11 GREAT IDEAS FOR IMPROVING YOUR MATERIAL HANDLING, PACKAGING, & WAREHOUSE PAGE 28
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ADAPTING to the NEW NORMAL GOODBYE SURCHARGES, HELLO DYNAMIC PRICING? P. 8 OPTIMIZING YOUR WAREHOUSE FOR E-COMMERCE SUCCESS. P. 14 THE KEY TO A SUCCESSFUL CARRIER/SHIPPER RELATIONSHIP. P. 24
COMPANY PROFILE White paper: Handling Ecommerce in a Warehouse Facility Retailers and their logistics partners are already running with throughput rates that exceed their capacity forecasts, as they struggle to pack, label and ship increasing volumes of parcels. To reduce the time and cost of handling greater volumes of floor loaded parcels manual processes must be automated. The new white paper from Caljan explores some of the possibilities including installing Telescopic Conveyors and Automatic Labeling Systems. Advanced telescopic conveyor solutions enable facilities to reduce handling between the warehouse and the loading dock. The amount of labor involved in the unloading/loading process is reduced. 3-4 man teams can be replaced by just one person. This type of equipment is often considered due to its basic utility and high degree of automation and even mobility. When a warehouse has space constraints, Telescopic Conveyors can swiftly be moved into position when the need arises then moved away from the door to allow for forklift traffic. Telescopic conveyor solutions connect the loading dock with the sorting and picking area, reducing handling time for floor loaded cargo significantly.
Integrating labeling with the Telescopic is a space-saving solution for identifying goods entering the warehouse. A carrierspecific label can be applied at precise X, Y, Z and U coordinates when the item is ready to be shipped out. Purchasing new loading equipment is a significant capital investment. However, businesses discover that the ROI is visible from day one of operations. The throughput of cargo immediately increases, fewer people are required, creating a faster unloading/loading process. Although ecommerce growth is not expected to continue at today’s rate, logistics professionals believe levels will settle at a significantly higher level than pre-corona. Download the new Caljan white paper and learn how you can optimize handling of floor loaded cargo: https://caljan.com/wp-us
CONTENTS /// Volume 28 | Issue 4
14 16 20 22 32 06 EDITOR’S NOTE Adapting to the New Normal By Amanda Armendariz
08 SPEND PERSPECTIVES Moving Beyond Surcharges — Dynamic Pricing By John Haber
09 OPERATIONAL EFFICIENCIES Help Wanted: The Employee Shortage Dilemma By Susan Rider
10 PACKAGING A Roadmap to Reducing Packaging Carbon Emissions By Clint Smith
11 PARCEL COUNSEL The Five Most Critical Elements in Transportation Contracting: Part II By Brent Wm. Primus, JD
12 SUPPLY CHAIN SUCCESS Understanding Time in Transit Data By Anna Behrens and Quinn Nelson
14 OPTIMIZING YOUR WAREHOUSE FOR E-COMMERCE SUCCESS: BEST PRACTICES FOR LOGISTICS VETERANS AND NEWCOMERS
3 Major Factors Driving Customer Satisfaction You May Be Overlooking By Kimberly Strausser
By Chelsea Mori
16 IS IT TIME TO MOVE TO A NEW WAREHOUSE? By Stephen T. Hopper, PE
20 BUILDING OUT OMNICHANNEL? TARGET IS THE ONE TO WATCH By Rick Watson
22 SHOULD YOU RENEGOTIATE YOUR CARRIER CONTRACT NOW? By Tim Sailor
24 THE KEY TO SUCCESS FOR THE SHIPPER/CARRIER RELATIONSHIP By Paul Yaussy
32 THE MIDDLE MILE MEETS THE LAST MILE By Jay Kent and Cathy Morrow Roberson
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34 WRAP UP
SPONSORED CONTENT 03 WHITE PAPER: HANDLING ECOMMERCE IN A WAREHOUSE FACILITY 07 DON’T LET CHANGING PACKAGING TYPE OBSOLETE YOUR MHE 19 COMBATTING THE WAREHOUSE LABOR SHORTAGE AS E-COMMERCE GROWS 27 FULFILLMENT AUTOMATION SOFTWARE: NO LONGER OPTIONAL 28 11 IMPROVEMENTS FOR YOUR MATERIAL HANDLING, PACKAGING, & OVERALL WAREHOUSE OPERATION
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 EDITOR’SNOTE
ADAPTING TO THE NEW NORMAL By Amanda Armendariz
“A
dapting to the new normal.” How many times have we heard that phrase in the last 16 months? It’s become such a ubiquitous catchphrase in our society that to many, it has lost its meaning. But, like many common phrases that worm their way into our speech, there is some significant truth to it. The COVID-19 pandemic has changed consumers’ buying habits and expectations, and there isn’t any going back. E-commerce, which was already on a huge upswing, will continue to become an even larger portion of the economic landscape. Consumers are demanding more choices, more visibility, and faster delivery (for free, of course). In this hyper-competitive environment, how can shippers set themselves apart? Your company’s own data is the best place to start. It sounds simple, but too often, companies fail to really drill down into how their data applies to customer satisfaction and, eventually, the organization’s bottom line. Do you truly
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understand your shipment data on a granular level? Have you taken a deep dive into what your average customer prefers (it seems counterintuitive in this age of free and fast shipping, but sometimes consumers are more than happy to wait an extra day or two for their package if it means their shipping cost — and, therefore, yours, too — is reduced or eliminated). Have you explored other methods of getting your package to the consumer (I’m always amazed now when there is a store that does not have curbside pickup or BOPIS, since some of the most successful retailers during the pandemic utilized those offerings to their advantage, and will likely keep them around even as the economy recovers). No two companies are the same, so while it’s important to stay abreast of what your competitors are doing, it’s also critical to look at your own data and the preferences of your loyal customers, since it’s those two things that will truly help you steer your company toward success. On the following pages, you’ll notice some articles have the PARCEL Forum ’21 speaker badge, so check those out for a great preview of what you can expect at our September show in Washington, D.C. Visit PARCELForum.com for more information or to register, and I’d love to chat with you in person there about what your organization is doing to adapt to the new normal. As always, thanks for reading PARCEL.
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
How Retail Supply Chains Can Adapt to the New Normal By Satish Natarajan
Rethinking Last-Mile Delivery Solutions to Beat the Driver Shortage By Aaron Hageman
UPS Announces New Peak Surcharges By Matt Bohn
APPLICATION ARTICLE
Don’t Let Changing Packaging Type Obsolete Your MHE First there was the humble corrugated carton. Then came the alternatives: polybags, bubble mailers, shrink wrap, etc. As shippers looked for packaging that would provide the protection required for their items, yet reduce the costs to ship said items, creative new designs came out to boost the bottom line. Though this was largely successful, the unintended side effects on material handling equipment (MHE) became clear: no longer would legacy systems that were designed for cartons with sturdy flat bottoms be able to continue to handle the wide variety of packaging now in use. Nowhere was this more apparent than at the sortation level, polybags jammed in shoe sorters, and bubble mailers rolled off cross-belt sorters. So how do you make sure that, as these packaging innovations come into widespread use, your expensive MHE does not become obsoleted? 1. Choose a linear sorter that uses a positive discharge When considering a traditional linear style sorter for outbound sortation, one of the main issues that EuroSort has seen is that irregular shaped items do not always discharge accurately. This could happen for a few reasons, but we mainly see it when the product rolls while being discharged (such as on a cross-belt, narrow belt, or rollerball conveyor); this means that it does not discharge when expected, and the item ends up in the wrong destination. EuroSort’s Push Bar Sorter eliminates that issue by using a positive divert that physically ensures that every item is discharged correctly, regardless of size, shape, or material type. 2. Consider tray sorters that eliminate conveyor transfers Though conveyor-based sorters have been the standard, switching to a tray-based sorter could have many advantages with changing packaging types. By utilizing a tray sorter in which each tray only contains one item, you can eliminate conveyor transfers and the associated hassle of items getting stuck between conveyors and sucked into the drive unit. The Eurosort Split Tray, Push Tray, and Cross Tray Sorters utilize this tray sorting mentality and offers
the ability to manually induct, which aids in reducing capital expenditure, improving flexibility, and eliminating polybags getting stuck between belt transfers. 3. Plan for the unexpected Package types will continue to change, whether that is to reusable packaging, paper-based polybags, or maybe something not even thought of today. Buying a outbound shipping sorter is typically a long-term investment and you want to make certain that your system can handle changing package types. Be wary of technology that does not give future adaptability or has significant packaging limitations. The EuroSort Split Tray Sorter is highly proven with postal carriers around the world and can sort anything from light polybags to heavy cartons which gives a flexibility not found in other sorting solutions. Whether you are looking to upgrade an existing facility or design an entire new sortation system, our team of sortation experts is here to guide you though our suite of flexible, accurate parcel sorters. Contact Us Today!
Sales@EuroSort.com 410.656.2101 EuroSort.com
SPENDPERSPECTIVES
MOVING BEYOND SURCHARGES — DYNAMIC PRICING By John Haber
T
he post-COVID-19 supply chain is speeding up to satisfy the consumer who has money to spend and is quick to hit the buy button on their laptop or phone for a variety of items. Where the items are delivered depends on the consumer, and more times than not, it also depends on shipping costs. Retailers face higher shipping costs from ocean and air to road and rail and to the last mile as consumers buy more items online and buy more frequently. As such, retailers try to pass these costs along to customers in various ways while trying to offer “free shipping” as a competitive requirement. Carriers of all modes frequently announce general rate increases and surcharges to try to stay ahead of future demand. However, carriers often analyze historical data to determine what a rate and/or surcharge should be for a future period. Indeed, the consulting firm, McKinsey, notes that pricing strategies in logistics have been less mature than in other sectors. Fragmentation and a historically low degree of digitization have been challenges in developing more complex approaches. But, thanks to such technology as artificial intelligence (AI) and machine learning, logistics providers are dabbling in dynamic pricing. According to a Logistics of Logistics podcast, dynamic pricing is a pricing strategy in which businesses set flexible prices based on current market demands. Companies can change prices based on algorithms that consider competitor
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pricing, supply and demand, and other external factors in the market. The trucking market has been adapting to dynamic pricing for a while now. For example, the digital freight brokerage firm, Convoy, introduced dynamic pricing in 2018 to address the spot market within the trucking industry. According to Convoy, dynamic pricing ensures shippers can move their goods through a 100% coverage guarantee. The End of Parcel Surcharges FedEx and UPS already appear to be heading down the dynamic pricing path. In 2020, FedEx introduced a new organization, FedEx Dataworks within FedEx Services, focused on “harnessing the power of the rich FedEx data ecosystem to transform the digital and physical customer experience. FedEx Dataworks will create solutions that build the network for what’s next by collaborating across the enterprise to integrate the technology and services customers expect and deserve”, according to the company’s press release. This includes capturing information at every stage of delivery a package passes through, from creating a label and scanning it through to its last-mile delivery. Algorithms are developed from this data and build the best possible routes. UPS has undertaken a similar task with its latest version Dynamic ORION (On-Road Integrated
Optimization and Navigation), introduced in 2020. This version reoptimizes routes in real time and based on changing conditions. As the routes are optimized in real time, it’s just a matter of time before pricing will be optimized, in real time, based on these routes. During UPS’s recent investor and analyst virtual conference, UPS executives discussed their Next Generation Profit initiative, a cross-functional program that, among other things, allows UPS to “optimize pricing for each customer and better align our cost to serve with the value we create.” During the discussion, UPS CFO Brian Newman said, “We are continuing to evolve the platform to leverage technology that will adjust pricing in a more dynamic manner to maximize overall profit in real time.” As such, surcharges, as we know them today, could disappear along with annual rate increases. Instead, pricing will likely be determined based on current demand and available capacity on any given route at any given time. For shippers, this means that accurately forecasting capacity needs will become even more critical as will parcel contract negotiations.
