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PARCELindustry.com
EDITOR’S NOTE
PREPARING FOR PEAK
By Amanda Armendariz
Like much of the country, my area just went through a couple of weeks of sweltering, 90-degree-plus temperatures. The pool was a lifesaver during this time, and as I watched my kids go down the waterslide for the 500th time, I laughed thinking of how in our industry, the peak holiday shipping season is already at the forefront of most of our minds. Never mind the fact that cold and snow seem almost inconceivable right now in the sweltering mid-summer; if you’re a parcel shipper and you haven’t already begun preparing for peak season, you
need to bump that to the top of your to-do list ASAP.
Luckily, there are still plenty of steps you can take to optimize your parcel shipping operation ahead of the busiest time of the year. Micheal McDonagh gives some great insight in his article on page 26, and on page 30, Steve Hopper shares 10 surefire ways to optimize warehouse productivity in just one day, which means this advice will reap dividends year round, not just during peak season. And remember, even if this year’s peak doesn’t go exactly as planned, you can take what you learned this year and implement it in plenty of time for next year’s season.
One of the best ways to prepare for peak is learning from your peers, which is why I highly encourage you to attend this year’s PARCEL Forum, September 16-18 in Dallas. This show is the leading industry event for small-package shippers, and looking at the conference lineup has me so excited. The agenda is packed with knowledgeable speakers and interesting, relevant sessions — there truly is something for everyone. Visit PARCELForum.com for more information and to register. I hope to see many of you in Dallas!
As always, thanks for staying connected with PARCEL.
EDITOR’S PICK
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
Top 4 Energy-Saving Tips for Efficient Packaging Line Operations
By Emily Newton
The Future of Last-Mile Delivery: Innovations and Expectations for Seamless Shipping By
Charles Haverfield
U.S. Postal Service Recommends New Prices for Parcel Select
SUPPLY CHAIN SUCCESS
AMAZON: REVOLUTIONIZING LOGISTICS
By Andy Johnson
In recent years, Amazon has not only dominated the e-commerce landscape but has also been making significant strides in revolutionizing logistics with its Logistics-as-a-Service (LaaS) offerings. This move marks a pivotal shift in how businesses approach supply chain management and delivery logistics. Amazon’s venture into Logistics-as-a-Service is a strategic evolution beyond its core e-commerce platform. For years, Amazon has been expanding its logistics capabilities to offer businesses comprehensive solutions that include warehousing, transportation, and last-mile delivery. This initiative allows smaller businesses and even larger enterprises to leverage Amazon’s extensive logistical infrastructure without the need for significant upfront investment in their own supply chain operations.
Amazon Begins LaaS with Prime Logistics
In January 2023, Amazon announced its ambitious “Buy with Prime” initiative. This program integrated Amazon’s logistics prowess directly into the customer shopping experience. Consumers were able to benefit from enhanced delivery options, including faster shipping times and more reliable service, all powered by Amazon’s robust logistics network. To reach this level, Amazon’s delivery services underwent significant expansion throughout 2023. This expansion included new technologies, such as drone delivery and enhanced route optimization algorithms, aimed at further improving efficiency and reducing delivery times. By scaling its delivery capabilities, Amazon not only met the growing demand for faster deliveries but also set new benchmarks for logistics performance in the industry. Obviously, Amazon operates a vast network of fulfillment centers, distribution hubs, and transportation fleets worldwide. A peek behind the scenes reveals the complexity and scale of Amazon’s logistics and supply chain operations. This infrastructure is carefully designed to handle the immense volume of orders generated by Amazon’s
e-commerce platform and now begins to extend its capabilities to serve third-party businesses through LaaS.
The Rise of LaaS Amazon’s LaaS initiative carries profound implications for both businesses and consumers. For businesses, it offers a turnkey solution to streamline logistics operations and scale more efficiently. Smaller enterprises, in particular, benefit from access to Amazon’s advanced logistics infrastructure, enabling them to compete more effectively in the market.
And as the juggernaut continues to grow, certain shippers are now being contacted directly by Amazon with shipping proposals. While anecdotal, these proposals are interesting on several levels, the first being the client mix. The reviewed proposals target a niche group of retailers in the $75 - $100 million annual spend range, which is likely where Amazon sees its greatest profitability margin. The second interesting facet is the simplicity of the proposal. On average, Amazon’s proposals have been limited to 20 pages or fewer, making them easy to decipher — without a legal team on standby. This basic, straightforward approach has immense appeal to many shippers struggling to keep up with the intricacies of much lengthier agreements from the competition. And with Amazon now surpassing both UPS and FedEx in annual deliveries, it leverages
the density in its network to provide proposals with no residential surcharge — a game changer for some customers.
Yet with all of these advantages, Amazon still lags behind its competitors in one way — the lack of a robust express offering. With one of the largest distribution footprints in the world, it’s a small thing for Amazon to be able to reach the vast majority of domestic population centers within one to two days. Some areas close enough to distribution points can even enjoy same-day service. However, this is still not a substitute for actual express service levels, which Amazon has not quoted on in the reviewed proposals. It certainly has the volume density to build this out, and will, no doubt, continue to do so. Yet until a fully functional express offering can be utilized, shippers considering an Amazon proposal will have to look at more traditional carriers to fulfill that business.
Amazon’s foray into Logistics-as-a-Service represents a transformative step in the logistics industry. By leveraging its unparalleled logistics capabilities, Amazon not only strengthens its own operational efficiency but also empowers businesses of all sizes to thrive in the competitive landscape.
Andy Johnson is Project ManagerParcel Consulting at Körber.
PARCEL COUNSEL
ANATOMY OF A LAWSUIT, PART FIVE: WHERE IS THE TRIAL? WHAT LAW APPLIES?
By Brent Wm. Primus, JD & Andrew M. Danas
Starting in the November/December 2023 issue of PARCEL, previous installments of PARCEL Counsel have explored various aspects of a lawsuit, beginning with terminology and basic concepts such as venue and jurisdiction. In this issue, we will look at what are often the most important aspects of a lawsuit — the location of the trial and the law that is chosen to resolve the dispute.
In contractual disputes a litigant may be comfortable when litigating a case in the courts and under the law of the state in which it is headquartered and has offices. It may be less comfortable and choose to settle a dispute if required to litigate under unfamiliar laws in a distant location.
Federal and state courts have complicated special rules that determine when a court can hear a case and exercise jurisdiction over the litigants. If jurisdiction exists, a judge or arbitrator presiding over a case must also determine what law to apply. This is often the law of the state where the case is litigated.
However, many business disputes involve parties and transactions in multiple states. In these situations, state “choice of law” rules may apply that assist the fact finder in determining which law should be used to resolve the dispute. In contract cases, these rules often require consideration of the location of each of the parties; where the contract was formed; and where the contract was performed.
Applying these rules often leads to factual and legal disputes at the initiation of a lawsuit. To reduce these uncertainties, many companies include in their contracts provisions that stipulate the forum and applicable law to use for dispute resolution.
Transportation and logistics service providers frequently include choice of law and forum clauses in their standardized form contracts; tariffs; bill of lading terms; and general terms and conditions. Using such clauses with multiple customers allows these providers uniformity and certainty over where and how disputes involving their services will be resolved, especially for loss and damage claims.
The United States Supreme Court has repeatedly held that such clauses in contracts are presumably valid and should be enforced — even if they are in form contracts such as a Bill of Lading and even if the clause stipulates that disputes must be resolved outside of the United States and under foreign law. The Court has reasoned that parties to a contract are presumed to know its terms and even if there is little room to negotiate changes if a party does not agree with a contract provision it should not enter into the agreement or use the services, for instance, by tendering a shipment without a properly drafted independently negotiated contract in place.
The application of these clauses frequently makes it economically impractical to pursue potential litigation, especially for claims involving international shipments where the claim would be resolved outside of the United States under foreign law.
