PARCEL SOLUTIONS FOCUS:
AUDITING AND SPEND MANAGEMENT SOLUTION PROVIDERS YOU NEED TO KNOW
JANUARY-FEBRUARY 2018 PARCELindustry.com
Take Your Small-Shipment Operation
ABOVE AND BEYOND
ARE YOU LOSING THE FIGHT AGAINST OVERSIZED PACKAGES AND THEIR SURCHARGES? P.12
ARE CLOUD-BASED SOLUTIONS THE ANSWER TO SUPPLY CHAIN OPTIMIZATION? P.24
HANDLING FULFILLMENT IN THIS AGE OF “I WANT IT NOW.” P.26
CONTENTS /// Volume 25 | Issue 1
18 24 26 30 06 EDITOR’S NOTE Making 2018 Your Best Year Yet By Amanda Armendariz
08 OPERATIONAL EFFICIENCIES Taking Stock for Fresh Starts By Susan Rider
10 SPEND PERSPECTIVES Delivering Exceptional Customer Service Through the Last Mile By John Haber
11 APPLICATION ARTICLE: A New Approach! GMTS
12 SUPPLY CHAIN SUCCESS FedEx and UPS Look to Box Out Large Packages By Greg Merz
13 APPLICATION ARTICLE: Simplify Your Supply Chain PITT OHIO
14 SHIP RIGHT Start Your Year Off Right – Achieve Control of Office Shipping. By Aaron Videtto
15 APPLICATION ARTICLE: Streamlining the Business of Shipping Intelligent Audit
16 TO SUM UP 18 AUDITING AND SPEND MANAGEMENT SOLUTIONS TO OPTIMIZE YOUR OPERATION 24 SHOULD COMPANIES BE HEADING TO THE CLOUD FOR THEIR SUPPLY CHAIN’S FUTURE? By Doug Surrett
26 IMPROVING CUSTOMER SATISFACTION IN THIS AGE OF “I WANT IT NOW” ORDER FULFILLMENT By Ed Romaine.
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29 APPLICATION ARTICLE: Redefining Customized Service U.S. Cargo
30 CROWDSOURCING THE FINAL MILE: THE NEXT BIG OPPORTUNITY IN PARCEL DELIVERY By Rick Jones and Itamar Zur
34 THE INCONVENIENT TRUTH ABOUT PACKAGING WASTE AND LAST-MILE DELIVERY By Bob Malley
36 PARCEL COUNSEL Back to the Future: UPS and Last-Mile Delivery By Brent Wm. Primus, J.D.
38 WRAP UP Delivery Convenience By Michael J. Ryan
PRESIDENT CHAD GRIEPENTROG PUBLISHER KEN WADDELL EDITOR AMANDA ARMENDARIZ [ amanda.c@rbpub.com ]
EDITORIAL DIRECTOR ALLISON LLOYD [ allison.l@rbpub.com ]
EDITORIAL INTERNS CATHERINE SBEGLIA KRISTYN SOMMERS AUDIENCE DEVELOPMENT MANAGER RACHEL CHAPMAN [ rachel@rbpub.com ]
CREATIVE DIRECTOR KELLI COOKE ADVERTISING KEN WADDELL (m) 608.235.2212 [ ken.w@rbpub.com ]
PARCEL PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2018 © by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949.702.5390, www.ReprintPros.com.
P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
JANUARY-FEBRUARY 2018 PARCELindustry.com 5
EDITOR’SNOTE
MAKING 2018 YOUR BEST YEAR YET By Amanda Armendariz
F
or many of us, the holidays are a time of joy, togetherness, and family. For many shippers, they likely hold the same viewpoint with respect to their personal lives, but professionally, the holidays can be an overwhelming time of stress. Peak season is no joke; volumes are up exponentially, companies are dealing with the staffing demands of temporary employees, and the environment is ripe for mistakes to be made. So it’s no wonder that as we close out the first month of 2018, I can almost hear a collective sigh of relief from our readers. We did it; we survived another peak season! You deserve a break, so take a week or so to relax now that the stress is reduced. But then use your renewed energy to tackle anything that could present a problem
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for next year’s peak season. Yes, I know; it seems a bit crazy to be thinking about next holiday season already. But that is what successful shippers do; they take the lessons learned from one peak season and implement those changes in time for the next year. For example, were you short-staffed this year with respect to the increase in package volume? Then now is the perfect time to sit down with HR and formulate a plan to attract and retain qualified, temporary workers to help you during the surge. Or perhaps a good portion of your packages were delivered after the promised date; now would be a good time to sit down with your carrier representative and discuss what changes could take place to avoid (or at least reduce) this issue in 2018. As you set out on your journey to make this the best year yet, we hope you find plenty of resources in the following pages. From showcasing the latest auditing and spend management solutions to analyzing the effect that oversized packages are having on the delivery network, we hope you finish this issue feeling renewed and prepared for 2018. As always, thanks for reading PARCEL.
EDITOR’S PICK
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
PARCEL’s Most-Read Articles of 2017 By Amanda Armendariz
Could Box-Making Machines Be the Answer to Your Packaging Woes? By Barry Tabor
Streamlining Shipping Compliance Regarding Dangerous Goods By Brandon Yost
OPERATIONALEFFICIENCIES
TAKING STOCK FOR FRESH STARTS By Susan Rider
W
hew! You made it through the holiday rush. Many companies do 80% of their volumes during the three-month holiday period. Even if you are not one of those companies, you may have seen an increase in volume the last three months of the year, which means January is a great time to breathe and refresh your distribution center. First things first, let’s take stock of ourselves. What are our talents, strengths, and values? What are our weaknesses, and where could we improve? In coaching an executive recently, my colleagues and I discovered that he was well-liked and admired by most employees. You would think that there was no room for improvement, but doing a deeper dive, we uncovered why top players were leaving the company —
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because this executive was too nice. What, too nice? Yes, A-players tend to give their all without being told to. When they see every other associate who is only giving 70% or less being treated with the same rewards, recognition, and kindness, it gets frustrating and de-motivating for the A-player. Being a top performer, they know that they are in demand and that they can get a position elsewhere easily. This is usually why they jump ship — not because of pay or position but because they want to be recognized and given appreciation for their efforts. The next thing to take stock of is your team. Are they in the right positions, and do they need upgrading with some seminars, school, or other training? Do you have some that need to be replaced? Put together a plan to make sure you find the right person to fill the empty positions. PEAK SEASON REVIEW One of the most important things to review is the previous peak season. What went right? Make sure you give accolades to the right people, but more importantly, take a look at what went wrong and where changes and improvements need to be made. Once you have a complete list, prioritize by value to your company. Some things may be done without spending any money, while some things may require collaborating with merchandising and sales. It is better to make a plan now, in your slower season, to improve these items than to let them
linger until the month before the peak season. Meet with your executive team. If you barely squeaked through peak season this year, you will need to know what the growth expectations are and what is being budgeted by the company. Oftentimes, the distribution manager is kept in the dark until they are in the middle of peak season. A company I met with last month said they doubled their volumes in the distribution center, and it would have been nice to have some forewarning. You can’t continue to do what you have always done and expect a different result. Review your processes. Would automation be a good solution? How can you improve each process — receiving, put away, picking, packaging, and shipping — by at least 10%? If you come up with better processes accumulatively, you will improve your throughput and need less part-time help for the same volumes — certainly a win/win. If you are thinking materials handling, automation, or changes are needed, now is the time to get that fine-tuned and ordered. The material handling industry has some long lead times for rack, conveyor, and automation changes, and you definitely want the system installed, tested, and running smoothly before your next peak time comes around.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn.com.
SPENDPERSPECTIVES
DELIVERING EXCEPTIONAL CUSTOMER SERVICE THROUGH THE LAST MILE By John Haber
T
he provider that offers the fastest last-mile service wins the race, right? Think again! It’s all about customer service. In today’s growing digital world, technology reigns supreme by allowing users to track packages, book shipments, manage inventory, and a lot more via smartphones, tablets, and laptops. But what if something unexpected happens? Picking up the phone may involve being put on hold for hours or jumping through hoops just to speak to someone. Even worse, what if there is no phone number available, but instead just an email address? For shippers and customers alike, time is crucial, and because of this, social media has become a quick way to find assistance and vent frustration. However, a growing number of social media customer assistance accounts are bots that encourage the user to
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send a private message via the platform with details so that a ”real person” can respond in maybe a not-so-timely manner. THE IMPORTANCE OF CUSTOMER EXPERIENCE According to a survey conducted by logistics software firm Convey, 83% of retailers confirmed that customer experience is a company-wide goal. In today’s digital commerce, 70% confirmed it is either crucial or very important to improve “bidirectional communication” with consumers regarding their delivery expectations, package tracking, and resolution of delivery options. Another 70% agreed that “the ability to take dynamic and proactive action on in-transit issues such as rerouting or expediting shipments” is crucial or very important. However, what happens when customer experience and service conflicts with other company priorities, such as cost savings? The same survey found that more than 50% said reducing costs and improving margins is still crucial. The first instinct is to automate processes and provide as much data to the customer in real time as possible. This works well until something unexpected happens. TIPS FOR EXCEPTIONAL CUSTOMER SERVICE As noted in an article from consulting firm McKinsey, consistency is key. We took this concept and established our top three customer service tips for today’s digital environment.
