11 REGIONAL & FINAL-MILE CARRIERS THAT CAN MAKE ALL THE DIFFERENCE PAGE 30

THE ART OF A NETWORK ANALYSIS:

MAY-JUNE 2021

PARCELindustry.com

TAKING YOUR SMALL-PACKAGE OPERATION UP A LEVEL PAGE 18

THE CARRIER CONTRACT NEGOTIATION PROCESS HAS CHANGED POST-COVID. ARE YOU PREPARED? P. 40 IS THE TRADITIONAL HUB AND SPOKE MODEL ON ITS WAY OUT THE DOOR? P. 8 HOW ZONE-BASED PRICING FOR ADDITIONAL HANDLING AND LARGE PACKAGE SURCHARGES COULD AFFECT YOU. P. 12

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CONTENTS /// Volume 28 | Issue 3

16 18 22 26 36 06 EDITOR’S NOTE One Year Later By Amanda Armendariz

08 SPEND PERSPECTIVES Beyond the Traditional Hub and Spoke Last-Mile Strategy By John Haber

09 TECH SPACE Using Technology to Build Talent By Chase Flashman

10 PACKAGING Minimizing Distribution Damages By Kevin Howard

12 SUPPLY CHAIN SUCCESS Zone-Based Pricing for Additional Handling and Large Package Surcharges By Elijah Moon

14 OPERATIONAL EFFICIENCIES Surviving and Thriving During Chaos By Susan Rider

16 KPIS AND BENCHMARKS – THE CRITICAL BUILDING BLOCKS OF OPTIMIZED SUPPLY CHAIN SUCCESS By Steve Beda

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18 THE ART OF A NETWORK ANALYSIS By Phil Schmidbauer

20 ARE YOU COMPETING EFFECTIVELY WITH FREE SHIPPING? By Thomas Andersen

22 WHAT’S SLOWING DOWN YOUR ORDER FULFILLMENT TIME? By Norm Saenz

26 NOT READY FOR ROBOTS? ACCESSIBLE TECHNOLOGIES CAN BRIDGE THE GAP By John O’Kelly

36 AUDITING CARRIER INVOICES TO MAXIMIZE YOUR PARCEL SAVINGS By Jamie Vogel

40 NAVIGATING CARRIER CONTRACTS POST-COVID-19 AND THE E-COMMERCE BOOM By Brenden Russell

44 PARCEL COUNSEL The Five Most Critical Elements in Transportation Contracting: Part One By Brent Wm. Primus, JD

46 TO SUM UP

SPONSORED CONTENT 24 6 CHOICES FOR YOUR PARCEL SHIPPING SOFTWARE, SYSTEMS, & STRATEGIES 28 AFMS: THE “SPORTS AGENTS” OF LOGISTICS AND SUPPLY CHAIN 30 GET TO KNOW 11 REGIONAL AND FINAL-MILE CARRIERS 39 STACKING THE DECK TO EMPOWER PARCEL SHIPPING 43 RETAILERS AND MANUFACTURERS ACHIEVE SHIPPING GOALS DESPITE DISRUPTIONS 45 THE SHIPPING SOFTWARE CHECKLIST

PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ amanda.c@rbpub.com ]

AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ rachel@rbpub.com ]

CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ ken.w@rbpub.com ]

PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 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

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!

EDITOR’SNOTE

ONE YEAR LATER By Amanda Armendariz

t’s hard to believe that as of this writing, it’s been a year (or, 13-14 months, to be precise) since COVID-19 swept the world and many states instituted stay-at-home orders. As we all know by now, during that time, the e-commerce sector exploded, as people started ordering every conceivable product online in an effort to avoid physical stores (or find the products that were cleaned out of said stores!). An industry that was already on a marked upswing shot ahead by light years. While businesses certainly welcome the exponential growth in orders, with this increase comes challenges, as well. No business wants to lose out to their competition, but it can also be daunting to figure

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out how to address this growth while maintaining customer satisfaction and respectable profit margins. But that’s exactly what shippers must do. While life is slowly heading back to normal, given the increasing number of vaccinations and the re-opening of many public spaces, one thing that came out of the pandemic that is likely here to stay is this increased e-commerce volume. Even when COVID-19 is (hopefully) a distant memory, I still can’t see myself resuming in-person shopping in many cases, purely because I’ve grown so accustomed to the convenience of online ordering or curbside pickup. And I know I’m not alone, so the sooner that shippers can meet this growth head-on, the better. One way that shippers can tackle this opportunity is by conducting a thorough network analysis to see if they’re leaving any savings on the table. It may be that these shippers need to branch out from the Big Two and include regional carriers in their carrier mix to a greater degree than they do already. We’ve included a special look at some of these carriers, starting on page 30. Be sure to check it out; you never know, your next partner in shipping success could be found within those pages. As always, thanks for reading PARCEL.

Responding to Supply Chain Disruptions Using AI By Ilya Katsov

6 Supply Chain Management Strategies to Save Money By Emily Newton

UPS and FedEx Reinstate Their Money Back Guarantee on Select Services By Gavin Creado

SPENDPERSPECTIVES

BEYOND THE TRADITIONAL HUB AND SPOKE LAST-MILE STRATEGY By John Haber

edEx’s and UPS’s hub and spoke method might soon be a thing of the past as e-commerce growth drives last-mile deliveries closer to the customer. As described by UPS on its website, the hub and spoke method is the consolidation of transportation assets through “hub” locations that connect to and from multiple “spokes,” or destinations, along the network. A 2014 article from a trade magazine, Inbound Logistics, perhaps described the hub and spoke method best. Transportation providers pick up cargo from its point of origin, described as the spokes’ tips, and transport the cargo back to a central processing facility, the hub. The shipment is then either warehoused or distributed directly from the heart of the network. The hub and spoke method accounts for 99% of all deliveries worldwide. Many shipping companies have adopted this method to speed up deliveries and reduce costs. However, a significant drawback to hub and spoke is that it is not very flexible. Other deliveries determine delivery times within the network and on a delivery route. But, in an e-commerce and omnichannel world, one needs to be flexible and fast. According to Tom Allason, founder and former CEO of fulfillment and last-mile provider and former eBay subsidiary, Shutl, hub and spoke is the dominant logistics model because it is the only cost-effective way of sending a package over 10 miles. But to be fast, flexible, and cost-effective, retailers need to think differently when it comes to the last-mile network. Retailers such as Target, Walmart, and The Home Depot have realized that their brick-and-mortar footprint can be used to help fulfill online orders. If a customer who

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lives two miles from a store places an order for an item in that store’s inventory, why ship it from an e-commerce fulfillment center hundreds of miles away? Why not ship it from the store? Also, many of these stores are closer to the customer; thus, utilizing a local delivery company would be more cost-effective than using FedEx or UPS. As more retailers shift their focus more on e-commerce and omnichannel, last-mile strategies will need to go beyond the use of a hub and spoke strategy that FedEx and UPS utilize. Instead, retailers will also need to incorporate a pointto-point strategy into their last-mile strategy to meet the next-day and same-day delivery demands. Unlike the hub and spoke strategy in which FedEx and UPS dominate, the point to point strategy is highly fragmented with thousands of local and regional operators. Retailers are adding more and more of these local and regional operators to their list of last-mile providers to ensure capacity and serve consumers’ preference for speedy delivery times. Third-party logistics providers (3PLs), such as SEKO Logistics and Geodis, incorporate these local and regional operators along with the USPS, FedEx, and UPS, building out last-mile networks for their customers. Fulfillment technology and provider companies such as

ShipBob are doing the same with their customers as well. These alternative last-mile options are being developed not necessarily to compete with FedEx and UPS but to provide additional options for retailers and other businesses for faster deliveries in urban locations such as Los Angeles, Dallas, New York, and Chicago, and, in a lot of cases, at lower shipping rates than what FedEx or UPS would charge them. These alternative last-mile networks are also being developed for additional capacity needs if FedEx, UPS, or the USPS cannot accept specific amounts of volumes due to capacity limits or restrictions. Hub and spoke may not necessarily be dead as many analysts have proclaimed, but instead, it’s now just part of the last-mile strategy for retailers. Retailers need to think beyond this traditional method and incorporate the point-to-point method into their last-mile strategies as well. 3PLs and other supply chain providers have noticed this need due to the growth in e-commerce and omnichannel and are building out alternative last-mile networks for their customers that incorporate both strategies.

John Haber is the Founder and CEO of Spend Management Experts and can be reached at solutions@spendmgmt.com.