Litigating any dispute is usually the option of last resort. Litigating a dispute in
an inconvenient forum under a potentially unfavorable law is not a good situation to be in. Thus, it is very important that parcel shippers know all of the documents, including those which may be incorporated by reference, and the terms in those documents that will govern their transactions including the law and forum for resolving any dispute. It is especially important to be aware of the controlling terms before using a transportation provider’s services so that a shipper can attempt to negotiate more favorable choice of law and forum terms to the shipper than may be offered by the provider. All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A., the Senior Editor of transportlawtexts, inc., and Director of Virtual Education for the Transportation and Logistics Council, Inc.
Andrew M. Danas is Partner, Grove, Jaskiewicz and Cobert, LLP. For more information, visit www. gjcobert.com or email adanas@ danaslaw.com. The information contained in this article is intended to be general background information. It does not constitute and should not be relied upon as legal advice. Readers should contact a qualified attorney should they have a specific legal question.
Previous columns, including those of William J. Augello, may be found on PARCELindustry.com. Your questions are welcome at brent@primuslawoffice.com.
Beautiful Efficiency: Taming Ugly Parcels Through Automation
Despite the ongoing advancements in automation and technology, many warehouses still heavily rely on manual processes for parcel sorting. This dependency poses significant challenges, especially amidst rising labor costs and the complexities of the e-commerce boom.
According to industry experts, the global parcel sorting market is estimated to grow from $3 billion to $6.70 billion by 2029. This surge is driven by the pressing need for operational efficiency amid a shortage of reliable labor resources.
Solutions like Engineering Innovation, Inc.’s (Eii) Chameleon® Parcel-Processing Solution are at the forefront of this transformation. This modular system addresses critical bottlenecks in warehouse operations, including the handling of “ugly parcels” and polybags, which traditionally require extensive manual handling.
“Automation isn’t just about scanning and sorting anymore. It’s about tackling ‘ugly packages’ — items that traditional conveyor systems struggle with,” said Brent Gregory, Director of Business Development & Marketing at Eii. The term ‘ugly parcels’ encompasses oversized, irregularly shaped items and those enclosed in polybags — items notoriously challenging for conventional sorting systems. Eii’s Chameleon® Solution tackles these challenges head-on with its adaptable design and specialized modules.
One of the standout features is the newly developed Shuttle Divert module, specifically designed to manage polybagged items more effectively. These modules prevent polybags from getting stuck or misdirected on conveyor belts, ensuring smooth and efficient sorting without the need for manual intervention.
For warehouse managers looking to transition from manual to automated operations, adopting a phased approach is crucial. This approach minimizes disruption while maximizing the benefits of automation tailored to specific operational pain points.
Eii’s technicians emphasize the importance of starting small and scaling up gradually. This strategy allows warehouses to integrate automation seamlessly into existing processes without
overwhelming operational workflows. The Chameleon’s modular capabilities facilitate this transition by offering functionalities such as sorting, dimensioning, labeling, and barcode reading — all essential for efficient parcel handling.
The shift towards automation yields significant benefits beyond labor savings. Companies that have implemented automated parcel-handling solutions report substantial improvements in operational speed, accuracy, and cost-effectiveness. As the logistics landscape evolves, automation emerges not only as a solution to labor shortages but also as a catalyst for enhanced operational efficiency and customer satisfaction. By investing in adaptable solutions like the Chameleon®, warehouses can future-proof their operations and navigate the challenges of an increasingly digital marketplace.
Embracing automation is not just about replacing manual tasks, but about transforming warehouse operations from chaotic to streamlined and efficient. With solutions like the Chameleon®, warehouses can optimize their processes, overcome operational hurdles, and stay competitive in an everevolving industry.
To explore how the Chameleon Parcel-Processing Solution can revolutionize your warehouse operations and handle ‘ugly parcels’ with ease, schedule a demo with our operations experts today. Discover firsthand how automation can enhance efficiency and scalability in your logistics processes. Contact us at sales@eii-online.com or call 765-588-9088 to learn more.
COST OF RETURNS CONTINUES TO RISE DURING THE FIRST HALF OF 2024
By Tony Sciarrotta
The latest findings from the Reverse Logistics Association’s (RLA) quarterly Returns Index show that returns costs continue to rise faster than returns volumes.
The returns cost index jumped from 208.7 for Q4 2023 to 235.6 for Q1 2024, while the returns volume index inched up from 50.35 to 50.4 for the same period. The index is based on 50 as the midpoint. Above 50 indicates an increase, and below 50 indicates a decline.
Expectations for Q2 (ending June 30) indicated continued rising costs, which began in Q4 2022 when the costs index jumped to 126.8 from 114.3 in the previous quarter.
Survey respondents’ commentaries and interviews suggest that transportation and labor costs have been the primary drivers for rising costs.
Indeed, major nationwide parcel carriers’ general rate increases (GRIs) for 2023 were among the highest in recent years. UPS’s 6.9% GRI for 2023 went into effect the last few days of December, while FedEx’s own 6.9% GRI went into effect in January 2023.
Meanwhile, as part of its Delivering for America strategy launched in March 2021, the United States Postal Service (USPS) also began raising rates more aggressively.
Higher rate increases were justified by higher operational costs, inflation, and, in the case of the USPS, adjusting rates that had been considered too low for too long.
Parcel carriers also raised surcharges, expanded surcharge coverage, such as Delivery Area Surcharges, and changed fuel tables for parcel, freight, and air services, effectively increasing the fuel surcharges for each transportation mode.
In addition, labor costs have also contributed to higher return costs. According to the latest data from the US Bureau of Labor Statistics, average hourly earnings for warehousing employees were $23.59 in December 2022, $24.38 in December 2023, and $24.78 in April 2024.
Attracting, training, and retaining reverse logistics workers is a constant worry. While several startups have tried to automate the reverse logistics process, people remain the most critical part of handling returns. Perhaps the day will come when a robot can perform a “sniff test” on a shirt, and not as many people may be required.
Speaking of robots, even though it has not been noted in our quarterly returns index, technology investments are being made to understand and help reduce costs, such as:
Artificial intelligence (AI) and machine learning (ML): These technologies optimize return processing, forecast demand for returned goods, and even personalize customers’ returns experience.
Advanced analytics:
Businesses leverage data analytics to track and analyze return trends. This allows them to identify areas for improvement, such as packaging issues or products frequently returned due to defects. By understanding why products are being returned, companies can take steps to reduce returns and improve customer satisfaction.
Internet of Things (IoT) sensors: IoT sensors can be attached to returned goods to monitor their condition in real time. This information can be used to determine the best course of action for the product, such as whether it can be restocked, refurbished, or recycled.
The overall cost burden of returns remains high. This is due to various factors, including rising labor, transportation, and fuel costs. As technology investments in areas like AI and automation continue, some efficiency gains can be expected. However, the trend suggests that returns will likely remain a significant cost pressure for businesses in the foreseeable future.
Tony Sciarrotta is Executive Director of the Reverse Logistics Association.
The RLA offers various tools, white-papers, and monthly webinars that provide best practices in managing reverse logistics.
Optimizing E-Commerce Packaging: Cutting Costs and Enhancing Efficiency
It’s no secret that packaging is a crucial step in the e-commerce fulfillment process. Each online order, oftentimes accommodating multiple items, must be packaged in a costeffective and efficient manner. The unboxing experience also plays a pivotal role in driving brand loyalty. Any damage to merchandise during transit will disappoint customers and pose a substantial financial burden on retailers.
Many e-commerce businesses still adopt a simplistic approach to packaging, utilizing a range of average box sizes and manual packing stations. This method is labor-intensive, slow, and wasteful. More importantly, it exposes the business to the impact of the rising costs of sourcing labor and transportation, highlighting the need for a more efficient and cost-effective packaging strategy.