Consistency across all channels: Ensure customer service is consistent and not siloed across all channels including in-store, online, and mobile. Consistency between retailer and last-mile delivery partner: Establish and understand roles for each partner, and ensure technology tools and real-time data are shared with the customer. Consistency in communication and follow-up: A retailer’s responsibility does not end when it hands off a package to its last-mile delivery partner. Follow up with the customer to make sure the package was delivered on time and not damaged, and don’t forget to ask if the customer is completely satisfied with their experience. CONCLUSION The customer experience and service begin when the customer enters the store or website and continues all the way to the customer’s front door and, in some cases, even beyond. It is equally important for the last-mile delivery provider to provide an exceptional experience and service. Consistency is important, and by keeping the customer in the loop and providing them tools to participate in delivery time selection and shipment tracking, the customer is more likely to return to do business with both the retailer and last-mile delivery provider.
John Haber is the Founder and CEO of Spend Management Experts. Contact John at solutions@ spendmgmt.com.
APPLICATION ARTICLE
A New Approach! Looking to lower your logistics costs? There’s a reason why GTMS is named a TOP Audit and Freight Payment solutions provider in 2017. The professionals at GTMS are the industry’s logistic experts that will reveal opportunities to positively impact your bottom line. We have a very unique approach to Audit and Spend Management, offering multiple solutions in cost management from our TMS to unique Parcel/Freight Payment solutions. No Parcel/Freight Payment Provider Needed. Our business intelligence solutions are specifically designed to help customers manage their logistics end to end more effectively by automating the process to make it the easiest to implement and manage, all with no IT. We work in a collaborative effort with you to provide best practice spend management and shipping optimization solutions.
“Our web-based solutions will positively impact your bottom line.” HOW WE ARE A SUCCESS FOR YOU! Tools, Experience and Partnership. Big client data management is our forte. The uniqueness of the company lies in our groundbreaking webbased business intelligence system, which helps clients achieve 100% on-time service, 100% invoice accuracy, and allocation. This is accomplished while identifying 100% controllable cost avoidance benefiting e-retailers, manufacturers, consumers, and carriers. You will learn that GTMS provides you with the business intelligence technology that frees you from the obligation of using other third-party solutions. Knowledge and data analytics is how GTMS is an integral part of the cost savings solution. SHIPPING OPTIMIZATION! GTMS offers concise-actionable reports that enable shippers to optimize their logistics spend with ongoing controllable cost monitoring to measure cost savings for the C Level down to the “actionable items” at the
management level. Analytical tools allow quick and easy management of cost savings that effect your bottom line directly, allowing you to know who to bring to the table for significate spend reduction and creating ‘win triangles’ by optimizing the speed/cost relationship on all shipments. IS FAST AND FREE DELIVERY ONE OF YOUR ISSUES? In today’s global logistics market, the growing consumer demand for fast and free shipping is presenting a significant challenge for organizations to manage their shipping costs while obtaining the demand of “fast” delivery by the end user. To avoid overpaying and gain more profound insights into logistics flows, companies that ship goods are foraging for efficient mode optimization solution providers. Having served in the logistics industry for more than a decade, GTMS is spearheading paradigmchanging technology innovations to help shippers streamline costs, increase efficiency, and enhance visibility throughout the entire logistics process. } } } }
Parcel: National, Regional LTL: National, Regional Truck Load: National Regional, Owner Operators International: Air/Ocean/Customs, National, Regionals, NVOCC’s Direct
Let GTMS provide you the solutions of cost savings, automated solutions, better visibility, and peace of mind on every transaction. Contact us today.
855.884.3555 sales@gtms.us www.gtms.us
SUPPLYCHAINSUCCESS
FEDEX AND UPS LOOK TO BOX OUT LARGE PACKAGES By Greg Merz
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he booming trend of e-commerce shopping continues to grow, and not just in massive sales, but also in the actual size of products available. Furniture, fitness equipment, home appliances, mattresses, and other goods once bought and delivered by local stores can now be purchased online with delivery executed by parcel carriers. As these large, often residential, packages bog down the FedEx and UPS networks, routes, and truck space, a battle by the carriers has slowly been waged to combat these burdensome items. The fight against oversize packages has grown to include not just the introduction of substantial surcharges, but also an increasingly broad definition of what falls into this category. These recent changes have primarily come in two forms. The first is the reduction of dimensional factors that place an emphasis on billing packages based on the size and space a package consumes on a truck, rather than actual weight. The second is another reduction, this time in the qualifying sizes
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for Additional Handling and Large or Oversize Package surcharges. Following UPS’s 2017 lead, FedEx has matched the Additional Handling minimum length, which will now apply to any package “48 inches along its longest side” in 2018. This was previously set to 60 inches in length for UPS (2016) and FedEx (2017). As is regularly the case with FedEx and UPS, they are in lockstep with re-defining their respective Oversize or Large Package criteria for 2018. This charge will now apply to packages exceeding 96 inches in length for both US air and ground services. While FedEx previously had a threshold of 108 inches for Express services, UPS did not include this caveat for Large Packages in prior service guides. Getting to the cost of these newly re-defined surcharges, we start to see a clear picture of what FedEx and UPS hope to accomplish. Both carriers implemented an additional charge for the already premium Large Package surcharge during the peak holiday shipping season — UPS at $24 and FedEx at $25. Meanwhile, FedEx added an extra $3.00 to its Additional Handling surcharge during peak. UPS will follow suit for the 2018 holiday season with its own $3.15 add-on to the standard Additional Handling surcharge. All of this was a sign of even more cost-prohibitive measures to come as we look ahead in 2018. The standard rate increase will see both FedEx and UPS equal each
other with Additional Handling fees at $12 while the Oversize charges grow to $80. However, UPS is taking another dramatic step beginning July 8, 2018 when any package with an actual weight over 70 pounds will bring the Additional Handling Fee up to $19, and all residential shipments deemed to be a Large Package will now pay a $90 surcharge. UPS has also taken the lead on 2018 peak surcharges with the following size-related charges: } The newly defined Large Package Surcharge will increase an additional $26.20 per package from November 18, 2018 – December 22, 2018. } All Additional Handling fees will increase an extra $3.15 per package from during this time. While the FedEx 2018 peak season charges remain to be seen, it is not hard to predict a similar announcement forthcoming. The abrupt and recent nature of these charges may leave shippers scrambling. However, as always, shippers should look to negotiate concessions on both standard and peak season charges. Secondly, there are opportunities to explore regional carriers that may still be more generous in accepting and delivering large packages. Finally, it is important to assess your packaging to help avoid triggering these charges.
Greg Merz is Sr. Analyst, Transportation Solutions Consulting at enVista. Contact him at gmerz@ envistacorp.com.
APPLICATION ARTICLE
Simplify Your Supply Chain In the shipping world, it is no longer just about getting a product from point A to point B the fastest. Carriers are becoming a resource for shippers, offering more services in different modes to optimize service and cost. Working with a carrier who understands your business needs and is flexible enough to think outside of the box makes all of this possible. PITT OHIO takes a strategic approach to understanding our shipper’s environment and develops solutions that simplify their supply chain. This approach starts with an in-depth conversation designed to produce valuable, clear, and meaningful dialog through an interactive process geared towards a shared understanding of the problem. The result? A creative one-to-one solution tailored around our best-in-class technology, partners and service.
Ideally, these conversations are not a linear discussion with a beginning, middle and end, but are instead an interactive process that enables us to pinpoint the opportune moments of real impact. Our free analysis of your parcel spend will uncover characteristics and cost drivers in your company and results in a unique, complete parcel solution driven by your data. Great strategic conversations generate breakthrough insights by combining the best ideas of the people involved. These shared insights will result in a spark of creativity that formulates a solution not previously identified on your own. We use our leading-edge technology to enhance your parcel shipping with a non-intrusive, performance-based approach. The best conversation you have this week could be with PITT OHIO. Share with us your pain points and explain what challenges you face every day. We use these essential conversations to uncover the challenges you’re facing and we excel at turning these opportunities into customized small package solutions. Together we will discover a unique, opportune moment to make a real impact on your business and simplify your supply chain.