John Haber is the Founder and CEO of Spend Management Experts and can be reached at solutions@spendmgmt.com.
OPERATIONALEFFICIENCIES
HELP WANTED: THE EMPLOYEE SHORTAGE DILEMMA By Susan Rider
Y
ou know the old song lyrics: “And the sign says, ‘long hair freaky people need not apply.’” Well, we have thankfully come of age, and we are now accepting long hair, tattoos, earrings, and more as we attempt to staff our warehouses. And it’s not just exclusive to the positions within the supply chain. In areas with a high concentration of warehousing and distribution centers, they must compete with fast food restaurants, retail stores, and others all vying for that same warm body. Not only are they trying to attract unemployed people, but they are also actively trying to poach your team, as well. When you currently have open positions and it’s time to ramp up for the peak season rush, how would you even attempt to fill all your open slots? Unless you are the only game in town, it will not be a simple task but will require extra effort, innovative thinking, and a focus on implementing new and untried programs. Attracting New People Marketing certainly comes in to play as many HR firms are getting creative. For instance, many are advertising a higher minimum wage on signs, billboards, etc. But when you drill down into the details, it may be without health insurance, PTO, or other benefits. Make sure you are promoting the holistic benefits of working at your company. Of course, realize that health insurance to the very young is often not the highest priority. Many of them want the cash, while stock options, health insurance, and other benefits are more attractive to an older worker. Take advantage of high school career days. Show students the potential to grow within your company. If your company has tuition assistance, even better! You will have to get creative on your shifts for this workforce and may need to work with your talent acquisition team to think outside the box and get creative. Also, you may have to change some of your company policies to enable ear buds, t-shirts, jeans, and tennis shoes. It’s a different
world when you are trying to attract the young. Don’t overlook college job fairs. If there is a school in your area that has any supply chain courses, get to know the professors so they may refer students to you to get real-life experiences in the supply chain. You will be able to choose the cream of the crop this way. If you are not already using an internal referral program with compensation, now is the time to start. All your A-players will be very careful in referring people, and by hiring friends and family of associates, you create a more invested atmosphere where people work together as a team. Referrals should be $1,500 or more (if that sounds like a lot, remember, a headhunter or staffing agency would cost much more). Evaluate Your Current Status Some things to take into account: How to shorten the onboarding process (period of time from when a new person walks through the door until they are productive)? Can your typical two-week classroom training be shortened to one week? Review the training curriculum to ensure every hour is quality training. Can you supplement your normal training program with aids to ensure that although the time to train has been shortened, quality is not reduced? Many distribution centers today are hiring multi-lingual individuals, so you must examine any posted instructions and make sure they are posted in Spanish, English, and other languages that are prevalent in your area.
Retain Your Current People Listen to your employees and acknowledge their needs. Fatigue mats, recognition, better air flow in the heat of the summer, walkie talkies so they don’t have to search for a forklift driver; this list could be a page long. Do you know what your people need, what they are thinking, or what the current mood in your facility is? You can bet that whatever it is, there are conversations going on in the lunch room that are invaluable. Get their feedback by having a suggestion box or have feedback given electronically with a web portal. Offering sign-on bonuses to new employees in this tight employment time may upset some of your tenured people, so by implementing a referral program, you can explain that they, too, have an opportunity to make some extra cash by identifying friends and family members that would be good hires. Hopefully the people crunch will get better, but if you are continually in the deficit mode, you may want to look at justifying automation or technology to make you more efficient and productive in order to shift some people from one area to another.
Susan Rider, President of Rider & Associates, Supply Chain Consultant, and Executive Life Coach can be reached at susanrider@msn. com. She will be speaking at this year’s PARCEL Forum in DC; visit www.PARCELForum.com for more information.
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PACKAGING
A ROADMAP TO REDUCING PACKAGING CARBON EMISSIONS By Clint Smith
I
t was recently announced that more than 100 organizations had signed The Climate Pledge, a commitment to reach the Paris Agreement 10 years early and be net-zero carbon by 2040. This has sent an important signal that there will be rapid growth in demand for products and services that help reduce carbon emissions. Specifically, signatories to The Climate Pledge have agreed to: Measure and report greenhouse gas emissions on a regular basis. Implement decarbonization strategies in line with the Paris Agreement through real business changes and innovations, including efficiency improvements, renewable energy, materials reductions, and other carbon emission elimination strategies. Neutralize any remaining emissions with additional, quantifiable, real, permanent, and socially-beneficial offsets to achieve net-zero annual carbon emissions by 2040 — a decade ahead of the Paris Agreement’s goal of 2050. As one of the signatories, Pregis has embarked on a net-zero plan to help reach the specified objectives. For companies who may be thinking of ramping up their environmental efforts, our deep dive into this topic has led us to develop a step-by-step systematic approach to reach our objectives. If you are interested in ramping up your efforts, here are some of the things you should be considering. Greenhouse gasses (GHGs). Each organization needs to begin the process by identifying which GHGs are generated in its manufacturing environment. Most packaging manufacturers will want to measure carbon emissions. Analysis is critical in identifying the carbon generating hotspots within the organization and its suppliers. That creates a solid foundation from which to take action. Here are the three steps that will help you identify and create a plan to reduce carbon-based emissions: Scope 1. During this first scope, your focal point will be
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measuring emissions produced by your facilities and vehicles. Another way of putting it is, look at factors that are directly in your control. Examples include your manufacturing facilities, office space, warehousing, company vehicles, etc. This is the easiest scope to tackle and should be your first priority. Scope 2. Moving on to the next level, focus on decisions that you have partial control over. Examples include emissions associated with purchased utilities such as electricity, water, etc., used by your facilities. For example, if your operations are located in areas with deregulated electrical grids, you can source or produce renewable energy. Scope 3. Moving on to the most challenging level on your road to carbon neutrality, your goal will be to capture upstream and downstream activities within the value chain where you have less control over the emissions created. Distribution, raw materials, business travel or customer use, and disposal of your products are just a few examples. And, while this is the most complex, it can make a significant difference in reducing carbon emissions for manufacturing organizations and, oftentimes, lead to the most rewarding outcomes. In our analysis, 20 to 30% of emissions take place within the first two scopes. The area in which your efforts will have the greatest impact is Scope 3. However, because these initiatives require involvement and collaboration with other companies, this is the most challenging area to tackle.
Conversely, engaging with your supply chain partners can create significant business benefits in addition to environmental ones. By opening the doors of communication and putting processes in place to reduce your environmental footprint, you will end up creating new products (or modifying existing ones) to support your mutual environmental objectives. These collaborative efforts will generate next-generation, disruptive products that are not only good for the environment but will also supply the fuel for business growth. Frequency of effort should be another key aspect of your plan. Carbon foot printing shouldn’t be a once-in-ayear activity. Continuously reviewing your emissions data enables you to take action when needed, adjust to changing market opportunities and actively manage your progress toward the targets you’ve set. Be consistent in asking engaging, and sometimes tough, questions of the suppliers and customers you work with. Remember, those collaborations will have the most significant impact on your carbon footprint, as well as theirs.
Clint Smith is Pregis’ senior director, global sustainability. Pregis is a leading global provider of protective packaging solutions and focuses on preventing product damage, improving customer satisfaction, and preventing waste by reducing returns that add up in fuel and energy environmental impacts.
PARCELCOUNSEL
THE FIVE MOST CRITICAL ELEMENTS IN TRANSPORTATION CONTRACTING: PART II By Brent Wm. Primus, J.D.
I
n the previous issue of PARCEL Counsel, we looked at the first two critical elements of transportation contracting: rates and charges, and limits of liability for loss and damage. In this installment, we will look at the remaining three elements. The third critical element is the various time limits relating to such things as the time limit for a carrier to assert charges in addition to those originally invoiced or for a shipper to dispute the original invoice. Other time limits relate to the period of time to provide notice for loss and damage claims and the time limits for any legal action to be commenced if the claim is disputed. For international air and ocean shipments, the time limits relating to loss and damage claims are set by international treaties. For shipments originating in the United States transported by regulated motor carriers, the governing statute is 49 USC 14706 — colloquially known as the Carmack Amendment. This statute does not set forth specific time limits relating to loss and damage claims. Rather, it specifies certain minimum periods e.g., nine months to file a
claim for loss and damage and two years to start a lawsuit after the claim is denied in whole or in part. While most motor carriers adopt these limits, it is to be noted that some major carriers are increasingly putting into their tariffs and service guides time periods that are less than those set forth in 49 USC 14706. The legal basis which would allow these carriers to establish these shorter time limits is unknown to me. These shorter limits could be addressed in negotiations. Time limits between shippers, brokers, and carriers relating to payment of charges are clearly negotiable. For example, a shipper and carrier may agree that claims for overcharges and undercharges could be set at 60 days rather than the 180-day period set forth in the statutes. The fourth critical element relates to issues of liability other than for loss and damage to cargo. Perhaps the most significant contingent monetary liability relates to liability to third parties arising out of a highway accident. The issues to be negotiated are who will bear the responsibility for payment of such claims and the extent of that responsibility. Related to this are provisions relating to the indemnification of the parties to each other and the type and amount of insurance for a carrier to hold.