TECHSPACE

USING TECHNOLOGY TO BOOST TALENT By Chase Flashman

ver the last year, the COVID-19 pandemic exposed supply chain weaknesses, including supplier shortages and factory shutdowns, along with numerous challenges that affected the workforce. Combine that with rapid globalization, and even the most experienced supply chains were left scrambling for solutions under mounting pressure. The last 12 months have been a complete game-changer for the supply chain industry. Intelligent automation (IA) was once a nice-to-have technology. However, organizations are beginning to realize that it is now a must-have, as technologies like IoT and machine learning are becoming customary in supply chains across the globe. Businesses that are leveraging IA are prepared to handle remote teams alongside supply chain and customer service disruptions. However, technology should not be a replacement for talent. Companies need to ensure that they strike the right balance between the two, and empower their employees with the tools to make their jobs easier. While it is tempting to dream of installing IA and then walking away, it is important to remember that automation is not a 1:1 replacement of employees. When implemented correctly, IA should enable your existing team to get more done. These are tools that should be used to automate repetitive tasks from work routines,

including computational tasks like crunching numbers and increasing accuracy while removing human error. By leveraging the power of robots to optimize rote tasks, IA enables supply chain professionals to focus more on strategic work. IA can aid employees in making better-informed decisions or have better visibility and traceability of shipments by implementing IoT sensors. The benefits of IA include improving processes with the combination of machine learning and data science. By implementing IA, companies will be able to refine their workflow over time and, in turn, make better long-term business decisions. The introduction of IA should not be something that should intimidate your current employees. Rather, IA should be viewed as a solution that can help your employees work smarter, not harder. The right technology can attract and retain highly skilled employees. The truth is, procurement and supply chain professionals are not looking to work with outdated technology. This is why businesses must invest in technology that will ultimately enable their employees to be more efficient. By allowing skilled employees to flourish by automating mundane tasks and enabling them to put their competencies to good use in the workplace, companies will create a better employee experience. A higher-quality experience

often leads to higher employee productivity and satisfaction. Higher employee productivity and satisfaction not only boost morale but can also have a positive impact on the company’s success. Due to rapid technological advancements in IA, companies should explore what automation can do for their employees as well as their customers. The Future of IA It is important to note that human employees are still critical to the success of a business, even if the business is fully automated. Contrary to popular belief, IA will not result in mass job losses, but rather a change in job style thanks to evolving technology. The job market is only getting more and more competitive, particularly in the procurement and supply chain sector. Technology has the power to create win-win opportunities for both employees and businesses. The companies that choose to invest in IA and empower employees to take on new challenges will ultimately be the ones that come out on top.

Chase Flashman is Co-founder and CEO of ShipSights, a developer of industry-leading supply chain data analytics software & producer of enterprise-level consulting solutions.

MAY-JUNE 2021  PARCELindustry.com 9

PACKAGING

MINIMIZING DISTRIBUTION DAMAGES By Kevin Howard

y mother used to say, “Don’t believe anything you hear and only half of what you see.” It sounds a bit pessimistic, but I’ve been surprised at how often those words have rung true in the world of distribution packaging. I was going to share several stories of a variety of products to help illustrate the value of visiting the supply chain. Instead, I’ll share only one story that encompasses many learnings. The goal of field observations (whether done in-person or virtually) is to identify consistent failures and their root causes. Once this is established, laboratory tests can be initiated to replicate the failures as seen in distribution. Once damage is replicated, then this becomes the new baseline test for all products to pass. A good test replicates consistent failures and doesn’t cause failures not seen in distribution. High Failure Rates in Parcel Shipping in India Hewlett-Packard had decided to break into the inkjet

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printer market in India with its smallest, lowest-cost product, though a select few other models were also offered. Millions of this small product had been shipped all over the world and had very low damage rates. Within a few months of shipping tens of thousands of units in India, the damage rates soared 10 times higher than average. Some people jumped to the conclusion that more and higher drops must be occurring, thus requiring more cushioning and larger boxes, two things that would have dramatic cost implications. Conjecture is not the same as data. A trip was in order. Consistent package failures were identified on visits to 22 warehouses, wholesalers, and retailers in four different Indian states. Noting the types of failures and their root causes were key to successfully modifying packaging to survive the harsh conditions found in Indian distribution. Hot, humid temperatures, coupled with bad roads and many individual handlings, contributed to failures. All HP products arriving into India went to a distribution center near Mumbai. Walking into the warehouse, it appeared that everything looked pretty good. Closer inspection, however, provided the first clues of why packaging was failing in large numbers. The bottom layer of palletized boxes that had arrived via ocean container from certain suppliers commonly showed crushing, while pallet loads from other manufacturing sites didn’t. Were the boxes too weak? Were the boxes out

of spec? The answer: it had nothing to do with box design or materials. Closer inspection found the pallets were out of spec. A well-meaning procurement engineer had unilaterally decided to save HP money by eliminating nearly half of the wood from the official pallet. If the procurement team had checked in with the design and testing teams, they would have been able to verify whether or not such design changes might result in performance issues. Eliminating nearly half the deck boards, and then reducing the thickness of the remaining deck boards, meant that forklift tines would easily bow the remaining deck boards upward each time the pallet was lifted. As the boards flexed upward, the stretch wrapped boxes could not escape the pressure, causing a crease in the bottom boxes. In other words, these boxes were being crushed from the bottom up, not from the top down, as would be normally expected. Also, as the spacing between deck boards increased, many of the box corners sat in gaps. When deck boards do not support box corners, then box compression strength decreases about 50%. Beyond the first distribution center, the most consistent failure seen at every stop was the box tape broken on a large percentage of boxes. Tape had never broken in lab tests. What was different in India than what was tested? A couple of things: 1. Virtually all boxes are stripped off of pallets for travel throughout India, not unlike single parcel e-commerce

trade. Many of the printer boxes were taller than they are wide. Since none of the boxes are shipped or stored as unitized loads on a pallet, the workers normally laid the boxes down on their largest face, both in trucks and in warehouses, to form a more stable stack. When laid on their sides, the fluting was no longer helping support compressive load. Also, the flaps were bulging outward, stressing the tape. Due to the lack of material handling aids in storage areas, workers commonly stepped on the boxes to place more boxes onto taller stacks. It should be noted that I’ve seen the exact same thing at freight carriers in US and European airports. However, the tape appeared to break only on certain products and not on others. Why would that be? It turned out the tape was not to specification, but only at certain manufacturing sites. When the lab tested actual samples of tape from the manufacturing sites making these products, we easily broke that tape in drop tests that caused no issues for the approved tape. 2. Testing hadn’t included compression or vibration forces on boxes laid on their sides. We noticed a tremendous amount of scuffing issues on the outside of the nicely printed (litho-lam) boxes. Only certain products had severe issues while others had no issues. Why? Like the tape issue, only one product line had severe vibration

problems with box graphics. We developed a new type of rub test to replicate the failure. Improving the type and amount of varnish on the box, along with increasing the outer liner weight, solved the issue. Direct field observations led to understanding that tape was not to spec and that this inferior tape had been used at only a few manufacturing sites. There were no tape breakage issues on products using the approved tape. The out of spec pallets were also causing irreversible problems, and again it was discovered that only a few manufacturing plants were using these designs. Particularly valuable was the observation that all boxes spent a significant part of their life lying on their broadest face and are never

unitized in pallets when stored and shipped. More than 90% of the problems in India disappeared after changing to the approved tape and pallet, strengthening the box material, and improving the varnish over the graphics. The savings were more than 30 times the cost of these improvements. Only through careful observation were the key points discovered. I encourage all companies to SIFY, or See It For Yourself.

Kevin Howard is a consultant with and owner of Packnomics LLC. His focus is on distribution packaging design and testing. He can be reached at kevin. howard@packnomics.com. Visit www.packnomics.com for more information.

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SUPPLYCHAINSUCCESS

ZONE-BASED PRICING FOR ADDITIONAL HANDLING AND LARGE PACKAGE SURCHARGES By Elijah Moon

n April 11, 2021, UPS, in another effort to contend with oversized parcel packages in its network and ensure the costs associated with these volumes get passed along to shippers, transitioned to a zone-based pricing structure for its additional handling and large package surcharges. These charges were previously fixed across all zones, but the fees now differ by zone and are grouped into the following buckets: Zone 2, Zones 3-4, Zones 5+, and international. While there are no significant cost differences for Zones 3-4 and other international zones, shippers should pay special attention to the price changes occurring in Zone 2 and Zones 5+ for these surcharges. Diving deep into the new zone-based pricing model provides a perspective into the parcel giant’s mindset. UPS reduced the

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additional handling surcharge for packages shipped in Zone 2 by 5.9-8.2% while at the same time raising the fees for those going Zone 5 and beyond 4.9-12.5% (Figure 1); similarly, large package surcharges shipped in Zone 2 are now 3.84.8% lower while those going Zone 5 and beyond increased by 11.5-14.3% (Figure 2). In summary, whatever surcharge savings shippers might realize in Zone 2 will be offset or come at a cost due to the higher increases in Zones 5+. Understanding the Impact of These Changes Understanding package characteristics (e.g., weight and dimensions) and the number of the additional handling and large package surcharge occurrences across parcel distributions will play a critical role in knowing how these changes impact overall transportation costs. In particular, Figure 1 and Figure 2 show UPS increasing its additional handling and large package surcharge by double-digit percentage points when the package characteristics are associated with dimensions as opposed to weight and packaging reasons. All packages currently receiving the large package surcharge are already dimensional-based due to the length or a combination of both length and girth. Packages receiving the additional handling surcharge because of the dimensions are for the following:  The length (longest side of the package) plus girth [(2 x width) + (2 x height)] combined exceeds 105 inches.