SHIPRIGHT
START YOUR YEAR OFF RIGHT – ACHIEVE CONTROL OF OFFICE SHIPPING By Aaron Videtto
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perating in multiple locations, either in different states, offices, or parts of a campus, can create challenges when it comes to managing an organization’s shipping and mailing processes. Beyond the mail center, desktop and remote shippers add complexity, making it hard to capture spend totals and create efficiencies. Consider, for example, the university with thousands of faculty members, some of which use the school’s mail center to send, while others handle their mailing and shipping needs remotely. Or picture the multi-location law firm, with dozens of attorneys managing client needs, and the medical center that processes significant volumes of ship requests on a daily basis. A digital enterprise-wide solution can bring clear visibility
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organizations can miss out on opportunities to save. into the breadth of sending needs and spending habits. Here are some of the obstacles organizations face without one. USING MULTIPLE CARRIER ACCOUNTS Remote senders may use their own carrier accounts or visit retail locations to process shipments, paying above and beyond an organization’s established carrier rates. Oftentimes, related costs appear on individual expense reports. In these instances: Organizations miss out on the benefits of established rates; Shipping expenses may be reported differently, depending on department or location; Businesses lack a complete view and control of carrier spend, which is vital data when it comes time to negotiate rates. Disparate processes and silos leave organizations in the dark when it comes to establishing best practices and understanding the full impact of shipping on the bottom line. Without clear sight into mailing and shipping behavior — who is sending what, when, and how — businesses struggle to define workflows and create efficiencies. You can’t drive new, cost-effective processes if you don’t know what behaviors are currently in practice. The ability to easily compare shipping options helps ensure you are using the right carrier at the right rate at the right time. Without a solution that offers this to all senders,
CLOUD-BASED SOLUTIONS MAKE THE DIFFERENCE Cloud-based, multi-carrier solutions can help organizations achieve complete control, visibility, and accuracy over shipping and mailing operations. They bring mail centers, desktop users, and remote shippers alike on board one application, giving a simple, complete view to organizations. This has several benefits: All sending activity and costs are captured on one platform Workflows are standardized, which helps minimize errors and curtail expensive sending habits All shipments benefit from negotiated carrier rates, helping to reduce overspend A view of multi-carrier options helps employees make smart choices each time they send Additionally, cloud-based shipping solutions offer an alternative for organizations that do not want an on-premise product with IT dependency and related costs. Plus, their streamlined analytics and reporting create efficiencies for accounting teams who previously may have been tasked with reconciling bills from multiple sources.
Aaron Videtto, Director of Office Shipping Solutions at Pitney Bowes, has extensive experience designing, building and delivering global, user friendly, enterprise-class sending and receiving solutions for mobile, SaaS, and on-premise needs.
APPLICATION ARTICLE
Streamlining the Business of Shipping On average, shippers spend over 50% of their total logistics expenditures on transportation, making it worthwhile to outsource freight audit and bill payment to those who specialize in such services. However, while these services might appear to perform a single function, they can also provide additional value by delivering important data and insights into a company’s current processes. CHOOSING A FREIGHT AUDIT AND PAYMENT PROVIDER A freight audit and payment provider can help you streamline your operations and improve your bottom line. So, what should you consider when evaluating potential providers? 1. Commitment to Technology In today’s world, technology changes quickly. Is the provider committed to investing in the technology as needs and requirements change? Does it have the necessary resources to do so moving forward? Is it their proprietary software? 2. Business Intelligence and Analytics Capabilities Sometimes providers claim to offer more than they can deliver — making it important to discuss the types of business intelligence and reporting capabilities they can provided prior signing the agreement. Don’t be afraid to ask questions to ensure that the system matches the promise. 3. Financial Stability Part of choosing a freight audit and payment provider includes trusting them to make payments on your behalf to your carriers. Therefore, making sure that the provider is financially stable and abides by solid security practices is an important consideration during your evaluation and selection process. 4. Scalable Technology Prior to locking in a provider, verify that their solution can handle your current invoice volume and future growth, as well as facilitate carrier profiles. 5. Ability to Support All Modes The provider should have the capability to handle all modes of transportation your company might use, as well as the ability to view all data in one central location.
6. Carrier Relationships Your provider should have staff dedicated to maintaining carrier relationships to help resolve issues and create efficiencies. Your provider should also act as a true extension of your company and remain up-to-date on carrier pricing changes to support current and future needs. 7. Satisfied Customers Once you have compiled a short list of providers, do some research. Who are their customers? Do you recognize any of them? Do they have customers within your industry? Are there any testimonials available for reference? Do their customers appear satisfied? THE FUTURE OF SUPPLY CHAIN FROM A GLOBAL PERSPECTIVE Today’s global supply chain also requires the proper management of international shipping data, so hiring a freight audit and payment provider can be a worthwhile investment. Whether your transportation methods are single or multimodal, outsourcing your freight audit and payment services can help you streamline your accounts payable processes and allow you to effectively and accurately allocate costs across your organization.
sales@intelligentaudit.com 201.880.1110 www.intelligentaudit.com
TO SUM UP
One of the questions raised as we examine trends in the parcel industry is, should a supply chain management (SCM) solution be all on-premise, all cloud, or a mix? The reality is that in the inter-related and inter-reliant world of SCM, an “either-or” approach won’t work. A successful approach will require a blend of cloud and on-premise technology in order to enable shippers to manage higher volumes, reduce costs and cycle times, enforce compliance, and improve customer service.
By analyzing each inventory class’s velocity and physical characteristics, the ability to implement simple automation will often become apparent and yield tremendous labor and time saving rewards. The days of using one means of order fulfillment when your customers are demanding, “I want it NOW” are gone. — ED ROMAINE
— DOUG SURRETT
The fight against oversize packages has grown to include not just the introduction of substantial surcharges, but also an increasingly broad definition of what falls into this category. — GREG MERZ
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You can’t continue to do what you have always done and expect a different result. Review your processes. Would automation be a good solution? How can you improve each process — receiving, put away, picking, packaging, and shipping — by at least 10%? If you come up with better processes accumulatively, you will improve your throughput and need less part-time help for the same volumes — certainly a win/win. — SUSAN RIDER
THE STANDARD MAILBOX WAS DESIGNED TO HANDLE LETTERS, MAGAZINES, AND VERY SMALL PACKAGES, BUT IN TODAY’S WORLD, CONSUMERS ARE BUYING JUST ABOUT ANYTHING.
In 2016, Amazon’s shipping revenue amounted to $8.98 billion, whereas the company’s outbound shipping costs came to $16.17 billion — which means it lost $7.19 billion on free shipping. Amazon has done a good job convincing Wall Street that losses like this are A-OK. But businesses that don’t have Jeff Bezos as a CEO are expected to make a profit, and that is hard and getting harder if they can’t absorb shipping costs into higher product prices.
— MICHAEL J. RYAN
— BOB MALLEY
18 PARCELindustry.com  JANUARY-FEBRUARY 2018
SPONSORED CONTENT
a AUDITING AND SPEND MANAGEMENT SOLUTIONS TO OPTIMIZE YOUR OPERATION As you kick off the new year, you may be looking for an auditing or spend management partner to help you get a better handle on your shipment costs, which can eat up a large portion of a company’s profits, especially if charges are billed incorrectly. Many companies successfully take on the auditing task in-house, but sometimes it pays to have a partner by your side. If you fall into the latter category, take a look at the solution providers on the following pages. They may be just what you need to make this year a success!