Labor Burdens
Labor costs are typically the largest expense in e-commerce fulfillment. In fact, these expenses often rank just below inventory costs in warehouse facilities. According to Hopstack1, labor can account for approximately 65% of the warehouse budget. This challenge is exacerbated by rising wages, which are up 4.4% year-over-year2, making it even more challenging for businesses to control expenses without sacrificing efficiency or customer satisfaction. Moreover, fewer employees are willing to perform monotonous and physically demanding jobs for minimal compensation, further complicating staffing and operational efficiency in warehouses.
Transportation Expenses
Transportation costs continue to rise as well. In addition to the cost of drivers, the cost of fuel remains unpredictable. According to research from the American Transportation Research Institute3, fuel costs for for-hire drivers rose 53.7%. Additionally, UPS and FedEx increased their shipping surcharges by more than 6.9% for 2024. While these costs are
out of a shipper’s control, there are other strategies that can be implemented to reduce overall cost.
The Solution? Right-sized Packaging
Utilizing on-demand 3D packaging automation technology, Sparck Technologies’ CVP Impack and CVP Everest create fitto-size boxes for each single- or multi-item order of any shape or texture. This process occurs in one seamless flow and can reach speeds of up to 1,100 boxes per hour. This approach can create significant savings, offering solutions to effectively address both labor and transportation costs:
Labor: Sparck’s automated packaging solutions help companies save an average of 88% in labor costs and eliminate up to 20 packing stations. Automation also alleviates the stress and strain of finding suitable labor, which is particularly challenging during peak periods.
Transportation: With fit-to-size packaging, companies can eliminate the need for larger-than-required boxes filled with extra air or volume that incur unnecessarily high shipping costs.
Right-sized packaging is a game-changer for e-commerce businesses looking to curb skyrocketing transit and labor costs. This innovative technology not only fuels business growth but also provides the ability to handle busy seasonal peaks with ease. Automated right-sized packaging technology truly offers the full package.
To learn how you can reduce your packaging costs, contact us today.
In the last 20 years, USPS’s position in the market has shifted dramatically. The shift to email communications, electronic bill payment, digital marketing, and other technological innovations has meant fewer letters as a percentage of total USPS volume and revenue. Originally designed for letter delivery, the network now inefficiently manages and services packages in an infrastructure not built for this purpose.
This is where Postmaster Louis DeJoy and the 10-year Delivering for America Plan comes in. Delivering for America was first announced in 2021, and it has grown and evolved since then. The plan, whether explicitly part of the plan or corollary actions meant to support the plan, involves four primary initiatives that we will cover here:
Changes to current service standards and definitions
Adjustments to the current network and resources
Price changes
Evolution of how the USPS deals with consolidators and workshare partners
I should mention that as of the time of this writing, much is still unclear. Many of the proposed changes are still pending Postal Regulatory Commission (PRC) consideration and approval. We will do our best to describe the current state of the play, but things may have changed prior to publication.
Changes to Current Services / Service Standards
USPS Ground Advantage was launched in July 2023, combining the former First-Class Package, USPS Retail Ground, and Parcel Select Ground services. This new offering has been well received by small to mid-sized shippers, who appreciate Ground Advantage as a cost-effective alternative to Priority Mail and the national parcel carriers’ ground services when value is more important than speed. However, there are concerns about the impact on
rural customers, potentially leading to slower delivery times and further declines in on-time performance.
Most of the proposed changes currently under consideration do not alter the services themselves but instead modify the delivery standards of existing services. These proposals are facing intense public and political opposition.
Current Network and Resources
As mentioned above, the USPS network has long needed a top-to-bottom overhaul for some time. The network was well designed to fit its original purpose, but as that purpose has shifted over time, efficiency and effectiveness has been negatively impacted. The specific contemplated changes to the network are too complex to dive into in this venue, but the USPS is effectively changing the structure and function of its sort facilities and is planning consolidation of many facilities. In May of this year, DeJoy agreed to pause further consolidation until January of 2025 and to slow the implementation of the network changes. The pause was in response to pushback from a group of senators, as well as significant pressure from the public and shippers, which itself was spurred largely by challenges in the Atlanta hub. Despite the agreed upon pause, it appears that the USPS has, or may be, continuing with some of the planned changes. In
a June 17 press release, the Postal Regulatory Commission said, “(the PRC) requested information about continued large-scale network changes by the Postal Service despite its announced ‘pause’ in implementing parts of the Delivering for America (DFA) plan.” The release also stated, “On May 20, the Postmaster General issued a letter to the Chairman of the Senate Homeland Security and Governmental Affairs Committee, Senator Gary Peters, stating that the Postal Service would move forward with network changes in dozens of locations around the country, despite separately announcing a “pause” in some facility consolidations. The Postal Service is required by law to request an Advisory Opinion on changes that will impact service on a nationwide or substantially nationwide basis, and the Commission continues to urge the Postal Service to request an Advisory Opinion on certain DFA initiatives.” It is uncertain which perspective will win the day on this issue.
Price Changes
On May 10, the USPS filed notice with the PRC of proposed price changes, primarily targeting Parcel Select pricing, the service used by most postal consolidators and workshare partners. The proposed increases were 25% on average, but that only tells parts of the story; as with national parcel carrier GRIs, the average obscures the effect. Where the increases
will hit heaviest depends on the weight, the point in the USPS network that packages are injected, and, ultimately, on the PRC’s approval. Sub-pound packages and those injected closest to the DDU will take the bulk of the hit; in some instances, as high as almost a 50% increase. Also, assuming PRC approval, sub-pound pricing will for all intents and purposes be going away. Yes, sub-pound packages will be accepted, but rates will be normalized to the new, higher, one-pound rate.
These are not tactical increases meant solely to address revenue or margin shortfalls. Rather, they play into the USPS’s strategy regarding workshare partners.
Consolidators and Workshare Partners
Of all the in-process changes affecting shippers, the relationship between the USPS and its workshare partners is arguably the biggest. While the USPS is not proposing to cut workshare partners’ access to DDU injections explicitly, the proposed rate changes are structured to make these injections less profitable and incentivize consolidators to inject further upstream in the USPS network. If the proposed changes are approved, the USPS will effectively
eliminate, or all but eliminate, workshare partners’ ability to profitably inject at the DDU level. Consolidators will have to raise shippers’ prices, inject further upstream, or more likely both. The USPS is effectively trying to take a greater share of relationship and revenue ownership of the workshare model and make the best, most profitable use of the more efficient network it is building. Whatever happens here, it seems obvious that shippers are going to pay higher prices for USPS workshare/ final-mile shipments. This is an extremely dynamic situation. And all of the variables listed above are interrelated. As the USPS has
become a bigger player in the parcel market and looks like it will continue to penetrate the market, shippers should watch developments closely. It is going to be a bumpy ride for the next few years, and those shippers who follow developments closely and position themselves to shift volume across carriers and services quickly will reap the benefits (or suffer the losses) of the changes to come.
Joe Wilkinson is VP, Professional Services (Transportation Consulting) at Intelligent Audit. He can be reached at joeywilkinson@ intelligentaudit.com
GUEST COLUMN
ADDRESSING INTERNATIONAL MAIL
By Merry Law
Editor’s Note: This originally ran in the July/August issue of our sister publication, Mailing Systems Technology, but we thought our PARCEL readers would find it helpful, as well.
An addresses format is defined by where the elements — building number, street name, city, postal code, etc. — are placed within the address block. Each country defines their own address formats. The format of US addresses is not common among the countries of the world, although it’s similar to the ones in Canada and Australia. That leaves more than 200 postal destinations with different formats. For most highly developed countries, the address formats are part of well-known, well-developed standardized national address systems for their domestic postal mail. Less developed countries may not have formal or standardized address systems.