The fifth critical element is how and where disputes are to be resolved. The “how” relates to whether it is to be resolved in court and, if so, will a jury trial be waived? Also, with respect to the “how,” there are options other than court that can be very advantageous, e.g., mediation and arbitration, to which the parties can agree in a contract. The “where” relates to where a dispute will be venued, i.e., where will the court be geographically located? The parties almost always prefer to have their hometown be the chosen venue. To conclude, since Part I of this column was written, capacity has tightened to an extent not seen in recent years. Accordingly, it may not be currently possible for a shipper to negotiate any terms significantly different than the carriers’ standard terms… but it might not hurt to ask. 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.
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SUPPLYCHAINSUCCESS
UNDERSTANDING TIME IN TRANSIT DATA By Anna Behrens and Quinn Nelson
W
ith over two billion online shoppers and a 44% year-over-year increase of e-commerce sales in 2020, demand for accurate, timely, and detailed package data has never been higher. A shipper’s ability to predict demand, manage their product mix and inventory placement, and maintain healthy margins is advantageous in remaining competitive. But despite the abundance of data available across disparate systems, many shippers are wrestling with a key question: How can I best leverage the data available to achieve my two primary objectives — exceed customer expectations and reduce costs? Problem: Shippers are limited by the timing, quality, and availability of carrier invoice data. Without thorough and real-time package and tracking information from a carrier, shippers are uninformed on their network, and consumers are left with little information about their highly anticipated order. Imagine having information on exact SKU (stock keeping unit) numbers that are causing transit time delays, being able to pinpoint which size or type of box those SKUs were packaged in, and recording time stamps for each stage of the shipment process (packaging, pickup, shipping, delivery). Further, imagine having business intelligence capability to visualize and analyze this data to make real-time and informed decisions. Your ability to cross-reference and match carrier data with ERP (Enterprise Resource Planning), TMS (Transportation Management System), OMS (Order Management System), and WMS (Warehouse Management System) tracking data will enable a more robust data set, allowing further visualization and analysis into costs and inefficiencies within your network. Benefit: Having access to robust and detailed package information can open a world of opportunities for your transportation network. Detailed tracking information can increase customer satisfaction and uncover opportunities to deliver packages more efficiently. In addition, a business intelligence tool allows you to synthesize the aforementioned data and use it most effectively.
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Solutions: Here are three ways to enhance your carrier data and time in transit reporting capabilities. Business Intelligence: Having a strong and robust business intelligence platform will allow shippers to regularly track critical time in transit metrics. Knowing these metrics will allow you to understand your typical customer’s experience and drill down by carrier, service level, location, etc. This type of granular view allows you as the shipper to easily monitor for blind spots or areas needing attention within your network. Order Match: Order matching is a process where supplier data is collected upon manifest and is later cross-referenced and matched with the invoiced data sent by the carriers. Examples of this data could include SKU information, box sizes, order number, order date, etc. This data is extremely useful in not only providing more details about each individual package, but also allows for a better estimation of costs that may be subsequently billed by the carrier (i.e., extra surcharges and fees). Track and Trace: Track and trace solutions provide both customers and retailers real-time visibility to order and shipping status. With track and trace, shippers and consumers can see detailed information on the status of packages and have peace of mind in knowing when the package has made it to its final destination. Whether a package is stuck in the Suez Canal, or arrived 30 seconds ago on the wrong doorstep, it is important for consumers
and suppliers to know the status of their packages. Once you have some or all the solutions outlined above in play, it is essential to leverage the data in the most meaningful way possible. Critical Metrics to Review It is important to view time in transit metrics in multiple different ways. The way that a customer views time in transit will typically be different than how a carrier views time in transit. Additionally, slicing your data in multiple different ways can allow you to easily track customer experience based on what carrier and service are being utilized. The metrics outlined below are most critical when reporting on customer experience and can be easily modeled within most business intelligence platforms. Time in Transit: These metrics should report time in transit based on a seven-day week. Therefore, if a package shipped on Thursday and arrived on a Monday, it would calculate as four days in transit. This view of your data is considered to be the true “customer experience” view of transit times as it most directly reflects what customers experience. Business Days in Transit: These metrics use a five-day, M-F week or a six-day, M-S week to calculate days in transit. While this metric less accurately reflects what the customer experiences, it more accurately reflects how both shippers and carriers typically operate. Depending on the carrier or service level you are using, service may be offered on five, six, or even seven
days per week. Customizing the business days in transit calculation based on these nuances will allow you to view time in transit through the same lens that a carrier would. Additional metrics to track can include average transit days, average transit days over time, average transit days by zone, average transit days by service, percentage of shipments delivered in one day, two days, three days, etc. (by carrier, by service, or by zone), average transit days by zone and service combined (matrix), and average transit days by receiver state. Advanced Time in Transit Metrics While the metrics outlined above establish a critical reporting baseline, adapting your business intelligence tool to your specific business needs and internal KPIs can paint an even clearer picture of your operations. Here are a few examples of more advanced or “customized” time in transit metrics to model. Customized breakouts specific to your business: You are not limited to breakouts by carrier/service/zone. Transit times can be calculated and visualized by your own internal categories. Examples include outbound locations, GL codes, fulfillment types, SKU numbers, order type, etc. Score-carding against internal targets: If you have internal targets to achieve around time in transit, use your
business intelligence capabilities to monitor the success rate of reaching these targets. On-Time Performance: There is a critical distinction between “time in transit” and “on-time performance.” Time in transit represents the average number of days that packages take to arrive regardless of carrier, service, location, etc. On the other hand, on-time performance measures how well a carrier is meeting their delivery commitment times by service. This type of reporting typically considers “on-time” vs. “late” and is most often viewed as a percentage. This type of data can be more challenging to gain access to. However, if you do have access to such data, modeling overall on-time percentage by carrier, service,
lane, receiver location, etc. can provide powerful insights. The ability to manage detailed package information is becoming a necessity for shippers as the e-commerce market continues to boom. Success is where preparation meets opportunity. By taking steps to increase your data quality and subsequently having tools in place to effectively analyze that data, you are priming yourself for success.
Anna Behrens is an Account Analyst with enVista Transportation Solutions. Anna has worked directly with clients to enable their success and achieve transportation goals through data analysis and solutions focused reporting. Quinn Nelson is Senior Account Analyst, enVista.
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Optimizing Your Warehouse for E-Commerce Success: Best Practices for Logistics Veterans and Newcomers By Chelsea Mori
I
n today’s fulfillment ecosystem, e-commerce is quickly changing the game. For those looking to take advantage of the post-COVID e-commerce boom, especially 3PLs, it is imperative to prepare while continuing to scale, remain nimble, and meet customer demands. And with peak shipping season right around the corner, now is the time to get started. Improve Operations Continuous operational improvement is crucial to a warehouse’s success regardless of how long you have been in business. In some cases, older businesses may have outdated processes or technology that can hinder operations, while newer businesses may not have the expertise as to where and how to optimize. Wherever your business sits on the spectrum, the goal with e-commerce fulfillment is to streamline operations to measure key performance indicators (KPIs) for future improvement. As a best practice, an audit of services and operations will help identify where processes may be lagging and which workflows are providing optimal performance. Inbound and Outbound Workflows: Closely examine receiving, picking, and packing processes to understand the mechanics behind each workflow and output. Learn where you may have redundancies or where you can use
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technology to speed up or optimize order fulfillment processes. Inventory Management: Use a warehouse management system (WMS) to confirm inventory counts and cycle times are accurate. Implement new processes or paperless methods like barcode scanning to remove manual entry and errors. Keep track of findings to learn where you can improve and reduce future issues. Warehouse Layouts: Use FAST principles to increase e-commerce efficiency. When looking to achieve optimal performance, 3PLs need to focus on warehouse flow, accessibility, space, and throughput to improve and order efficiency. Invest in Technology Rapid e-commerce growth has spurred an excess of new technologies for the logistics and supply chain industry. And, last year’s increased online buying has sped up this evolving landscape. Technology innovations, automation, and integrations are the cost of e-commerce fulfillment to increase customer satisfaction and remain, or become, profitable. As reported in 3PL Central’s Third-Party Logistics Warehouse Benchmark Report, 3PLs in the highest growth brackets were 200% more likely to invest in system integrations with shopping carts and marketplaces and 50% more likely to invest in e-commerce.
Technology comes in all shapes and sizes these days, but when looking to optimize for e-commerce, it is a best practice to focus on three main areas. Innovation: For long-term fulfillment players, the biggest change is moving from on-premise solutions to the cloud. While SaaS-based technology has been a part of the logistics tech stack for a number of years, there are still businesses who are slow to adopt cloud-based technology. In fact, the on-premise WMS market growth is projected at only 13.1% CAGR from 2020 to 2025, whereas cloud-based WMS is expected to grow at 28.7% during the same period. Automation: Process and workflow automation — from managing labor, inventory, receiving, picking and packing, to shipping — will offer the best opportunity for growth. Automation is also the best way to improve efficiency by removing manual entry and errors that can lead to mis-picks and chargebacks. Automation will also help tackle the management of all billable activities — helping warehouses get paid more and faster. Integrations: Wherever your business sits in the supply chain, integrations are crucial to connecting multiple players and metrics. In most cases, the ability to connect with a 3PL’s WMS will allow for greater visibility, which will improve the customer expe-
rience. Whether you invest in custom EDI or API integrations, shopping carts, or Wi-Fi enabled devices, integrations are a requirement to meet increased e-commerce shipping demands. Enhance the Customer Experience The customer experience is at the heart of e-commerce fulfillment. Today’s e-commerce consumers expect nearly unlimited product choices, real-time visibility into inventory, multiple shipping methods with product tracking and delivery, perfectly branded orders, and hassle-free returns. With Gen Z buyers making up 40% of global consumers, a seamless shopping experience is a must to remain competitive. One of the best ways to enhance the customer experience is to build better relationships with everyone in the supply chain. Direct to consumer (DTC) manufacturers are now leaning on 3PL warehouses to help with innovation and growth, as 3PLs already have a history of customer satisfaction and key relationships with shippers. Whether
you are a newcomer to e-commerce or you already have years of experience, when optimizing your operations for e-commerce, you must have a clear path to improve the customer experience. Branding: Nothing is more important for an e-commerce business than their brand. The ability to meet expectations utilizing technology will ensure complete satisfaction. Today’s warehouses must be prepared to deliver a fully branded experience for each order — from the box and packaging materials, to the shipping and return labels, not to mention meeting and exceeding consumer expectations on speed and cost of delivery. As far as the consumer is concerned, the 3PL is the same as the retailer. Notifications: Sending automated notifications to supply chain customers for inventory updates, stock status reports, and OSD (overage, shortage, damage) reports will ensure satisfied customers and repeat business. Warehouses can also create billing notifications to save staff valuable time, which can be
spent improving the customer experience in other areas of the business. Visibility: Utilizing warehouse technology that allows customers to self-serve with real-time data is key for e-commerce. Retailers and sellers need to have 24/7 access to inventory levels to ensure they keep accurate levels available and maintain complete visibility throughout the supply chain. This is especially important during peak shipping seasons. With the continued growth of e-commerce fulfillment, supply chain players must be prepared to work together to meet growing expectations. Today’s logistics professionals must be well versed in how to build and maintain key operational workflows, invest in the right technology, and create long-lasting relationships to improve the customer experience.