JANUARY-FEBRUARY 2018 PARCELindustry.com 19
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ALEXANDRETTA TRANSPORTATION CONSULTING
Alexandretta Transportation Consulting was founded in 2017 in order to provide expertise in all aspects of parcel spend management, from audit to domestic and global parcel negotiations, all under the umbrella of a solution-oriented, results-driven, and client-centric approach. Founded in 2017 by long-time industry veteran, Melissa Priest, Alexandretta provides nearly 80 years of cumulative experience in parcel negotiations, providing significant cost savings in the domestic US, Mexico, Canada, Europe, and Asia. This expertise allows Alexandretta to provide a comprehensive global strategy for cost savings, thereby optimizing savings in the US and abroad. Audit services provide further savings, visibility, and cost recovery. Alexandretta engages with clients spending $1 million to $500 million in annual parcel spend and focuses on e-commerce and omni-channel merchants looking for assistance with the integrated carriers, the regionals, and the USPS and finds significant savings in 95% of all engagements. In addition to parcel expertise, Alexandretta also brings a team of seasoned air, ocean, and LTL/FTL experts to its clients, further allowing for significant and seamless savings across modes. www.alexandrettaconsulting.com
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CASS INFORMATION SYSTEMS
Cass Information Systems, Inc. is the leading provider of freight audit, payment, and business intelligence services. Leveraging over 60 years of experience, we provide solutions to major corporations having complex transportation payment and information needs. Cass’ comprehensive parcel spend management solutions help to reduce and manage your parcel shipping expenses. Our complete parcel auditing includes duplicates, rates, manifested and not shipped, accessorials, adjustments as well as compliance and service failure audits. We also will allocate parcel spend to meet complex general ledger requirements. In addition, Cass’ web-portal provides data visualization dashboards and ad-hoc reporting to help you further manage and reduce your parcel spend. 20 PARCELindustry.com JANUARY-FEBRUARY 2018
If your company ships over 100,000 packages annually, we can provide substantial savings for your company. Reduce processing expenses, stop overcharges, accurately allocate costs, and receive critical parcel data. Contact Cass today to see how we help create a competitive advantage through reduced costs, increased efficiency, and better decision-making capability. www.cassinfo.com
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CT LOGISTICS
CT Logistics is celebrating 95 years of supply chain management services in 2018. Since 1923, companies have leveraged CT for freight audit, payment, TMS solutions worldwide. CT customizes all solutions for our clients to support all modes, including parcel. CT’s services will reduce your costs and save your company money. CT audits every shipment to recover money from your total parcel, package, and freight expenditures. All rates and cost items are calculated, including bundled pricing, hundredweight, and dimensional pricing. All shipments are reviewed for address, account number, COD, dangerous or restricted goods, declared value, and oversize. All shipments, including third-party, are reviewed for inside, residential, Saturday pickup or delivery, as well as GSRs (Guaranteed Service Recoveries). CT’s services also include supply chain management, TMS solutions, LTL and Full Truckload shipment execution, bid management, shipment planning and execution software, as well as professional services for consulting and advising. CT’s business intelligent platform provides global supply chain visibility for benchmarking and trending, with graphical dashboards for management information. CT is SOCII and ISO 9001:2008 certified. www.ctlogistics.com
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GLOBAL TRANSPORTATION MANAGEMENT SOLUTIONS
The company was founded in 2006 by D. Shawn Shaw, who brings 20+ years of transportation experience to Global Trans-
portation Management Solutions. Shawn spent 15 years in operations management, operations support, and sales, where he managed logistics operations for many top 1000 companies, earning multiple awards for lean logistics practices and taking this vast knowledge and building our foundation that is GTMS today. GTMS offers controllable cost monitoring for all modes of transportation, from our state-of-the-art TMS that provides least cost routing, rating, labeling, and manifesting for all modes of transportation to our BI tools that track every transaction, dozens of reporting functions for cost savings that impact your bottom line, and completing the process with an automated line item detail audit on all transactions for all modes for transportation including NMFC classifications rebate and rolling discounts. GTMS also offers consulting on reducing costs in your logistics, RFP management, big data analytics, discounted carrier rates for all modes including postal as well as discounted insurance vs. carrier insurance, duty drawback and customs solutions. www.gtms.us
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GREEN MOUNTAIN TECHNOLOGY
Green Mountain Technology (GMT) partners with the world’s largest parcel shippers to plan, execute, and monitor high-volume parcel networks. Our Parcel Spend Management (PSM) solution simplifies network complexity, drives increased profitability, and enhances the customer experience through a suite of tech-enabled services. It starts with our best-inclass parcel audit and invoice automation, then leverages that data for advanced analytics, optimization, and ongoing network improvement and contract management projects. GMT’s highly engaged, strategic delivery model, unique network modeling and re-rating technology, and Fortune 500 customer base uniquely position GMT to deliver unparalleled value. Our customers represent more than $4 billion in parcel spend and consistently experience a five to 10 times return, net of our fees. Our outcomes are proven by numerous customer honors including QVC’s Supply Chain Partner of the Year and Office Depot’s Partnership Award. Learn more at GreenMountainTechnology.com
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INTELLIGENT AUDIT
Founded in 1996, Intelligent Audit is the leader in supply chain data analytics, business intelligence, and freight audit and recovery, with a wide range of services available to clients looking to reduce costs, improve customer satisfaction, and discover new strategic enhancements within their supply chain. Intelligent Audit successfully manages more than $8 billion in customer transportation spend and specializes in reducing carrier and freight costs for more than 2,500 customers and leveraging technology to provide insight into helping shippers think smarter. As a premier technology company with deep knowledge of the logistics industry, Intelligent Audit has developed a best-inclass, proprietary software system to automatically review every package shipped for accurate billing — verifying all charges against carrier contracts and validating all potential exceptions. This, paired with a team of strategic account managers and freight and transportation industry expertise, provides an unrivaled ability to uncover opportunities for cost reduction and supply chain improvements. The IA system is data-agnostic, industry-agnostic, and covers more than 3,000
carriers worldwide, allowing customers to achieve hard and soft dollar savings by strategically optimizing their supply chain. www.intelligentaudit.com
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PARCEL RECOVERY
For over 18 years, Parcel Recovery has focused exclusively on the parcel industry. We provide solutions designed to reduce shipping costs with UPS, FedEx, and regional carriers up to 25%. Parcel Recovery’s audit team has years of experience in parcel logistics and has worked with hundreds of companies to provide an accurate comprehensive invoice audit. Our consultants average over 20 years of experience and have negotiated some of the first volume discounts with the national parcel carriers in the early 1990s. We help companies of all sizes level the playing field. Our professional, data-driven approach saves our customers 20% on average without changing carriers or service types. Our fees are contingency-based and the most competitive in the industry. A no-cost, two-week trial will provide you a sample of the credits you can expect. www.parcelrecovery.com
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REVEEL
Since 2006, Reveel™ has been dedicated to providing Shipping Intelligence™ for the smartest business decisions possible. Founded by former DHL sales executives, Reveel was created to level the playing field. Over the past decade-plus, our zero-risk services have saved our clients millions of dollars. At Reveel, our mission is to increase our clients’ profitability by empowering them with shipping intelligence and advocating for transparency within the industry. We lift the veil on the pricing that your carriers are offering to similar companies, giving you valuable industry and regional benchmarks. Our dedicated team of local experts will help you identify measurable savings with invoice auditing and real-time reporting and analytics. The best part is that all of this comes at zero cost to you. If we don’t save you money, we don’t get paid. www.reveelgroup.com
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SHIPWARE
Shipware’s passion is to utilize our experience and technology to help businesses reduce parcel and LTL shipping costs five to 30%. With 50+ audit points, Shipware’s AI/invoice audit service recovers more dollars than any other firm — which is consisJANUARY-FEBRUARY 2018 PARCELindustry.com 21
tently proven in head-to-head comparisons. Our contemporary carrier pricing knowledge leverages over 200 years of collective experience. Once engaged, we guide your team through the entire contract negotiation process. We put our “money where our mouth is;” compensation is based on actual, implemented savings — guaranteeing results or we’re not paid. The value of Shipware’s contract optimization services extends well beyond pure bottom-line savings. Not only do our results continue to impact costs following our engagement, but the Shipware process transfers expertise and negotiation skills to our customers. Shipware manages over a billion dollars a year for some of the most recognizable brands in the world. Our team saves millions of dollars for our clients annually, increasing service quality — with no required change in carriers. We offer a free analysis with a guarantee: If we can’t uncover parcel/LTL savings, we’ll pay you $10,000! www.shipware.com
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STRATEGIQ COMMERCE
StrategIQ Commerce is a technology and services company that specializes in consultation and business intelligence solutions for effectively and efficiently managing the supply chain. Founded in 2018, SIQC services provide shippers an in-depth view of detailed cost by carrier mode providing a basis for effective consultation on market opportunities and cost control negotiations covering all aspects from pool to parcel distribution. SIQC expertise tied to reporting metrics provides an industry leadership in building competitive landscape assessments for our customers. SIQC uses the integration of carrier EDI files and API links to produce cost and tracking metrics providing real-time reporting of matched order and invoiced shipments attaining the maximum cost and service visibility for SIQC customers. The SIQC - NOW service portal provides 30-minute updates to delivery status, giving shippers predictable and actionable data for proactive customer service action, optimizing the shipper-customer experience. SIQC ties this depth of market cost management into our ability to counsel our clients on market bench22 PARCELindustry.com JANUARY-FEBRUARY 2018
marks and strategies to maintain the most cost-efficient and cutting-edge metrics for product distribution. http://strategiqcommerce.com
a TRANSPORTATION INSIGHT Transportation Insight brings small-package shippers rapid improvements in cost, service, and risk. With parcel and multimodal supply chain solutions engineered from insight, the Enterprise Logistics Provider leverages digital data modeling, deep domain expertise in all modes of transportation, and next-generation technology to deliver an agile, continuous improvement platform that drives down cost and optimizes enterprise performance. Transportation Insight’s robust parcel technology platform (audit, engineering, advanced analytics) is an integral part of how we drive value-creation for clients. Our parcel audit solution helps shippers realize significant cost savings through error identification and resolution, data analysis, and small package claims and recovery. Backed by rigorous process controls independently audited in an annual SOC 1 Type II report, we’ve got the auditing of complex parcel invoices down to a science. We process millions of parcel invoices weekly and perform audits to make sure clients receive the desired service at their contracted terms. Our best-of-breed parcel audit focuses on invoice, compliance, and service. As shippers face major transformation due to omni-channel, e-commerce, digitalization, AI, capacity constraints, and import/ export compliance risks, our lean end-toend supply chain solutions deliver immediate improvements, logistics-related cost savings and enhanced efficiencies to accelerate profitable performance. www.transportationinsight.com
and control of their transportation spend across all transportation modes. With nearly 300 customers, a global footprint and range of solutions spanning freight and parcel audit, bill payment, financial allocation services, spend analytics, visibility, and expert consulting, Veraction enables companies to manage their critical and significant transportation spend more effectively. Veraction is headquartered in Memphis, TN with US offices in Austin, TX and Saint Simons Island, GA as well as global offices in Amsterdam, Manila, and Shenzhen. Visit Veraction at www.veraction.com.