International mail sent from the US requires addresses in Latin letters, like those in this article, and the numbers used in English. Some street names in other countries contain Roman numerals; they are allowed. If you collect addresses in other alphabets and scripts, those addresses will need to be transliterated into Latin characters. Transliteration is the process of changing words to another alphabet or script: (red in Armenian) = karmir (Armenian, Latin alphabet). Translation is changing words to another language: rouge (French) = red (English) = roja (Spanish). Addresses should not be translated because the translated address will not be understood in the
destination country. (Some foreign language addressing is permitted. See the International Mail Manual (IMM), section 122 for details.)
When collecting addresses from other countries, online or printed forms need to accommodate the addresses used in those countries. That includes allowing for longer words and longer names of people, including compound given and family names. For example, Escherheimerlandstraße or Escherheimerlandstrasse (22 or 23 characters), a street in Frankfurt, Germany, is abbreviated Escherheimerlandstr. (20 characters). Hery Martial Rakotoarimanana Rajaonarimampianina (48 characters) is a former president of Madagascar.
Foreign addresses may have additional information that is not used in US addresses. They may include a second street name or a city section or quarter, for example. A few countries specify a region and a district in addition to a town or city. Altogether, up to 10 lines may be required. If mailing to a business, lines for a title and internal delivery information may add to that. The table below gives
some indication of the space requirements.
Some basic suggestion for address forms include:
Use forms that accommodate longer address lines and more address lines.
Do not limit the state or province to two letters. A full line is sometimes needed.
Allow the postal code (ZIP Code) to use numbers, letters, spaces, and hyphens.
The last line of the address is the destination country name in English. The IMM has a country index that uses the names accepted by the USPS with some cross-references. Information on country addresses can be found on the UPU’s web site, www.upu.int. WorldVu LLC publishes the Guide to Worldwide Postal-Code and Address Formats. (Full disclosure: I am the editor of that Guide.)
Merry Law is President of WorldVu LLC and the editor of Guide to Worldwide Postal-Code and Address Formats. She is a member of the UPU’s Addressing Work Group and of the U.S. International Postal and Delivery Services Federal Advisory Committee.
THE NEXT-GENERATION E-COMMERCE DELIVERY NETWORK IS HERE HOW TO STRATEGICALLY DESIGN AND IMPLEMENT IT
BY MIKE LAMBERT
Whether you’re a growing e-commerce brand or a mature omnichannel retailer, you’re likely evaluating your e-commerce delivery network design as consumer expectations, competitive forces, technology, and the carrier marketplace continue to rapidly evolve. Accelerating advancements in new breed order fulfillment, delivery, and returns technology coupled with the rapid expansion of the carrier marketplace and associated capacity present many challenges, but also a unique opportunity for shippers. That opportunity is the design and implementation of the next generation of e-commerce delivery networks.
Where to Start?
An effective design process begins with an e-commerce delivery strategy clearly defining goals and objectives related to fulfillment footprint, service, carriers, and cost. Shippers will need to evaluate the current state and assess a multitude of options to create a roadmap leading to optimal results. Furthermore, shippers will need to be prepared with big data analytic capabilities and know-how to model complex multi-variable “what-if” scenarios to support the fulfillment footprint design and carrier service decision-making process.
Next, shippers should evaluate their current network to identify opportunities to fulfill their customer promise goals at the least cost. To perform this assessment, develop a baseline cost and transit time data analytic model. This model will identify gaps in achieving optimal fulfillment facility and carrier service selection. The greater the number of fulfillment facilities, carriers, and service options, the
greater the potential for sub-optimal selections. This evaluation will allow for the identification of symptoms and root causes of sub-optimization for correction in the current network design and to be addressed in the future state design.
Then, shippers should evaluate their fulfillment facility and technical capabilities along with their associated constraints. This evaluation will serve as the basis for developing a strategy and roadmap to remove constraints for unlocking the full potential for delivery and returns optimization. For example, if a shipper’s parcel rate shop TMS is limited in its rate shop capabilities to optimize carrier transit and costs, then a business case should be made for removing this limitation. Additionally, locations from which inventory is allocated for order fulfillment may also have physical constraints for processing throughput or volume, and these must be addressed.
When designing an optimal e-commerce delivery network, it’s also essential to understand the current carrier market and the solutions available. Many shippers depend on an order fulfillment strategy that requires the ability to ship from a high number of origin points in their network. This dependency presents opportunities for established national and regional carriers to provide solutions. At the same time, there are new gig-economy delivery and service innovations in the market, which are evolving rapidly. Many national, regional, and local/gig-economy carriers and traditional parcel carriers may be incorporated to provide and further an optimized solution in both cost and service.
In addition, e-commerce delivery has expanded beyond the traditional small parcel to oversize and bulky items such as barbeque grills and treadmills. LTL or specialty carriers are expanding capabilities to capture the needs of shippers for these product types with cost-acceptable solutions. There is a good chance that many of these carriers and providers can meet the needs of shippers for a portion of their network based on their volume and package profile. Best of all, these carriers are eager to win business by partnering to leverage their unique value proposition. From this evaluation of the carrier market, an initial carrier service strategy can be derived.
Beyond delivery capabilities, shippers need to understand the invoicing and tracking data quality capabilities of any new carrier before implementation. This data is critical for managing budgets, understanding gaps in expected costs and transit time, refining network optimization through modeling, and managing the customer experience. If a shipper’s network design will include less-established carriers, look to engage an experienced and quality advisor with a full view of the carrier
market and deep knowledge of the data considerations to assist in the evaluation and provide recommendations.
Looking Forward
What’s next after shippers have researched and aligned potential carriers and providers with their strategies? Shippers can engage these providers in procurement events to gain pricing and transit time expectations for evaluation in their digital twin model. This exercise will be an iterative one, running various “what-if” scenarios through the model. Shippers will use the provided carrier pricing proposals, volume requirements, and transit times during the procurement process to arrive at the ideal mix of carriers and providers with the most optimal carrier cost and terms. In most cases, it is a best practice to source a national carrier network for both small parcel and LTL shipments followed by working closely with the specialized carriers to optimize areas of the network that require more specialization whether based on distance, special handling, or SKU profile.
Along with the carrier procurement process, shippers should evaluate, procure, and implement the best-in-breed providers to optimize and manage the selected carriers they choose as partners to service them and their customers. Focus on e-commerce delivery execution and management systems such as transportation management, packaging optimization, delivery experience management, and returns. This process can be daunting for shippers. However, closed-loop ecosystems of best-in-breed technology and technology-enabled services are entering the market to provide a streamlined access point to data-share, analytic, and advisory capabilities for small and large shippers alike. A closed-loop ecosystem of these solutions provides the best means for optimizing an e-commerce delivery network on an ongoing basis at the required speed to value.
Designing an optimized e-commerce network is fundamental to achieving a firm’s brand strategy, meeting consumer expectations, and staying competitive. The process requires thoughtful evaluation of the current state delivery network, future network requirements, fulfillment location constraints, execution systems, and the carrier marketplace to develop a strategy and roadmap plan. The ability to model big data as a digital twin of a shipper’s network and to iterate through countless multi-variable “what-if” scenarios is required to make decisions that will lead to the optimal state. Execution systems must be able to execute in near real time or in real time upon making optimal cost and service decisions. The process of designing and implementing an optimized e-commerce delivery network is complex. However, a quality industry advisor with big data analytic capabilities and closed-loop ecosystem knowledge can streamline, expedite, and get the greatest value possible out of the process.
Mike Lambert is Chief Operating Officer, Green Mountain, the leading e-commerce delivery, parcel, and LTL spend management provider in the world. Mike can be reached at mlambert@greenmt.com.