 The package with the longest side exceeds 48 inches.  The package with the second-longest side exceeds 30 inches. Shippers must also be mindful of the additional handling fees associated with packaging and weight. Packages not fully encased in a corrugated cardboard shipping container receive additional handling – packaging fees, while boxes with an actual weight greater than 50 pounds domestically and 70 pounds internationally get additional handling – weight fees. The increases for packaging and weight in Zones 5+ are 4.9% and 5.9%, which still equate to higher shipping costs for this criterion in longer zones. Shippers can start making short- and long-term strategies to mitigate the cost impact of the additional handling and large package surcharges in Zones 5+. In the short term, request an addendum that adjusts the discounting in Zones 5+ back to the previous pricing. This strategy is beneficial if you already have an established, strong partnership with UPS and a significant amount of spend leverage with them. In the long term, shippers can do the following:  Examine your current package characteristics to see if there are box-size improvements that can reduce the number of packages assessed by these surcharges. There may be a better way to package the products and avoid the cost altogether from a dimensional standpoint.  Reduce the zones, utilizing a ship-from-store strategy or zone skipping.

Figure 1

Figure 2

 Identify viable regional carriers, which generally have fewer and cheaper accessorial and surcharge fees, to take on a portion of these packages.

Elijah Moon is a Project Manager with the Transportation Solutions Consulting Group at enVista. Elijah is responsible for

leading shippers through the complex world of transportation sourcing, allowing shippers to reduce their transportation spend. He has extensive knowledge of carrier agreements, data collection, modeling tools, and route planning that enable clients

to save money and maximize carrier performance. Some of the customers he has worked with include 1-800 Flowers, Sephora, Vitamin Shoppe, Genentech/ Roche Diagnostics, PetSmart, Tommy Bahama, Vera Bradley, and See’s Candies.

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OPERATIONALEFFICIENCIES

SURVIVING & THRIVING DURING CHAOS By Susan Rider

his last year may have you wondering who broke a mirror, causing seven years of bad luck, or when we will emerge from doom and gloom. As I write this, we are faced with weather issues, second and third variants of the virus, and the never-ending battle to find and retain good employees. The extreme strains of the past year certainly have broken a few supply chains, and as many scramble to get to the other side, we must take a few moments to examine where the weak links were and what we can do to make things better before the next wave of unforeseen disasters. On the bright side, (and there’s always a bright side if we look for it), the happenings of this past year broke the weak links, making the areas that need attention, focus, and action extremely visible. First, you may find that your HR team needs to update their outdated methods for recruiting and attracting new associates. No longer does a simple wage increase attract the younger, more culturally motivated employee. Applicants today are more interested in the quality of the workplace, the onboarding process benefits (free lunches go a long way, surprisingly) and the overall treatment and appreciation of the team. For distribution centers located in many areas that have seen an abundance of growth, there is a need to think creatively while trying to recruit the next level of good team members. Second, a glaring need in many distribution centers is forecasting. Being able to prepare for peak days, overflow days, and down days gives the DC managers an opportunity to prepare. A concentration on sales and operation planning (S&OP) communication is the best practice. Unfortunately, in most companies, this has not trickled down to the DC operations, with the DC managers being the last to know when products change, new business happens, or when there is a major change in business philosophy. The old

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attitude of, “Just give it to the distribution centers and they will figure it out” is still in existence and thriving. What can you do? Many distribution center managers complain that they are just a pawn in a huge chess game and never informed or included in conversations. Unfortunately, this is very true. Even when the senior supply chain executive is sitting at the table, information rarely trickles back down. Third, e-commerce companies have seen a boon like no other in the last 12-18 months. People that had previously never used the internet to purchase groceries or supplies are now using this method. Does that mean that when the pandemic is in the past that the increased infrastructure will be obsolete? Hardly; many believe that this new influx of habits will create a new normal. The new normal will be continued usage and comfort of internet ordering and less brick-and-mortar purchases. Do the malls become ghost towns? Some may not survive, while others will get creative in the new “order/ pick up mode.” New designs will encompass this new way of shopping, becoming a new norm. What that will mean for multi-channel retailers is a renewed focus on an intermittent layer of inventory over the entire network. It will become imperative to know the inventory and have complete visibility of where, how, and when to ship. Lastly, eliminate errors that may cause problems downstream. If your team is manually using data input for any process, look at ways to

reduce or eliminate all manual data input. We are human, and finding that perfect human being that never makes mistakes is a fairy tale. In these trying times, when overtime is more common, associates are more likely to make mistakes. Already stressed out people become even more stressed as they are tired. Therefore, the human element will continue to make mistakes. Unfortunately, some facilities merely increase the number of checking. Increasing checking by three times does nothing more than increase the number of people and the number of hours everyone must work. Eliminate the manual input with the right technology solution. The operative word there is the right technology solution. One e-commerce company finally decided it was time to get a WMS; unbeknownst to them, they selected an antiquated piece of software that would not allow multiple locations for a single SKU. The company was currently storing their top five percent SKUs in pallet picks, case picks, and each pick. Yikes! A manual workaround was called for, setting the company backwards once again. The best thing to do is ask for help. Selecting a piece of technology, automation, or a new process is a major step for most companies, and getting an experienced person’s opinion is always beneficial.

Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn.com.

KPIS AND BENCHMARKS –

THE CRITICAL BUILDING BLOCKS OF OPTIMIZED SUPPLY CHAIN SUCCESS

By Steve Beda

icture the beleaguered sports coach. Any team will do. They all have the same issue as they pace the sideline: How do I really know if my team is any good? Many coaches look at individual players and their game stats, but to truly answer the question and make smart, informed decisions, we have to look not just at our own bench but understand the bigger picture. Knowing individual and team strengths, weaknesses, and performance stats across

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the whole team, plus how those compare with others out there, is the only way to get — and set — a true definition of best and then measure successfully against it. Apply this to the world of parcel shipments and supply chain operations and the same scenario plays out in the offices of every supply chain executive across the globe. How, after the unexpected conditions, soaring prices, surcharges, and long-tail impact of 2020, do we optimize our operations to deliver greater efficiencies and improved ROI? What

decisions need to be made now? Especially in parcel, where last year’s boom is only set to get bigger according to the Retail Industry Leaders’ Association, which predicts an additional 25-40% online sales growth across all categories going forward. To answer these questions, and to drive operational efficiencies and greater ROI, we must have a comprehensive view of past performance, current trajectory, and how that compares to best-in-class operations in the industry. Let’s take a closer look at putting the right data practices and most meaningful KPIs in place. Starting Out Right – Embracing Master Data Management Even the best KPI is worthless without high-quality data from the point — or many points — of entry to analysis. Even more so when you consider we’re often measuring performance across international inventory supply channels, multimodal transportation operations, and a wide, complex network of carriers in a constantly capacity-stressed market. Master data management is the comprehensive process of collection, curation, analysis, and trend modeling of data across thousands of operational touch-

points as well as the key to establishing total visibility of the kinds of influencers, variables, events, and operational factors that can make the biggest impacts on efficiency and your bottom line. Collecting Only “Clean Data” for KPIs – Best Practices There are four key principles of master data management: 1) aggregating data eliminating data silos, 2) centralization of information from multiple sources (ERP, OMS, FAP, and others) to enable the creation of one, consistent, and ultimately true view of operations and spend, 3) normalization of data to ensure it looks and reads the same, enabling algorithms to model and KPIs to analyze effectively, 4) eliminating bad data such as duplicate entries, inconsistent address formats, and other inconsistencies that can skew KPI analysis. The KPIs that Matter – What Goes on the Dashboard? Let’s turn that clean data into KPIs around what matters most. When it comes to organizing KPIs around key areas for analysis, there are three levels to consider: executive, operational, and local level. For example, executive leaders want to know how much they are paying in transportation to deliver revenue and how to improve. Other KPIs across the operation essentially measure the steps to try and meet this need: inventory, transportation logistics, network and inventory planning, procurement, and financial management. Inventory KPIs The ultimate goal is to ship a product to a customer when and where they need it, creating a good, if not great, customer perception of your brand and a seamless experience. In retail, where order fill rate is a major priority and omnichannel delivery can dramatically impact customer buy/return efficiency but can be challenging to execute, investment in the appropriate tech and KPIs is important. Measuring stockouts will help assess customer experience, but there are many inventory KPIs that will also help create a clear performance picture. These include distance to customer and how quickly