FEATURED AUDITING AND SPEND MANAGEMENT COMPANIES ALEXANDRETTA TRANSPORTATION CONSULTING
www.alexandrettaconsulting.com
CASS INFORMATION SYSTEMS
www.cassinfo.com CT LOGISTICS
www.ctlogistics.com GLOBAL TRANSPORTATION MANAGEMENT SOLUTIONS
www.gtms.us
GREEN MOUNTAIN TECHNOLOGY
GreenMountainTechnology.com INTELLIGENT AUDIT
www.intelligentaudit.com PARCEL RECOVERY
www.parcelrecovery.com REVEEL
www.reveelgroup.com SHIPWARE
www.shipware.com STRATEGIQ COMMERCE
a VERACTION Veraction is the leader in Transportation Spend Management solutions. Veraction combines industry-leading, cloud-based applications with best-in-class services to help companies realize savings, visibility,
www.strategiqcommerce.com
TRANSPORTATION INSIGHT
www.transportationinsight.com VERACTION
www.veraction.com
SHOULD COMPANIES BE HEADING TO THE CLOUD FOR THEIR SUPPLY CHAIN’S FUTURE?
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BY DOUG SURRETT
t seems as if Mother Nature is having its way with the supply chain industry lately. While the mighty river of the “Amazon effect” is a disruptive element in creating new levels of customer expectations regarding the speed and visibility of goods in transit, the question of clouds — specifically cloud-based solutions — has come to the forefront as well. There’s good reason for organizations to consider the benefits — agility, scalability, extensibility, affordability — of cloud-based solutions, especially when considering the growth and trends within the parcel market. Parcel growth is increasing: Parcel shipping volume is predicted to grow two percent (from five to seven percent) through 2018. While this figure may seem low, it is predicated on a large base figure. In 2015, the United States shipped 11.8 billion parcels, followed by Japan (9.4B), Germany (3.0B), UK
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The parcel market is booming; cloud-based solutions could be the answer to managing this growth. (2.2B), and France (1.5B), so the growth of the number of parcels is huge. Carrier dynamics are increasing: IT organizations are forced to keep up with the constantly changing requirements of parcel carriers as they add new services and update rates to reflect ever-evolving business models. Market complexity is increasing: One of the leading areas of parcel growth is cross-border parcel shipping. If you consider that China represents the fastest growing retail e-commerce market — with expectations to be 47% of all retail e-commerce sales by 2020 — cross-border parcel shipments will continue to rise. One of the central questions these trends raise is, should a solution be all on-premise, all cloud, or a mix? The reality is that in the inter-related and inter-reliant world of supply chain management (SCM), an “either-or" approach won’t work. A successful approach will require a blend of cloud and on-premise technology in order to enable shippers
to manage higher volumes, reduce costs and cycle times, enforce compliance, and improve customer service. WHY ARE COMPANIES MOVING TO THE CLOUD? According to this year’s survey by Harvard Business Review Analytics Services, the top business drivers for adopting cloud and hybrid-cloud technology are: Business agility/flexibility – 49% Cost reduction/maximize IT investment – 43% Improved security – 37% System reliability/availability – 35% Ability to analyze/act on data – 34% Better customer experience – 34% Ability to innovate – 30% By taking advantage of cloud adoption, organizations can tap into the “generic” benefits of quick implementation, operational flexibility, pay-as-you-go services, automatic and regular upgrades, as well as updated security measures.
But beyond the “generic” benefits, a cloud or hybrid approach to supply chain solutions can offer so much more: An integrated approach – A more robust integration API enables parcel technology to seamlessly connect with on-premise or cloud-based applications for comprehensive supply chain automation. Speed – Processes and order fulfilment can be managed at a much faster rate and eliminate processing errors. Visibility – A cloud-based solution that is integrated with multiple partners can store all transportation-related data in one central location, creating better visibility and impeccable customer service. With that said, a cloud solution can achieve an even higher level of benefit if it embraces a more modern approach to the supply chain, moving away from a traditional logistics model and embracing a global trade network (GTN) model instead. The technology of yesterday was on-premise, deployed behind a firewall,
which makes participation from the outside world very difficult. Cloud technology does not inherently have the ability to support a GTN. The network needs to be able to flex and adapt to all of the participants connecting through a variety of means. A GTN is a living ecosystem of supply chain partners all connected through one cloud-based technology platform. In this model, the focus is on interactive collaboration among carriers, shippers, forwarders, suppliers, 3PLs, and even customers. It drives a powerful network effect with the benefits of universal connectivity among participants. This connectivity creates a number of benefits to help companies streamline their global supply chain management. According to Gartner, the demand for big data analytics has been the largest driver of cloud subscriptions. In fact, more than three-quarters of global enterprises will be using advanced analytics to improve business performance in the next five years. Advanced analytics delivered in the cloud can bring value to a supply chain that a premise-based solution cannot.
Organizations should also consider the amount of actionable intelligence the GTN can provide to help make better business decisions. It eliminates black holes and guesswork by providing real-time data on what is happening in the supply chain. The analytics can be used to enhance optimization opportunities so companies can look beyond micro-optimization and expand to macro-optimization within the network. No matter how it’s deployed, the cloud delivers the benefits of transparency, end-to-end visibility, and the maximum potential from partnerships. “Living on cloud nine” will have an entirely new meaning as we head into the future of SCM.
Doug Surrett is Chief Product Strategist for BluJay Solutions, where he oversees the company’s product convergence and expansion strategy. He has been in the logistics industry since 1988, serving in leadership roles focused on transportation management, warehouse management, operations, and global trade.
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By Ed Romaine
IMPROVING CUSTOMER SATISFACTION IN THIS AGE OF “I WANT IT NOW” ORDER FULFILLMENT Customer satisfaction is influenced by a variety of factors — one of the biggest is delivery time and cost. How do you satisfy the customer expectations of (almost) immediate fulfillment?
