no secret at this point that FedEx and UPS have led the way. However, several regional carriers have followed suit in adding new surcharges mid-year. Before signing any agreement, you want to determine if your new partners are likely to do this, and if so, whether you can negotiate or decline any new/increased surcharges as has sometimes been possible in the past. 4. What happens if we need more capacity on short notice? While most shippers have a good grasp on their estimated volume in a week or month, unforeseen things can happen. Whether it be unexpected publicity or better than expected sales, you need to be prepared to scale on a moment’s notice. Therefore, you need partner(s) who are willing to work with you to find solutions when you are in a bind. 5. How do you handle your last-mile delivery? The last mile is always a tricky conversation to navigate, as each carrier or courier handles this piece at least slightly differently. FedEx is transitioning all its packages away from the postal model, while UPS continues to grow its partnership with the USPS. Likewise for regional and niche carriers, each carrier acts differently. A couple of important topics to touch on are the following: Do you own your own fleet and deliver directly to customers? If the answer is yes, do your employees act as independent contractors or are they part of a union? The answer to this could
affect you if a labor strike ever presented itself. If the answer is no to owning its own fleet, does the USPS deliver the packages? As some unpleasant experiences pop into mind from the last year and a half, these questions will help you weed out potential carriers. 6. What was your on-time delivery like during the pandemic? Again, this was a hot topic in 2020 and will likely continue to be as we get into the fall and winter of months of 2021, especially during peak season. It is going to be important to hit milestones as we approach the holidays, and the fact is, several carriers did very poorly at this in 2020. When you are paying for upgraded services, you expect your partners to deliver on those services. Therefore, you need to know how any potential partner performed in this area over the last year, and how they plan to improve in 2021. The days of choosing a carrier based solely on the bottom line may be behind us. Instead, the focus has shifted to who can deliver the best combination of reliability, rates, and partnership — and these questions should help you make a decision.
Logan Mullen is a Senior 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 firstname.lastname@example.org.
SURVEY: HOW OUR READERS RATE THE
Carrier Performance On a scale of 1-5, with 5 being the highest rating.
Customer Service FedEx | 3.00 UPS | 3.38
By Amanda Armendariz
USPS | 2.34
2020 was certainly a tumultuous year for parcel shippers, and 2021 is shaping up to be no different. This year’s survey showed a slight decrease in both the number of our readers who use FedEx and some of its scores, while the number of shippers who utilize UPS and USPS has increased slightly, as have some of their scores. (If you’re curious about how our readers ranked the carriers in the past, you can head to PARCELindustry.com/ magazine. This will take you to our digital archives, where you’ll be able to view past September/October issues, as the survey is always in that edition). Since we have a lot of info and not a lot of room, without further ado, let’s get to the results.
On-time Service Performance FedEx | 2.55 UPS | 3.33 USPS | 2.34
(driver courtesy, package handling)
FedEx | 2.92 For the full survey, visit PARCELindustry.com/ 2021carriersurvey or scan the QR code
UPS | 3.48
Did you use FedEx in the last 12 months for domestic parcel shipping? 12.77%
USPS | 2.76
Claims Processing FedEx | 2.55
UPS | 2.65 USPS | 1.79
Refunds for Late Delivery Did you use UPS in the last 12 months for domestic parcel shipping?
Did you use USPS in the last 12 months for domestic parcel shipping?
FedEx | 2.24 UPS | 2.63 USPS | 1.69
29.27% Yes No
Pricing (published rates for service levels, willingness/fairness of negotiations)
FedEx | 2.58 UPS | 2.52 USPS | 2.41
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Other Insights into Our Industry
On a scale of 1-5, with 5 being the highest rating.
Seventy percent of our readers reached out to their carrier(s) to discuss COVID concerns last year, so this year’s 83% is a decent increase.
The number of our readers who said the carriers handled their concerns regarding COVID-19 “very well” grew compared to last year, but so did the number of those who said their concerns were handled “not at all well.” 3.03%
How important are regional carriers to your mix? Not at all important
48.48% 17.50% Very well; they addressed all concerns and handled them to the best of their abilities
Somewhat unimportant Somewhat important Important Very important
Somewhat well Not at all; we experienced significant disruptions that we feel could have been handled by the carriers to at least some extent Other
SEPTEMBER-OCTOBER 2021 PARCELindustry.com 17
If you have modified your PRIMARY carrier in 2021, what was your main reason for doing so? 4.35% 4.35%
If regional carriers are part of your shipping mix, what percentage of parcels do you ship with regional carriers? 1-5%
Needed to achieve better pricing Dissatisfied with service Changed our level of service (i.e., air to ground) Diversified to use more carriers Reduced the number of carriers used Previous carrier was unable to help us effectively during the COVID-19 pandemic
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more than 50%
If you use regional carriers, what is the PRIMARY reason you chose to do so? Cost Service
9.38% 9.38% 50%
Speed Reliability Other
IS A MULTI-CARRIER SOLUTION RIGHT FOR YOU? SIX FACTORS TO CONSIDER
By Thomas Andersen
n an era of restricted carrier capacity, ongoing changes to carrier pricing practices, and changing consumer behavior, one may wonder, is now the right time to diversify your stable of carriers? Many shippers faced monumental difficulties last year when they were surprised by their sole carrier placing limits on peak season volume, and many large enterprise shippers received unexpected rate increases, often ranging from 20% to 50%. A shift to a multi-carrier solution may help mitigate these issues and create opportunities for cost reductions and an improved customer experience. That said, having multiple carriers is not necessary for all organizations, and there is a myriad of advantages and disadvantages associated with creating a multi-carrier environment.
Savings Opportunities: Pricing can vary substantially between carriers, even between those that offer similar services. In addition, regional carriers, consolidators, and others can be substantially more cost-effective based on service, zone, weight, or applicable accessorial charges. They can offer superior service performance in select areas, often at much lower prices. Most of these “other” carriers carve out a niche for a smaller overall percentage of the shipper’s volume. Even the global carriers can offer superior transit times and solutions for certain types of shipments, perhaps strategically positioning an offer for express volume, international shipments, or other select shipments. Being able to optimize service solutions based on these factors can improve service performance while
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reducing costs. These creative solutions often require out-of-the-box thinking and effective communication between the carrier representatives and the shipper. Cost Implications: When including additional carriers into your portfolio, there are several cost implications that must be considered. Since most agreements are structured based on volume requirements, often with a limited buffer to shift volume away, the costs that are related to making a shift to other carriers can be quite substantial. It should be noted that volume is the primary driver when negotiating most carrier agreements, so any lost savings resulting from lesser volume should be weighed against savings that are gained elsewhere. There are additional direct costs tied to investments in technology to manage the shipment processing, as well as additional resources to manage carrier relationships and processes. Operational Flexibility: In today’s environment, where the carriers have exercised their ability to increase rates or cancel agreements, typically upon 30 days’ notice, having the flexibility to shift volume to other carriers can be essential. With capacity constraints being an ongoing issue, having additional carrier options is not only a nice alternative, but often critical to a long-term successful supply chain model. Regional carriers, USPS consolidators, and other niche carriers can often service a specific segment at a fraction of the cost of the global carriers, so carving out a portion of one’s volume with non-global carriers can be a great solution, should one’s shipment profile and volume support it. Customer Service: With the shift to two-day, next-day, and even same-day delivery, many companies continue to shift towards local and regional carrier options that can service clients quicker, while at a reasonable rate. Adapting the local carrier model will continue to play a key role for companies with a local brick and mortar presence. Others may find other ways to differentiate, focusing on a high level of service. This may include allowing clients to choose the carrier and service. Although the industry continues to shift from a carrier-specific solution to focusing more on optimal delivery dates,
there are companies that continue to focus on providing carrier options to their clients. It may be that one services a specific area more effectively than others or simply caters to a sense of comfort for the recipient. It tends to come at a cost, however. Complexity: Managing multiple carriers can be complex. In addition to managing and negotiating multiple agreements, one has to ensure that volume requirements are met. Unless a simple routing process is developed, investment in a carrier-agnostic shipping system is typically a necessity. This allows one to implement agreements from all applicable carriers, allowing employees to rate shop based on time in transit and cost. It eliminates much of the guesswork about which carrier and service is the best option, saving time and money. It increases productivity and can maximize the service performance and value. Most can also be integrated with one’s WMS, ERP, and other systems, resulting in streamlining and improving additional processes. The cost can be minimal to
upwards of several hundred thousand dollars to purchase and to maintain. Keeping Carriers Honest: A multi-carrier model helps keep carriers in check. When carriers know that options exist, they remain more engaged and interested in accommodating pricing-related and other requests. If rate shopping is applied, shipping decisions are no longer perceived to be made by the shipper, but rather the technology that’s in place. The threat of making a carrier switch also exists when a carrier-agnostic shipping system exists. That transition can otherwise take weeks or months, versus simply implementing new pricing and transitioning volume as soon as the next day. There’s no single solution that’s best for every organization. For smaller to midsize shippers, the likelihood of having volume limitations and substantial rate increases applied is certainly less likely than enterprise accounts. Managing a single agreement and relationship is simpler and can often involve utilizing the carriers’ technology for shipment processing. If the volume is limited and
the shipment profile lacks complexity, managing a single carrier relationship may just be the most effective solution. Yet, there are a variety of other factors that may contribute towards adding carriers to the mix of business, so start by assessing the current shipment profile. As for the relevant data points, one should identify if shipments within the current portfolio are better suited for another service level or carrier. Common scenarios may include lightweight residential shipments that can be serviced by a USPS-integrated solution, identifying shipments that can be serviced by regional and local carrier models, and if service performance and cost benefits exist or may be feasible with another carrier.