By Shemin Nurmohamed
A LOOK AT THE LATEST SHIPPING STATS
In
its eighth year, the Pitney Bowes
Parcel
Shipping Index continues to tell a story of growth and opportunity. But don’t
take our word for it; look at the numbers.
Pitney Bowes began tracking US shipping volumes in 2016. Through three different White House administrations; three different postmaster generals; breakthroughs in shipping management and tracking technology, automation, robotics, and self-driving vehicles; and the volatility of a global pandemic, supply chain disruptions, and inflation, the steady growth of parcel shipping as measured by the total volume of packages shipped, received, and occasionally returned continues its historic climb.
Only once in eight years have US parcel volumes declined from the year prior. In 2022, they dropped slightly from record-setting growth in the two years prior when the COVID-19 pandemic led to voluntary and government-mandated lockdowns, and an exponential spike in online shopping.
Some industry executives and analysts lamented this brief decline in year-over-year volumes. They had hoped that COVID-era e-commerce trends were the new norm and rapid growth would continue indefinitely, or at least for a longer period of time.
Because of these outsized expectations, some of our colleagues have grown discouraged. If you are one of them, the chart on the next page should be
encouraging. It clearly indicates that the pandemic did in fact change behaviors in a lasting and positive way for parcel shippers. The fact is US parcel volumes remain on a trajectory that far outpaces predictions made prior to the pandemic.
The continued growth of our industry, along with continuously evolving consumer shopping behaviors, is changing parcel carrier dynamics. We see this most acutely in the growth of Amazon Logistics and the speed with which new carriers are entering the market.
When Pitney Bowes issued its first Shipping Index in 2016, Amazon had already overtaken eBay as the most popular online marketplace in the US, and we watched Amazon extend its popularity globally. Today, Shein, Temu, and a number of other emerging marketplaces and other “fast fashion” retailers are attempting to challenge Amazon’s prowess with varying levels of success.
The trajectory of its marketplace and competitive threats from other global players was relatively predictable when we issued our first report, but very few could have anticipated the birth and exponential growth of Amazon as a leading shipping and last-mile delivery provider.
In 2023, of the four largest carriers (USPS, Amazon Logistics, UPS, and FedEx), only Amazon Logistics grew volumes year-over-year, and by
a staggering 15.7%. Two years after passing FedEx in parcel volumes, Amazon Logistics has passed UPS and is gaining momentum on market leader USPS. Meanwhile, smaller last-mile carriers (those other than the big four) collectively experienced substantial year-over-year growth – 32.5% revenue growth and 28.5% volume growth.
Although Amazon Logistics nearly tripled its shipping volumes from 2019 to 2023 (from 2B to 5.9B), it remains fourth in market share by revenue ($28.6B), generating less than half of UPS ($68.9B) and FedEx ($63.2B), foreshadowing a secular shift in the economics of last mile delivery towards smaller parcels and cost-effective shipping services.
Those are all facts. Now, some predictions.
Consumers demonstrated an insatiable appetite for “real-time retail” in 2023, resulting in an influx of smaller, less-expensive, lightweight packages in the marketplace and a wider array of last-mile delivery providers bringing them to shipping docks and front doors. While parcel volume growth has shifted from double to single digits, our Index projects that consumers’ appetites for “real-time retail,” or affordable goods, will continue to elevate parcel volumes into the years ahead.
As the carrier landscape becomes slightly more crowded and vastly more competitive, high-quality data and shipping management software, including dynamic tracking capabilities, will become even more important to a wider array of office shippers, retailers, and — for the efficiencies these
technologies create — consumers. For example, as shippers of all sizes gain access to an array of carrier options, multi-carrier platforms with recommendation engines will help shippers identify and select the best carriers for their network and individual shipments, meeting customer demands
efficiently and cost-effectively. Based on closely and accurately monitoring parcel volumes for the past eight years and making reasonably good predictions over that period, this is some of what we expect in the years ahead. Obviously, it is easier to count parcels that have already shipped than it is to predict the number of parcels that will ship. Nonetheless, I hope the steady and persistent growth trajectory of parcel volumes over the eight-year history of the Index gives everyone reading this a sense that they are in the right industry at the right time.
Shemin Nurmohamed is EVP and President, Sending Technology Solutions at Pitney Bowes, a global shipping and mailing company that provides technology, logistics and financial services to more than 90% of the Fortune 500. She is dedicated to helping working women progress in their careers and has authored a book (Outshine, published by FAQ Books, 2017) and given a TEDx Talk on the subject.
10 WAYS TO MAKE THE IMPROVEMENTS YOU NEED THIS YEAR!
Since 1963, Caljan has specialized in helping parcel carriers, retailers, and manufacturers around the world handle loose cargo efficiently. Using highly engineered Logistics Automation technology, we optimize the supply chain. Throughput is increased, cost is reduced, and the work environment is safer and more ergonomic. Operating at a global level, with multiple production facilities and an international organization, our customer approach is individual. Logistics equipment and solutions are configured and custom-built to match the specific requirements of each application. Stage gate project management means we can successfully handle orders with larger volumes, an increased customer base, and comprehensive, turn-key projects.
Designed Conveyor Systems (DCS) has 40 years of experience serving major clients in multiple industries by providing material handling solutions, full-scale warehouse operations, and conveyor designs custom-crafted for their needs. DCS does not sell ready-made conveyor systems but builds relationships that empower collaboration to craft custom warehouse designs together. DCS utilizes consulting, engineering design, project management, installation services, and client support to ensure our customers can keep their promises to deliver on time.
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Parcel shippers need DMW&H's material handling solutions to optimize efficiency, reduce operational costs, and enhance scalability. With over six decades of industry expertise, DMW&H offers innovative, end-to-end solutions — from facility analysis to commissioning and 24/7 support. Their customized, forward-thinking approach ensures that each solution is tailored to the unique needs of the client's distribution center, providing a competitive edge in a rapidly evolving market.
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For over 30 years, Ensign has designed and manufactured custom material handling equipment. Offering the safest and most dynamic high-speed parcel unloaders for the parcel handling industry, our machines easily integrate into new and existing sorting lines and can be designed for any type of transportation containers; gaylords, plastic totes, carts, hampers. Control configurations range from simple manual controls to fully automated including AGV loading integration. Advanced discharging technology automatically modulates the flow of parcels into sorting systems. These systems quickly deliver polybags, boxes, envelopes, and mixed materials onto conveyors, chutes, and tables without causing damage to the contents inside. VIDEO | www.ensignequipment.com | sales@ensigneq.com | 616.738.9000
FOCUS ON MATERIAL HANDLING
EuroSort’s PROVEN automated sortation systems provide Final Mile + Middle Mile Logistics Companies, Consolidators, and Carriers a distinct advantage in efficiency, accuracy, and scalability. By significantly reducing manual labor and errors, our systems streamline operations, achieving throughputs of up to 30,000 units per hour. This allows for rapid sorting of parcels, regardless of their size, shape, or weight. The modular design of our systems supports seamless scalability, accommodating seasonal demands, fluctuating throughput volumes, and ongoing business growth. EuroSort redefines small parcel logistics.
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Warehouses deploy material handling equipment (MHE) to meet rising throughput requirements. This typically leads organizations to deploy mixed portfolios from multiple vendors that need to be managed individually. Managing automation systems individually poses significant challenges. It often prevents businesses from leveraging their automation solution to its full potential and from achieving targeted ROI. Körber’s Warehouse Control System (WCS) provides a vendor-neutral solution that orchestrates diverse material handling technologies. Serving as a centralized hub, it coordinates and manages transport tasks across different warehouse automation systems. It also ensures uninterrupted material flow, even in the event of device failures.