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ustomers keep flexing their collective muscles by choosing to spend their money with companies who not only provide the products they want, but with a delivery method, time, and cost they find acceptable. We call this omni-channel, but let’s not confuse facts; it’s customer service. Not long ago, delivering pallets of a single SKU within a week’s time met customers’ objectives. But times have changed, and in order to keep up, so should your order fulfillment operations. The key is to understand your customers’ demands and wishes as well as what the competition is doing. More importantly, because companies are continuing to
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address customer concerns in new and better ways, you, too, need to be constantly improving your game. Retail organizations should do anything and everything possible to capture every sale humanly (or robotically) possible to make their financial year. This means constant improvement in every area. There are many elements of “I want it now” order fulfillment that are required to meet your customers’ expectations. Some examples include: 1. Physical location/proximity to your customers 2. Software that utilizes and optimizes inventory throughout your supply chain, regardless of its location
3. Predictive analytics to ensure the proper quantity of items are manufactured and on the correct shelves ready for delivery 4. Automation and efficiency to achieve same-day fulfillment and eliminate labor and time } “Free” returns and shipping } Accuracy and quality of what and when you are shipping to retain your hard- (and often costly) earned customers 5. Last-mile delivery, whether it be Uber, Lyft, drone, or parcel delivery organizations An article — or entire book — can be — and has been — written on each of the bullet points above. For the sake of my readers, I’ll focus on just a few items. AUTOMATION AND EFFICIENCY TO ACHIEVE SAME-DAY FULFILLMENT AND ELIMINATE LABOR AND TIME The area where you have most control is your warehouse and distribution center. Start with looking at the areas of your distribution operations that are consuming the most resources. Try to take five minutes out of your crazy day to step back and observe what happens in the areas consuming the most resources. What would you do differently to make things better? Let me take some guesses. You observe pickers walking excessively, reaching, bending, and moving around each other during peak periods. What are some of the solutions? Slotting – When is the last time you slotted or placed your SKUs in a logical location? Most operations correspond to some form of Pareto (80% of your orders use 20% of your inventory). Therefore, items not being picked are out of the system. Slower movers are located higher or lower on your racks. Faster movers are ergonomically located. Fastest movers are on the ends, and products ordered simultaneously are either kitted or located next to each other to reduce travel. You get the idea. Slotting is a no-brainer. You can purchase software and do this internally or hire an external resource to complete periodic reports. A tip to remember: slotting reports should display and highlight moves based on a value (often return on investment, or ROI) of what each move will provide you. This allows you to prioritize labor and focus on truly beneficial efforts. Look at your data, and divide and conquer. Look at your A, B, C, and D movers. Are you using the same picking methods and material handling equipment? You shouldn’t be. By analyzing each inventory class’s velocity and physical characteristics, the ability to implement simple automation will often become apparent and yield tremendous labor and time saving rewards. The days of using one means of order fulfillment when your customers are demanding, “I want it NOW” are gone. If you want to reminisce about the good old days, drop me a line, but if you want to succeed, make plans for continuous changes and improvements. The solution needs to generate a fast ROI, provide the efficiency benefits needed to pay for the free shipping and returns, and provide a pick window that allows all orders to be shipped and received properly. Here are some points to consider: JANUARY-FEBRUARY 2018 PARCELindustry.com 27
} Intelligent Pick Lists – Yes, it’s 2018 and I’m still writing about batch picking multiple orders simultaneously as an operator walks one time through the bins. I’m amazed at how many operations will load several orders onto a cart and pick one order to completion at a time. Pro tip: Don’t do this! } Voice or Pick-to-Light – I won’t go into tremendous detail because you likely know all about these technologies, but they provide increased efficiencies in the correct inventory classes, physical characteristics, and velocity levels. } Horizontal Carousels – Horizontal carousels are some of the most underutilized technology for providing tremendous ROI while dramatically eliminating labor and floor space while increasing accuracy and throughput. A workstation (or pod) of carousels works collectively to present the correct piece to be picked to the operator. The integrated pick-to-light directs the picking and putting activities to ensure high accuracy and throughput levels. This virtually eliminates wasted walk and search time and should increase throughput levels of your current picking speed by at least three times. } Portable A-Frames – For fast-moving SKUs that can be stacked and dispensed, portable A-Frame systems eliminate all picking labor at rates up to 2,200 orders per hour. Shipments or totes move by the system on standard conveyor, and each channel in the system automatically dispenses the correct SKU and quantity into the passing order. For operations that have fast-moving inventory in boxes, bottles, or blister packs, this system provides the flexibility and scalability many organizations benefit from. What can take hours of manual labor can be literally done in minutes. } Document Inserters – The ability to insert coupons, promotions, flyers, etc. into an order automatically not only provides increased customer satisfaction and repetitive sales but, in many cases, is a revenue generator. There are many advertising dollar opportunities available, and this technology makes it easy to generate. Past generations of this technology were costly, but today’s technologies allow rapid deployment and a fast return on investment. “I want it now” order fulfillment is a fact of today’s business and operations practice. If the past five years are any indication, you should aim for 10-15% annual increases in your efficiency levels just to keep pace, let alone excel or remain a competitor.
Ed Romaine is VP Sales & Marketing, SI Systems (www.sihs.com). He has over 30 years of experience in helping organizations improve their order fulfillment and warehouse systems and processes, including order picking, software, and conveyance technologies. He is also the former chairman of the Automated Storage & Retrieval Systems (AS/RS) group, the Supply Chain Execution Group (SCE), and Order Fulfillment Solutions Group (OFS) of America. Ed can be reached at romaine@ sihs.com or 484.894.5211. 28 PARCELindustry.com JANUARY-FEBRUARY 2018
APPLICATION ARTICLE
Redefining Customized Service A customized solution is only valuable when coupled with reliable service you can count on and an answer that doesn’t break the budget. U.S. Cargo is built on the idea of creating flexible logistics solutions for specific shipping needs. We didn’t create the concept; we’re just perfecting it by redefining what it means to benefit from complete, customized service. At U.S. Cargo we pride ourselves on our commitment to develop transportation services and logistical systems to meet the needs of our customers and our personalized delivery services and solutions create sustainable, long-term value for our customers, business partners, and employees. U.S. Cargo respects that every business has different needs, and our pricing methods reflect that. We don’t let schedules or
systems get in the way of servicing you with the highest priority. No business need is too small. Whether the requirements are standard or unique, our personalized commitment to meeting our customers’ transportation and logistical needs exceeds that of the competition. While our core business is standard parcel and lightweight LTL, we also leverage our assets in various ways to create solutions based on customer specific needs. U.S. Cargo is a diversified ground services provider that offers high-value, lowcost premium services, tailored to unique market demands. The customized solution must work for you and your business; otherwise we didn’t do our job. A successful collaboration is possible by teaming up with the right carrier. Team up with U.S. Cargo and benefit from a much needed redefined approach to customized service. You deserve customized solutions, consistent service, and cost-effective answers for you and your customer.
www.us-cargo.com 614.552.2746
CROWDSOURCING THE FINAL MILE: THE NEXT BIG OPPORTUNITY IN PARCEL DELIVERY As this method of delivery becomes more and more common, it could change the game for carriers, shippers, and consumers alike.
By Rick Jones and Itamar Zur
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he proliferation of ride-sharing platforms and on-demand delivery services poses a serious question to the parcel delivery industry: Can a similar crowdsourcing model be harnessed for final-mile distribution? We believe so. Based on the success of Amazon Flex and our own experience, it’s clear that when leveraged effectively, crowdsourcing can yield major operational benefits, particularly in small parcel delivery. Let’s dive deeper into the applicability of crowdsourcing up to the final mile of delivery, taking a look at the common misconceptions around the economics of the model, the key benefits of crowdsourcing, and how technology can solve the two largest implementation challenges — trust and performance level. Finally, we would argue that crowdsourcing should not be the sole domain of disruptive technology companies like
While crowdsourcing is often associated with on-demand or point-to-point deliveries, the model can also be applied to scheduled, high-volume distribution. One company that has already harnessed this model successfully (and continues to expand it) is Amazon. Drivers who enroll and pass background screening on the Amazon Flex platform are assigned delivery routes of up to 60 parcels, which they complete using only their private vehicle and the Flex mobile app. Launched in 2015, Flex already has over 100,000 crowdsourced drivers, delivering millions of parcels daily in over 50 US cities (and, more recently, in seven new UK markets). If Amazon can harness the gig economy to high-volume distribution, why wouldn’t other carriers be able to do the same?
Uber and Amazon. With the right mindset and investments in technology, carriers too can harness the gig economy to better capitalize on the growing demand for drivers in the final mile. TAPPING THE CROWD When discussing final-mile crowdsourcing, we refer to a distribution model in which dispatchers outsource delivery routes to a large network of qualified drivers in the form of an open call, often through a technology platform. In other words, rather than solely relying on permanent employees or contractors to perform delivery tasks, dispatchers can expand their reach by tapping a crowd of available drivers for single-day tasks. The key to this model is that delivery tasks must be simplified and standardized so that even non-professional drivers can successfully complete them with their own vehicles without much trouble.