Thomas Andersen is Partner/EVP of Supply Chain Services for LJM Group. He and Kenneth Moyer (Partner/EVP of Supply Chain Strategies for LJM Group) will be speaking more on this topic on Wednesday, September 15 at this year’s PARCEL Forum.
SEPTEMBER-OCTOBER 2021 PARCELindustry.com 21
NEGOTIATING PRICING IN AN ENVIRONMENT OF RATE INCREASES:
3 BEST PRACTICES TO MAKE YOUR MARK
BY ADI KARAMCHETI
n the current parcel market, demand heavily outweighs supply. The carriers are leveraging their temporary advantages as much as possible. So, is there really nothing to do but wait until things come back into balance? Thankfully, no. It’s still a competitive market with plenty of alternatives you can leverage. The carrier you’re not using today can be your best friend in your next contract negotiation. But regardless of whether you want to switch, here are three proactive steps you can take to optimize your chance of success, even in the current seller’s market. Everyone likes working with people or companies that make their jobs easier. There’s a lot you can do to make your drivers and sales reps happy and create incentives for them to ensure your operational and pricing needs are met. My colleague, Paul Yaussy, recently published an article called “The Key to Success for the Carrier/Shipper Relationship,” in the July/August edition of PARCEL. Some of his underutilized practices for drivers might seem like small gestures, but they go a long way.
Come negotiation time, having allies in the carrier operations department is surprisingly helpful. Proactive steps like ensuring packages are ready when your driver arrives, making it easy for your driver to access your pickup area and keeping it clean of debris, being flexible with your pickup window, and helping them keep their tight schedules and stay healthy by providing water on hot days all go a long way in establishing goodwill. Carrier sales reps also have challenges you can simplify. Carriers have laid off salespeople, placing increased demands on remaining reps. As we come out of COVID, reps will likely add more travel time to an already historically busy workday. Like the drivers, reps have goals to meet. In addition to volume and revenue targets, they’re often measured on other, more nuanced administrative goals like completing a number of client visits per day (sometimes accompanied by their manager), delivering a certain number of business reviews each month, and pitching certain products. Making yourself available to help them hit these goals will build goodwill with your rep, provide you with valuable insights into your own shipping profile, and potentially expose additional ways to collaborate. And making anyone look good in front of their boss is something they will definitely remember come negotiation time.
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Your shipping profile: Understand it and communicate it to strengthen your negotiating position. You rely on your carrier reps for insight into the complex carrier pricing structures and increasing number of rate changes each year, but their heads might be spinning just as quickly as yours. They’re often granted limited insight into the reasoning behind pricing decisions, even for their own accounts, and rarely have access to the same data used by other departments. Similarly, their internal partners are relying on those same reps to offer insight into the needs of your account. Help them simplify at least half this process by proactively communicating what you have to offer and what you need. The better you are at telling your own parcel story, the easier it will be for your sales rep to communicate those details to their pricing department. Provide packages per day, average weights, dimensions, service levels, commercial/residential, designation, etc. Put your story on paper. This becomes a business case your rep can hand to their pricing department. The more of YOUR story they can tell, the greater the impact you can have on your negotiation. In the absence of information, pricing departments must assume the worst to
protect their employer. So, for example, if your residential customers each receive two packages per shipment, it’s important to communicate that; it practically doubles the carrier’s assumed delivery density, dramatically lowering the delivery costs for the carrier. How do you know what the carriers want? You know what you have; the key is linking that to what the carriers want. If the majority of the below list describes your shipping profile, congratulations on being a unicorn. But even if it doesn’t, highlight what you’ve got. These characteristics are almost universally valued: 1. Shorter zones. 2. Commercial deliveries. 3. Multi-piece deliveries. 4. Weights between 10 and 20 pounds. 5. Dense and securely packaged products. 6. Urban and suburban pickups and deliveries.
7. Steady volume throughout the year, or at least off-peak spikes to help smooth network demand. 8. Small- to medium-sized business (strong margins, tomorrow’s large businesses). If you really want to go the extra mile to understand the carriers, listen to their quarterly earnings call. But, if you take this step, keep in mind that much of what you learn might be spun to show the carrier in the best possible light as they work to meet, beat, or set investor expectations. Also, many regional carriers and other good options are still privately held and may not offer the same insight into their operations. Another excellent option is to work with third-party shipping experts, since they can provide you with an unbiased view of the carriers and how they operate. While your drivers and sales reps will often work very hard to do their best for you, they are ultimately employed by the carriers.
Thriving in the Current Environment It’s true that carriers have rare advantages in the current environment, but things are not hopeless. Be proactive and take these steps to ensure a successful pricing negotiation: 1. Maintain a long-term focus as you build relationships with your drivers, operations contacts, and sales representatives. 2. Know who you are as a shipper and make sure you communicate that to your carrier reps. 3. Understand how your shipping profile matches what the carriers are looking for and highlight those strengths.
Adi Karamcheti is Consultant, Professional Services at Shipware, LLC, a San Diego-based parcel consulting ﬁrm that specializes in cost reduction and recovery services. He, along with his colleagues Rob Martinez, Trevor Outman, and David Sullivan, will be speaking more on this topic on Tuesday, September 14 at this year’s PARCEL Forum.
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OPTIMIZING RETURNS TO REDUCE MARGIN EROSION
BY MICHAEL FOY
n the early days of e-commerce, returns flew under operation’s and finance’s radar, and perhaps rightly so. The volume of e-commerce purchases was low, and returns were minimal and simple. During these early days, returns meant including a preprinted returns shipping label in the original package, which put the onus of the return squarely in the consumer’s court. Quantifying the cost of returns was basically relegated to parcel transportation costs and determining the returner’s share of that cost. Amazon’s returns model and the pandemic changed the rules — and the tools — of engagement. E-commerce sales grew by 32% from the previous year, while returns grew nearly five times that amount. Consequently, returns management became a top priority for many forward-thinking trading partners. Margin erosion from excessive returns began eating up bottom-line dollars, but to what extent remained a mystery.
While margins and return costs vary greatly by industry, company, and category, trading partners are being forced to measure and address their returns practices to avoid further diluting their hard-earned profits. Therefore, product returns have secured a spot on the executive’s “short list.” Typically, companies fall into one of three classifications for returns management and processing.
in place. However, they are not proactively mining their data; therefore, insights are limited — which is a key barrier to improving the returns process. As the saying goes, “You cannot improve what you cannot measure.” Companies in this classification will soon step up their returns effort as they learn business-asusual is not a sustainable approach.
Early Adopters The early adopters, seeing the writing on the wall, understand returns-related costs and are actively engaged in implementing solutions that provide intelligence and visibility into the post-purchase activities and behaviors of their consumers. They have embraced score-carding consumers and are actively adjusting return policies accordingly. Early adopters are also incorporating rules-based engines, machine learning, or AI to identify optimal disposition methods to maximize value recovery and minimize environmental impacts.