Chelsea Mori is Director of Marketing, 3PL Central. Visit www.3plcentral.com for more information.
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IS IT TIME TO MOVE TO A NEW WAREHOUSE? Stephen T. Hopper, PE
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erhaps your business completed a comprehensive logistics network study years ago when you determined the location and design of your current warehouse and selected or constructed your building. And perhaps your warehouse facility has served your business well over those years. Even so, some things have probably changed since you moved in. Your customers have changed. Your inventory has changed. Your workers have changed. Your neighborhood has changed. Your costs have changed. Your needs have changed. The reality is, the value your warehouse contributes to your business is heavily driven by the age-old real estate mantra: “location, location, location.” In addition to the location, your warehouse’s value is also driven by other key attributes that should support your business effectively and efficiently. So how do you decide whether it’s time for your business to move to a new warehouse? To make the right decision, consider and evaluate these five important aspects of your business and your warehouse operation. Your Business Growth As the old saying goes, “You can’t put 10 pounds of potatoes in a five-pound sack.” That might seem obvious, but
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something similar could be said about your warehouse. The effective operating capacity of your warehouse comes in three distinct forms, which I call the “capacity trinity.” These capacities track different things and are measured differently, but you should understand them in your warehouse operation: Physical capacity – How much “stuff” (in units of inventory) can your warehouse hold in storage? SKU capacity – How many pick facings are available in your warehouse to support efficient picking of your unique items (SKUs)? Throughput capacity – How much volume (in units of inventory) can be efficiently processed through the functional areas of your warehouse during your peak week of the year? You probably planned your current facility to satisfy your expected business requirements for some timeframe after you moved in, but has your sales volume (in units stored and shipped) increased significantly since those days? Has your warehouse exceeded its original expectations? Or are you forecasting additional growth in sales volume in the coming years? These situations are generally good problems for a business to have, but your warehouse needs room to grow efficiently. In the face of growth, limited
capacity of any type could mean your current facility is reaching the end of its useful life. It might soon “hit the wall” and be incapable of supporting the future requirements of your business. Your Customer Expectations and Outbound Freight Costs More than ever before, your businesses must cope with “the tyranny of ‘now.’” Customers of all types are demanding faster deliveries, even as soon as the day their orders are placed. Speed of delivery is driven mainly by proximity, and unless your customers pay for shipping, delivering your products to them over longer distances increases your shipping costs. Consequently, regardless of the outbound transportation modes you use (parcel, LTL, FTL, fleet, etc.), the location of your warehouse has a profound effect on your operating costs — and on your customers’ satisfaction. As a practical matter, this means your warehouse should be located close to your delivery points, such as your customer locations or retail stores. Or, if you ship primarily through a specific carrier, your warehouse should be located close to that carrier’s major hub or crossdock facility. Whether your warehouse serves customers in the retail, wholesale, commercial, industrial, or government
business sector, or some combination of these, it’s likely that you’re experiencing increasing demand for smaller and more frequent deliveries associated with e-commerce. It’s also likely that this “ones instead of tons” trend accelerated during the recent pandemic. In most cases, a warehouse that was designed to pick and ship fewer, larger orders does not efficiently support the picking and shipping of smaller, more frequent e-commerce orders. Starting from scratch by moving to a new warehouse optimized for e-commerce can be much more cost-effective and expedient — and result in fewer headaches — than redesigning an existing warehouse to support a significantly different business model. Moving to a new, logistically optimal, efficiently designed warehouse can pay big dividends to your business. Reduced delivery times to your customers and shorter delivery distances are likely to result in increased sales and reduced freight costs, respectively. And ensuring that the design of the warehouse is
tuned for efficient picking, handling, and shipping of e-commerce orders is likely to result in other reduced operating costs, such as the costs of labor and space. Your Inbound Freight Costs If you pay your suppliers for shipping their products to your warehouse, then the location of your warehouse can also have a substantial effect on your inbound freight costs. As with deliveries to your customers, proximity also affects the speed of delivery from your suppliers to your warehouse. So even if the cost of your inbound freight is paid by your suppliers, the location of your warehouse is likely to govern how quickly you can receive products from them. Ideally, this means your warehouse should be located close to your supply points, such as your primary suppliers’ shipping locations, your manufacturing facilities, and the ports and other points of entry through which you import your products. Logistically optimizing the location of your warehouse based on these supply points will result in faster product
availability and reduced freight costs. Your Labor Costs Your local labor market is constantly changing. Finding, hiring, and retaining workers for your warehouse probably becomes more difficult with each passing year. Labor costs are consistently increasing in most geographic areas, but some local markets have seen greater wage increases than others. In addition, the shrinking availability of qualified workers with basic skills who are willing to work in warehouses for reasonable wages is a growing problem in many geographic areas. And as industrial centers grow, competition with other local employers can compound the problem, further limiting worker availability and putting additional upward pressure on local wage rates. Without question, labor is the largest single cost category for operating most warehouses. Since local market conditions can radically influence labor availability and costs, one of the major potential benefits of moving to a new
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warehouse is that your business can select a location where qualified labor is more readily available, competition is lower, and wages are more reasonable. Your Facility Operating Costs The characteristics and condition of your current facility should also be considered when you’re thinking about the possibility of moving to a new warehouse. Understandably, the costs of operating a warehouse (such as wages, rents, utilities, insurance, regulatory fees, and taxes) tend to increase over time. And industrial facilities naturally deteriorate with ongoing operation, so they require more maintenance and repairs as they age. Older buildings also have more antiquated design elements, which result in higher operating costs. On the other hand, newer buildings are more likely to incorporate desirable design elements for warehousing, such as greater clear heights, floors with higher structural capacities, and broader column spans, all of which facilitate modern, high-density storage methods.
Newer buildings are also more likely to be equipped with energy-efficient heating and cooling systems, insulation, and lighting, as well as modern fire-prevention systems. Assess the condition of your current warehouse facility relative to the benefits of a better facility. Also ask yourself if the design of your current facility supports modern warehousing best practices. For example, facilities with multiple floors or poorly proportioned aspect ratios (length-towidth) typically don’t enable functional layouts that provide efficient material flows. Your business might experience major savings in facilities costs if you move to a new warehouse. All Things Considered When making the important decision whether to move to a new warehouse or not, it’s vital to be objective rather than emotional. Take a holistic approach. Define your realistic business requirements and variables (suppliers, customers, demand volumes, etc.). Perform a cost-benefit analysis that
compares the “stay put” alternative with the potential “move” alternative. Evaluate the alternatives quantitatively by crunching the numbers using the same set of data and requirements, but also be sure to consider qualitative factors, such as when your current lease will end. If you decide it’s time to move, then what? How do you decide where to move? Find out in my article in the next issue of PARCEL.
Stephen T. Hopper, PE is Founder & Principal of Inviscid Consulting, whose mission is to help business plan and streamline their warehousing, logistics, manufacturing, and distribution operations to drive down operating costs, boost capacity, improve service levels, and mitigate risk. He can be reached at steve.hopper@inviscidconsulting. com or 404.832.5326. He will be speaking at this year’s PARCEL Forum on Wednesday, September 15. Visit www.PARCELForum.com for more information.
APPLICATION ARTICLE
Combatting the Warehouse Labor Shortage as E-Commerce Grows How companies can overcome today’s labor constraints with automated packaging solutions In today’s e-commerce driven world, shippers are under pressure to do more with less while being efficient. With every facet of the supply chain under scrutiny, labor issues often dominate the conversation due to scarcity, unreliability, and cost pressures. Many companies are struggling to keep up with changing customer behaviors and surges in demand because of employee turnover, absenteeism, and repetitive, non-value adding tasks driving staffing frustrations. With the heightened need for warehouse workers, labor issues are often the first place companies experience signs of strain. However, in an accelerated warehouse environment, getting more packages out the door with a smaller footprint and less labor is critical. Consequently, a company’s packaging process must be reliable, efficient, and consistent. Parcel packing can be one of the most manual and laborintensive parts of the supply chain, leading to higher overall costs. How do businesses keep up when faced with labor shortages and rising costs? Automated Packaging Solutions like the CVP Impack and CVP Everest from Quadient optimize order fulfillment, solve labor challenges, and reduce package volume for shippers across a variety of industries. With only one or two operators required, these solutions offer an average of 50% reduction in shipping volume and an average of 88% reduction in packing labor as they can replace up to 20 manual packing stations. This means a labor reduction of staff, supervision, recruitment, training, and human resources costs — all while generating a higher production volume and greater accuracy with a smaller footprint. Both auto-boxing systems measure, construct, seal, weigh, and label each variable dimension single- or multi-item order of either hard or soft goods in a custom fit-to-size box
while eliminating or reducing the need for void fill materials. The CVP Impack packs up to 500 parcels per hour, while the CVP Everest packs up to 1,100 parcels per hour. They help you operate lean, use less materials and void fill, and ship parcels efficiently. In fact, some customers see a full return on investment in as little as 18 months or less depending on parcel volume. Parcel packaging is logistically critical and with the current labor shortages, success is directly related to fulfilling orders in a timely, cost-effective manner. Companies that are automating their packaging process with right-sized packaging can give them an immense competitive advantage, as shippers can reduce and reallocate labor — improving overall profitability. Additionally, when creating a right-sized box every time, packaging is guaranteed to remain consistent. When switching to a CVP solution, companies can benefit by saving on labor costs, navigating peak seasons, ensuring accuracy of process, managing less inventory, and increasing efficient use of employee time. Transform your fulfillment strategy today by switching to an automated packaging solution to ensure all steps of the process are optimized — even when laborers are hard to find. Contact Packaging by Quadient for more information on auto-boxing solutions and the ROI opportunities.
sales.packaging@quadient.com 678.819.1599 packagingbyquadient.com/us
BUILDING OUT OMNICHANNEL?
