Parcel May/June 2014

PARCEL

MAY-JUNE 2014

www.PARCELindustry.com

Special Regional Carrier Section!

Ready to branch out from the Big Two? Check out these profiles Page 14

CONSUMER RETURNS taking a toll on your bottom line? Surefire tips to reduce them in the first place.

Page 26

AVOIDING OPERATIONAL

pitfalls in a dynamic parcel network.

Page 24

PARCEL

CONTENTS MAY-JUNE 2014 | volume 21 | issue 4

Features Departments 06 Editor’s Note

The Changing World of Retail

By Amanda Armendariz

08 Transportation ABCs

When Your Shipping Is Affected More Than “Average”

By Aaron Samuels

10 Operational Efficiencies Is It Tune-Up Time?

By Susan Rider

14 Special Regional Carrier Section: Get to Know the Carriers!

Considering adding regional carriers to the mix?

Check out their profiles!

11 Spend Perspectives

Flat Rate Shipping – Convenient, but Is It a Cost Saver?

By John Haber

12 Omni-Channel Steps to Success

Intro to Omni-Channel

By Joe Wilkinson

24 Unintended Operational Consequences:

Avoiding Operational Pitfalls in a Dynamic Parcel Network

26 Reducing Returns:

An Ounce of Prevention Is Worth a Pound of Cure

By Ayal Latz

By Mike Lambert

28 Don’t Be Taken

by Surprise:

Plan Now for Big Dimensional Charge Increases Coming in January

By Doug Caldwell

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president chad griepentrog publisher marll thiede editor amanda armendariz

[ amanda.c@rbpub.com ]

circulation director rachel chapman

PARCEL 2901 International Lane Madison WI 53704-3128 p: 608-241-8777 f: 608-241-8666 www.PARCELindustry.com

[ rachel@rbpub.com ]

marketing cierra bauer creative director kelli cooke advertising ken waddell

[608-442-5064 ] [ ken.w@rbpub.com ]

Josh Vogt [ 785-320-7950 ] [ josh@rbpub.com ]

PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copyrighted 2014 Š by RB Publishing Inc. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, RB Publishing Inc. or its staff becomes the property of RB Publishing, Inc. The articles in this magazine represent the views of the authors and not those of RB Publishing Inc. or PARCEL. RB Publishing Inc. and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine.

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5

EDITOR’S NOTE

BY AMANDA ARMENDARIZ

The Changing World of Retail he world of retail is changing, and changing quickly. As Joe Wilkinson notes in our new column, Omni-Channel Steps to Success, if you look at the time it took to receive an item ordered from a catalog in 1975, compared to the time it takes to receive an order placed online today, we’ve reduced the delivery time by approximately 97%! That’s pretty impressive — and it means the pressure is on for retailers to get customers their orders accurately, quickly, and cost-effectively.

This issue is packed with tips and strategies to help you stay competitive. From reducing returns in the first place (and let’s face it, the fewer returns one has to deal with, the better, both from a financial standpoint and a sanity one!) to avoiding the unintended operational pitfalls that sometimes appear in a complex parcel network, this issue is a must-read for anyone hoping to get a leg up on their ecommerce process.

And speaking of ecommerce, someone has to ship all those packages, right? FedEx and UPS are fantastic at what they do, and they certainly are the best choice for certain shipments. But if you want to diversify your shipment mix a bit, check out the regional carrier profiles, starting on page 14. In this changing world of retail, you always need to be one step ahead of the competition. So don’t get in a rut and just stick with what you always do; consider branching out.

Your bottom line will thank you!

As always, thanks for reading PARCEL.

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• Same-Day Delivery: A Checklist for Retailers Seeking an Antidote to Amazon • Shipping 101: What do UPS and FedEx take into consideration when offering you pricing?

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TRANSPORTATION ABCS

BY AARON SAMUELS

When Your Shipping Is Affected More Than “Average” s the second quarter of 2014 continues, your finance department should be looking at your increasing transportation costs and reviewing how much your company was affected by the annual rate increase put in place by your shipping carriers for the year. While the carriers state in their press releases that prices are going up by an “average” amount, you should be aware of how the average is calculated by the carriers and how it may not be affecting you by an average amount.