the product is expected and ultimately shipped; inventory days of supply; order cycle time — the time between customer order and receipt of goods, which is critical in residential parcel or when embracing distributed order management (DOM); and returns — which need to balance speed and convenience for the consumer at the lowest possible cost. Transportation Logistics KPIs The main KPIs in this area include cost per shipment, cost per unit weight, and on-time performance — increasingly important where a two-day or shorter SLA is becoming the e-commerce target. All transportation logistics KPIs measure how you move goods through the supply chain — and the relative speed, efficiency, and cost to do so — but also provide enormous insight into the operational components that could affect greater efficiencies and cost savings. Are you using the best routes, shortest distances, optimal lowest-cost packaging, and appropriate carriers to deliver service at the best cost? Are accessorial charges as a percent of total cost in line with targets? Use KPIs to measure all of these variables, understand which carriers are performing best, and utilize services most efficiently. Additionally, other variables, like CO2 emissions, are important to identify greener execution for the future. Procurement One of the most important areas for KPI analysis and reporting is procurement and compliance. Securing the best carriers by type of rate, service, lane, mode, and other variables requires solid metrics going into initial contract negotiation for your goals — this is the first step. The next is tracking performance data to measure the percentage of execution that is compliant with rate, terms, and business goals. Understanding noncompliance will also help set goals and standards for future contracts and identify variance along the way. Financial KPIs Monitoring actual supply chain costs, especially variable costs like transportation, is an important KPI. Understanding how those costs are being allocated and the ROI of any strategies put in place

will all play into proper budget planning. In short, without financial KPIs measuring actual cost to budget estimates and analyzing the root cause of the variances, it will be impossible to course correct appropriately for future years. Another area of measurement is cost per unit or cost per SKU, totaling the transportation and non-transportation costs, in order to better plan budgets and product profitability. The Benefits of KPIs in Creating a Mature Supply Chain Over time, KPIs provide historical data that informs current operational planning. Setting target performance goals based on that historical data and your future goals — and using KPIs to measure against them — allows us to conduct a health check of the current state operation and answer with databacked accuracy the questions: how are we doing and how do we compare against others of similar size? Most significantly, the learnings from data analysis can pinpoint the root causes of operational inefficiencies, problems with inventory, underperforming carriers and many other variables to guide short-term corrective action but also set adapted strategies for improved ROI and long-term success. KPIs allow us to stress test our current game plan, to run simulations, and try new strategies for success. And, just like the coach on the sidelines, who knows the strengths, star players, and weaknesses of the opposing team, when we have data-driven answers, we have the playbook for continual improvement and long-term success in an ultra-competitive field.

Steve Beda is Executive Vice President, Customer Solutions, at Trax Technologies (traxtech. com). He is a veteran of the international supply chain industry, consultant, author, and sought-after speaker on global supply chain optimization strategies for mature, industry leading companies. Trax is the global leader in Transportation Spend Management, empowering organizations with globally complex supply chains to have greater control and visibility in their global transportation costs, giving them enterprise-wide efficiency, maturity, and value. MAY-JUNE 2021  PARCELindustry.com 17

THE ART OF A NETWORK ANALYSIS

BY PHIL SCHMIDBAUER

very successful business owner today focuses on delivering customer value — faster, better, and cheaper than their competitors. While relative to different types of consumers, one thing every business has in common is the cost of logistics. According to the 2020 CSCMP State of Logistics Report, business logistics costs were $1.63 trillion in 2019, or 7.6% of the national GDP ($21.43 trillion). Cost is one-third of the “better, faster, cheaper” equation. Speed and quality are equal parts, but it is often difficult to measure how much value they provide to the consumer. A good network analysis can provide strategic guidance toward reaching the optimal mix of the three variables. At a high level, a network analysis helps you understand a few critical spend elements: transportation, warehousing, and inventory. Additionally, it helps you understand the service impact on the end consumer. This article will focus on the distribution of physical goods as opposed to the service industry.  How many distribution points should I use?  Where should those nodes be located?

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 What’s the impact on these costs (transportation, warehouse, and inventory)?  Most importantly, what is the impact on customer value? As with most models, there are no perfect answers. There are directional answers based on company strategy, customer perceived value, and the competitive marketplace. Number of Distribution Points Determining the optimal number of distribution points can be complex. Most importantly, it is highly dependent on a company’s strategy. Are you trying to build velocity into your supply chain? What visibility do you have to customer orders? How quickly do your customers expect product from you? How much will you pay for speed? Increasing distribution points allows you to meet customer demand faster. Amazon continues to expand its footprint in order to provide next-day delivery on more items. Walmart and Target are using their store footprint to fulfill online orders. Consumers can order products and have them delivered overnight or, sometimes, the same day. Not everyone has the capital of these large companies to simply expand and compete in this marketplace. At a high

level, more strategically placed distribution centers (DC) will allow you to service your customers faster. The complexity of more distribution points, however, is added transportation costs and higher inventory levels. Additionally, there is a complexity to managing inventory levels of the same product at multiple locations. It is very difficult to ensure you have the right product, in the right place, at the right time, and in the right quantities when you have many locations. Naturally, the more locations, the more complexity. Location of Distribution Points Location of nodes is going to be driven by your supply chain. You need to ensure your model includes your inbound (raw material) flow, as well as your outbound customer shipments. A “center of gravity” can be misleading if you are not using baseline transportation rates in your modeling. There are many warehouse costs to be reviewed; however, your transportation cost, or service time, needs should drive the location of your distribution points. In the case of one business, the model (based on transportation cost) suggested they open in Valdosta, GA and another in Dallas, TX. During due diligence, a few issues arose which led them to review alternate locations. This process led to the opening of a

ARE YOU COMPETING EFFECTIVELY WITH FREE SHIPPING? BY THOMAS ANDERSEN

he “Amazon Effect” has led to most e-commerce consumers expecting free and fast delivery; often within one to two business days. There’s a price to pay for that, which ultimately falls on the retailer. It’s a concept that plagues large online retailers but can be even more detrimental for the small- to medium-sized companies, especially those with a strong e-commerce presence. Carriers continue to increase their shipping rates annually (not to mention their indiscriminate and random assessments of new fees and surcharges throughout the year), and Amazon continually sets precedents, raising the bar by offering faster shipping, almost always for free. With the ongoing development of local and regional distribution centers, delivery in hours, rather than days, will soon become the norm. These game-changers have led to most e-tailers following suit at the risk of losing sales. Many have decided that joining Amazon is a necessity in order to remain relevant, often parting with a large portion of profits — yet by opening the door to Amazon and replicating their own inventory in that marketplace, they become their own direct competitor. Shipping small parcel packages, especially to arrive in one to two business days, is not cheap. In fact, Amazon reported $61.1 billion in shipping

costs for 2020 (up from $37.9 billion in 2019). With Amazon offering free shipping to an estimated 150 million Prime members, assuming that each member pays $119 per year (students and others receive a discount), less than $18B should have been recouped in membership fees in 2020. With Amazon’s 2020 revenue exceeding $386 billion (retail accounting for the largest share) and net income exceeding $21 billion, it’s clear that Amazon builds sufficient margin into the product while taking a sizable loss on the shipping. Now that’s a model e-tailers would like to replicate! Businesses have a difficult time keeping up with heavyweights, partially due to volume. The amount of product a small business moves in a year could be the smallest fraction of what Amazon ships from one distribution center in a day. All shipment characteristics being equal, it’s basic economics — the more that’s shipped, the less it should cost. With shipping costs on the continuous rise, and the assumption that shippers will spend more than Amazon per shipment, how do shippers remain competitive? Perhaps one place to start is by taking a lesson from Amazon — thinking outside the box (and we don’t just mean converting from boxes to polybags). Assess if Free Shipping Is Necessary B2B recipients are typically more accustomed to paying for shipping

than B2C recipients. For B2B, even passthrough shipping costs are often common, or an amount that’s consistent with the industry, as well as past practices (for repeat clients). The more specialized or customized the item, the more common it is to pay for shipping. A minimum spend threshold to meet free shipping requirements is common. The additional margin from additional purchases to meet that threshold often helps to offset a greater portion of the shipping cost. Keeping an eye on if or what the competition charges also doesn’t hurt. Consider Other Options When free shipping is not a viable option, flat-fee or other predictable methods to apply shipping costs tend to be successful. Getting sticker shock at the end of the check-out process is likely to increase the abandoned cart rate and limit future visits. People view shipping as an added cost and tend to be much less receptive to it than if the base product costs more. Note that the consumer should not be financially burdened based on their proximity to

Improving Packaging to Reduce Package Sizes The un-boxing experience replaces the in-store experience for many consumers, so it should be reflective of the brand, as long as it’s not cost-prohibitive. Polybags, paks, and envelopes may be viable options, as they reduce the dimensional weight. If boxes are necessary, can some be eliminated, or can custom boxes for common shipment types be considered?