The Laggards The final classification is the laggards. These companies view returns as a necessary evil — one that cannot be stopped without risking the loss of a shopper. To combat the escalating cost of returns, these companies often focus on top-line growth. This, of course, can exacerbate the issue until they clearly understand the hard and soft costs of returns. Once this is determined, they can begin improving returns processes and policies by comparing these costs to the lifetime value of a customer. All companies, regardless of classification, must embrace returns as a non-linear process and suppress the urge to reallocate resources from forward logistics to reverse logistics.
Taking Care of Business (TCB) Companies in the TCB category have mature returns models and processes
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Self-Evaluating Your Returns Management Methodologies The path to “returns enlightenment” begins by understanding where you are in your current approach and then comparing your position to where you want to be. This is not as simple as it may sound given the complexities involved, such as disparate data and metrics, change management, shortage of labor, and organizational disruption — just to name a few. A good starting point is to honestly agree or disagree with the statements below. Keep in mind, there are no “right” or “wrong” answers since these statements are merely to help you understand your current position. We have staff dedicated to returns management or outsource this function. We know our true return cost components (soft and hard): Items like labor, customer service, space, transportation, cost of money, inspection handling, restocking, customer friction (loss of future orders), etc.
We monitor the return’s cost impact by time periods, customers, trends, etc. We have analyzed our reverse logistics network model in the last 12 months to optimize the facilities network and zones/distances where returns are sent. We can determine optimal disposition methods while adhering to the returns mandates of our clients/brands. Our company focuses and monitors the cycle time of a return just like we do on the speed of fulfilling an order. Our 3PL (if utilized) knows how to do returns and we understand how they bill us for these returns. We communicate with shoppers across the entire path-to-purchase and path-to-return. We are reviewing or revising our returns policies every six months. Our sustainability efforts are integrated with our returns management.
Keeping Returns Costs in Check There are traditional ways to lower the return costs, such as negotiating parcel rates and altering your return policies. Other, non-traditional cost containment measures include shortening return zone exposure, refining inspection processes, improving returns technology, or outsourcing the entire returns management process. Additionally, decision support systems can increase the quality and speed of decision-making. These intelligent systems balance costs with benefits, which is critical as parcel, warehouse space, and labor costs escalate at unprecedented rates.
Michael Foy is Director of Business Development for Inmar Intelligence. He can be reached at email@example.com. He will be speaking more on this topic at this year’s PARCEL Forum on September 15.
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GAINING PRODUCTIVITY AND FLEXIBILITY THROUGH AUTOMATION By Josh Duane and Ray DeMelfi
usinesses across the world are seeing increasing and ever-changing demands from their customers. Many companies are looking to automate processes with the intent of increasing productivity. They are turning to conveyor, robotics, and software to meet customer demands while combating the increasingly hard to find and rapidly rising costs of labor. This increase in automation can be beneficial in boosting productivity but can have the downside of limiting a company’s flexibility. The key to getting the full benefits of automation, while being in a position to adapt to any future changes in business, is combining the proper plan with the right level of automation. Planning for Automation When considering automation, starting with a well-thought-out plan often differentiates those whose projects succeed from those that fail. Some key steps in planning for automation are: Define restraints: Generally speaking, there are only a handful of reasons that companies consider automating
processes, and the most persistent motivators today are: to increase productivity, to supplement labor in cases where there are shortages, to combat the rising cost of labor, and to provide a safer working environment. The different ways to address these automation drivers are numerous. The key to fixing the issue is understanding and clearly defining what is restraining the operation. Determine business objectives: Determining what is holding the business back is important, but on its own, it does not paint the full picture. The goals of a business are equally important in determining what to automate and how much automation is justifiable. If, for example, the objective of a business is to decrease the ship time of an order, it would need to be paired with the restraints that hinder the ability for the business to ship same day. This pairing will define the framework for what needs to be automated. Have a plan for growth: Having a strategy for growth in place prior to the implementation of automation allows a business to move quickly when growth occurs. Designing the system to handle
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more volume than originally needed, having a plan for a future system expansion that is minimally invasive to the operating business, and having clearly defined metrics to determine what course of action to take are all things that can be done to facilitate future business growth. Have a full understanding of the impact: Newton’s third law has taught us that “for every action, there is an equal and opposite reaction.” This holds true for the implementation of automation. Addressing the restraint of a function within the business will have an impact on other connected or tangential areas. For instance, if the business’s objective is to reduce labor in the picking process and the decision to automate to increase productivity in picking is made, this increase in productivity may have a negative impact in packing and shipping. It is imperative to be able to follow the change through the system and have a plan to address all areas that the change could impact. Determining the Right Automation Fit Just because an action can be
automated does not mean that it should be. Determining the right automation to address the objective, remain flexible, and provide a positive return on investment can be a daunting task. In most instances, it is not going to make sense for a company to go from a completely manual operation to a fully automated, lights-out, facility. A few things that can determine the right level of automation are: Know where to focus automation efforts: Technological advancements have made the automation of virtually any task possible. With options being limitless, knowing where to focus your attention is important. Tasks that are repetitive, labor-intensive, and require a high level of accuracy and precision are great candidates for automation. Implementing a crawl, walk, run approach: The definition of crawl, walk, run will vary from business to business. One company’s run may be a brisk jog through the neighborhood, while another’s may be Usain Bolt’s record-setting 100M dash. The key in the crawl, walk,
run approach is to determine what level of automation makes sense at each step and at what cadence. You can build your growth plan for walk and run if you design crawl correctly. Avoid Automation Pitfalls Inflexibility: Plan for growth and future change. Implementing a system that is too rigid can impact the direction of future business decisions. It is important to plan for growth and have multiple uses for your automation where possible. Validate: Exert the effort required up front to fully validate the automation and its application to your operating environment. Choosing a solution and then later discovering it only supports a fraction of your business may erode the benefit and lead to unnecessary process complexity. Overspending: It’s easy to get caught up in all of the great things that automation can do for your business. Making sure that your ideas are not larger than your budget is imperative. Building a realistic ROI business case
prior to implementing any automation solution is essential. Having no plan after implementation: Implementing the right level of automation is only part of the battle. If there is no plan for support in place after the implementation, the project will fail. Ensuring that procedures are followed, metrics are tracked, and the system is properly maintained after implementation is critical.
Josh Duane is the Director of Sales for Hy-Tek Integrated Systems Southern Operations Division. Hy-Tek designs and implements material handling and automation systems across a multitude of industries. Josh can be reached at firstname.lastname@example.org. Ray DeMelﬁ is responsible for leading the Johnson Stephens Consulting operations practice, which includes supply chain strategy, facilities planning/design, and process improvement services. He can be reached at raydemelﬁ@johnsonstephens.com.
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By Rebecca Wyatt and Cam Elliott
KEEPING UP WITH THE (DELIVERY) JETSONS: Creative Order Fulfillment Strategies from the Pandemic
t first thought, order fulfilling robots and virtual reality lipstick try-on may conjure a mental image of something right out of The Jetsons. The long-running TV series portrayed a utopian future of three-day workweeks, aero cars, and even a robot maid called Rosie — a life simplified by all manner of technological advances, leaving plenty of time for leisure. While current trends in order fulfillment are driven by a need for customer satisfaction and cost savings, as opposed to more time for leisure, order fulfillment strategy has changed, and technologies in place today are a lot closer to The Jetsons than you may realize — and the urgency to embrace the trends of the future is very real. Let’s take a look at three trends you should not ignore. Micro-fulfillment It’s not difficult to understand why so many retailers, especially grocers and big box ones, began looking to create
smaller versions of their warehouses and distribution centers inside their less-populated (and sometimes closed) store spaces. At the heart of micro-fulfillment strategies is an increased desire to meet the customer where they’re at, a positive message during the pandemic. Micro-fulfillment often blends the power and efficiency of a shipper’s warehouses and/or distribution centers with the swiftness and personalization of regional fulfillment, sometimes even including last-mile delivery. Some see micro-fulfillment as a natural progression of another popular order-fulfillment strategy during the pandemic (BOPIS/ curbside pickup), the premise being that widespread investment and expansion of these programs lead to retailers naturally rethinking their retail spaces, along with reconsidering how they can best use all of their available resources to fulfill as quickly as possible to the consumer and out-maneuver pandemic-driven logistical concerns. Both Kroger and Target have notably invested heavily into micro-fulfillment in the last year,
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announcing their own highly specialized order fulfillment centers. Kroger believes its planned two dedicated order fulfillment centers will reduce the costs and increase the speed of online grocery delivery, and, while announcing their planned order fulfillment center, Target stated its belief that “shipping a package from a store rather than a fulfillment center is 40% cheaper”. Robotic Order Fulfillment While robots have been promised as a serious and innovative game-changer for shippers for some time now, their adoption has been slow as brands remained steadfast to carefully planned budgets. Then came the pandemic, which quickly threw those plans off course and gave shippers new reason to consider more long-term opportunities. According to a recent RetailWire survey, “73% of large retailers say the importance of using robotics in warehouses or distribution centers has increased due to factors that emerged during the pandemic.” Whether they’re facilitating order picking or packing, robots make great and fast additions to the socially-distanced warehouse. And not only are they speedier than their human counterparts, 100% of their activity data can be mined for greater network goals, like inventory management. But their benefits go beyond the warehouse; many brick-and-mortar retailers (especially grocers) have found use for robots in scanning product shelves for low stock, price verification, and more.