In late 2013, the US parcel carriers made their annual announcements that due to the increasing cost of doing business, an increase in their base pricing would be made that affects all of their customers. For both carriers, it was stated that the 2014 pricing for Ground shipments would increase by “an average net 4.9%.” UPS’s Express/Air shipment prices increased by an average of 4.9%; FedEx Express increased by 3.9%.

But what does that average mean?

There is a carrier rate chart published for each service level, showing the price that applies for each combination of weight (every 1-lb increment) and zone. The zone is a grouping by distance that will need to be travelled, typically from Zone 2 at the shortest distances to zone 8 moving cross-country. Each year, the carriers will update every price on that chart, and take the average increase across all of the individual increases in order to 8

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determine the average increase for that service. They will then average up all of the increases for Ground services and call that the total average Ground yearly increase, and the same for Express and International services.

How do these individual price increases affect the average?

What can I do to help my business avoid this skewed increase?

One thing that you can do is to work with your carrier to adjust or amend your current agreement to put a cap on your yearly increases in pricing. By being a valued customer and shipping a guaranteed amount of volume with the carrier, you should be able to come to an agreement regarding a cap on your increases each year that is below this national average.

This will help offset some of your increases and minimize the overall effect of the yearly General Rate Increase.

The carriers typically increase the shorter-distance, lower-weight prices by a larger margin than the higher-weight, longer-distance shipments. This allows the average to balance out for the service, while increasing the carriers’ ROI for the less cost-effective While the carriers state that shipments they will be making over the course of the year. prices are going up by an As an example, the low“average” amount, you est-cost shipment available is typically a Zone-2 (shortest should be aware of how the distance), one-pound Ground average is calculated. shipment. In 2013, this price for both carriers was $5.84.

Both carriers increased this price in Is this a recent trend that will 2014 to $6.24 — an increase of about eventually go away?

6.8%, which is far higher than the av- For over a decade, the US parcel carriers erage stated increase of 4.9% for the have been increasing prices, and it does service as a whole. not look to be a trend that will be stopping A similar comparison for an Express anytime soon. service shows the lowest-weight shipBy paying close attention to the way ments increasing by about 7.5%, again that the carriers perform their annual higher than the average and balanced rate increases and how it affects your out by lower-increased pricing for heavier shipping, you will be in a better position shipments. to know how to negotiate a capped inThis means that a company that primar- crease and prepare for future transportaily ships smaller-weight shipments (under tion cost increases.

10 pounds on average) will experience an increase in cost that is higher than the national average increase, whereas a AARON SAMUELS is Managing Partner at Bridgecompany shipping exclusively packages Net Solutions. Visit www.bridgenetsolutions.com weighing over 20 pounds will be much for more information. less affected by the annual increase.

OPERATIONAL EFFICIENCIES

BY SUSAN RIDER

Is It Tune Up Time? istribution centers are like cars.

Every now and then you have to review and examine the facility along with all the tools that keep your facility running to achieve maximum efficiency. Review the facility to determine what to add to your check up list and look for areas that need a tune up. Labor is costly so look for areas where if the equipment were to fail the most amount of labor would be left idle.

Tune ups can include a revamping of equipment that needs maintenance attention for the year and change out of equipment that has become old and out of support. Start with the evaluation of the mission-critical equipment first. Create a template/checklist you reuse every year. You may want to color code the checklist in a stop light method; green, yellow, orange and red color coding will give you a visual throughout the year on areas that may need your attention.

Also, from year to year, you’ll be able to see how that piece of equipment has progressed. Categorize your checklist in such areas like: software, hardware supporting software, third party software, conveyors, picking equipment (including RF guns, supervisor stations, printers, forklifts, battery rechargers, etc.) As you can see, the list can get very long.

The more detailed the list and the more things you add to the list, the fewer interruptions in your day-to-day operation.

Visiting one facility, I noticed a slow 10

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down in a picking area because the pick list printer ink ran out. No one knew where the extra ink was stored, and the IT guy was out sick. Finally, a decision was made to send someone to the local office supply store. In the meantime, 30 order fulfillment people took a long break. Very costly! While you are checking equipment on your list for needed maintenance, take note of how much needed supplies or parts are in stock.

Also add signage around that equipment to inform folks where the spare parts or supplies are kept. On the checklist add the date of service of item and any detail that may help you while troubleshooting.