Assess the Various Delivery Options and Carriers UPS and FedEx offer premium services that may not be necessary, depending on geography and the package characteristics. In other cases, more affordable USPS-integrated services can be utilized. Also consider offering next-day, two-day, and three-day options at a premium cost. There are consumers that are not looking for the cheapest alternative, but rather faster delivery options.

servicing clients with same-day delivery and convenient pickup options, while improving the supply chain to offer more SKUs in a timely manner. These solutions are free or come at a low cost. The average consumers’ online shopping habit jumped approximately five years ahead due to restrictions associated with COVID-19. The consumer is becoming accustomed to receiving packages from someone in a private vehicle, just as they have been from someone in a brown truck. It is more critical than ever to identify how one can maintain a competitive advantage, based on service, cost, and time.

Is Ship-from-Store a Possibility? For multi-location brick and mortar companies, the ship-from-store model can provide faster delivery times at lower shipping costs. There can be implementation and system challenges, such as: creating space in already cramped back rooms, training employees on shipping methods, carrying packaging supplies in store locations, etc., but these challenges can be offset by utilizing regional or local carriers for the deliveries, which provide same-day or next-day deliveries at lower costs.

Consider Options that Enhance the Purchasing Process Customers gravitate to special offers and reward programs, such as a loyalty program with rewards based on number of purchases or money spent, giveaways, and other alternatives. There is not a one-size-fits-all solution to meet the expectations of the online consumer. The environment is fluid, and it’s important to have options available, while being able to adapt to the changing environment. Amazon, Target, Walmart, and others are already

Thomas Andersen is a Partner and Executive Vice President for LJM Group, working closely with clients to manage parcel cost optimization initiatives. LJM Group has been helping shippers save time and improve proﬁtability with expert FedEx, UPS, & DHL Express parcel contract analysis & rate negotiations, parcel invoice auditing, data & analytics, as well as shipping consulting services focused on cost management since 1998. Visit www.myLJM. com for more information. To speak with Thomas, please call 631.844.9500 or email tandersen@myljm.com.

your DC, although your cost may be higher due to the distance.

Buy Online Pickup in Store (BOPIS) and curbside delivery are services that complement these solutions.

MAY-JUNE 2021  PARCELindustry.com 21

WHAT’S SLOWING DOWN YOUR ORDER FULFILLMENT TIME?

By Norm Saenz

ulfillment managers remain concerned following the 2020 holiday peak season, which was riddled with shipping delays and operational gridlock. They are aggressively searching for opportunities to reduce order cycle times to support demand. Finding operational improvements involves breaking down the detailed requirements of the business (e.g., order volumes, lines per order, units per order, item dims, service levels, etc.). And, while small parcel carrier limitations were a major issue during the prior holiday season, we will focus on “inside the four walls” opportunities. Most fulfillment issues can be categorized into data, process, equipment, labor, and technology. Managers must

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dive into these areas of their existing facilities to find ways to drive fulfillment to its maximum potential. Data An underlying issue limiting fulfillment speed is the lack of quality data informing the design and supporting operational management. The top issue is missing and inaccurate item master data, including vendor case dimensions and weights, units per case, and cases per pallet. This information is valuable in determining if an item is conveyable and selecting the appropriate pick location size. Order history data is also required to generate profiles including each and full case pick volume activity, lines per order, units per line, and other profiles.

The application of the item master details with the order volumes/profiles is the key to designing and managing an operation. There are multiple dimensioning systems available to collect this information, and it should be a top priority. While it may seem too late to integrate this data into an existing operation, it can be used for daily planning and adjustments to the design. Process The fulfillment process begins with receiving and stocking inventory into the building. This foundation enables replenishment to a forward pick area where orders are processed into totes or shipping boxes. The last 100 feet typically includes the packaging and manifesting functions and is often a limiting factor to higher throughput. However, the most common area of improvement is order picking, which often uncovers replenishment as a big issue. These two processes must be synchronized in order to have the highest possible throughput. The additional challenge is most “process” improvements require modifications to equipment and/or systems to realize the greatest benefits. For example, converting to a batch-picking process, using a min/max replenishment strategy, integrating pick & pass, using carton-

ization logic, applying automatic label print/apply technology, and executing velocity-based slotting require changes to equipment and/or systems. Pick Equipment The selection of pick equipment (e.g., shelving, case flow, pallet flow, shuttles, AMRs, etc.) and the facility layout are critical to achieving fast cycle times. Design flexibility is also important for handling unexpected demands, such as acquisitions. The pick location sizes should be based on supporting a target “days of supply” that minimizes replenishments, while not oversizing the pick area. This balancing act is a major challenge faced by managers. Not having inventory in the pick location at the time of pick is the greatest risk to lengthening order cycle times. Yet, putting too much (or all) of the inventory in a pick location increases the pick area footprint, which lengthens order cycle times (and expands capital budgets). The sizing effort starts by applying the items’ dimensions with the expected daily volumes. With this analysis, you can evaluate an effective days-of-supply varied by the item’s velocity. Ideally, the fastest movers (A-items) are adequately stocked in the pick locations to hold about two weeks of inventory. The dilemma is how much space and what equipment is required to provide this amount of inventory. Generally, for A-items, it is not feasible to stock more than a month of inventory in the pick location or you risk oversizing the pick area. Ironically, the slower items (assuming similar item sizes), may have months of inventory in the smallest location. These slower items may also be picked directly from reserve storage to provide more space in the pick area for faster movers. Dynamic slotting may also be an option, which requires a pick location size that supports changing volumes based on multiple factors. However, dynamic slotting may increase replenishment labor versus a fixed location strategy, so there is often a hybrid approach. This location sizing analysis is a balancing act involving the

cost of pick/replenishment labor and the size/capital cost of the forward pick area. Material Handling Equipment There is a wide range of material handling equipment integrated within the pick area, including carts, conveyor, lift trucks, and fully automated product-to-person technologies. To speed up order fulfillment, most utilize a multi-level pick platform with conveyor to transport totes/shipping cartons through zones, put-walls, dunnage machines, auto-labeling, and pack stations. In more sophisticated designs, automation, such as AMRs (automated mobile robots) is used to automatically move products to pick/pack stations. The use of automation is rapidly growing to speed up fulfillment, but it requires additional capital. Building a solid return on investment is required to justify the additional investment with savings mostly within the pick and replenishment labor functions. While automation is the solution for many, misaligned processes, equipment, and limited staffing can quickly lower the expected returns. Labor Productive workers are essential to faster order fulfillment and are becoming harder to find and keep. This has caused some to over-staff, resulting in higher costs per unit and an unproductive work environment. Others have limited staffing options and are relying more on a temporary workforce. Whatever the situation, providing quality training and a comfortable work environment is important to attracting/ retaining workers and achieving higher productivity. Additionally, using the right number of supervisors (~20% ratio to employee count) can keep fulfillment flowing efficiently. Many deploy labor management software as a solution, but these systems can backfire if the proper amount of time is not allowed to build accurate standards and for change management. Workers should be held accountable for performance, but need an efficient design, proper training/ supervision, and supportive systems.

Systems/Technology An effective system should enable a well-designed solution and not add constraints. The ability to batch orders (e.g., single-line orders) and wave management are valuable capabilities to speed up fulfillment. Systemically driving replenishment to ensure pick locations have the required demand is another must-have functionality. Establishing an ongoing slotting strategy is critical to managing congestion and increasing labor productivity. Many companies are dealing with dated systems and are aggressively looking for system modifications and bolt-on solutions to speed up fulfillment. To achieve faster order fulfillment, it is important to have efficient processes and size the forward pick area to balance pick and replenishment labor. This balance requires the right mix of equipment and integration of material handling technology. For an operation to remain productive, the workforce must be properly managed and trained. Maintaining consistent fulfillment speeds requires the support of systems to empower the design and enable high productivity levels. Identifying the specific reasons for sluggish order fulfillment and unleashing the potential can be discovered by breaking down processes, equipment, layout, labor management, and software.