Augmented and Virtual Reality Selling and Fulfillment Yes, really. Much like robots, AR and VR technology seemed somewhat of a novelty prior to the pandemic. But 2020 saw a dramatic drop in in-store foot traffic (an average 16% decline, according to Retail Dive), leaving many retail shippers seriously reconsidering the at-home shopping experience. Brands such as IKEA, Macy’s, and Sephora began heavily emphasizing AR/VR-enabled mobile apps that let consumers visualize everything from furniture sizing/placement to lipstick colors. It’s estimated 100M online consumers were AR shoppers in 2020, making for an incredibly effective retail selling tool; however, these brands also discovered an impact on returns. The common belief is that AR/VR technology lets consumers understand products better, which leads to fewer returns. Macy’s notably reported that return rates for its AR/VR-assisted purchases dropped to less than two percent (up to a five percent difference from the industry average). But this technology goes beyond
selling — shippers of all types, as well as vendors, are finding that wearable computing devices can decrease order picking and packing times. One study found “wearable computing devices” increased the average picking speed of new warehouse employees by 37%, and DHL prominently expanded its “Vision Picking” smart glasses worldwide after finding a 15% bump in warehouse employee productivity. And again, while not exactly new, this technology directly addressed some of the unique challenges created by the pandemic, such as social distancing measures, filling gaps created when employees had to quarantine or chose to leave the job due to safety concerns, as well as a growing desire amongst brands to speed up order fulfillment as much as possible to seemingly increase delivery speeds during unprecedented decreases in carrier capacity. Should you go all-in on AR and robotic order fulfillment? That depends. Much like the rise of carrier diversification, these order fulfillment strategies were not created during or by the pandemic;
however, they have amassed huge interest and buy-in from shippers of many types and sizes (especially e-commerce retailers) looking to combat pandemic-driven industry challenges. And, almost all of these new fulfillment strategies enhance the customer experience. Our best advice? As you envision near-term future enhancements to your order fulfillment strategy, consider the technologies necessary to ensure you’re not playing catch-up with your competitors and the market.
Rebecca Wyatt is a Solutions Manager at Green Mountain Technology (GMT), where she partners with clients representing nearly $1B in parcel spend to provide GMT’s strategic Parcel Spend Management solutions — Network Optimization, Spend Analytics, and Contract Management. Cam Elliott is the Brand Manager at GMT, where he oversees the design, creation, and direction of GMT’s customer touchpoints, particularly as they relate to the mission, vision, and values of GMT and its audience.
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AFTER A GLOBAL PANDEMIC, THE FUTURE OF DELIVERY IS LOCAL
BY MARC GORLIN
efore the pandemic, consumers were satisfied with one-click ordering that came with two-day delivery, or even next-day delivery. Not anymore. In an extremely short period of time, ordering goods in the morning and having them delivered to your home the same afternoon was recast as a musthave service, providing a lifeline for millions of families. Same-day delivery surged like never before. The pandemic presented many steep challenges for retailers and their supply chains, but among the most urgent was: how could they get goods as close to the end consumer as possible? Suddenly, retailers of all sizes had to figure out how to re-engineer and extend supply chains locally, transforming logistics and fulfillment into hyperlocalized and
distributed operations. And then, they had to figure out how to incorporate flexible, on-demand, reliable, same-day delivery into the equation from all those new locations. What do businesses need to thrive in this emerging local-delivery world? There are four key expectations. 1. Speed According to Ware2Go, nearly all consumers — over 90% — see two- and three-day shipping as table stakes. One-third of consumers expect same-day delivery. And while customers put up with delayed shipments in 2020 because they really had no choice, don’t get used to it. It won’t last. COVID basically finished what Amazon started: It taught consumers that they don’t have to wait. Same-day service is available in a variety of models, with a consistency and cost that matches or beats the performance of traditional parcel carriers.
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Creating a fast, reliable home delivery program stands to help retailers win big. More than three-quarters of consumers say they are more likely to purchase from a brand again if delivery was fast. 2. Agility, Flexibility, and Optionality No longer does fulfillment happen from one or two distribution centers. Hyperlocal fulfillment means deconsolidating inventory and spreading it across sometimes hundreds of brick-and-mortar retail sites. Those facilities are now tasked with triple duty responsibilities: offering consumers traditional stores to shop from themselves; operating as local fulfillment centers for online orders shipping direct to consumers; and serving as local pickup sites for buy online, pick-up in store (BOPIS) orders. Consumers are getting anything and everything delivered to their homes. A delivery might be a small package of time-sensitive medicines, a repair part for an appliance, printer ink cartridges,
or a new computer monitor — not just stuff that fits neatly into a box. How can retailers manage to deliver every single SKU, especially when traditional carriers are avoiding them, or instituting huge surcharges to handle them? 3. Unlimited Scalability Traditional fixed-asset networks are capacity constrained, that’s not news. For hub-and-spoke models, adding capacity requires physical facilities and vehicles that can take months to deploy. Even as the major players have ramped up operations, they’re still turning to pricing surges and volume caps to manage demand. Retailers need a scalable solution that can expand to meet delivery demand in real time, and industry leaders are turning to crowdsourced delivery for the last mile. A crowdsourced network draws on consumers already in the right place in their personal vehicles, store employees, customers, and even local commuters for unlimited, rapid scalability. In a surging e-commerce economy, you need solutions
to quickly add delivery capacity exactly where it’s needed in real time. 4. Unprecedented Reach Consumers everywhere are demanding faster fulfillment. It’s not enough to provide coverage in major metro areas. Home improvement stores and other retailers operate in mid-size, suburban, exurban, and rural communities, as well; same-day networks have to be able to reach into these communities with the same service reliability. Looking Ahead Before 2020, last-mile, same-day delivery already was the fastest growing segment of transportation. The pandemic simply became an accelerant to that growth. Shopping behaviors have changed permanently. As more and more consumers figure out how easy it is to get stuff delivered to their doors in a few hours, why waste time going to the store? The surge in traffic experienced by traditional parcel carriers and courier
businesses is expected to continue at least through 2021 and well into next year. Some parcel carriers have already imposed new surcharges and are beginning to signal the need for volume restrictions to prevent their networks from being overwhelmed again. Under intense pressure, costs have escalated, rates have risen, and service declined. It’s an infrastructure built to deliver, at its fastest, next-day service. But increasingly, retailers are realizing that “good enough” is no longer good enough. Flexible, scalable, reliable same-day delivery requires doing something vastly different than we’ve done before: taking the supply chain directly into the communities and towns where your customers live.
Marc Gorlin is Founder & CEO, Roadie (www. roadie.com). He will be speaking more on this topic on Wednesday, September 15 at this year’s PARCEL Forum in DC. Visit www. PARCELForum.com for more information.
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WHERE’S THE BEST LOCATION FOR
YOUR NEW WAREHOUSE?