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five different stores in a city and centralizing them so that local delivery partners can pick them up for same-day service (this happens multiple times a day). These sort centers are powered by Shipt, Grand Junction, and Deliv technology acquisitions — each at a different place in that value chain. Further upstream, there are also regional distribution centers (RDC) to help accurately and efficiently replenish stores. Item picking in stores is another interesting part of Target’s omnichannel strategy. For instance, INF — or “Item not Found” — happens when an associate goes to a shelf to complete a “fulfill from store” order and the item isn’t there. Target tracks this metric regularly and works to reduce the occurrence of these incidents. Rather than building tons of new mega-stores, Target is focusing on adding 30 to 40 new small-format stores over the next several years — a strategy the company has been consistently executing (successfully) since 2016. The smaller store formats create a Target brand experience for the customer, which an automated facility certainly doesn’t, and also allows inventory to be deployed closer. Speaking of stores, Target is investing billions of dollars in the coming years in remodeling and upfitting its stores. In fact, the company plans more than 120 store remodels this year alone — primarily related to drive-up and same-day services, which are Target’s most popular and fastest-growing offerings.
Stores: The Backbone of the Strategy Stores are central to Target’s omnichannel strategy. In 2020, Target’s own stores fulfilled 95% of its sales — either pickup, curbside, or ship-from-store. Unlike giant warehouses, shipping from stores engages associates, provides more visibility into inventory, and results in additional revenue from buy online, pick-up in store (BOPIS) browsing. Downstream from its stores, Target employs a sort center model — taking orders from four to
Implementing New Ideas It is obvious that Target store managers are listening to their employees, sorting the best ideas, and passing those up the chain to get approved and implemented. Here are a few examples I noticed while listening to earnings calls: Hidden temperature control lockers/areas in front of stores for associates to hold orders for guests and delivery partners to come in More space for order staging at the front of stores Protection for workers from weather/elements and even (I suspect at times) crime when fulfilling drive-up orders
TARGET IS THE ONE TO WATCH By Rick Watson
hinking about who’s on top of their game right now? It’s Target. There are so many lessons to be learned from its current success — a success that’s been a while in the making. What’s working for Target? Small-format stores and more of them, using stores as fulfillment centers for online orders, wisely deploying local sort centers and regional distribution facilities, investing in house brands, viewing supply chain as an opportunity for revenue and innovation rather than a necessary hindrance, and being willing not only to experiment, but to give that experiment breathing room to flourish.
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You can always identify a well-run business when it understands the entire value chain and works on each part to make it faster and more efficient. This results in reduced cost, happier employees, and improved customer experience. Wins for all involved. At the beginning of Target’s 2013 supply chain journey, the company set goalposts for its experiments and, more importantly, remained nimble in defining success. Target set out saying, “If this is going to work, our supply chain margins need to resemble a customer picking up something in the store,” and then set about making it happen, evaluating and redefining success along the way. What else is Target nailing? Assigning multichannel credit. The company’s CEO laid out a strategy in 2013 saying, “There are no penalties, or there is no internal conflict at all as it relates to who is going to get that credit for the sale. We are double crediting everybody from an internal standpoint, and then we take it out at the enterprise level to make sure that it all washes through on a consolidated basis.” This means that the stores get the same “credit” for sales (in terms of achievement) as online if the stores are at any point included in the online value chain — and vice versa. Then, of course, when Target reports to Wall Street, it removes the double-counting. This rewards all parties rather than creating counter-productive internal competition. An added bonus is that customers then see one unified brand across all channels and have a consistent brand and customer service experience. Finally, Target is also investing in house brands — 10 of which have a market upwards of $1 billion, and which represent onethird of sales (and an even bigger percentage of the profit!). This is where Target excels at differentiation and building customer loyalty. It’s also where Target edges out online-only competitors; the thrill of the “treasure hunt” and the likelihood that a BOPIS order ends up with a little something extra in the cart when the shopper takes a quick lap through the store. What’s Next for Target? If Target is going to acquire technology, the smartest place to invest resources would be to help scale sortation centers. The company is still investing slowly and patiently, but actively looking for technology to scale these operations. Between the store-as-fulfillment center, sortation centers, and RDCs, the share that is delivered to home can be convenient for consumers and more profitable for Target. The bottom line here is this — Target is hitting its stride across the board. People, process, and technology are all working together in concert. This is rare to see in business, and more people should be taking notice of what’s happening here. If I were a retailer looking at something to learn from Target, the execution model is where I would start.
Rick Watson is CEO & Founder, RMW Commerce Consulting. He can be reached at rick@rmwcommerce.com. He will be speaking more on this topic at this year’s PARCEL Forum on Thursday, September 16. For more information, visit www.PARCELForum.com. JULY-AUGUST 2021 PARCELindustry.com 21
SHOULD YOU RENEGOTIATE YOUR CARRIER CONTRACT NOW?
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BY TIM SAILOR
iven the current landscape facing shippers, it has become increasingly important for shippers to recognize the new normal and a future with “perpetual peak” surcharges. This environment has presented significant challenges for CFOs and logistic managers trying to forecast shipping costs and budgets. It has become virtually impossible to know your company’s true shipping costs when the carriers apply arbitrary new charges and make them immediately effective. There are several important actions shippers need to take in 2021 to combat these issues. Shippers should begin by conducting a thorough review of their current carrier agreements. If your carrier agreement was written and implemented several years ago, does it reflect the current surge of new charges the carriers are imposing in 2021? How do shippers really know if they have a best-in-class agreement? As we have emphasized for many years, contract terms and conditions can be much more important than rate discounts in controlling your overall transportation costs. And, while most shippers have many concessions in their agreements that are favorable, do these have the same impact in 2021? This is particularly true for “peak season” surcharges. While shippers may have contractual concessions for historical peak surcharge timelines, these concessions may have little or no impact on new surcharges or the rapid rise of current tariff increases to charges like additional handling, oversize, residential charges, or increased volumes.
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Not only are the carriers applying “peak season” surcharges during the entire year, but they are also trying to apply volume constraints on many shippers. The carriers are now trying to tie additional charges to seasonal volume, but they are also trying to impose capacity limits on the number of packages they will service in the Q4. Given these new circumstances, shippers should look to their agreements to see if they are protected from these new carrier practices. The second but equally important area may be contractual language to protect shippers from being penalized by growing and increasing their revenues and accompanying shipment volumes. Do you know how much these charges are impacting your shipping expenditures? The first thing you need to do is conduct a thorough data analysis to see exactly where your shipping dollars are going and your overall average cost per shipment. Pull down this data by month and pay particularly close attention to all the new invoice line items. This is especially important for your fourth-quarter shipping as the carriers dramatically increase these costs during what was the “traditional peak season.” Renegotiating your current agreement will not be an easy task. Typically, the carrier reps will tell you that you might jeopardize your current concessions and may not reduce your overall costs. They will also tell you that their companies are emphasizing margins over growth and do not really want to handle your business, particularly if you have shipments that DIM, require additional handling, are oversized or residential, or your volume is heavily seasonal. It is ironic to think that the carriers had been “losing” money on your account while providing service for years.
Most times, your shipping characteristics have not materially changed, but the carriers have benefited from your internal growth and success over the years. Back It Up with the Data One of the best ways to counter this argument is to show the carriers all of the YOY additional costs you have incurred to move the exact same shipments. And remember, there were no peak season surcharges before 2017. In 2017, there was a six-week period where UPS applied a peak season surcharge of $0.27 for residential deliveries and $24 for large packages. Today, those fourth-quarter peak surcharges are $1.15-$6.15 for residential and $60 for large packages. One of the best ways to illustrate the financial increases has been the dramatic rise in accessorial costs. Let’s take additional handling as an example, as outlined in the chart below. Other commonly applied surcharges are Delivery Area Surcharge (DAS) and Residential Delivery Add-On. For DAS, the increase has been around 14% over the last five years, and the increase for the residential fee has been a whopping 26%. Remember, these increases are in addition to the tariff GRI, which happens every January. Once shippers do the data analysis to quantify how much more they are paying the carriers in 2021, it will be clear to both you and the carrier that shippers have taken a huge hit to their bottom line. Your data analysis should also help you identify your greatest pain points and the areas where you have experienced the greatest increases. This data is a solid basis to begin discussions with your carrier on how to improve your current agreement and to lower costs. Another way to leverage your incumbent carrier is to consider bringing in a regional carrier for some of your volumes. Typically, regional carriers offer better rates and much lower accessorial fees. Additionally, they can provide you with additional capacity during your peak period where your volumes and revenues dramatically increase, i.e., Q4. Our recommendation is that any current agreement should give shippers appropriate discounts for all accessorial costs and that these should be capped YOY. Incentives should also be able to be applied to any new or increased surcharges, and there should be language that protects you from any volume or capacity limitations during the Q4.
Keeping your
BUSINESS Moving Forward.
Prolann partners with end users, OEM’s & system integrators as their mechanical engineering resource. We assist with concept development & system modifications w/ complete installation drawings, BOM’s, plans, elevations & critical cross-sections, created in AutoCAD 2D, 3D & Inventor. Development includes conveyor installation drawings with; structures, support steel, KIP loads & beam sizing with platforms, catwalks & access, developed to your & your customer’s specifications. Prolann conducts on-site field checks and laser building scanning for point cloud development & clash detection. Too busy, limited resources? We are here to assist. Lump sum pricing for defined scopes of work. Established in 1992, with decades of parcel system development experience.
1.519.944.7824 Ext 202 | www.prolann.com | sales@prolann.com If your current agreement does not meet these standards and the new realities of 2021 pricing, it may be time to renegotiate or consider going out to bid with other carriers. Good luck!
Tim Sailor is the founder of Navigo Consulting Group, which specializes in contract optimization, distribution analytics, and strategic sourcing. Since 1995, Navigo has reduced its clients shipping costs by 20-30%. Tim has been recognized as a Distinguished Logistics Professional by the American Society of Transportation and Logistics, Inc. You can reach Tim at Tim@NavigoInc.com. He will be speaking on this topic at this year’s PARCEL Forum on Wednesday, September 15. You can find more information on www.PARCELForum.com.