Software is something that indeed becomes an issue. The more dependent on software we become the more we need to make sure we have installed the proper procedures to prevent downtimes. Review the age of your software, the database and the supportability of the platform. All of this is critical to ensure your system is not kept hostage by a vendor at the last minute. It’s better to plan for a new installation of software than at the last minute have to install a new software solution that is not really assisting you.

Last year, a software company decided to make all their clients upgrade, so they sent out notices to all existing customers stating they had two months to upgrade or the system is unsupported. Many upgraded to a less than par solution out of fear and concern of not being supported.

Don’t let this software nightmare happen to you. Technology changes rapidly and new systems have much more userfriendly tools and much more functionality to help support today’s operation in a distribution center. Tools like business intelligence dashboards, online help and

many more are the norm and NOT added modifications. If software or equipment you are using gets acquired by another vendor, this is a warning signal. Hopefully, the new company will handle the acquisition well but unfortunately it’s not always the case. Don’t invest any more money into the product until you find out the facts. This industry is riddled with sad stories brought about by acquisitions.

Transportation cost is at the top of mind for everyone today. Is there a better solution for you? Is the software you are using to ship your products effective in choosing the best type of shipment to save you transportation cost and expense?

Categorize your checklist in such areas like: software, hardware supporting software, third party software, conveyors, picking equipment.

The bottom line is you must become proactive instead of reactive in your facility. Just as we send out cars for their annual tune up, our bodies for once a year check-ups, the distribution center should be checked out on a regular basis. If you have equipment, ask your vendor for a suggested critical list of spare parts. If you are in a distribution hub with many other companies using the same equipment, get to know them in case of emergencies and the equipment that they have installed and their spare parts list. It might help to have a friendly neighbor in a state of emergency.

SUSAN RIDER, Supply Chain Consultant, Executive/ Life Coach can be reached at susanrider@msn.com.

SPEND PERSPECTIVES

BY JOHN HABER

Flat Rate Shipping – Convenient, but Is It a Cost Saver? or the small business, shipping costs can be difficult to budget.

One solution is flat rate shipping, which is now more readily available.

Flat rate shipping has been around for some time.

In 2007, while DHL was still trying to make a go of it in the US domestic market, it introduced an all-inclusive flatrate box for US shipping customers. DHL’s ShipReady Box provided 2nd day delivery service, without any weight restrictions, for one inclusive fee to and from all points within the 48 contiguous states.

According to DHL’s Senior Vice President of Corporate Marketing and Communications at the time of introduction, “The ShipReady Box brings added convenience and shipping flexibility to the small business and occasional shipping customer. These customers need quick, easy and reliable shipping support so they can focus their time and energies on building successful businesses.”

Today, DHL offers a flat rate shipping option in such countries as the United Kingdom in which it provides up to seven box sizes from envelope to boxes that can hold 25 kg.

Meanwhile, back in the US, the leading flat rate shipping providers are the USPS and FedEx. The USPS offers flat rate shipping for both domestic and international shipments. For domestic shipments two service levels are offered. Priority Mail Express Flat Rate provides five service options and Priority Mail Flat Rate provides 13 service options. For international, Priority Mail Express International Flat Rate

and Priority Mail International Flat Rate service levels are available with varying service options for each. Domestic option ships 1-2 business days whereas the international option ships 6-10 business days to almost 200 countries.

In late 2013, FedEx Express introduced its flat rate shipping option, FedEx One Rate and is marketing it to small businesses including eBay sellers.

According to its website, to ship using FedEx One Rate, customers select their free FedEx Express packaging, an eligible FedEx Express domestic shipping service and the destination. The FedEx One Rate price is then calculated based on the packaging type, service selected and distance. FedEx One Rate shipping is available with one-, two- or three-day U.S. domestic FedEx Express time-definite shipping commitments.

According to FedEx, “For consumers and small businesses alike, FedEx One Rate pricing allows customers to plan and control their express shipping costs more easily. They can add to the box without adding to the cost.”

While flat rate shipping is indeed convenient and easy to budget, is it a cost saver?

It depends. For the small business customer who can fill these boxes up with heavy items, then perhaps it is a cost saver.