By Stephen T. Hopper, PE
nce you’ve decided it makes sense for your operation to move to a new warehouse, how do you decide where it should be located so it will provide the best service levels for the lowest operating costs? This follow-up article to my July/ August piece outlines an objective, emotion-free process for you to follow as you go about determining the best location for your new warehouse. Define Your Business Requirements Over Your Planning Horizon Start by identifying your planning horizon for your study — three to five years from now is typical — and forecast the requirements of your warehouse over that time. For example, define the following: Sales volumes – What will your projected shipping volumes be, in units (not dollars), during the average week, as well as during the week when you experience your seasonal peak volume? SKUs – What SKUs will you be receiv-
ing, storing, picking, and shipping? What are their attributes? Customer orders – What types of orders will you be fulfilling? What are their attributes, and how will you ship them? On-hand inventory – What will your projected maximum on-hand inventories be, in units (not dollars), during the average week, as well as during the week when you experience your seasonal inventory peak? Suppliers – Who will your suppliers be? How will your warehouse need to accommodate inbound shipments from them? Customers – More importantly, who will your customers be? How will your warehouse need to accommodate outbound orders and meet their expectations?
Develop an Objective Scorecard Since you will be evaluating several alternative warehouse locations, your next step is to decide how you will measure and evaluate your alternatives
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objectively. Make a list of all the data points and attributes that you’ll want to compare, such as: Annual transportation costs (inbound and outbound freight costs) Annual facility costs Annual equipment and technology costs Loaded annual full-time, part-time, and temporary labor costs, including benefits and overtime Initial warehouse relocation costs Service levels o Average supplier (inbound) delivery time per order, in days o Average customer (outbound) delivery time per order, in days Any intangible and qualitative factors that are important to your business Keep in mind that the more data points and attributes you document on your scorecard for comparison, the more comprehensive your comparison will be. On the other hand, more points of comparison will require more time and effort during your evaluation, so don’t create unnecessary work. Select the Right (Optimization) Tool for the Job Accurate optimization of a warehouse location also requires an effective modeling and optimization tool to analyze your supply chain data, so your next step is to select a good one for your business requirements. The right tool for this purpose will help you identify the best location for your warehouse over your planning horizon. Notice that I said the “right” tool, not the “best” tool. A variety of modeling and optimization tools are available to you. They range from ubiquitous spreadsheet applications that you probably already use to highly sophisticated software programs that can be leased by subscription for upwards of $10,000 per month. How good is good enough? The right modeling and optimization tool for you depends on your desired level of comprehensiveness and accuracy and the size and complexity of your warehousing operations. There’s no need to cut butter with a chainsaw. Often the “best” optimization tool is overkill for the needs of a business, and it will almost always add more cost, time, and complexity to the process.
If you plan to model your warehousing operations in-house, discuss your business requirements with several reputable developers of modeling and optimization tools to determine which solution suits your needs. On the other hand, if you hire a good logistics consultant to analyze your warehousing operations, they can probably provide the right modeling and optimization tool for your business requirements as part of their project engagement.
Gather Data, Data, and More Data Make no mistake about it: Determining the optimal location of a warehouse is an intensely data-driven exercise, and the GIGO rule (garbage in, garbage out) profoundly applies here, but it’s a universal truth that is too often ignored. Consequently, gathering comprehensive, accurate supply chain data for each item on your scorecard is your next step. This will be the most time-consuming and tedious activity in the process. But if you don’t model your alternatives using good data, there’s no point in doing it at all.
Accurately Model Your Existing Warehouse Location Then the fun begins! You’ll need to model the projected costs and service levels of your current warehouse, so you have something to compare with those of any other potential warehouse locations you decide to consider. In this step, configure your current warehouse operations into the modeling and optimization tool you selected and make sure your model is accurate. This initial model will serve as your “base-case” (baseline) model, and it should realistically represent your current warehousing operations, both historically and over your planning horizon (assuming you stay put and don’t move to a new warehouse). To configure this base-case model in your tool, set up the locations and relevant attributes of your current warehousing operations, including: Your current warehouse All your suppliers’ ship-from locations All your customers’ delivery (demand) locations Any other physical locations in your
distribution network (ports, pool points, cross-dock facilities, etc.) Then import at least one year’s worth of your historical data (outlined in the sections above) and freight-rate information into your tool to see if the calculated costs and delivery times match your actual historical costs and delivery times. If the calculations of costs and service levels aren’t reasonably close to your actual historical costs and service levels, then your model isn’t accurate, so you’ll need to correct your model. If they are reasonably close, that’s great news — you’ll know your model is valid. Now you can update your data set with the numbers you projected over your planning horizon, and you’ll be ready to model your alternatives.
Define and Model Your Alternative Warehouse Locations This step involves deciding which alternative warehouse locations you want to configure into your modeling and optimization tool and evaluating them. Apply your team’s collective logistics expertise
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to decide which potential warehouse locations are worth considering and comparing. Depending on which modeling and optimization tool you’re using, your software might also be capable of suggesting optimal warehouse locations. Assign a unique name for each alternative warehouse location you decide to model. For example, I typically call the base case “Alternative 0” and number all the other potential alternatives accordingly (Alternative 1, Alternative 2, etc.). Since the data set in your modeling and optimization tool was updated in the previous step to include your projections over your planning horizon, just replace the warehouse location attributes in your tool for each alternative, and save each alternative’s model under the name you assigned to it. Whether you’re looking for an existing building or a greenfield site, before you lock down the potential warehouse location for each of your alternatives, it’s a good idea to do some sensitivity testing in your models. Sensitivity testing is a fancy name for doing some trial and error in your models, and this is usually
very easy with modeling and optimization software. You can slightly tweak the potential location of the warehouse in each model to see what effect that has on the projected costs, service levels, and other factors. For example, you might move your potential warehouse into a known industrial area, or into a county or city with lower taxes, or to a location with easy access to major highways, or to a location more convenient to places that might appeal to a future warehouse workforce. Objectively Compare All Alternatives and Select the Winner Once you have finalized all your alternative warehouse locations and finished running each of their models using the same data set for your planning horizon, your final step is to compare your alternatives and select the best warehouse location for your business. You can easily achieve this by creating a simple spreadsheet table. List all your alternative warehouse locations (including your base-case alternative) across the columns at the top, and list all the data points and attributes you defined for your scorecard
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down the left-hand column. Then enter the resulting metrics into your modeling and optimization tool calculated for each alternative into its respective column. Voilà! This table will give you a proforma, apples-to-apples, summarized snapshot of the costs, service levels, and other intangible and qualitative factors associated with each alternative warehouse location, without letting your emotions influence your thinking. You will objectively and easily see which warehouse location will deliver the greatest value for your business, and by how much. Then it will be time to start planning that new warehouse to turn those projected benefits into a reality!
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 email@example.com or 404.832.5326.
How to Beat Shipping Carrier Delays and Rising Costs It is not a secret the major national carriers have struggled to keep up with the significant increases in package deliveries over the past year. Any business that ships their products felt the pain of the resulting delays and rising costs from the same flood of shipping volume. The good news is that improved technology and more shipping carrier options give shippers some paths to beat carrier delays while keeping shipping costs down. Here is what you need to know about using zone skipping and finalmile shipping services to improve your fulfillment strategy. Zone Skipping and Final-Mile Shipping Large enterprises have taken advantage of zone skipping and final-mile shipping for many years, but shipping all packages with the major national carriers was just easier for everyone else. However, significant delays from national carriers with increased shipping costs leaves customers unhappy and makes it harder to compete with large corporations. Zone skipping is when you consolidate a group of your shipments and use a freight (air or truck) option to get them closer to your customers and skip the national sort centers seeing the most delays. Finalmile shipping is the deconsolidation of this batch of shipments and the individual deliveries of those packages to the customer. When you combine these services with predictable pricing and service levels, your company is no longer beholden to any national carrier and you don’t have to accept long delays. Automate the Process with Better Technology Advancements in shipping software and technology have made zone skipping and final-mile shipping services readily available to far more shippers and more affordable than ever before. When the process of zone skipping and final-mile shipping is automated with software, you can use the service when it makes sense and the software alerts you that it’s available. It also gives you an immediate option to respond to any restrictions or volume limitations from the national carriers. The IndyShip
team works with shippers of all types to identify when zone skipping and final-mile shipping make sense and helps you automate the process so that you’re no longer forced to accept significant delays and rising shipping costs while losing customers to a large retailer. IndyShip Guides Your Company Through the Process IndyShip was founded in 2019 with a goal to create new shipping capacity and flexible shipping options to keep up with customer demand. Today, IndyShip has warehouses across the United States and a vast network of professional delivery drivers. Integrated through industry-leading technology, IndyShip offers tailored solutions for local delivery, final-mile services, zone skipping, and warehousing services. IndyShip has composed a team of industry experts from all areas of the supply chain vertical, from e-commerce merchants to parcel delivery specialists. We understand what your business expects in a carrier partner, because we’ve been there ourselves. Contact us today at 877-282-1822 to find out how IndyShip can help your business thrive during peak season.