Shurtape Technologies, LLC, is an industry-leading, global manufacturer and marketer of adhesive tape and consumer home and office products, available under recognizable brand names such as Duck®, FrogTape®, T-REX®, Painter’s Mate®, Shurtape®, and Kip®. Shurtape packaging solutions include hot melt, acrylic, and water-activated tapes that are designed to withstand the rigors of the supply chain. ShurSEAL® Automated and Manual Packaging Solutions are purpose-built to keep lines running at peak production. For secure seals, every time.
seconds, easing labor and peak challenges, improving throughput, and reducing DIM
label each custom order, creating the perfect package. Automated packaging allows you to keep pace with the increasing numbers of online orders even during peak times. Companies worldwide benefit from a seamless packing process, saving labor costs while reducing box volume and corrugate consumption.
VITRONIC Machine Vision offers data collection and parcel sorting in an end-to-end Auto-ID logistics solution. Auto-ID solutions handle the efficient recording and integration of data in warehouses and logistics centers throughout the world. VITRONIC has an expanded portfolio of offerings that provide a complete dimensioning, weighing, and scanning solution for logistics automation, whether items are on pallets, boxes, bags, or unpackaged goods. Intelligent, modular sorting systems, like the VIPAC Small Sort, combines the collection of shipment data and automatic sorting, together in one end-to-end solution.
The piping hot pandemic-era parcel market has cooled, giving way to softer demand. But while shippers currently navigate calmer seas, peak season looms on the horizon. Forecasts for this year call for a more muted peak, though shippers still face icebergs lurking beneath the surface that can cause carefully planned peak operations to leak cash and sink budgets. Here are five ways to prepare.
1
Keep a close eye on carrier surcharges
After engaging in significant discounting to compete for falling package volumes last year, UPS and FedEx have more recently deployed accessorial charges as covert tools to increase yields, with changes to fuel, demand, and delivery area surcharges. Carriers typically communicate changes to fuel tables and other accessorial charges as part
of annual general rate increase (GRI) announcements, but in recent months, they have made several out-of-cycle changes to boost revenue. With new rules governing which surcharges apply in what circumstances and major increases applied to others, shippers could face higher costs to move the same parcel mix.
For example, UPS and FedEx expanded the delivery area surcharge (DAS) to more ZIP Codes earlier this year, adding 82 ZIP Codes clustered in urban centers that impact a full one percent of the US population. As a result, carriers now consider more than half of all ZIP Codes in the US “difficult or costly to access” and subject to the DAS. Carriers have also raised the fuel surcharge three times since the 2024 GRI announcement, with both ground and express fuel surcharges becoming increasingly divorced from the government indices on which they’re supposed to be based. As
of March 2024, the jet fuel index was up 40% since 2021, but during the same period, the express fuel surcharge was up over 100% for both carriers. Over the same period, the diesel fuel index was up 22%, but the ground fuel surcharge for both carriers was up over 75%.
2
Conduct a package and service audit
Getting a thorough understanding of their package volume can help shippers navigate the evolving minefield of carrier surcharges. Audits can not only define the potential impact of recent changes but give shippers a view of their most expensive parcels and actions that could be taken to avoid incurring oversize and other major surcharges. For example, to avoid the particularly expensive additional handling surcharge that applies to large, bulky packages, it may be more cost-effective to divide them into two smaller ones that fall below the carriers’ size and weight thresholds for the fee.
Audits are also important tools to get ahead of the errors that tend to happen when shippers and carriers alike get busy working through higher volumes. Validating addresses in advance helps shippers avoid correction charges from carriers in case fulfillment operations neglect to check addresses in the rush to get orders out the door. And if carriers erroneously apply surcharges, audits equip shippers to quickly correct them before they snowball. For example, one inappropriately applied residential charge can turn into a recurring problem if a shipper has several customers in the same area.
Finally, shippers should take a critical eye to the service levels they use and evaluate whether more expensive express services are really necessary, or if a lower cost option like ground or even SurePost will do the job. For example, shipments within a 600-mile radius of their destination will typically make it there within two days via ground, without the added cost of more expensive express service.
3
Start promotions earlier to smooth out peaks
Remember the “peak surcharge” of years past? It now has a different name — demand surcharge — and rather than
applying only during peak season, it lasts all year. However, a peak element still remains, as demand surcharges are at their most expensive from October through mid-January, and a lower demand surcharge is applied in other periods of the year.
For larger e-commerce businesses with a lot of residential deliveries, odds are that peak season will see them hit the volume threshold to trigger residential demand surcharges. To limit their exposure to demand surcharges when they are most costly, these shippers can take action to spread some of their peak volumes to earlier months. Whether by starting sales promotions early or other tactics, shifting volume to blunt spikes in demand for shipping services can not only save parcel costs, but smooth the operational burden inside distribution centers, too.
Onboard alternate carriers ahead of time
The worst time to onboard a carrier is when you need them urgently. Opera-
tions must be prepared well ahead of time to confidently pivot to a backup option so that a service interruption with a primary carrier does not trigger even greater complications when switching to an alternative to handle the delivery. Make sure an agreement is in place, software and other systems work, and tests have been completed to verify success and work out any wrinkles. That way, if the original carrier misses a pickup Friday, shippers can rest assured the other carrier is ready to hit the ground running when they call them on Monday.
Using alternate carriers can also help limit demand surcharges by keeping volumes below certain thresholds. However, volume-based discounts are an important consideration for diverting parcels from FedEx and UPS. Carriers determine discount tiers based on 52-week averages, so if shippers move away too much volume, they risk dropping to a lower discount tier. To prevent unintended
consequences, avoid snap decisions and rely on careful analysis well ahead of the holiday rush.
Chart the Right Peak Season Course
While projections anticipate a more subdued peak season compared to the memorable highs of the pandemic era, shippers cannot afford complacency. They face a parcel landscape marked by complexity and a seemingly constant shift in pricing logic — who knows when the next fuel surcharge increase will materialize? Setting the proper foundation and finding the right formula requires expertise and experience, with careful decision-making that sidesteps adverse effects. Starting early and bringing in the right support can help businesses successfully chart the course of peak season success.
Micheal McDonagh is President of Parcel, AFS Logistics.
THE UNIVERSAL AND PARCEL TRUTHS OF FULFILLMENT
By Brian Fish
Let’s begin this article with something on which we can all agree — there is no shortage of recommendations regarding how to engage parcel carriers during procurement events. My goal here is to not only address parcel requirements specifically, but also to provide universal truths when engaging carriers of any mode during the procurement process. Let’s start from the beginning — a very good place to start. It is first important to determine if the procurement process, regardless of mode, should be facilitated in-house or by a third party. This would not be an article written by a consultant if it did not include the phrase “it depends,” so let’s get that out of the way now. It is this person’s opinion that parcel operates in a world of its own, much further afield from the likes of truckload and LTL transportation. If you are reading this to enable this decision, perhaps the intricacies of parcel fulfillment will help drive this decision.
The Universal Truths of Transportation Fulfillment
I have facilitated a significant number of procurement events up and down the supply chain, and there are a number of characteristics of a successful process that do not change:
1. Bad Data = Bad Procurement Event
Duh, you say, and you are correct. This should be obvious to all, yet time and time again companies rely on incomplete, unsubstantiated, or otherwise erroneous data to support their procurement events. The good news, other than the fact that everyone has this problem to some degree, is there are ways to mitigate the risk of responses not reflecting the needs of your business:
Development of a Quality Item Master
Having an item master is as important, or perhaps more so, than the volumes themselves. Today, companies can rent or lease equipment for quick documentation of weights and dimensions of SKU and SKU families. Strongly consider completing this process before starting your procurement event.
Descriptive vs. Prescriptive Data
Let’s say you have reliable, complete data regarding the origin-destinations, volume, and dimensions of your in-scope transportation. Coupled with the applicable service constraints, this should allow providers to return estimated costs with confidence. This portion of the bid allows for a descriptive bid response. In contrast, assume you have no reliable data on the number of historical claims. This drives the needs for a prescriptive approach, ensuring all bid respondents are using the same information on which to base their solutions (i.e. assume 500 claims annually with an average product value of $1,000).