WHAT MAKES CROWDSOURCING ATTRACTIVE? There are two common misconceptions around the attractiveness of final-mile crowdsourcing. The first misconception is that crowdsourced drivers are generally more cost-attractive than professional independent contractors. According to this argument, since crowdsourcing effectively increases the supply of available drivers, most drivers settle for a lower pay to remain competitive in the marketplace. In reality, however, this is not always the case. In most US markets, crowdsourced drivers such as those driving with Uber, Lyft, or even Flex typically earn $16-$22 per hour. During hours of peak demand, at night or on weekends, ride-sharing drivers can expect to earn north of $30 per hour. Evidently, these rates are not necessarily lower than those of independent contractors who currently drive with most regional carriers or local courier companies. Moreover, due to the temporary nature of the crowdsourced employment (most crowdsourced drivers only drive in their free time or between jobs), crowdsourcing platforms often find themselves spending significant capital on acquisition of new drivers to combat the high driver churn. The benefit of the model therefore lies elsewhere. A second common misconception is that crowdsourcing is disruptive to traditional delivery businesses because it
enables shippers to skip the middleman, that is, bypass the operator and instead work directly with the driver. This, too, is an inaccurate statement; in principle, just like traditional delivery models, crowdsourcing platforms need operators to coordinate between customers, drivers, and consignees, not to mention solve real-time problems. Crowdsourcing is not inherently “leaner” than traditional delivery models. The truth is that most cost advantages associated with crowdsourcing have little to do with the model itself and much more to do with the superior technology that crowdsourcing platforms use. Uber and Amazon are able to skip the middleman because they automate large parts of their operations and rely on smart algorithms, instead of relying only on flesh-and-blood decision makers. THE BENEFITS LIE IN THE FLEXIBILITY Contrary to common beliefs, the most significant benefit of final mile crowdsourcing lies in the incredibly flexible nature of this model; crowdsourcing platforms can ramp their capacity up and down at a short notice and more easily match supply of drivers with the fluctuating demand for deliveries. Amazon, for example, can instantly scale its final-mile fleet by posting more routes to its Flex app or by temporarily increasing the proposed pay to drivers (a concept it has borrowed from Uber’s surge pricing). Companies who leverage crowdsourcing therefore have a winning card; they can quickly scale capacity and capitalize on business opportunities in times of high demand, without incurring the high costs and headache of hiring for temporary work. This is especially true during the holiday season, when demand for drivers tends to climb rapidly. A second advantage relates to the labor misclassification risk — which has become increasingly concerning for carriers who use professional (permanent) independent contractors. Compared with an individual whose daily work is to deliver parcels for the same company along the same route, crowdsourced drivers are truly independent; they are free to work with multiple platforms simultaneously and have greater control over their schedule. Therefore, compared with the traditional JANUARY-FEBRUARY 2018 PARCELindustry.com 31
model, crowdsourcing may present reduced exposure to labor misclassification risks (although note that this question is far from being decided by the courts). Note that the benefits of crowdsourcing do not lead to the conclusion that companies should completely replace their existing fleets with crowdsourced drivers. After all, the cost of maintaining a large crowdsourced fleet can be cumbersome, and experienced delivery drivers are still valuable. Rather, delivery companies should use crowdsourcing as an effective and flexible means to complement their existing fleets and quickly ramp up when more capacity is needed, or to make deliveries for what we call the “micro-mile:” taking deliveries from a forward delivery consolidation point such as a neighborhood convenience or grocery store to the consignee — be it a home or a business. OVERCOMING IMPLEMENTATION CHALLENGES Admittedly, the implementation of crowdsourcing in the final mile is not
a straightforward one, although it is certainly feasible. It requires us to address two main challenges. TRUST AND RELIABILITY Almost all delivery companies today rely on drivers with whom they have a continuous employer-employee or customer-contractor relationship. It is common to assume that such drivers are less likely than a single-task crowdsourced driver to steal, be late for work, or drop out without notice. Therefore, the first challenge for the implementation of crowdsourcing is to achieve satisfactory levels of trust and reliability. Companies like Uber, Lyft, and Amazon solve these issues by performing continuous background checks prior to and throughout the driver’s work. They leverage GPS tracking, robust chain-of-custody procedures, and real-time ratings and reviews that they collect from consignees, and they provide their drivers with strong incentives to refrain from any misconduct. These procedures can result in an even
higher level of safety and reliability than those of traditional delivery businesses. Moreover, most consignees in the US are already familiar with the sharing economy concept and are seldom concerned about a non-uniformed driver showing up at their door with a package. Similarly, last minute drop-out can be largely prevented with proper incentives and timely check-in requirements. For example, Amazon requires its Flex drivers to check in on the app some 45 minutes prior to their scheduled route. When repeatedly failing to check in on time, drivers lose access to the platform. This way, Amazon has been able to increase its reliance on Flex drivers even during holidays or unwelcoming weather, when drivers are otherwise more likely to drop out. PERFORMANCE LEVEL The second challenge concerns the performance and efficiency level expected from a delivery driver. Professional drivers traditionally have had an advantage over crowdsourced drivers because they often
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repeat the same route and thus gain critical know-how: They learn how to avoid common GPS inaccuracies, where to park the vehicle, how to get into certain buildings, or how to prioritize commercial deliveries. This allows them to save valuable time en route — which ultimately also benefits their delivery company and the shipper. Most drivers need a few weeks to reach this level of proficiency. Critical to the success of crowdsourcing is therefore the ability to simplify and standardize these delivery tasks such that any crowdsourced driver could perform them almost just as well as a professional driver. Here, too, technology is the solution. TIME FOR TECHNOLOGY UPGRADES If crowdsourced drivers were given a paper manifest and expected to figure out the route on their own, crowdsourcing would never take off. One of the most important factors contributing to the success of Amazon Flex is that it provides drivers with the most advanced technology to complete their routes while eliminating
any opportunity for error. We believe that carriers can have the same capabilities. Dynamic routing, geofencing, online route book to correct any GPS errors, a photo database of all drop-off locations, and clear capture of any specialized services — such as cash-on-delivery (COD) or signature required — should all be part of a smart mobile app that provides drivers with easy step-by-step instructions. Live tracking, chat tools, and an instant settlement system can help operators gain control over any crowdsourced operation while removing unnecessary friction. The good news is that these technologies already exist in the market — and can be adapted for any kind of operation regardless of crowdsourcing. It is only a question of whether one is willing to make the investment, and there has never been a better time to make it.
accumulated operational expertise and on-ground volume consolidation give these companies a baseline cost advantage over disruptive “asset light” entrants. Adding crowdsourcing provides traditional carriers an opportunity to further leverage these capabilities, but it requires a change in mindset and a proper investment in technology. Those who will take advantage of this opportunity and put crowdsourcing to use will be best prepared to profitably capitalize on the massive growth that is projected in the final-mile space.
CONCLUSION Despite the proliferation of crowdsourcing platforms, traditional delivery companies are still best positioned to win in tomorrow’s final-mile space. Long
Itamar Zur is the founder and CEO of Veho Technologies, a technology and crowdsourcing platform for final-mile delivery. Veho is winner of the 2017 Harvard Business School New Venture Competition.
Rick Jones is the CEO of Van Pool Transportation. Formerly, he served as the CEO of Lone Star Overnight, a regional carrier headquartered in Texas. He has over 30 years of experience managing large-scale delivery operations.
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THE INCONVENIENT TRUTH ABOUT PACKAGING WASTE AND LAST-MILE DELIVERY Shipping air is a lose-lose-lose-lose proposition, but how do you rectify this?
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nyone who shops online has had this experience: A big parcel carrier truck pulls up to your house, spewing CO2. The delivery person drops a large package on your porch. You open it up only to find the tiny product you ordered swimming in a sea of Styrofoam peanuts, air bags, and other filler. Everyone loses in this scenario: The carrier that could not cube out its load, the e-commerce merchant that the carrier taxed with dimensional weight (DIM) fees for wasting space on the delivery vehicle, the consumer who paid for the waste in the form of higher shipping charges or product costs, and, of course, the environment. CARRIERS HATE SHIPPING AIR, AND THEY WILL MAKE YOU PAY FOR IT During an investor conference at the end of the 2015 holiday rush, Fred Smith, FedEx’s CEO, famously went on a rant against e-commerce companies whose sloppy packing practices wasted valuable space on his trucks and planes during the holiday rush when demand for capacity was at an all-time high. He complained
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that “we were getting lots of packages that were one or two cubic feet, and inside was a six-ounce stuffed toy.” Can you blame him? It would be like expecting airlines to provide free seats on a plane just because you want to put your feet up on the seat in front of you. For some businesses, time is money. For carriers, space is money. In response, both FedEx and UPS have ratcheted up the costs for shipping packages that are light relative to their size. FedEx and UPS reduced the standard DIM factor for 2017 from 166 to 139, making it more likely than ever that shipments with too much air will be subject to DIM weight rating — an “air tax.” LTL carriers have followed suit for the same reasons, introducing “spacebased” rating. The pressure is on to be more aware of cost-effective packing and palletization or else pay the price in the form of unexpected dimensional weight fees. THE AMAZON EFFECT: LOSE MONEY SHIPPING AIR, BUT MAKE IT UP IN VOLUME Amazon has established a new normal in e-commerce parcel delivery — free
last-mile shipping, including two-day delivery and other premium services that are eating into margins, including Amazon’s. In 2016, Amazon’s shipping revenue amounted to $8.98 billion, whereas the company’s outbound shipping costs came to $16.17 billion — which means it lost $7.19 billion on free shipping. Amazon has done a good job convincing Wall Street that losses like this are A-OK. But businesses that don’t have Jeff Bezos as a CEO are expected to make a profit, and that is hard and getting harder if they can’t absorb shipping costs into higher product prices. So why does it seem that Amazon habitually sends out packages filled with air, despite its public Amazon Packaging Certification Program? Maybe it thinks more about speed and the cost of fulfillment (reducing steps in its picking and packing process) than it does about the extra fees it would incur with dimensional weight surcharges. Or maybe it can afford to not be vigilant about transportation cost-effective packing because it has negotiated dimensional weight surcharges out of its carrier contracts. Have you? Probably not.