877.282.1822 firstname.lastname@example.org https://IndyShip.com
By Stephanie Martin
KEY FACTORS TO MULTIPLE SOURCING WITH REGIONAL CARRIERS
any things have changed in the past year, but one thing that is constant has been rising shipping costs. With today’s current market, the addition of more peak surcharges, decreased delivery performance, and new capacity limits, the environment seems to favor the major carriers. With that being said, we are seeing more shippers who are looking for options to level the playing field and showing more interest in utilizing regional carriers. When implemented correctly, using multiple sourcing between major and regional carriers can allow shippers to gain greater control of their shipping strategies, increase package volume flexibility, improve transit times, and lower shipping
expenditures. On page 20, we discussed how to decide whether or not a multi-carrier strategy was right for you, and this article will continue the conversation by showing how to successfully integrate regional carriers into your carrier base if that is the direction you decided to go. Getting Started There are a number of key considerations, including geographical reach, delivery coverage, transit times, delivery performance, and pickups that must meet your company’s requirements. Additionally, you will want to check for shipment limitations that the major carriers may not have, such as weight limits of 50 pounds, dimensions over a certain size, prohibited items, and oversize or non-machinable packages.
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The next step is to dive into shipping rates, both base rates and surcharges. Regional carriers may offer competitive shipment rates with fewer and lower surcharges than the major carriers. Unlike the major carriers, some of the regional carriers do not have fees for commercial signature confirmation, daily pickup fees, and audit fees. Regional carriers typically also offer lower surcharges in commonly used areas like residential surcharge, additional handling, declared value, and delivery area surcharges. Secondly, they may also have better transit times within their unique network and may be able to deliver your shipments faster and at a lower cost. There are additional benefits offered with regionals, such as late ground pickups, better DIM divisors, expanded next-day ground deliveries, service flexibility, and more personalized customer service (just to name a few). A final consideration is to see how incorporating a regional carrier is going to impact the overall spend with your primary carrier. Begin by reviewing your existing agreement for volume commitments and potential penalties. Look to see if your current discounts are up front or if they are linked to your portfolio tier/earned discounts. As a matter of practice, most
UPS and FedEx agreements are designed to ensure that all the volume and revenue is not given to another carrier. Secondly, pull historical invoice data or ask your carrier for a 52-week report showing gross spend. Make sure that this is a representative view of your shipping footprint. This will help quantify how much volume you may be able to move to a regional carrier without incurring increased costs with your primary carrier. Making the Move Once you have determined out how many shipments would be eligible for a regional carrier, put together a representative data file and provide it to the regional carriers for a bid response. This way, they will respond with a proposal that is tailored specifically to your shipment characteristics: weight, zone distribution, dimensions, residential/ commercial mix, etc. Be sure to identify if you are a seasonal shipper in your data sample as well. Many shippers,
especially heavy peak season shippers, ran into capacity limits in 2020 Q4. Major carriers were overwhelmed with packages and put volume restrictions in place. This forced many shippers to look to regional carriers to pick up the packages that were over the limits set by their primary carrier. After you implement a regional carrier agreement, you need to ensure that you have the necessary automation to create a guide for least cost routing. Consider all of the factors when setting rules for your TMS. Are you comparing the fully landed costs, including the shipment cost and all surcharges? Be sure to use a final billed weight based on dimensions and not just actual weight. Also update the cost tables to include any peak surcharges that were previously not in place. Think of transit times and how fast your package needs to get to its destination. Will it get there faster with your primary or regional carrier? Least cost routing rules will also need to include limitations like location, package size/weight, and
peak shipment quantities. Additionally, some customers can override these rules if they have preferences for one carrier over the other. Bringing in regional carriers can help improve service performance, lower shipping costs, and give you additional package capacity during your peak season. If you can’t make this solution work with your current carrier agreement, it may be time to re-evaluate your current agreements and negotiate a new agreement that will give you the flexibility to realize the benefits of a multi-carrier solution up front.
For the last 13 years, Stephanie Martin has been a senior analyst for Navigo Consulting Group. Her data driven approach has provided shippers with a keen understanding of their requirements and costs, and has given them opportunities to save and optimize millions of dollars in excess shipping costs. Stephanie can be reached at Stephanie@NavigoInc.com.
SEPTEMBER-OCTOBER 2021 PARCELindustry.com 37
COMPLEX BUSINESS RULES: A HOUSE BUILT FOR SUCCESS
BY JUSTIN CRAMER
very shipper can agree that the past year has seen a dramatic shift in buying habits from more traditional retailers to online sales, with the pandemic and safety concerns pushing consumers to shop online. Delivery time has become more critical for shippers as consumers are following the shipping journey of a package. They are recognizing the idea of on-time shipping, or when a retailer says a package has left the warehouse, distribution center, or store shelf, and how it compares to on-time delivery, or when the package is actually delivered to the customer. As this shift in customer expectations has progressed, shippers’ enterprise software stacks (ESS) have had to adapt with them. Specifically, the shipping software in the stack has had to change
to allow for the inclusion of new carriers and new tracking feeds. New carriers have been added, new tracking feeds are being pulled, and many pre-existing business rules have had to be changed. Business Rules How easy these changes are to make in shipping software relies almost exclusively on the mix of business rule types. As e-commerce grows and the fulfillment process continues to become more complex, brands need to design and set up business rules to be configurable and easily changed by the business as their needs change. There are two major types of business rules (algorithmic and prescriptive) that will allow retailers to control the options for delivery, enhancing the customer experience and relaying cost savings to the retailer. Understanding the difference between algorithmic and prescriptive business rules facilitates the selection of the right technology for your specific shipping
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logic. Prescriptive business rules are very fast to execute. They are typically conditional, usually represented by true or false. These types of rules are not easily adaptable and require a software engineer to revise as your business scales and the shipping environment changes. Algorithmic business rules are, by definition, built to be configurable by new data. They will simply adjust to new information with automated decision-making. They are rules that, when given an input, simply return an output. If that input were to change, the output would change as well. They may execute a bit slower but provide greater flexibility in the long run without having to engage a software engineer as often. Building Better Business Rules Think about these rules like the classic story of “The Three Little Pigs.” Building your house out of sticks alone is like building your shipping software system out of prescriptive business rules
alone. We can equate the big bad wolf to any of the issues from the past year: capacity constraints, cost control, and peak surcharges, to name a few. These struggles felt by shippers across the industry can literally blow your house, or shipping software system, down. On the flip side, build your house of bricks, or just algorithmic business rules, and your house will stand — but think about how long it took to build that house. And what happens if you need to move your house? Say your house is in danger of a tsunami (of new orders) and you need to add a new carrier? How easy will it be to pack up that house of bricks?
With prescriptive business rules, you may have stated that all packages less than one pound must ship Priority Mail. However, with the addition of a new regional carrier, maybe you want to rate shop your shipments. Rate shop groups are part of an algorithmic business rule set. By having your business rules state that you want to rate shop all packages, you can add the new service(s) to the target rate shop group and let the system automate the decision. Using our analogy from above, you can see how a hybrid house built with a brick base and stick walls would be akin to building business logic with a hybrid set of prescriptive and algorithmic business rules.
Applying Business Rule Logic When used effectively, business rules can simplify the system update process, which is necessary as the parcel shipping landscape changes. To understand the importance of these rules, let’s look at something many of us have had to do in the past year: Add a regional carrier.