Norm Saenz is a recognized leader in supply chain engineering, with 29 years of experience in facility planning, design, and implementation management. As a Managing Director and Partner with St. Onge Company, he develops client accounts and manages projects involving new and existing facility designs, space and layout planning, labor productivity estimating, equipment and technology evaluations, capital cost and ROI development, design specifications, supplier selections, and implementation management. In addition, he supports St. Onge projects involving Supply Chain Logistics Optimization and Execution Software (WMS, LMS, WCS, WES, TMS,). Visit www.stonge.com for more information. MAY-JUNE 2021  PARCELindustry.com 23

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AUDITING CARRIER INVOICES TO MAXIMIZE YOUR PARCEL SAVINGS

BY JAMIE VOGEL

rom the detailed rate tables and opaque service agreements to all the different delivery options, small parcel shipping is complex. Add to that annual general rate increases, peak season surcharges, and “because-we-want-to” rate and surcharge changes, and calculating an accurate cost for a shipment becomes frustratingly hard. It’s so hard that the carriers themselves often invoice wrong — up to four percent of the time (in their favor, not surprisingly). This makes auditing FedEx and UPS invoices a necessary part of every shipper’s invoice approval and payment process. The need to audit carrier bills is already clear to some companies, but the approach each takes can be very different. Even just understanding what exactly can be audited has changed significantly in the past 12 months (more on that to come). Regardless, shippers need to be proactive in identifying all of the opportunities that exist to recover the money carriers owe them due to the carriers’ invoicing mistakes. Why Do Invoicing Errors Happen, and Who’s at Fault? In a perfect world, the carriers could be trusted to invoice for shipments accurately. They’d also be reliable enough to credit

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customers fairly for refunds they are owed for carrier mistakes. But that’s not the reality. This means that a parcel invoice audit is a requirement to confirm that the carrier pricing matches what is spelled out in your agreement. An audit is the only way for a shipper to prevent being overcharged for carriers’ errors in calculation or misapplied surcharges. It’s worth noting that many of the refunds shippers can claim are the result of “honest” errors, so some are understandable — but most are not. And since shipping, by its nature, is often subject to Murphy’s Law (whatever can go wrong, will go wrong), actual costs often end up being different than what is estimated by a shipper when the shipment initially was handed off to the carrier. Unfortunately, it’s shippers who bear the burden of catching the mistakes no matter the cause. But since it’s so hard to audit shipping invoices, a lot of companies either overlook the errors or see the problem as a basic cost of doing business. How to Keep the Carriers in Check Here are different approaches shippers can take, some of which are more effective than others. The carriers make it difficult to find the needles sprinkled throughout the haystack, and there is even a lot of misunderstanding about which parts of invoices can be audited and what’s actually refundable. The significant change to what can be audited alluded to earlier has to do with the carriers’ service performance guar-

YOUR EAST COAST PACKAGE DELIVERY PARTNER CDL Last Mile, in business for 66 years and counting, has evolved into one of the premiere small parcel carriers servicing the Northeast and mid-Atlantic regions. With solutions designed specifically for e-commerce shippers, we deliver everything from meal kits to medical supplies, and everything in between. Our customers love our simplified pricing, updated tracking technologies (VPOD, live GPS, SMS text), and deliveries 7 days per week. Find out why Shippers are partnering with CDL Last Mile for their final mile solution in the Northeast. Reach out to our Sales Team today to discuss your shipping needs.

antees. At the outset of the pandemic, both UPS and FedEx suspended their guarantees, which meant shippers could no longer get refunds for shipments that were delivered late. This guarantee was a big part of many companies’ refunds in the past, and it is also the reason many use UPS and FedEx and not the USPS. Thankfully, UPS and FedEx took the small step of reinstating some of their service guarantees this past April without a lot of fanfare. This is a good illustration of how shippers need to stay on their toes when it comes to monitoring the carriers’ billing and pricing.

www.CDLdelivers.com Sales@CDLdelivers.com 212-989-1200 x2

How to Maximize Refunds Shippers have a few options to get the money they are owed back from the carriers. Their results vary, however. Some companies go the route of trying to audit invoices themselves, but to do it correctly and thoroughly requires specialized experience and technology. These companies are almost certainly leaving money on the table. Others engage with an auditing company that claims to be the best because they audit for the most data points. But maximizing the amount of money your company recovers happens by focusing on what matters and with the right approach. The number of items that can be audited is not a secret, so claiming to audit more things doesn’t significantly change the results. It is the application of technology to find the opportunities that makes an audit truly beneficial. With service guarantees partially back on the table again, here are some of the other more impactful errors that occur regularly and should be given most attention:  Incorrect delivery address (It’s common for correct addresses to incur this fee in error, but it takes effort to identify when it occurs.)  Dimensional audit (Rules for how dimensional sizes are calculated change periodically and the calculations are complex.) MAY-JUNE 2021  PARCELindustry.com 37

 Duplicate shipments (Shipments can be invoiced twice, and unsuspecting shippers will pay both invoices.)  Invalid residential surcharges (Drivers can, at their discretion, add this surcharge and often do so incorrectly.)  Invalid Saturday delivery and pick-up (With weekend deliveries becoming more common, this charge is being misapplied more frequently.)  Rate audit (This identifies a misapplied discount and tends to happen with groups of packages.) By the way, although it’s not an error or refund possibility, there is another new invoice-related cost to be aware of. FedEx is now applying a late fee penalty of six percent for past due invoices. This is one more reason to be diligent and organized with your audit and payment processes. Missed Opportunities It should also be stressed that not auditing invoices comes with big opportunity costs beyond just the refund checks and hard-dollar savings. Small parcel shipping creates a lot of valuable data, and there is a huge opportunity to leverage that information to not only improve your shipping operation, but also many other parts of your business. Auditing invoices creates data that can be used to learn a lot of things about your business and help with strategic decision making, such as which distribution facilities are performing best, which product lines are most profitable, and ways to opti-

mize inbound shipping costs from suppliers, to name just a few. Within the supply chain function, parcel data can provide insights into carrier performance and your overall network efficiency, down to the package level. Armed with data, logistics managers can analyze their operation to make better decisions in both the short and long term. Auditing Is Zero Risk and All Reward Be assured that auditing invoices will not negatively impact your carrier relationships. The money recovered is money the carriers already know they owe you. It’s no accident that the carriers sometimes make it very hard for you to know when you’re owed a refund and even harder for you to get it. For most shippers, auditing invoices will recover a significant amount of money and provide you with a treasure trove of valuable data that, if utilized well, will give you the data-backed knowledge and insight to make your shipping operation the best it can be.

Jamie Vogel is EVP of Sales & Marketing at Transportation Impact, a technology-first company providing cost-savings and service performance improvement solutions for shippers. Motivated by her passion for continuous learning and building relationships, she is also the host of the Let’s Talk Ship webinar series, where she engages in thoughtful discussions with industry leaders on all things logistics. Jamie can be reached at jamie.vogel@transimpact.com.

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APPLICATION ARTICLE overall cost of meeting (or exceeding) customer expectations from any given inventory origin.

Stacking the Deck to Empower Parcel Shipping

E-commerce suites can be integrated directly to the multi-carrier shipping software or can access the capabilities through an OMS. Either approach can help to provide realistic expectations and options to allow the customer to be in control of their shipping speed vs. spend. Including an OMS in the process allows all inventory sources to be considered, not just the warehouses.

The shipping experience is one of the last crucial steps in the customer journey for online sales. In the aftermath of a year with remarkable e-commerce growth, how shipping is handled has become increasingly critical for retailers as more consumers from across generations are shopping online.

WMS While WMS software supports the day-to-day warehouse operations, most WMS providers have basic, limited shipping features as they do not specialize in parcel capability. Multicarrier shipping software helps to narrow the shipping options that meet the customer’s expected delivery date and then select the lowest cost service level, acknowledging if additional time is necessary for fulfillment.

Who wins? Retailers who implement the right technology to automate the shipping process. By achieving millisecond transaction times through rapid rate shopping, retailers can deliver positive experiences, and with customer expectations high, it is essential to have the right technology in place that will build customer loyalty and enable brand development. Figuring that out is the hard part.

POS Point of Sale (POS) software often fills the role of WMS software for stores. By simplifying the ship-from-store process behind a POS, store associates, who already have to fill many roles, will not have to familiarize themselves with another software to get the powerful shipment execution advantages of using a multicarrier shipping software.

The current shipping environment requires options for online shoppers — including curbside pickup; buy online, pickup in store (BOPIS); and direct-to-consumer (DTC). It also requires visibility into the expected delivery date. This kind of functionality involves retailers being able to leverage multiple inventory sources and carriers to facilitate a quick delivery. With all these logistical complexities in mind, a well-balanced Enterprise Software Stack (ESS) is crucial for retail logistics.

ERP Enterprise Resource Planning (ERP) systems are designed around a common, defined data structure (schema) that usually has a common database. ERP systems provide access to enterprise data from multiple activities using common constructs and definitions and common user experiences.