By Bob Malley
WEIGH THE COST OF LAST-MILE DELIVERY: ONE PYRAMID OF GIZA/YEAR What do last-mile deliveries and the Pyramids of Giza have in common? Answer: nine million tons. That’s about what the Great Pyramid weighs. It’s also the weight of all CO2 emissions produced by last-mile parcel delivery trucks every year. Yes, I couldn’t believe it either until I did a back-of-the-envelope calculation (transportation and logistics professionals, please check my math!). The major parcel carriers deliver around four billion residential packages every year, and this number is rising. The average last-mile segment of a residential delivery is around four miles, according to a parcel executive I know. The EPA estimates that a light-duty truck’s CO2 emission is around 1.144 pounds per mile. Multiply the number of last-mile deliveries by four miles by CO2 pounds per mile, and you get the total weight of CO2 introduced into the atmosphere: nine million tons. You know what else weighs nine million tons? Twenty-five Empire State Buildings, 98 US Capitol Buildings, 2,748 Saturn 5 rockets, 40,918 Statues of Liberty, and 1,534,416 elephants. You get the point. We’re
talking about a lot of CO2. And the above assumptions don’t include reverse logistic activity (“returns”), which is becoming a permanent feature of B2C e-commerce merchant strategy. If we don’t get smarter about packing, we may need a bigger greenhouse. CARTONIZATION TECHNOLOGY = COST-EFFECTIVE PACKING It’s one thing to be aware of the need for cost-effective packing and another thing to put systems and controls in place to ensure those results are achieved. Those are missing in most fulfillment operations. In order entry and purchasing, agents are left to guess as to how many cartons or pallets will be required to fulfill an order; therefore, estimating shipping costs often miss the mark. During fulfillment, warehouse personnel are free to decide which cartons they should use to pack orders. But few take transportation costs and other business rules into account because the variables are too complex to assess manually. Use too many small cartons, and you will overpay in the form of minimum carrier charges. Use cartons that are too large, and you pay DIM fees. Ignore carriers’
DIM weight factors, and you may pay DIM fees when you don’t have to (an exception: USPS doesn’t charge DIM fees for local zones). These decisions can be fully automated. The latest generation of cartonization technology borrows from the advanced mathematics and algorithms that have powered the video game industry for years. Learn more about how cartonization technology works by visiting PARCELindustry.com/Cartonization. As Amazon continues to use shipping costs as a competitive weapon, it is more important than ever to ensure your organization practices cost-effective cartonization. It’s good for your business, good for carriers, good for consumers, and good for the environment. That’s a winning combination.
As CEO of Pierbridge, Inc., Bob Malley has built a global organization that developed Transtream, the only parcel TMS platform that has earned both FedEx Diamond and UPS/ ConnectShip Platinum level status for excellence and customer adoption. He can be reached at 413.229.6619 or bob.malley@pierbridge.com. JANUARY-FEBRUARY 2018 PARCELindustry.com 35
PARCELCOUNSEL efficient, comprising up to 28% of the total cost to move goods.”
BACK TO THE FUTURE: UPS AND LAST-MILE DELIVERY By Brent Wm. Primus, J.D.
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n the last installment of PARCEL Counsel, we explored the legal characteristics of UPS and FedEx. While researching for that installment, I was reminded of the origin of UPS, which I would like to share with the readers in the context of last-mile delivery. While this topic is more operational in nature than the usual legal topics addressed in this column, I have a saying, “It helps to know where you are… if you know where you have been.” The term “last-mile delivery” has become very common in recent years, especially in parcel shipping. Wikipedia defines “last-mile delivery” as “a term used in supply chain management… to describe the movement of… goods from a transportation hub to a final destination in the home.” Wikipedia also noted that the “last leg of the supply chain is often less
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IN THE BEGINNING United Parcel Service began life as a motor carrier in 1907 delivering packages in the Seattle, Washington area. In that era, and continuing into the 1950s, the “retail giants” were large department stores located in the downtown business districts of the nation’s cities. The service that UPS focused on was to deliver parcels from those stores to the customers’ homes. I am old enough to remember this era, and my recollection is that there was no charge for this service. After originating in Seattle, UPS grew by providing this service in other cities and concentrated its services within what are known as “commercial zones.” From the very beginning, UPS called its vehicles “package cars.” Thus, the “last-mile delivery” in those days was the delivery of packages from a retail store, as opposed to a transportation hub, to the customer. THE 50S AND 60S The concept of shopping centers was first introduced in the Detroit area in the 1950s and spread rapidly. This had a devastating effect on UPS’ core business as the customer would now drive to the store in their own car and take their packages home with them. UPS addressed this threat by re-engineering itself as an inter-city package delivery service in direct competition with the USPS Parcel Post Service. It
grew from there to become one of the largest national carriers in the country. One way in which UPS accomplished this was to become an early and innovative user of intermodal by putting its trailers onto railroad flat cars for the line haul between major metropolitan areas. INTO THE FUTURE With the recent explosive growth of e-commence, UPS has become one of the primary providers of transportation that enables this growth. It was not that long ago when advertisements for a product would say “allow 4-6 weeks for delivery.” Now, it is my sense that customers are likely to opt for next day delivery, at a pricey premium, with same day delivery growing fast. Much of the information for this column was drawn from David J. DeBoer’s Piggyback and Containers. This is a fascinating book that covers much more than intermodal, including a chapter on how UPS and rail intermodal service contributed to each other’s growth. So, in a way, things have come full circle. UPS is still a last-mile delivery provider in 2018 as it was in 1907. However, now the origin is from a manufacturer or major distributor instead of a local department store. All for now!
Brent Wm. Primus, JD, is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found on the PARCEL site. Contact brent@primuslawoffice.com.
WRAPUP
DELIVERY CONVENIENCE Michael J. Ryan
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his was a successful and challenging peak season. Most volumes have exceeded projections, which has put pressure on the carriers to meet their customers’ delivery expectations. However, there is a bigger problem that is getting more and more exposure: theft of parcels from doorsteps and apartment/condo foyers. The result is a growing demand for safer and convenient delivery. The amount of parcels that are being delivered is growing exponentially, and by default, so is the theft of these parcels. Having free two-day delivery means nothing if the parcel is not there when you expect it. The standard mailbox was designed to handle letters, magazines, and very small packages, but in today’s world, consumers are buying just about anything. Some
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of the new dimensional rate rules that the major carriers have deployed in the past couple of years are driving merchants to optimize their box sizes with a goal that it will fit in a standard mailbox. However, this is only covering a small portion of the shipments.
The standard mailbox was designed to handle letters, magazines, and very small packages, but in today’s world, consumers are buying just about anything. Here are some of the other strategies that are being deployed to handle this problem: 1. Ship to a local store (own or partner) 2. Amazon Key 3. Customized delivery time 4. Parcel lockers The ship-to-store option has been around for a while, but despite being convenient for returns, it is not as convenient as having your package delivered directly to your home. The Amazon Key solution is designed to give
the Amazon driver access to a home, but this program is still in an early development stage. While this solution is convenient, it creates a lot of obvious risks on all fronts. The customized delivery option by the carriers is helping consumers receive their packages when and where they want them. However, providing effective delivery routes when delivery is customized can be challenging for the carriers. The parcel lockers strategy seems the most promising. These lockers have become a staple delivery option in many parts of the world, especially in Europe. They are beginning to gain traction in the US. I recently spoke with Nigel Thomas, CEO of GoLocker, and he stated: “Parcel lockers provide great convenience in both delivery and shipping of parcels. If strategically located, they are a safe, secure, and convenient option for parcel deliveries and reverse logistics operations.” The utilization of parcel lockers will be a hot topic in the US in 2018. These lockers can provide operational efficiencies to the carriers and, most importantly, convenience and peace of mind to the consumers. A win-win for all parties.
Michael J. Ryan is the Executive Vice President at Preferred Parcel Solutions and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@ preferredship.com.