Business Rules in the Future The past year serves as a warning that we don’t know what the future will hold. The key measure is to have a shipping system in place that has the flexibility and agility to adapt to whatever may come. “Fast/reliable delivery” was the most important online shopping
attribute among the consumers in the PwC’s June 2021 Global Consumer Insights Pulse Survey. What can be derived is that delivery services will only become more important and influential across e-commerce. Now that consumers have grown accustomed to same-day delivery service, customer expectations for delivery options will only increase and rise in demand. Intelligently applying business rule types today can ease the onboarding of such functionality in the future. When these rules are strategically built cooperatively, you can create a strong yet flexible shipping system that can withstand any big bad wolf looking to blow your house in.
Justin Cramer is Co-Founder, Head of Sales & Marketing, ProShip, Inc. He will be speaking more on this topic on Thursday, September 16 at this year’s PARCEL Forum.
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By John Callan
“DOOR WARS” – OVERCOMING THE
LAST STEP IN PARCEL DELIVERY
ever let a good crisis go to waste.” The achievements of a fledgling e-commerce industry during the beginning of this century have been astounding. The concept of shopping on a home computer or cellphone (anywhere, at any time, for absolutely anything), selecting and paying an agreeable price for it with a simple click, and receiving it in our mailbox or on our doorstep within a few days or even on the same day was unimaginable two decades ago. And now this entire supply chain journey that enables a $5 trillion online retail industry to thrive is accomplished in less time and for lower cost than driving to a store. This revolutionary restructuring of how we shop couldn’t have come at a better time. The catastrophic blow to the economy caused by the COVID-19 pandemic was devastating. But just imagine how we would have come through it without this inventive new e-commerce infrastructure that we now depend upon. Winston Churchill is credited with saying, “Never let a good crisis go to waste.” And while Jeff Bezos, the brilliant visionary credited as the father of the online shopping ecosystem called “e-commerce” didn’t build Amazon upon a crisis, the pandemic catastrophe is now thrusting this daring young industry into its next stage of innovation and invention at warp speed. “Crises are like adrenaline for innovation, causing barriers that once took years to overcome to evaporate in a matter of days. Entrenched orthodoxies on ‘the way things are done’ are replaced with ‘the new way we do things’ almost overnight,”
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says an article from McKinsey & Company. Perhaps it’s not yet appreciated as an industry crisis, but navigating the last step is the latest challenge to be tackled by inventive logistics entrepreneurs. Like the wide variety of products offered by Amazon at its “Everything Store,” a rising cohort of e-commerce service providers is offering a variety of creative methods for consumers to securely receive their goods in the comfort of their own homes. Suddenly, in pursuit of a seamless delivery infrastructure, opportunistic inventors are leaping at opportunities to close remaining gaps and tie loose ends along this inchoate new supply chain. Enabled by artificial intelligence (AI), they are developing parcel scanning and loading systems, route optimization tools, smart lockers, secure building access devices, aerial drones, sidewalk robots, autonomous electric delivery vehicles, and the software that links all their transaction data in real time. The “Last Mile” Is Not the “Last Step” Conventional supply chain wisdom defines “last-mile delivery” as “a product’s journey from warehouse shelf to the back of a truck, to a customer doorstep where, as the final step of the process, the package finally arrives at the buyer’s door.” Getting packages to customers’ doorsteps so quickly and efficiently is clearly a remarkable e-commerce supply chain industry achievement. But what good is all this effort if the package doesn’t eventually get inside the door and into the customer’s hands? Simply getting a package “to a customer doorstep” is hardly “the final step of the process.”
Criminal justice expert Dr. Ben Stickle asserts that, “the assumption that the retail supply chain ends when the products are delivered to the customer’s doorstep... is an outdated perception that does not fit the diverse needs of the consumer… Because most packages are left unattended at the consumer’s doorstep, the items are vulnerable to product loss, damage and theft.” Considering package theft alone, he cites a survey estimate that “over 35 million Americans were the victims of the crime in 2020, resulting in approximately 5.4 billion dollars in financial losses.” Dr Stickle suggests that the e-commerce delivery “industry needs to focus not merely on ‘The Last Mile’ of the package delivery process but ‘The Last Foot,’ so to speak… While this section of the supply chain may be the shortest, both in time and space, it is fraught with the most risks, highest losses, and significant impact to many stakeholders,” especially the retailers. Studies indicate that “issues at the last foot are rarely seen as delivery company responsibility; blame and poor brand trust are assigned to the retailer. As the direct contact with the consumer shrinks, the experience at the last foot needs to be positive.” And retailers need to own and maintain this relationship. Alternative Delivery Options Conventional residential mailboxes and neighborhood cluster boxes have met the needs of parcel delivery for decades, yet recent growth in volume and average package size are resulting in problematic overflow and re-delivery. UPS, FedEx, and USPS, of course, provide alternative package pick-up accommodations at their own locations for undeliverable articles and for customers who aren’t home at the time of delivery, and they are consistently expanding access points in partnerships with major retailers like Walgreens, CVS, and Staples. Buy online, pick-up in store (BOPIS) is another alternative access option that will certainly resume activity when consumers begin to venture out from under COVID-19 again. By the end of summer 2020, the share of retailers offering this omnichannel option had already jumped to 44%. A growing number of parcel locker operators are providing expanded package pick-up accommodation as well. They offer convenient contactless access in retail shopping, office, and commutation locations. It’s no surprise that Amazon Hub is a major player, while independent operators Smiota, Parcel Pending, and Pitney Bowes are all expanding their reach. The Household Threshold Is the Battle Line New battle lines are being drawn along thresholds at front doors across America as the latest wave of e-commerce delivery entrepreneurs prepares for “Door Wars” over the ideal solution for consumers to actually get their hands on their goods, on their terms! Beth DeCarbo of The Wall Street Journal recognized the trend in “last step” innovation during the depth of the pandemic. “To eliminate the need to leave home to retrieve a package, a number of companies offer smart locks and boxes for use at home. BoxLock, for example, sells a Wi-Fi connected lock that collects tracking information on coming SEPTEMBER-OCTOBER 2021 PARCELindustry.com 41
deliveries and alerts homeowners when they arrive. Delivery drivers use the lock to scan a package’s bar code, which opens the lock on a secured storage box. The homeowner then receives an alert that a package has arrived.” Another emerging “Door Warrior” with a focus on groceries and perishables is DeliverySafe. And HomeValet has also introduced a temperature-controlled household locker that accommodates groceries as well as parcels and is conducting a pilot in partnership with Walmart. No stranger to variety, Walmart is also trying out delivery by drone, not to be outdone by CVS, who, in partnership with UPS, is testing this method of personalized delivery to consumers’ homes too. And to add yet another team of competitors to this aerial dogfight, you can already “order Walgreens health and wellness products through Wing’s delivery app” in Christiansburg, VA. But what if you’re not home to greet your parcel as it’s tethered down to a safe landing in your yard? DroneDek is a new smart mailbox for drone package receiving and storage designed to accommodate and secure deliveries by aerial drone, even if you are not home at the time. Coming back to earth, one existing solution for secure unattended delivery is Key By Amazon In-Garage Delivery. It allows an authorized driver to open your garage door to leave your parcels inside, thus transitioning your residential threshold only at this point. Another inventive concept now in development by PoGo Door will facilitate hand delivery into the house interior through a special door panel. This “automated through-door delivery platform” is designed to enable “touchless, safe, automated deliveries through the threshold.” A new smart data-driven mailbox concept, the ITSA Dropbox from Real Time Logistics, brings heightened transaction accountability to residential delivery by scanning a parcel as it traverses from an exterior mailbox into a decorative interior cabinet. The system simultaneously transmits the delivery transaction data to the customer’s mobile device. It’s positioned for adoption by IoT-based “Smart Homes” as a tool to close the gap in today’s last mile of the supply chain. And now, just in case transferring the parcel securely into the customers’ hands by either handing it directly to the recipient, securing it in a porch locker, dropping it into a receptacle from a drone, leaving it in the garage, or slipping it through a trap door isn’t enough, could there be any other inventive way to win at “Door Wars”? How about stowing it in a secure safe below ground? One more solution is offered by ShipSafeHome (an underground lock box that helps prevent package and mail theft). As you can see, there is certainly an abundance of offerings for shippers who are attempting to come out ahead in the “Door Wars”!
John Callan is CEO, Ursa Major Associates, LLC. He will be speaking more on this topic at this year’s PARCEL Forum on Wednesday, September 15.