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THE KEY TO SUCCESS FOR THE SHIPPER/CARRIER RELATIONSHIP
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fter nearly two decades in a logistics management role at a prominent retailer, where building relationships was a major key to my success, I have changed roles. I always knew how important a great relationship with my carriers was, but in my short time in my new role, it has become even more evident. I can say with the utmost certainty that now, more than ever, having a great relationship with your carriers is critical to the success of your organization. Ideally, the shipper/carrier relationship should be a partnership built on trust and credibility, or, as my first boss loved to say, “This is a partnership, and we like to put the ‘partner’ before the ‘ship.’” It all starts with the carrier rep. In more meetings than I would like to admit, I’ve heard comments like the following from clients regarding their rep: “I have a hard time getting him to call me back.” “My rep doesn’t seem engaged.” “I haven’t talked to him/her in a few months.” “I have a great relationship with Carrier A rep but not the rep for Carrier B.”
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BY PAUL YAUSSY When I hear comments like these, I think to myself, “I wonder what the shipper has done to foster the relationship with the reps?” Believe me, it can be difficult to build a relationship with a rep you simply do not like, or a rep for a carrier you do not use. But it is critical to your success and should be top of mind. A Real-Life Example Several years ago, the organization I was with did an RFP and ultimately changed carriers, going from the incumbent, Carrier A, to Carrier B. Over the course of the following three years, my Carrier A rep and I made a point of staying in contact, even scheduling quarterly business reviews when there was no business to review. Often, we would give each other updates on our respective businesses, talk about sports, share a family story or two, and perhaps get some lunch. Neither one of us really had the time for that. I had a department to run; he had a book of actual business to attend to. Sometimes, I would go into the meeting thinking, “This is such a waste of time.” However, the continued fostering of the relationship eventually paid off, when after about three years of
not doing business together, we both had a mutual need. Carrier A wanted more volume to help fill the network prior to peak. I wanted to produce a per-package savings going into the upcoming peak season, which was forecasted to be our biggest ever. I had an imminent need to reduce our shipping costs to hit budget plans as our forecast was going through the roof. Simply by keeping an open line of communication, which took effort on both sides, we were able to have conversations that led to a partnership that benefited both of us. We engaged in a very quick negotiation — less than a week — that produced a very healthy savings for my company and delivered the volume that Carrier A wanted to help fill the network. As a result, we moved the entirety of the parcel business over to Carrier A. We were able to transition from one carrier to another in less than a month — right before peak season — in part due to the relationship that both sides made a concentrated effort to maintain. Your carrier representative is your internal advocate within these enormous organizations. While they typically are not authorized to make high-dollar pricing decisions or out-of-the-norm operational
considerations, the success of those types of inquiries are borne from the requests and support of your carrier rep. So, ask yourself, what are you doing to ensure you have the best possible relationship you can have with all of your carriers? Are you doing everything you can do to be a “Shipper of Choice” with your carriers? When capacity gets tight, will they be there for you? Don’t Hold Back Help your rep help you! As you continue to foster relationships with your carriers, it is important that you are doing everything you can do to help your rep understand your needs. Make sure they understand what you need to be successful in your role. When you talk to your carriers, tell them what you need from them using logic and reasoning and make sure they understand. Usually, when reps have a clear understanding of your business and what you need to be successful, they will go to bat for you. If your carrier (and specifically your rep) truly values your business, they view your success as their success and want to share in your wins.
Both the big and the little things count: Let’s start with attitude. Are you the type of customer that likes to receive, but never gives? Would your rep say you act like you’re doing them a favor, or that you truly act like a good partner, expressing genuine interest in your reps as people and fellow industry professionals? Do you use threats and scare tactics, and threaten to switch carriers with every increase and service failure, or are you reasonable, thoughtful, tough but fair? When you go to lunch, do you ever pick up the tab? Also, are you a gatekeeper, insisting that your account executive only deals with you, or do you promote their introduction and influence throughout the organization, especially the C-suite? Remember, sales professionals are tasked with developing relationships and value throughout the organization. It’s only to your benefit to help them do their jobs! Do you provide accurate forecasts to your carriers? Now, more than ever, providing accurate and timely forecasts to the carriers is essential to the success of the partnership. Carriers rely on this
data to build their plans related to labor, equipment, terminals etc. Over the most recent couple of years, carriers are holding shippers to their forecasts and not accepting packages that have exceeded the forecast. Some of our clients were telling us as early as June that carriers are already informing them that they are not accepting new volume. Do you afford the reps the time to do business reviews? Yes, this can be a painful part of the process for busy logistics managers, but taking the time to review the business with your rep is critical. You both can proactively share information and have conversations that could potentially decrease the amount of heartburn you will have as peak approaches. Or, as my example above illustrates, unpredictable opportunities might arise out of conversations had during business reviews. Do you have easy access into and out of your facilities? Carriers run on very tight schedules. Easy access in and out of your facilities is viewed favorably by carriers. Are your pickups and deliveries difficult
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to make, or are they easy? Can the carrier get in and out of your facility quickly, or do they face obstacles every time they arrive? Does the driver have to ring a bell and then wait for you to let him in, and if so, how long is the wait? Are the dock doors or access doors free from obstructions, or does the driver have to perform gymnastics just to get the truck near your doors? Are you doing everything you can do to make the pickup and delivery process easy? What about gratitude? Do you express sincere appreciation when your rep does something exceptional? Do you compliment the rep in front of their boss? Consider implementing vendor awards or offering to serve as a customer reference or customer tour site. Sincere recognition and positive reinforcement promote the behaviors you’d like! Do you have an excellent front-line relationship with your drivers? The relationship you have with the driver is often the most important relationship you can have with your carriers, and the most successful shippers have great relationships with their drivers. They do things
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like answering their door quickly, engaging in conversations both professionally and personally to foster a rapport, providing a cold water or Gatorade on hot days, or coffee and snacks once or twice a week. Both sides of the shipper/carrier relationship must proactively work to continue building the relationship. Simply put, both sides must do what they say they are going to do: Both sides should act in fair and professional ways. Carriers must bill correctly, and in turn, shippers must pay on time. Carriers and shippers must share relevant and accurate information. Timely follow-up is a requirement!
actually been easier, not harder. Both the carrier rep and the shipper do not have to plan for travel to meet, meaning there are more options to make it convenient for both. Perhaps you can have shorter but more frequent meetings, and information sharing is as simple as sharing your screen with each other. Yes, in-person is great, but there is no reason to allow virtual meetings to hamper your ability to partner with your carriers. Ultimately, both sides of the relationship want the same thing… a successful, long-lasting connection built on trust and credibility. I urge you look inward to see if you are doing everything you can to nurture or promote the relationship.
The COVID-19 pandemic placed an immense strain on the transportation network and now, more than ever, it is critical to have a positive, ongoing relationship with all your carriers. You may be saying, “The pandemic has made meeting harder,” but has it? I would argue that having to meet virtually with carriers over the last year has
Paul Yaussy is a Professional Services Consultant for Shipware, where he consults and advises clients through transportation cost reduction strategies. Paul joined Shipware in April of 2021 after more than two decades in logistics management roles, most recently at JOANN Stores, where he distinguished himself as a transportation cost-reduction specialist.
APPLICATION ARTICLE
Fulfillment Automation Software: No Longer Optional One word that high-volume online sellers hear all the time is “automation” (right up there with “machine learning”, “IoT” and “AI”). There’s a reason for this. It works... really well. The interest and prevalence of automation has accelerated exponentially during the pandemic, as companies continue to make adjustments to keep up with increased demand. There’s also another reason so many online merchants are adopting fulfillment automation as quickly as possible. It is incredibly difficult to hire enough people right now. The labor shortage can be attributed to a number of factors, most of them directly connected to the pandemic and a quicker bounce back in demand than expected for everything from apparel and recreational goods, to food industry related items. Expanded unemployment benefits, child care and remote school realities, and continued concerns over contracting COVID-19 are all contributing to a labor shortage that is forcing companies to take a hard look at how they can reduce reliance on headcount. High-volume online businesses are prime candidates to benefit from fulfillment automation software, like ShipWorks, and mitigating people resource issues is not the only reason. Cost savings, time savings, error reduction, inventory awareness, and more, are leading to a widespread adoption within the industry. If you are not currently using fulfillment automation software, you are already a few steps behind your digitally-transformed competitors.
workers. Things like one-click imports, bulk shipping label production, and batch processing reduce time consuming manual tasks and boost accuracy. Not only does automation boost accuracy and lower labor costs, it also helps reduce the actual cost for shipping by automatically negotiating discounts and comparing rate options among carriers. For example, ShipWorks’ Best Rate Tool automatically compares rates and services among all your carriers to ensure you get the best rate and service on every shipment. 2. Error Reduction: Human error can cost high-volume shippers a lot of cash: lost shipments, invalid shipping addresses, incorrect invoices, lost tracking numbers, and packages never shipped. Errors like this can have a lasting impact on your bottom line and your business’s reputation. Using fulfillment automation software eliminates the need for error-prone manual processes like copy-and-pasting, exporting and importing data, or manual entry using a keyword and mouse. 3. Enhanced Customer Experience: Happy customers are key to a successful business. Customers have very high expectations when it comes to shipping. They want their order to be accurate and on time. Everything from professional packaging slips to customized shipping updates emails impact the experience. ShipWorks automation features let you easily print labels at scale, batch process for speed, and automatically send updates to your customers. As your business grows, the effects of both your good processes and less-than-good processes begin to compound, and these things are often ultimately what makes or breaks a business. With automation, you can achieve higher shipping volumes faster and with less effort. Many high-volume shippers now see automation as a staple technology that has let their business not only grow and survive but thrive in an increasingly shippingheavy world. At ShipWorks, we specialize in flexible automations and unlimited integrations to make our multi-carrier shipping software a perfect fit for shippers of all sizes and outputs, because we can adapt to your business processes and scale with you to infinity.