An analysis between USPS and FedEx One Rate from Stamps.com, an online provider of USPS postage services, suggests that, at least in some categories, the USPS services offer a significant savings. A review of comparably sized packages and shipping routes suggests that shippers would save between 28.0% and 54.0% using Priority Mail over FedEx One Rate Express Saver (three-day delivery), depending on the route.

“I think that Priority Mail will be a better fit for ecommerce sellers over the new FedEx One Rate product based on the pricing being offered,” said Eric Nash, Stamps.com’s director of online marketing. “Keep in mind that 91% of Priority Mail packages are delivered within one to two days in the US, so most customers will be getting the items faster using the USPS Priority Mail.”

Regardless, flat rate shipping does provide a convenient means of shipping.

However, much of this flat rate shipping falls under the FedEx Express umbrella.

What about a similar solution for ground shipping? Come January 2015, FedEx Ground will implement dimensional weight pricing across all of the packages shipping via its FedEx Ground service. According to FedEx, this will set the transportation price based on package volume — the amount of space a package occupies in relation to its actual weight.

Previously, neither UPS nor FedEx have applied dimensional weight pricing on ground shipments less than 3 cubic feet.

For e-retailers, “free shipping” attracts more customers. However, with FedEx and possibly UPS making ground shipping more expensive, e-retailers will be forced to make a hard decision regarding how they manage the higher cost versus the sales from their free or flat-rate shipping promotions.

JOHN HABER is an expert in shipping, freight and transportation spend management. In his current role he provides the vision, and the execution knowhow, that helps companies save 10% to 20% or more in logistics spend. Contact him at jhaber@ spendmanagementexperts.com.

MAY-JUNE 2014 | www.PARCELindustry.com

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OMNI-CHANNEL STEPS TO SUCCESS

BY JOE WILKINSON

Intro to Omni-Channel mni-channel is the newest buzzword in the supply chain world.

But unlike previous “hot new things,” omni-channel has the potential to deliver on its promise. This article is the first in a four-part series aimed at providing shippers with an understanding of the benefits of an omni-channel strategy and actionable recommendations to help them develop and implement a strategy that both meets their specific needs and achieves exceptional results. In this initial article we will be introducing the concept of omni-channel and presenting some concepts around the customer experience that lie at the heart of the model.

Given the hype surrounding omni-channel, confusion abounds about what exactly omni-channel is. Generally speaking vendors only intensify this confusion and twist the definition to align with the products and services they sell. At its heart, omni-channel is about providing a seamless experience to the customer, removing both the perception and the reality of the company’s channel silos, and providing a flawless customer experience. It sounds simple on the surface, but done correctly, omni-channel is an incredibly complex (and rewarding) endeavor.

When many of us were growing up, even the largest retailers had two channels: store and catalog. You could go to a store and hope they had what you wanted. Or, you could browse a catalog, find what you were looking for, place an order, hope the item was still in stock, and (if you were very lucky) receive your 12

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item in eight to twelve weeks. Ponder that for a moment, and compare it with where we are today. If we assume the average delivery time from point of order was 10 weeks in 1975, we have reduced time to delivery by over 97% in just a few short decades. Today we press a few buttons on a mobile device, and our product arrives at our door the day after tomorrow, or in some (admittedly rare) cases, later today. These are the transit time expectations today, and transit times are only the beginning. What about when the item you wanted wasn’t in the store? Worse still, many times you would place an order with an enclosed check (if you’re too young to know what a check is, I can’t help you) only to receive a call three weeks later telling you the item was out of stock. This may seem like ancient history, but there are analogues of this going on even in today’s tech-filled world.

So omni-channel is about e-commerce and transit times? In part, but it’s really about the overall customer experience.

Historically, retail fulfillment has been about the capabilities of the seller. Today it is all about satisfying the desires of the buyer devoid of channel boundaries. In the rush to take advantage of the opportunities of e-commerce, many retailers have lost sight of the value of their hard assets. According to a recent MIT report, $1.1 trillion in store sales are influenced by the web. So, it is how the channels work together that can boost sales, not how one channel outperforms another at any given time. Put more succinctly, it’s making the various channels the organization pursues fuse to function as a single, seamless channel. Obviously this is not a simple knot

to untie. There are a lot of issues to resolve; technology, purchasing, inventory, transportation, training and culture, etc., etc., ad infinitum. Each of these elements contains its own tangle of interconnected challenges. At first glance it can seem insurmountable. But if you approach the problem in a logical, incremental way, it can be done.