Seasonality and Growth Factors
For companies in the retail sector, this is an obvious truth. Even for other industries, if access to a full year of shipping history is not available, it is important to provide visibility to the volume and duration of seasonal peaks and valleys. In addition, the procurement event should provide an estimate of annual growth for the duration of the initial contract length (again, to ensure bidders are working off the same information).
2. Separate the Bid vs. the Deal
What is the end in mind when companies run a procurement event? Most will say find the best partner at the lowest cost. The best way to accomplish this is to set up the bid package so procurement et al. can compare all the bidding companies in a fair and equitable manner. This is, pardon the metaphor, the “dating” portion of the process. Toward the end of the bid process, you will award the business and begin your prenuptial agreement and then get married. Development of that agreement should be somewhat separate from your dating life, except you will use the volumes from the bid to calculate your rates and accessorials for memorializing in your contract.
3. Managing to the Contract
Far too often, I work with companies who spend an extraordinary amount of time developing agreements with
their vendors, only to put the contract away until renewal time. The best way to ensure rates, accessorials, and services commitments are adhered to is to compare invoices and service reports to the contract. Yes, audit companies should provide much or all of this information. Now put it to action during your QBRs and other correspondence.
The Truths of Parcel Fulfillment
As many of you know, a procurement event in the parcel space is much different than other transportation modes. Let’s look at some of the ways that make it unique:
1. Accessorials, Accessorials, and More Accessorials
This is where they get you. At the beginning of 2024, UPS alone raised the fees on more than 30 of its accessorial charges. In the bid document outlining all rules of engagement and the means by which the bidders should submit their proposals, companies must be very prescriptive on how accessorials should be addressed. State that accessorials will not be paid unless agreed upon in the initial agreement and throughout the contract term. Require the bidders to note in the response when accessorials would apply to the shipment history in the bid and why. Specific to fuel, require submission of a fuel surcharge table and specifically how those surcharges are calculated.
2. Claims Methodology
For those who find claims to be somewhere between a nuisance and a cost containment problem, determine the best way to balance the labor associated with filing and controlling those costs. Many carriers are amenable to a percentage rebate to cover estimated claims. This can be beneficial to both sides in terms of time saved and simplicity of implementation.
3. Zone Skipping – Build Your Own Scenarios
With the growth of regional parcel players, companies may find awarding business to multiple providers is the best overall solution to parcel optimization. Develop scenarios where you are injecting freight into those regional zones, along with the classic approach of awarding all business to the “main players.” Don’t forget, it is best to consider multiple scenarios when executing a procurement event. Mode conversion (i.e. linehaul freight to regional carriers) is often a better cost play than parcel rates. As long as you provide enough time for the responses, the more options to consider the better!
To summarize: Clean your data, separate the bid from the deal, consider multiple scenarios, and be very mindful of the accessorials. Good luck!
Brian Fish is Senior Project Manager at St. Onge Company. He has over 30 years of expertise in the transportation and supply chain sector.
In the fast-paced world of warehousing and fulfillment, stressed-out managers are faced with demanding customers, high order volumes, tight deadlines, and a tight labor market, so improving worker productivity is vital. Fortunately, you can boost the productivity of your workforce quickly, without having to spend a lot of money. For example, here are 10 practical ways you can enhance productivity in your warehouse or fulfillment center in just one day:
Equip and Organize Workstations Efficiently – Efficiency starts at the workstation. (This might be a cart, pallet jack, or truck for mobile workers in the warehouse.) Standardize all workstations so that the right tools and materials are in the right locations, within easy reach: scanners, tablets, computers, printers, scales, pens and markers, packing materials and tape, utility knives, tape measures, flashlights, labels, paperwork and forms, gloves, cleaning supplies, etc. Declutter work areas and provide the necessary ergonomic adjustments to reduce strain and improve comfort. This simple step will cut down on time spent searching for tools and materials, allowing your workers to get their work done more productively.
Slot
Inventory
Efficiently in Picking Areas
– Think about your kitchen. You probably keep the things you use most often in the most convenient locations: drinking glasses in the cabinet next to the refrigerator, paper towels beside the sink, etc. And you probably keep that ice-cream maker you use once a year up on the top shelf of your pantry in the garage. Apply the same logic in your warehouse. Place your high-velocity (more popular) stock-keeping units (SKUs) up front, close to packing and shipping areas, and place them in the “golden zone” between the knees and shoulders of order pickers. This will reduce travel and reach, allowing your pickers to access
SUREFIRE WAYS YOU CAN BOOST WAREHOUSE PRODUCTIVITY IN JUST ONE DAY
BY STEPHEN (STEVE) T. HOPPER, PE
fast-moving SKUs more quickly, increasing order picking speeds and boosting productivity.
Implement Effective Visual Management – A well-organized warehouse is a productive warehouse. Use highly visible color coding to indicate specific zones and product categories. Post logical, easy-to-read signs and labels in strategic locations. Mark the floor with paint or tape to indicate aisles, staging lanes, work zones, restricted areas, and parking spaces for pallets, trucks, and carts. Effective visual management will reduce errors, improve efficiency, and enhance safety, resulting in better productivity.
Play Upbeat Music – Help your workers get their jam on. Boost their mood and morale with upbeat music. Studies show that lively, positive music creates an energetic atmosphere that enhances productivity. Choose music styles that appeal to your workers, but ensure that the volume doesn’t interfere with safety and effective communication. Playing the right tunes will lift spirits and increase work pace, contributing to a more productive environment.
Teach Supervisors to Be Coaches – If supervisors only monitor their workers passively, then productivity won’t improve. Train your supervisors not to be babysitters, but to be active coaches who actively train their team members. Establish an effective coaching program where supervisors work hands-on with each worker for at least one hour every month, providing praise for productive work and constructive feedback for needed improvement. Ensure that supervisors document these sessions on a chart so everyone can see improvement. Active, effective coaching will significantly improve worker skills and productivity.
Set Clear Goals for Your Team and Share Their Progress – As the saying goes, “you can’t manage what you don’t measure.” How would you know whether your favorite football team is doing well if the officials didn’t measure progress on the field and you didn’t know the score? So, set clear productivity goals for your teams every day. Use respected, industry-standard metrics and key performance indicators (KPIs) to measure your team’s progress (average orders, lines, units, cases, or pallets per hour, by function; average order cycle time; average dock-tostock cycle time; fill rate; etc.). Display these goals and your team’s progress toward them on whiteboards or digital displays in prominent locations. This visual representation will keep your team aligned and accountable and encourage them to reach their targets each day.
Track and Share Objective Productivity Metrics –Your team’s overall productivity is a composite of your workers’ individual productivities. Objectively track the productivity of every worker by function (receiving, putaway, picking, packing, shipping, returns, cycle counting, etc.). Even simple spreadsheets can be used effectively for this purpose if you don’t have a warehouse management system (WMS) or labor management system (LMS) to provide the data. Sharing these metrics with your workforce every week will foster transparency and motivate them to improve.
Gamify the Work and Reward Top Players – Most people enjoy playing games, and when they do, they play to win. Use your productivity metrics to organize challenges between workers and functional teams to encourage healthy competition and create a culture of camaraderie and recognition. Find out what rewards or recognition motivate your workers — paid time off, lottery tickets, free lunches, gift cards, “Star Performer” t-shirts, or even choosing the music for the next week. In the breakroom, post weekly rankings of your workers by function. Recognize and reward top performers and coaches every week. This will encourage each worker to strive to improve their own individual performance.