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Expect the Unexpected By John Haber President, Parcel, Transportation Insight
The growth in e-commerce sales continues to represent a large chunk of last-mile deliveries. In 2020, e-commerce retail sales increased 32.4% from 2019, according to the US Census Bureau. And the pace is continuing into 2021 with first quarter e-commerce retail sales increasing 39% from the same period in 2019. “The impact of the virus continues to generate elevated volumes, high demand for capacity, and increased operating costs across our network,” according to FedEx. As a result, retailers have seen shipping costs skyrocket and, in some situations, capacity cuts at the last minute. Retailers with physical stores are fighting back by fulfilling online requests in-stores and offering curbside pickup. In addition, a growing number of retailers are partnering with crowd-sourced platforms such as DoorDash and Instacart to offer same-day delivery services from their stores. Retailers are also utilizing regional small parcel carriers such as OnTrac, LaserShip, and LSO. Among the benefits of using these carriers are reduced number of surcharges as compared to FedEx and UPS and being geographically closer to a retailer’s customers.
strong customer demand. Unfortunately, these retailers are taking market share away from their smaller competitors who may not have the means or know-how to follow suit. Traditional Peak Season As the traditional end-of-year holiday peak season approaches, a wider divide between large and small retailers may occur. Businesses are being advised to book last-mile capacity sooner rather than later and to expect to pay even more for parcel shipping. Indeed, some last-mile providers noted in June that they were already booked for the holiday peak season while others set an August 1 cut-off period for new clients. Planning for the peak season is essential and requires forecasting, but unfortunately, shippers are unable to accurately forecast e-commerce due to the rapidly changing environment. In terms of ensuring on-time last-mile deliveries to customers, retailers will need to have at least two back-up plans for the upcoming holiday season. Capacity will remain tight in what FedEx is already describing as another “Ship-a-thon” holiday season. What else? Meanwhile, expect higher surcharges from FedEx and UPS. UPS announced not only an increase in COVID-related peak surcharges that began in July, but they also announced higher peak season surcharges, effective in October and until mid-January 2022. FedEx has not yet announced peak season surcharges, but they did increase COVID-related peak surcharges in lateJune.
High Transportation Costs Retailers are faced with higher transportation costs throughout the entire supply chain — air, ocean, truck, rail, and last-mile — because of high consumer demand. According to US Census Bureau data, US retail sales, excluding motor vehicles, parts, and gas stations, are up 18.2% compared to the same period in 2020, while record low inventory levels persist. A number of retailers are currently willing to invest in alternative, faster transportation modes to ensure their ability to service
404.902.5390 email@example.com transportationinsight.com
SHIPPING VISIBILITY CAN HELP BOOST THE CUSTOMER DELIVERY EXPERIENCE
BY MARK PICARELLO
he retail and e-commerce landscapes are crowded and competitive. Retailers are facing stiff competition both from legacy brick-andmortar companies and online marketplaces, including the industry leader in their market, which is driving customer expectations for free, fast, and transparent deliveries. To get ahead and stay ahead of the shop down the block or the e-commerce stores around the world, it is vital for retailers to create a sustainable competitive advantage by delivering a customer experience that exceeds expectations. The COVID-19 pandemic boosted US online shopping from March 2020 through February 2021 to $844 billion, a jump of $183 billion, according to Adobe’s 2021 Digital Economy Index. Hence, it is more important than ever for anyone that sells and ships products to meet or exceed customers’ expectations for delivery. Delivering Free and Low-Cost Shipping While not as easy for smaller retailers to absorb the shipping
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cost that the industry giants can, it is still essential to offer it when feasible, be it on all orders or only orders of a specific dollar amount. Surveys have shown that more than 70% of US consumers indicate that free delivery “greatly impacts” their purchasing decisions. Yet, next to product costs, not offering free delivery — or the price of paid delivery — is the second most common reason for shopping cart abandonment. With the expectation of free deliveries driving up overall customer acquisition costs, e-commerce businesses and the 3PLs that support them are looking for ways to make omnichannel fulfillment more economical. This is a challenge for those used to operating B2B fulfillment models where LTL and TL line hauls to distribution centers offered a significant cost/ pound advantage over D2C parcel shipping. They need a way to combine line haul cost efficiencies with the quality of lastmile delivery experiences. However, it isn’t always possible — or profitable — to compete on price alone. Fortunately, you can compete by delivering an exceptional customer experience by providing the information and insights that rival the big guys without breaking the bank. Here are a couple of ways that retailers can exceed customer shipping visibility expectations and deliver an
experience that will not only have them buy the first time but keep coming back for more. Provide Shipping Costs Early and Often Whether you are offering free shipping or charging for it, customers want to know the cost early in the process. It’s been reported that 70% of visitors to e-commerce sites are not making it through the purchasing process. Additionally, estimates show that 84% abandoned a purchase, quote, or booking after already putting it into the online shopping cart before being derailed by information — or lack thereof — at that point in the purchasing process. Part of those abandoned carts come from unexpected or unclear costs, including shipping, which is cited by close to 50% of shoppers who have abandoned a shopping cart. It is vital that e-commerce and retail websites calculate and show delivery charges in real time and update them throughout the shopping experience. It is also essential that packing, making sure you have the correct address, and more are done and calculated correctly to avoid accessorial fees that could surprise the customer at checkout, or worse, post-delivery. Tracking Takes Center Stage While info about pricing before purchase is vital to get customers to complete checkout, the thirst for information doesn’t end at the purchase. There was a time not very long ago when customers ordered an item from a retailer, e-commerce company, or an online marketplace and were surprised when they got home SEPTEMBER-OCTOBER 2021 PARCELindustry.com 45
PARCEL AUDITS with BI REPORTS
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NPI: efficiency through innovation
NPI’s Xstream shoe sorter was designed with small parcels in mind. Now in its 3rd generation is more robust and reliable than ever, providing greater modularity and functionality as well. Installations across the USA and other countries are proof of it. National Presort LP 214.634.2288 email@example.com www.NPIsorters.com
Express Delivery Customized Solutions
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and it was waiting for them. They had a basic idea that it would be there in a couple of days or even a week, which was good enough. But as large e-commerce players began to deliver information from packaging to delivery so often that it became commonplace, today’s consumers not only want to know the expected delivery date, they want visibility and the ability to track the item from order to delivery. Research indicates consumers are making tracking requests an average of eight times during the order-to-delivery cycle. So, having the right technology to track orders is essential for retailers and online stores to gain an advantage in today’s crowded landscape. According to a report in Digital Commerce 360, 93% of consumers want to stay informed throughout the delivery process, from the first mile through dropping it on the doorstep. Even more critical to your brand and delivering an exceptional customer delivery experience, more than 40% said they wouldn’t buy from the company again if you don’t provide that visibility. Shipping Technology Comes of Age While it has been common for years for shipping systems to notify customers with an email or text that an order is on its way, it may not be enough visibility for today’s consumers. Today, it may take more, such as proactive tracking and alerts. If customers, especially younger generations, are increasingly apt to track a shipments’ progress with greater frequency, why leave it up to them to pull tracking status? Instead, why not use optimization services to push orders’ tracking status and alert them of impending deliveries or delays to reset their delivery expectations? Technology is also available to include pictures of contents captured at the shipping point to help customers envision what they are about to receive or a personalized note from those responsible for fulfillment. In addition, pictures of items left at the point of delivery can provide recipients with an acknowledgment of successful and secure delivery. Again, these personal touches only add to the quality of the delivery experience while reducing inbound customer service traffic, cutting costs, and improving your ROI. Regardless of what you ship, where you ship, or to whom you are shipping, giving customers the ability to track orders quickly, easily, and seamlessly is not considered a “nice to have” service any longer. It is a “must-have.” From sustainability to easy returns, there are plenty of other things that factor into delivering the best customer experience you can that turns shipping into a competitive advantage. However, creating visibility of shipping costs and the delivery process early in the shopping process can not only get customers to complete the purchasing process but keep them coming back in the future.
Mark Picarello is Managing Director of Pierbridge, part of the WiseTech Global group. To learn more about Pierbridge’s ﬂagship product Transtream multi-carrier parcel management solution, visit https://pierbridge.com/ transtream/. 46 PARCELindustry.com SEPTEMBER-OCTOBER 2021