When partnered with the right technology, multi-carrier shipping software enables automated shipping decisions from any inventory location (distribution centers, stores, 3PL sites, and manufacturing vendors) based on business rules and logic that help exceed customer expectations while delivering at the lowest cost. ProShip multi-carrier shipping software can integrate with multiple parts of an ESS: OMS/eCom An Order Management System (OMS) is nearly essential for those focusing on an omnichannel strategy. The cost of a shipment is greatly impacted by the shipment origin and time-in-transit. Technology that can determine the correct origin, based on available inventory, saves time and shipping cost. When an OMS is integrated with multi-carrier shipping software, the shipper gains a critical understanding of the

Multi-carrier shipping software optimizes and consolidates parcel shipments as a complementary solution to an ERP. With ProShip, you can improve parcel spending visibility to identify key opportunities and understand the business case for transportation solutions beyond the basics. Looking ahead, resilient businesses will prioritize building flexibility into their supply chain. Building in flexibility means enterprises have more control over their customers’ shipping experience — a feat only possible when armed with the right tools. For more information on how to stack your software deck with ProShip, the most trusted global provider of automated multi-carrier shipping software, read on at www.proshipinc.com.

www.proshipinc.com

BY BRENDEN RUSSELL

NAVIGATING CARRIER CONTRACTS POSTCOVID-19 AND THE E-COMMERCE BOOM

The pandemic has changed much of how we do business, including contract negotiation. Here are some of the important questions to ask as you navigate the new normal.

he past year has certainly tested supply chains and brought them to their breaking point. With a 44% YOY increase in e-commerce spend in 2020 , carriers and shippers alike had to shift resources to account for the ever-growing B2C segments of their business. US average daily volumes for FedEx Express/Ground and UPS saw an average eight percent and 13% YOY increase respectively (see Figure A), but also jumped more than 22% in at least one quarter for each carrier during their fiscal 2020 year. So, it makes sense that both FedEx and UPS began revaluating their bottom line in Q2 2020, utilizing language that indicated they would have to increase revenues to keep up with the investments they had to make in their supply chains to withstand the large demand growth. Each carrier instituted peak residential surcharges that heavily impacted large retailers. They also created different ways of measuring volume baselines, assessing fees,

40 PARCELindustry.com  MAY-JUNE 2021

and put new restrictions on what they would pick up. The dust is now settling after a tough peak season, and many shippers are wondering how they can better prepare for unforeseen fees and thresholds again. There’s no doubt that many will turn to carrier relationships this spring to try and lay out more favorable pricing and language into their contracts, but many also do not know where to start. Peak Activity Is a Great Starting Place Updating contracts for 2021 and beyond seems like a daunting task, especially since the year proved that all the best planning can go out the window in a split second. However, there are strategic contract components you can focus on to help lower your cost per package and increase the ability to budget for the years to come. Start by addressing peak in the contract: define what peak season dates are, how fees will be assessed, and potential dis-

counts that could be included. Putting predictability back in budgeting has never been more important. Remember that many shippers did not know how carriers were going to assess billing for peak residential surcharges in 2020. This year, request reporting for your peak shipment volume and charges to ensure you can strategically manage your volume to target costlier peak fees. Pay Close Attention to the Day-to-Day Terms Both carriers have also been chasing more favorable payment terms, and FedEx has recently stated it will begin to assess late fees for unpaid billing (something it did not do before 2020). Pay attention to the payment terms laid out in the contract and consider if these terms make sense with how your company currently pays its carriers. Another thing to investigate in your current and prospective contracts is your incentive or earned discounts. Because of a large increase in parcel volume, many shippers could be near the end of their incentive tiers or do not have as favorable incentives for the change in volume or services from 2020. When looking to 2021 and beyond, if you believe your volume will stay on an upward trajectory, it would be best to reevaluate your incentive tiers to reap the cost-saving benefits of increasing volumes. If you changed to different services, or the characteristics of your shipments have changed a lot in the past year, it may also be valuable to revisit all discounts to your services, so that you are getting the best discounts on the most frequently used services and in the areas on the rate card (zone/weight) where most of your packages live. Minimum reductions (or minimum charges, as they are sometimes called) can be, depending on your package profile, some of the most important parts of a service pricing agreement. You can receive 90% off a service pricing, but if your minimum charge does not change or is too high and most of your packages are low weight and zone, you will not see many benefits in pricing because you will most likely be billed the minimum charge. Getting the minimum to a price you are comfortable with is very important. Keep Your Eye on the Future Market The GRI has always been an important part of a contract. The major carriers increased their rates by an average of 4.9%; however, we estimate a 7.24% and 7.65% increase for FedEx and UPS’s most common surcharges, respectively. Asking for and receiving a GRI that is less than the published amount is something that major shippers should strive for, and having a rate cap put in place on common accessorials like residential surcharges and DAS would be best-in-class. Target Bigger Cost Items There are other parts of the contract to focus on, regardless of the current climate. If you have packages with dimensions that are less dense than the list DIM divisor (139 for UPS and FedEx), where the actual weight is less than DIM weight, then

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a custom DIM divisor or threshold may be a good item to consider. Residential fees and Delivery Area Surcharge fees are also some of the hardest hitting surcharges to the bottom line, so getting any discounts on these accessorials would be the best surcharges to focus on first, especially if you are a heavy residential shipper. If you have certain surcharges that are assessed because of your packaging profile, like Additional Handling, consider custom thresholds. Additional Handling, Oversize/Large Package, and Overmax are three surcharges that have increased penalties during peak season, so addressing the packages that are causing these surcharges, getting custom thresholds, or switching Overmax shipments to a bulkier, article-centric mode like LTL or a courier could bring some savings throughout the year — especially during peak. Prepare for Plan B Inevitably, few contracts are perfect. As market conditions change, you may find your contract a benefit or a curse. Utilizing your shipper profile and customer data can go a long way in optimizing your contract terms; however, we saw many shippers benefit from utilizing a “Plan B” approach via carrier diversification in 2020. According to the 2021 GMT Parcel Benchmark Survey, most shippers prioritized Carrier Diversification as their top focus (colors in the chart to the right represent prioritization, red = top ranked, gray = lowest ranked), especially because carrier volume constraints created major issues for single-source shippers. If one carrier could not take their volume, they had no other option to get their orders off the DC floor. Shippers were also uniquely vulnerable to changing and rising accessorial and surcharge fees. This makes carrier diversification an important strategic conversation going forward, as it presents an opportunity for shippers to select the best rates and services to them at any given time. Shippers who have a regional fulfillment model already will benefit the most by using regional carriers, as well as shippers that have the software capabilities to manage multiple carriers. Regional carriers often have cheaper rates and surcharges than the larger carriers. Diversifying your carrier base is something that shippers should do during non-peak periods, because carriers need to estimate their volumes as well, and many were so busy during peak that they put new customer implementations 42 PARCELindustry.com  MAY-JUNE 2021

on hold until after peak. Whether shippers want to rebid their current contracts or implement new carriers, one thing is for certain: parcel shipping is an ever-evolving market, and to receive the best cost savings, the best strategy is to be proactive instead of reactive.

Brenden Russell is a Solutions Engineer II at Green Mountain Technology, a Parcel Spend Management solution provider, where he creates reports to help analyze and optimize customer parcel carrier networks. Brenden majored in Supply Chain Management with a minor in Information Systems Management from Auburn University. Visit www.GreenMountainTechnology.com for more information.

APPLICATION ARTICLE

Retailers and Manufacturers Achieve Shipping Goals Despite Disruptions Successful retailers and manufacturers are able to adapt when facing unforeseen supply chain disruptions. But this agility requires the right technology... as well as thoughtful planning, which is why Logistyx partners with companies upfront to create custom, detailed parcel shipping strategies that support shipping goals. A Look at Logistyx’s Approach With decades of experience in the parcel shipping industry, our teams have solved almost every kind of parcel shipping challenge. Our experts understand how to use cloud multicarrier shipping systems in a wide range of parcel shipping scenarios, from cross-border shipment execution… to HAZMAT shipment execution… to inbound shipment execution… to ship-from-store strategies. “Supply chain leaders need more than just software to achieve their order fulfillment KPIs,” says Ken Fleming, Logistyx President. “In partnering with our teams, our customers optimize their technology and strategies to maximize their technology investment and thrive.” Help with Ship-from-Store To meet consumer demand driven by e-commerce growth, Belk committed to investing in supply chain technology enhancements to better serve customers, including shifting more e-commerce delivery origins from distribution centers to stores. While simple in theory, executing store-level shipping presents considerable challenges, including limited carrier selection and complex rate shopping. Logistyx worked with Belk to address these challenges by implementing Logistyx TME, a solution that provides stores

with instant access to contracted carriers offering the best rates for each location. Seamlessly integrated with Manhattan Active Omni, the solution supports multi-carrier rating, rate shopping, shipment execution and label generation, real-time shipment tracking, and delivery transparency. Leveraging TME, Belk utilizes its stores as mini distribution centers to get shipments to customers’ homes, a key advantage during the COVID-19 pandemic. In addition, when faced with carrier capacity limits during peak season, Logistyx helped Belk grow its carrier network by tapping into its library of more than 550 carrier integrations. This added greater capacity into Belk’s parcel delivery mix by introducing regional and specialty last-mile carriers, while also reducing transportation costs and providing a consistent level of service. A Plan to Accelerate Global Shipment Execution and Gain Real-Time Shipment Visibility For global shippers like Cummins, managing huge numbers of global and local carriers can be challenging, and producing shipping labels and transmitting shipping information according to each carrier’s specifications is often a complex process. By implementing Logistyx TME, Cummins created shipping workflow efficiencies such as:  Ensuring ship-to addresses are valid and package weight and dimensions are within carrier restrictions.  Automatically identifying shipment consolidations and producing shipping labels in real-time at the moment the package is created.  Performing instant freight calculations in real-time, so that actual freight costs can be added to sales invoices.  Automatically producing carrier manifests and freight letters (CMR) at the end of each day. How Can Logistyx Help You? Whether you need to migrate to the cloud, create an integrated supply chain technology stack, or add new carriers to your transportation network, we have options to fit your unique needs. Contact us today to learn more about the breadth of Logistyx’s technology.