Hold Daily Team Huddles – Effective team communication nurtures success. At the start of each shift, each coach should hold a five- to 10-minute huddle with their team. Review the day’s goals and expectations, praise good performers, and address any issues that need attention. Answer any questions, and then get to work. Start these huddles on-time when the team is expected to be on the job. Studies show that effective team huddles significantly boost productivity by ensuring everyone is aligned and motivated from the get-go.
Take Regular Gemba Walks – To see improvements in the warehouse, managers need to be present, not sitting in their offices all day. Walk through your entire warehouse
at least twice a day at random times and observe activities. Greet workers — smile and get to know them. Hunt for “rattlesnakes” (anything that isn’t as it should be). Acknowledge and thank workers for jobs well done, but also look for inefficiencies and gently correct them. Gemba walks not only show that you care and are engaged but also help identify and address issues promptly, boosting overall productivity. And you could probably use the exercise.
Improving productivity in your warehouse doesn’t have to be costly or time-consuming. By implementing these 10 strategies, you can achieve significant results, and each of them can be implemented in just one day. Not only will you boost productivity, but you’ll also cultivate a positive and engaging workplace culture. So, take the first step today and start transforming your warehouse!
Steve Hopper is Founder & Principal of Inviscid Consulting. Inviscid helps businesses drive down operating costs and boost service levels in their warehousing, fulfillment, distribution, and logistics operations. He can be reached at steve.hopper@inviscidconsulting.com or 404.832.5326.
BY JOSH DUNHAM
THE TOP FIVE WAYS TO OPTIMIZE SPENDING ON PARCEL SHIPMENTS
Optimization efforts are not new, but shippers now have the data needed to optimize parcel shipping operations in ways out of reach for most in the past. Today, shippers are ideally qualified to optimize parcel spending in five ways.
When my business partner Chad Beville and I left our positions with carriers nearly two decades ago to create Reveel, our vision was straightforward — to help shippers level the playing field with carriers. In that endeavor, the recommendations we shared with clients were shaped not only by experience we gained in carrier sales roles, but also by lessons learned from exceptional shippers who approached their work strategically and methodically.
At the time, most shippers had limited visibility into their shipping activity and ability to control it proactively. Not surprisingly, in our early years, like most parcel consulting firms, we focused on carrier contract analysis, shipping best practices, and helping clients negotiate better terms and conditions in their carrier contracts.
The savings secured were significant, but it also became clear that leading shippers, those who took the most aggressive steps to optimize their parcel shipping spend, looked at their operations holistically. They also
eagerly sought data on anything that impacted costs.
Fast forward nearly 20 years, and the landscape for shippers and parcel shipping consultants is far different. Not only does today’s data science enable shippers to gain near real-time visibility and control over their shipping activity, but shippers can use that intelligence to automate processes that deliver savings.
More business leaders are also aware that a more strategic approach to parcel shipping does more than save money. There is a greater appreciation of shippers’ impact on business
imperatives, among them customer relationships, pricing strategies — the ability to offer discounted or “free” shipping is a big differentiator in e-commerce — expansion strategies for brick-and-mortar stores, and even the ability to comply with sustainability metrics in today’s increasingly global supply chains.
Efforts to Decrease Parcel Shipping Costs Are a Priority
Parcel shipping is now a C-suite concern, a welcome development for all of us who stressed its importance for years. Efforts to decrease parcel shipping spend are also stronger than ever, undoubtedly something influenced by the 30% increase in carrier costs over the past three years.
Fortunately, in such efforts to save money, shippers are more empowered than ever. Data science enables
shippers to know in real time how even subtle changes, including carriers’ new rules, surcharges, and fees, will impact their budget. Shippers now can also conduct powerful “what-if” analyses to see how actions they take will impact costs.
These efforts to lower costs and optimize parcel spend are more effective than ever. Today, shippers are seeing significant success in five key areas.
The Five Best Ways to Optimize Parcel Spending Are Broadly Applicable
Five key areas of parcel spend optimization deliver significant savings and are broadly applicable to organizations of all kinds. This includes e-commerce companies and omnichannel retailers, and organizations that depend on the fast delivery of direct and indirect supplies such as those in healthcare and manufacturing.
Any organization that wants to bring its parcel spend under management or aggregate its shipping volume to secure savings (for example, group purchasing organizations, franchises, or venture capital firms eager to increase the profitability of portfolio companies) should look at these five ways to optimize parcel spend:
Service level optimization:
Because the majority of shipments are unique “events,” parcel shippers often err on the side of caution when determining which carrier service level to use. With next-day delivery and even same-day delivery now increasingly expected, the temptation to send items via more expensive express services is understandable; however, technology enables shippers to know if this is necessary. In many cases, a parcel
(for example, an item purchased by an e-commerce customer) can be delivered by far less expensive ground services rather than via air and still arrive in plenty of time. And in situations where there is any question, brands can even ask the customer at what time they need the package, and offer them a lower shipping cost for a later time.
Carrier optimization: The nation’s parcel carriers are some of the most advanced companies in history with highly advanced networks that make it possible to ship packages to practically any location. But there are subtle differences that make one carrier the optimal choice for a particular shipment based on a wide range of criteria, among them its weight and dimensions, the zone it is being shipped from and to, when it must arrive, and other factors. There are often significant cost differences as well. Embracing processes that ensure that each parcel is sent by the optimal carrier is a proven way to significantly lower shipping costs. A multi-carrier approach is also a viable risk management strategy that often benefits shippers in carrier contract negotiation efforts as well.
Network optimization:
Many high-volume shippers are lowering their costs not only by using their shipping data to determine when additional options, such as regional delivery companies, make sense, and also how their own networks can be optimized. This includes using shipping data to determine where new distribution centers and warehouses should be located, when it makes sense to use a 3PL in a particular region, and other factors.
Transportation finance optimization: Businesses have numerous front-end systems, including transportation management systems, that ensure their policies are followed — and that shipping costs and data are accurately conveyed to core systems, including those for finance. Previously, it was difficult for organizations to determine if their policies delivered the savings they promised because the analysis required the review of mind-numbingly complex carrier invoice data. Data science addresses this and lets shippers effectively “close
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Parcel shipping is now a C-suite concern, a welcome development for all of us who stressed its importance for years. Efforts to decrease parcel shipping spend are also stronger than ever, undoubtedly something influenced by the 30% increase in carrier costs over the past three years.
the loop” and see in real terms how policies and systems really perform, and confirm that efforts to optimize one aspect of the shipping operation don’t have an unintended impact on another, such as when a multi-carrier approach saves money, but causes a company to fall out of a volume-based discount tier.
Carrier agreement optimization: Some things never change. One of the best ways for shippers to optimize parcel spend remains carrier contract analysis and the negotiation of better terms, prices, and conditions. Carrier contracts remain complex documents with numerous pages of fine-print details, all of which can dramatically impact costs. Shippers should be particularly mindful of the impact of new surcharges, particularly those that have different expiration dates than the contract, as well as new rules and fees, including those for specific zones. Most importantly, shippers should make a point of negotiating discounts and exceptions using the intelligence they gain from their own data. Such efforts should not only occur annually when carriers introduce their annual general rate increases, but rather on a routine basis.
Shippers that take these steps to optimize their service levels, carriers, networks, transportation finance, and carrier agreements will find the process lucrative. But it is also imperative to remember that even the most basic steps can decrease parcel spend. Every spend optimization effort should begin by asking where money is being left on the table — a reality that is painfully clear when one considers that more than 75% of shippers do not claim the rebates they are owed because carriers failed to satisfy their own guarantees, usually when a delivery was late. In parcel spend optimization efforts, the details and the basics are crucially important.
Josh Dunham is the co-founder and CEO of Reveel. Founded to help shippers level the playing field for carriers, Reveel’s Shipping Intelligence Platform uses Parcel Spend Management 2.0 technology to provide parcel shippers with the actionable insights they need to lower their shipping costs.