Here are 3 reasons you should be using fulfillment automation in your shipping business: 1. Time and Cost Savings: The more you ship, the more time it will save you. Highvolume shippers see scaling and compounding benefits with automations that reduce shipping complexity for your
sales@shipworks.com 417.283.8548 shipworks.com
SPONSORED CONTENT
IT’S A GREAT TIME TO MAKE IMPROVEMENTS TO YOUR MATERIAL HANDLING, PACKAGING, & OVERALL WAREHOUSE OPERATION From small changes to big changes, from equipment, to software, to services, NOW is a great time to make those changes you have been waiting to make for the past number of months. Take a good look at each one of the following companies and call or email them to help with your warehouse improvements. You might still be able to make the changes you need this year, or maybe you have started your plans for next year. In either case, these 11 companies have a number of options and ideas to help you. And don’t forget to tell them that you saw their details in PARCEL.
Automatic loading from Caljan helps parcel carriers and online retailers meet tight delivery windows Caljan AutoLoader moves loose cargo into trailers at high speed — without any human involvement. With up to 88% of consumers worldwide willing to pay more for same-day or faster delivery, extended waiting times can become a deal breaker. Meeting highly restricted windows has become critical to online retailers, their 3PL partners and parcel carriers. To ease the challenges of the growing e-commerce sector, Caljan AutoLoader increases throughput of loose cargo by automating the loading process. Parcels and polybags are loaded non-stop into any truck or trailer, removing the bottleneck to ensure all cargo leaves the warehouse on time. Even distribution for a fill factor of 80% The AutoLoader fills the trailer by moving from side to side, releasing the
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cargo with perfect precision to close vacant gaps in the vehicle — resulting in a fill factor of 80%. With minimal supervision, the AutoLoader cuts the cost of each parcel, package and polybag handled. Safe handling of cargo During operation, the AutoLoader detects obstacles and moves automatically to avoid collisions. With a release height of approx. 7”, items are carefully placed to prevent package damage. Sensors adjust the position of the conveyor to suit the height of the parcel, making room for packages of all sizes. 800.338.1751 caljan.com/wp-us
Designed Conveyor Systems (DCS) doesn't sell ready-made conveyor systems but builds relationships that empower collaboration to craft custom conveyor systems and warehouse designs together. The teamwork approach, sharing ideas and building on them, produces the most worthwhile material handling solutions. Your business is one of a kind, and your material handling solutions should be too. Each material handling system is customized for your specific warehouse operational needs and goals. DCS utilizes consulting, engineering design, project management, installation services, and client support to ensure our customers can keep their promises to deliver on time. Material handling systems and the definition of 'parcel' is changing, and you need innovative concepts that wouldn't have been considered in the past. Flexible conveyor systems designed for parcel distribution handle varying shapes and sizes, increasing the speed and accuracy of a well-designed warehouse. Our design team generates creative conveyor solutions that reduce your cost, increase capacity, and give you the ability to handle unique package sizes. These range from small city distribution centers to fully automated and integrated hubs with advanced conveyor systems. We've spent nearly 40 years building our parcel legacy, but we are not afraid to think outside the box. www.DesignedConveyor.com info@designedconveyor.com 615.377.9774
With more than a half-century of experience, DMW&H has refined a unique approach to automated solutions. We design, integrate, install, and support complex material handling programs that deliver complete, collaborative automation solutions that will meet or exceed your fulfillment and distribution needs. Our talented team of consultants, engineers, controls and software experts, and project managers will work with you from conception through final commissioning. They’ll design and deliver a material handling solution that will transcend your
strategic, operational, and financial goals. DMW&H’s dedicated process is organized to identify present and future issues with existing facilities, then execute all stages of the solution from the ground up.
Engineering Innovation, Inc. (Eii) provides unique expertise in automation design to help you meet demands with solutions that automate, improve accuracy, and increase throughput. Since 2006, Eii has worked to help create solutions that provide savings and efficiency for the postal and parcel handling industries. Facing larger numbers, wanting to reduce staff training, or need to move faster? Stay on track to match consumers' expectations of quicker, more affordable shipping by implementing automated systems. We provide innovative, automated solutions — in a smaller footprint with easy, cost-effective installation. Our future-proof modularity and configuration options allow for custom automation of your process, even as demands change. Eii can design a budget-friendly processing solution, whether you need
modules that adapt to your current system or a completely new setup. Our wide range of solutions means that we can provide options — from hand-operated systems to full automation. Eii creates solutions that work for any size operation, including fulfillment, returns, mailing, and shipping. Our mission is to develop practical products that work in the real world to ensure our customers’ success. Even after installation, Eii prides itself on our service and support to help guarantee your success and satisfaction. Learn more about how we can provide effective solutions for your business.
www.dmwandh.com info@dmwandh.com 201.933.7840
When your business is sorting parcels, polybags, and bubble mailers, trust the experts in parcel sortation. EuroSort’s proven track record in the post and parcel arena spans our entire 20-year history, and our equipment is trusted by post offices, final mile carriers, freight consolidators, and retailers around the world. These companies are experiencing reduced touches, increased items per day, and up to a 60% lower cost per piece as a result of implementing our sorters. EuroSort’s heavy-duty, non-magnetic sorter trays are designed specifically for the rigors of the automated parcel sorting environment and offer the most flexible solutions by enabling a sort directly to postal containers, such as postal bags, wiretainers, metal carts, and gaylords. This flexibility, combined with EuroSort’s industry leading narrow chute pitch, allows our customers to fit the largest number of sort to sack destinations in a set footprint or even to shrink the space required for the sort by up to 50% compared to other technologies. If you have unlimited resources and no need for an ROI, feel free to stop reading now. Otherwise, contact EuroSort today to see how our suite of parcel sorters can help reduce your MHE footprint, reduce your cost per piece, and increase your building’s throughput. EuroSort.com sales@eurosort.com 410.656.2101
sales@eii-online.com 800.350.6450 www.eii-online.com
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Why Fluence Automation? Fluence Automation has a long history of providing innovative technologies to the mail distribution, logistics, and parcel automation markets. We have deep technical roots in systems design and integration, vision, imaging, software, applied to mail and parcels automation. The combination of Fluence IP, creative engineering and integration, and excellent project management, provides our customers with the needed components to provide the best solution with a successful implementation. Our team is well positioned for projects that range from one up to large scale rollouts. Fluence provides solutions to many markets ranging from online fulfillment, inbound verification/reverse logistics, and delivery. We combine our expertise and experience with a strong portfolio of intellectual property and a network of the best partners resulting in solutions that make a substantial impact in satisfying the needs of the customer. Fluence brings a wealth of value to all aspects of parcel and mail process-
ing through game-changing products integrated in our solutions: imaging and address quality; sortation technology (letter and parcel); machine controls; industry-leading high-speed print & apply labeling; and postal processing and encoding.
NPI has been designing leading-edge sorting equipment for over 40 years setting the standard for affordable, high quality, high speed, low maintenance machines, while meeting the highest expectations in automated mail sorting with the industry’s most compact design. NPI equipment currently operates in over 27 countries providing functionality specific to each country and each customer’s operational requirements. NPI’s Xstream dual shoe-sorter has a modular, compact, ergonomic-design that makes sorting of parcels and flats faster and more efficient. It is capable of automated sortation of up to 24,000 parcels and flats per hour. With an Xstream system, you will be able to sort poly-bags, boxes, flats, trays and tubs, and most irregular
pieces as it can handle a wide variety of product sizes, shapes, and weights; it has optional in-motion weighing, dimensioning, and labeling; offers several options for bin destinations such as carts, sacks, and gaylords and a versatile and user-friendly Windows-based user interface. The Xstream integrates with your existing conveyor system and continues growing as your business grows!
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What Can a Fluence Solution Do to Improve Your Business? Our solutions can provide automation that improves productivity, reduces repetitive tasks to eliminate cumbersome jobs and reduce risk of injury, improves accuracy of jobs with verification and tracking, and improves delivery costs by reducing speed of inventory receipt, speed of shipping with courier drop-in discounts, and discounted costs of postage. Feel free to reach out to us to discuss your current and future needs. www.fluenceautomation.com 888.832.4902 info@fluecemail.com
www.npisorters.com 888.821.7678 (SORT) Sales@NPISorters.com
Labor constraints, high shipping costs, surging order volumes, and pressures to meet fast delivery demands have left companies striving for more fulfillment efficiency and lower costs. In many cases, parcel packaging can be the most manual and labor-intensive part of the fulfillment process. However, there is one solution that can solve these challenges: automated packaging solutions. Quadient’s CVP Impack and CVP Everest are 3D fully integrated automated packaging solutions that optimize all steps of parcel fulfillment. These auto-boxing technologies measure, construct, seal, weigh and label each variable dimension single- or multi-item order of either hard or soft goods in a custom fit-to-size box. The CVP Impack packs up to 500 parcels per hour with one or two operators, while the CVP Everest packs up to 1,100 parcels per hour using two operators. These solutions offer an average of 50% reduction in shipping volume and an average of 88% reduction in packing labor as they can replace up to 20 manual packing stations. They help you operate lean, use less materials and void fill and ship parcels efficiently. In fact, some customers see a full return on investment in as little as 18 months or less depending on parcel volume. Contact a packaging expert today to discuss how the CVP Automated Packaging Solutions can save you labor, shipping and material costs while streamlining your packaging process. packagingbyquadient.com/us sales.packaging@quadient.com 678.819.1599
Peak is quickly approaching, are you ready? Engineering resources are stretched thin, timelines are shrinking, what can you do? The answer is simple, call Prolann. We provide experienced manpower with mechanical engineering expertise. Decades of parcel handling systems project experience, makes Prolann your ideal resource to take the load off your engineering team. Prolann assists end users, OEMs, and system integrators with their parcel handling systems projects. From concepts to full system development, Prolann’s team has the experience, capability, and capacity to help. Understanding specifications of both our customer and the end user, Prolann’s team develops systems that work, following the requirements and specifications particular to each project. Prolann utilizes the latest software; AutoCAD 2D, 3D and Autodesk Inventor to develop the
mechanical installation drawings for your projects. Prolann completes on-site field checks and 3D laser scanning to create point clouds, 3D models, and clash detection. From conveyor installation drawings complete with all supports, platforms, & access, for new or reworked systems to developing working concepts, our team is available to assist your team or take on an entire project when your resources are not available. Prolann can provide a lump sum price to complete a defined scope of work, or we can complete a project on a time & material basis, depending on your requirements. Have a project and need resources? Call Prolann.
With the versatility and experience to address any fulfillment, packaging, and sorting need, Tension Packaging & Automation is ready to be your partner. We work with you and your floorplan in mind to design, build, and implement modular and scalable automated packaging, weighing, manifesting, and sorting systems to enhance your workflow capabilities, efficiency, and overall productivity, all to ultimately benefit your bottom line.