www.logistyx.com 877.755.2374 info@logistyx.com

PARCELCOUNSEL

THE FIVE MOST CRITICAL ELEMENTS IN TRANSPORTATION CONTRACTING: PART I By Brent Wm. Primus, J.D.

revious installments of PARCEL Counsel looked at the six rules of contracting. These rules are general principles relating to the process of contracting. In this issue, we will consider the substantive content of transportation contracts. The category of transportation contracts we will focus on are those between a motor carrier or transportation broker and their shipper customers. Shippers also enter into contracts with ocean carriers and, perhaps, with air carriers. The ultimate goal of a contract for transportation services is to get the best possible business terms and conditions… with minimum risk… in a fully insured environment. This goal applies to the providers as well as to their customers. The extent to which one can achieve this goal depends primarily on the relative financial strength of the parties. For instance, where it is contemplated that a shipper will be tendering over a one-year period a volume of shipments with freight charges in excess of $1,000,000, the shipper has significant bargaining power with small- to medium-sized carriers.

44 PARCELindustry.com  MAY-JUNE 2021

On the other end of the spectrum, shippers tendering only a trailer load or so of less-than-truckload shipments per week would have little, if any, bargaining power with large providers such as FedEx, UPS, and large national motor carriers. For that matter, shippers tendering “only” $1,000,000 in shipments with these large providers will also have limited bargaining power — especially when capacity is as tight as it has been over the last year. Another goal in transportation contracting for the shipper customers is to contract away from the carrier’s standard terms and conditions. These terms and conditions will be found in the carrier’s tariff or service guide. However named, they are established and set by the provider. Again, the ability for a shipper customer to contract away from the standard terms and conditions is dependent primarily upon the volume of anticipated shipments. With these goals in mind, the first critical element in transportation contracting is the obvious one — rates and charges. This is the element that businesspeople focus on. However, the other four elements we will look at are just as important in terms of protecting net revenues and minimizing legal and financial risks. The second critical element relates to the limits of liability for loss and damage to cargo.

For domestic shipments within the United States, these also can be negotiated. However, within Canada, there is a prevailing maximum liability of approximately $2 per pound. Canadian motor carriers are very reluctant to negotiate away from this limit. For international air carriers or ocean carriers, the limits of liability are set by international treaties. For ocean shipments to or from the United States, the limit is set by the Carriage of Goods by Sea Act (COGSA) which is $500 per package. For the international air carriers, the liability limit is set by the Montreal Protocol and is approximately $11.75 per pound. It is extremely rare that these providers would negotiate a higher limit of liability. In the next installment of PARCEL Counsel, we will look at the remaining three critical elements: time limits, issues of liability other than for loss and damage to cargo, and how and where disputes are to be resolved. 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 brent@primuslawoffice.com.

APPLICATION ARTICLE

The Shipping Software Checklist By Will Lindow

The exponential growth in e-commerce over the last year has forced businesses to take a hard look at their shipping software. Increased order volume, carrier capacity, and supply chain issues have merchants questioning whether their current solution is right for them and one that will benefit them well into the future. Understanding which software is the right fit for your business requires careful consideration. Ensuring that your decision is “future-proof” adds an additional layer of complexity. Here are some things to look for in a dedicated shipping software to ensure you are set up for the long haul: 1. Customization Small to medium businesses that are in the earlier stages of growth can benefit from a shipping software that is more templated and equipped with more defined workflows, like ShippingEasy or ShipStation. For warehouses and higher volume merchants who are well established and have sophisticated systems already in place, flexibility and customization become crucial priorities. They need a shipping software, like ShipWorks, that can work with, and be molded around, their current systems and workflow. Also, consider your speed and security needs. While cloudonly solutions offer convenience, higher volume shippers benefit from the speed and security of an on-site solution that allows them to drive workflow efficiencies and increase daily throughput capacity. Not sure if you prefer speed and security over convenience? Good news is you don’t have to choose. A hybrid solution like ShipWorks gives you the speed, scalability, and security of an on-site solution, married with the convenience of cloud-based features. The best of both worlds! 2. Integration Regardless of your shipment volume, you’ll want to ensure that the software is compatible with your current carriers, channels,

and systems, as well those you may expand to in the future. Java Momma’s CEO explains, “As we grew, other companies couldn’t integrate with our systems like ShipWorks. We’ve tripled our daily shipment volume!” Those running an ERP or WMS often find themselves adding a standalone shipping software to boost shipping performance. Be sure to choose a software that is compatible with and easily added to your current system, saving you significant time and money versus replacing your current WMS or ERP. 3. Cost Management While paying too much for shipping can add up quickly, especially for warehouses and other high volume shippers, carrier rates aren’t the only cost your shipping software should help manage. Look for features, like robust automation, that help you reduce costs by eliminating errors, speeding up workflows, and allowing you to scale without reliance on headcount. As ShipWorks customer 1st Phorm stated, “ShipWorks has automated everything for us. If we were doing this number of orders without ShipWorks, I would need hundreds of people here”. 4. Support Customer support is often overlooked but is one of the most important factors when choosing a software. From personalized assistance with initial setup, to issues that can bring your fulfillment to a grinding halt, you want to be sure you are dealing with real problem-solving experts and not script readers. Look for businesses that have been around a while. They will have seen a thing or two, and have the experience to get you up and running quickly. In summary, dedicated shipping software can and should act as an extension of a larger system, helping you get more done in less time. Whichever customer-facing services you use, however you store data, and whatever systems you currently have in place, ShipWorks is highly customizable and works with any existing system and workflow. With powerful features like our Best Rate Tool, Intelligent Order Routing, and endless automation capabilities, ShipWorks will help you optimize your shipping process for the present and future. This is why warehouses and other high volume businesses have been using ShipWorks for more than two decades.

shipworks.com 417.283.8548 sales@shipworks.com

TO SUM UP

In a perfect world, the carriers could be trusted to invoice for shipments accurately. They’d also be reliable enough to credit customers fairly for refunds they are owed for carrier mistakes. But that’s not the reality. This means that a parcel invoice audit is a requirement to confirm that the carrier pricing matches what is spelled out in your agreement. An audit is the only way for a shipper to prevent being overcharged for carriers’ errors in calculation or misapplied surcharges.

Businesses have a difficult time keeping up with heavyweights, partially due to volume. The amount of product a small business moves in a year could be the smallest fraction of what Amazon ships from one distribution center in a day. All shipment characteristics being equal, it’s basic economics – the more that’s shipped, the less it should cost. — THOMAS ANDERSEN

— JAMIE VOGEL

Fulfillment managers remain concerned following the 2020 holiday peak season, which was riddled with shipping delays and operational gridlock, [but] most fulfillment issues can be categorized into data, process, equipment, labor, and technology. Managers must dive into these areas of their existing facilities to find ways to drive fulfillment to its maximum potential.

The past year has certainly tested supply chains and brought them to their breaking point. With a 44% YOY increase in e-commerce spend in 2020 , carriers and shippers alike had to shift resources to account for the ever-growing B2C segments of their business. US average daily volumes for FedEx Express/Ground and UPS saw an average eight percent and 13% YOY increase respectively, but also jumped more than 22% in at least one quarter for each carrier during their fiscal 2020 year. So, it makes sense that both FedEx and UPS began revaluating their bottom line in Q2 2020.

Cost is one-third of the “better, faster, cheaper” equation. Speed and quality are equal parts, but are often difficult to measure how much value they provide to the consumer. A good network analysis can provide strategic guidance toward reaching the optimal mix of the three variables. At a high level, a network analysis helps you understand a few critical spend elements: transportation, warehousing, and inventory.

— NORM SAENZ

— BRENDEN RUSSELL

— PHIL SCHMIDBAUER

46 PARCELindustry.com  MAY-JUNE 2021

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