Take your packaging capabilities to the next level with Tension Packaging & Automation and let us expand your fulfillment potential today.
www.prolann.com sales@prolann.com 1.519.944.7824 Ext. 202
For 37 years, Tritek sorting systems have been used by leading corporations, institutions, and government to process, sort and distribute mail, flats, and parcels. The Tritek Parcel Sorter processes small parcels, flats, polybagged material, and more efficiently in a small foot print. The Tritek Parcel Sorter has been designed and developed to process high volumes of e-commerce packets and small parcels that can be customized to exact needs of an operation. Tritek Parcel Sorters can be customized to include: 1) OCR and barcode reading; 2) Scale, labeler, induction feeder and 3) Package dimensioning. Each sorter can be designed with a small footprint configurable to any facility’s size - up to 1,096 wheeled containers. The Tritek Parcel Sorter is the latest product to address the needs of customers who desire to lower their processing costs and increase operational capacity. https://tritektech.com 302.239.1638
tensionautomation.com 888.367.4660 info@tension.com
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THE MIDDLE MILE MEETS THE LAST MILE
T
BY JAY KENT & CATHY MORROW ROBERSON
he COVID-19 pandemic has redefined the retail industry by placing e-commerce at the center of retailers’ strategies. While e-commerce had been on a steady growth pattern prior to the pandemic, it accelerated in 2020 as consumers stayed home and opted to buy online versus venturing into stores. As a result, e-commerce retail sales increased 32.4% year-over-year in 2020, according to the US Census Bureau. As the number of COVID-19 vaccinations increases and the economy heals, the e-commerce acceleration is continuing this year with Q1 e-commerce sales up 39% year-over-year. Welcome to the “new normal.” Indeed, Brie Carere, FedEx’s Chief Marketing and Communications Officer, noted on the company’s fiscal Q4 earnings call on June 24 that the US domestic parcel market is expected to surpass 107 million packages a day in 2022, with e-commerce contributing 88% of the total US market growth. As e-commerce grows, the last mile has become even more important. Consumers want their purchases fast and they want options as to how they receive their purchases — curbside pickup; buy online, pick-up in store (BOPIS); parcel
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lockers; third-party pickup locations; or to the home. However, to meet the need for speed and the growing number of last-mile options, the last mile must be tightly woven with the middle mile. The middle mile is typically described as the part of the supply chain in which goods are transported from port or airport to a warehouse or fulfillment facility. A slip-up in the middle mile can result in a delay in the last mile. Positioning inventory in the right warehouses, fulfillment facilities, and stores are important. Retailers are fulfilling e-commerce orders in different ways and, as such, they need to utilize their data to understand how much and what types of inventories are needed for each of their facilities. In addition, quick and accurate automated solutions within facilities are also a must. Linking inventory systems, automation, and fulfillment processes to a retailer’s website and adding last-mile delivery options has proved extremely beneficial to retailers as they attempt to control product flow. Understanding the Information Not only is controlling the flow of products important, controlling the flow of information is also critical. Among the benefits to the customer (according to Amazon, who is the best in data/information
management) is the ability to provide more precise estimates of delivery. Gathering information throughout the supply chain process is helping retailers offer more precise delivery times and more delivery options; allowing consumers to view inventory availability in real time on retailers’ websites; helping retailers position inventory closer to consumers that are most likely to purchase a particular item; and much more. The added benefit of staging the appropriate inventory closer to consumer demand is that it allows the customer experience to be enhanced with the shortened deliveries. Through the use of cloud-based technologies, retailers are able to link store to e-commerce and implement supply chain strategies that connect the middle mile and last mile. An important benefit of cloud computing is that it enables real-time access to all operational and financial data across businesses, improving effectiveness, reducing expenses, and enabling better business decisions. The ease in scalability, pricing, and security levels the playing field for smaller retailers. As such, when COVID-19 spread throughout the world in 2020, retailers turned to these solutions to ensure business would continue. According to technology research firm, Gartner, spending on public cloud services is expected to grow 18.4%
this year, to a total of $304.9 billion, up from $257.5 billion in 2020. The proportion of total enterprise IT spending that goes on cloud computing is also expected to grow quickly, from 9.1% in 2020 to 14.2% by 2024. Measuring Success The retail industry is highly competitive, and retailers are under intense pressure to operate more efficiently. As a result, they are using a plethora of metrics to optimize every aspect of their operations. Many retailers like Walmart, Costco, and Kroger have specific on-time performance metrics for suppliers mandating agreedupon quantity needs that need to be received on time or the supplier will face possible penalties or SKU segmentation. Vendor requirements are an important enabler to reduce supply chain days from the manufacturer to the customer. Investments in warehouse, compliance software, and transportation management technologies are needed to proactively manage/optimize each supply chain component.
ER
Establishing key performance indicators as delivery times, inventory replenishment to sales, percentage of returns, fill rates, transportation costs, and more allows retailers to identify pain points quickly and optimize where needed when using cloud-based technologies. Benchmarking of key performance indicators is also done to determine success and identify areas that may need improvement. Benchmarking allows a company to compare its own products, operations, and processes to other companies as well as measuring vs. their own past performance. Companies that are interested in benchmarking must identify what they want to measure and then research, collect, and analyze market data to determine where the company is positioned. Lastly, each company should ensure they have a definite action plan and monitor the company’s progress on a weekly/monthly basis. Outlook E-commerce is expected to continue its
growth this year. According to market research firm, eMarketer, retail e-commerce sales in the US will increase by 13.7% to $908.73 billion, lower than last year’s 18% to $709.78 billion surge, but still exceeding pre-pandemic estimates of 12.8%. And according to McKinsey and the Retail Industry Leaders Association, consumers will choose retailers based on ease and richness of end-to-end experience. “Retailers must understand the role of digital shifts on the customer journey, upgrade e-commerce capabilities, and rethink the network as the role of the store blurs.” To succeed, the supply chain that powers this omnichannel strategy must be in sync.
Jay Kent is Managing Director, SLB Performance. Cathy Morrow Roberson is Founder, Logistics Trends & Insights. They will be speaking more on this topic at the 2021 PARCEL Forum on Wednesday, September 15. Learn more at www.PARCELForum.com.
Parcel Sorter
Modular design customized to your needs
• • • •
OCR and Barcode Reading Scale, Labeler, Induction Feeder Package Dimensioning Designed with a Small Footprint Configurable to any Facility’s Size - up to 1,096 Wheeled Containers
See the Tritek Parcel Sorter in live operation at Booth #414 at PARCEL Forum.
Tritek equipment gets the job done!
www.tritektech.com | 302-239-1638 JULY-AUGUST 2021 PARCELindustry.com 33
WRAPUP
3 MAJOR FACTORS DRIVING CUSTOMER SATISFACTION YOU MAY BE OVERLOOKING By Kimberly Strausser
I
t’s no surprise that customer satisfaction with online retail took a dive over the last year, as delivery delays and supply shortages originating from the COVID-19 pandemic were further compounded as companies rushed to replenish inventory. According to the American Customer Satisfaction Index (ACSI) Retail and Consumer Shipping Report 2020-2021, customer satisfaction in the retail sector overall dropped 2.3% to a score of 75.5 (out of 100), the industry’s lowest score since 2015. Despite retailers’ efforts to accommodate shoppers during the pandemic, the ACSI reported that 86% of retailers suffered from declines in customer satisfaction year over year. As retailers strive to satisfy customers, here are three areas that are often overlooked but heavily impact customer loyalty. Supply Chain and Inventory Optimization Software When looking to improve the customer experience, most companies think about point-of-purchase technology, such as their e-commerce website and contactless payment systems, but many overlook the importance of sophisticated supply chain management solutions. Not having the right product may be frustrating for customers, but being told an item is in stock only to find out it’s not is even more infuriating. A seamless online checkout experience can be quickly spoiled if immediately after placing an order a customer learns that the product is no longer available, or shipping is longer than promised. There are a variety of inventory management and optimization software solutions available today to help companies ensure they have the right product in the right place at the right time to preserve customer satisfaction in the face of rising customer expectations and market uncertainty. Companies need to deploy advanced technology, such as control tower solutions, that offer complete visibility,
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real-time planning, collaboration, and execution across all functions, suppliers, and partners within the supply chain. These control tower solutions provide total visibility and collaboration across the entire network and utilize artificial intelligence (AI) and machine learning (ML) to predict and resolve problems in real time. With an end-to-end view of the entire network, companies can quickly identify and correct issues to minimize risk, profit loss, and service disruption while maximizing efficiency and customer satisfaction. Creative Fulfillment Partners and Strategies On top of dealing with higher order volumes and limited labor availability, retailers faced additional fulfillment challenges as many carriers began implementing price hikes and parcel limits during the pandemic and holiday peak season. In addition to being the most expensive and inefficient part of the shipping process, last-mile delivery is also responsible for customer dissatisfaction, with the ACSI data revealing that timeliness of delivery is now the least satisfying aspect of the customer experience. When it comes to getting products to customers faster, retailers need to think outside of the box. Major drugstore chains like CVS, Rite Aid, and Walgreens have recently expanded their same-day delivery options by utilizing on-demand services like DoorDash, Shipt, and Instacart. Target is also testing out new fulfillment methods by utilizing dedicated sortation centers and contract workers
from Shipt to fill online orders even faster. And just in time for Mother’s Day this year, Estee Lauder Companies launched a partnership with Uber Eats and Postmates to provide next-hour delivery in select cities. Investing in Employees While product selection, price, and delivery speed are top priorities for customers, customer service still plays a major role in driving loyalty. Sixty-three percent of US consumers will switch to a competing company after a bad customer service experience, while 78% will forgive a company for a mistake if the customer service is excellent, according to research by Microsoft and Salesforce, respectively. Technology and processes are only as good as the people behind them. While automation can relieve workers of many tasks, it can’t fully replace humans in the workplace, especially when it comes to customer service. With today’s labor shortage, employee retention is more important than ever. Delivering a seamless omnichannel experience in rapid time is challenging. As consumer demands continue to grow, it is important to invest in the right people, technology, and processes to build customer loyalty and gain a competitive advantage in the new normal and beyond.
Kimberly Strausser is a Principal of Supply Chain Consulting Services at Tompkins Solutions (www.TompkinsInc.com). She can be reached at kstrausser@ tompkinsinc.com.