By now you should see that omni-channel is not just a pie in the sky concept; a strategy reserved for the biggest retailers in the space. Rather it is a critical component in the future life of every retailer.

For now I will leave you with a few questions to ponder: } Do your infrastructure and processes support having the right product, at the right place, at the right time, at the right price? } Do you give your customer the fulfillment options he/she desires, and do the costs of those options align with his/her price sensitivity and your cost? } Are you managing customer service and returns in a channel-agnostic fashion? } Are you leveraging all of your assets (DC, warehouse, store, technology, etc.) to their greatest value?

Stay tuned for the July/August issue to read Jim Brownell expound on the five pillars of omni-channel.

JOE WILKINSON is Director, Contract Analysis & Negotiation for envista. He can be reached at jwilkinson@envistacorp.com.

By Rob Martinez 14

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Carriers

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COMPANY PROFILE

COMPANY PROFILE

One Day, Same Day, Everyday

Regional Delivery And Distribution

LaserShip is a parcel carrier facilitating last mile delivery to east coast markets for businesses that desire reduced transit times, greater flexibility, and the elimination of excess costs within their supply chain. Founded in 1986, LaserShip has evolved into a leading provider of regional same day and next day distribution services for premier e-commerce and product supply businesses.

Prestige Delivery Systems provides all of your delivery and distribution needs locally and regionally. With customizable technology and tracking software, we deliver everything from a letter to a loaded semi trailer. Our uniformed contractor fleet provides prompt, reliable, professional service to our partners in virtually all industries.

Experience why we have become the industry leader in providing same-day and next-day delivery service. Prestige is your one call solution for all of your delivery needs…WE CAN DELIVER!

www.lasership.com/fast 800.527.3764 sales@lasership.com

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www.prestigedelivery.com 216.332.8025 newcustomer@ prestigedelivery.com

COMPANY PROFILE

Save Time & Money with OnTrac OnTrac is the premier regional parcel carrier in the eight Western States, providing overnight delivery at Ground Rates to more than 60 million consumers. OnTrac was founded in 1991 as a division of Express Messenger Services Inc., and has the expertise to provide superior service and value in the overnight delivery market.

As the name implies, a regional carrier serves a specific region within the United States, offering reliable package delivery services similar to the National Carriers. OnTrac delivers to every ZIP Code in California and the major metropolitan areas of Arizona, Nevada, Oregon, Washington, Utah, Colorado and Idaho. OnTrac’s regional hub-and-spoke model in this service area enables it to make next-day ground deliveries at distances of up to 500 miles with fewer fees and lower surcharges.

Because we understand the importance of flexibility, OnTrac offers later pickup times, which increases your productivity and allows you to process more packages per day. This is all part of OnTrac’s reputation for delivering excellent customer service and our “can do” attitude is the hallmark of our success. Additionally, our Money-Back Service Guarantee assures you that we are committed to exceeding the expectations of our customers.

Plus, as a SmartWay partner, OnTrac promises to do its part to save the environment by getting your shipments there with cleaner air. For more information on OnTrac, please call 800.334.5000 or visit us online at www.ontrac.com.

www.ontrac.com 800.334.5000

COMPANY PROFILE

Southwest Logistics and Delivery Done Faster, Better, Smarter In just 15 years, INTELLIQUICK DELIVERY has become the largest independent delivery/courier service in Arizona, strongly establishing itself in the Top 10 of “Ranking Arizona: The Best of Arizona Business.” With warehouse, fulfillment and cross docking operations in Phoenix, Tucson, Las Vegas and Denver, INTELLIQUICK DELIVERY can get it there Faster. Better. Smarter.

INTELLIQUICK DELIVERY has established a new standard for reliability and customer service in local deliveries and last mile courier services. Whether the service is same day delivery, next day delivery, scheduled local courier delivery, medical delivery, financial document delivery, cross docking, warehouse fulfillment or last mile services, their “can do” attitude, good manners and clean-cut grooming confirm this for our customers along with guaranteed on-time delivery.

With more than 250 uniformed and credentialed delivery driver agents and a national affiliated network, INTELLIQUICK DELIVERY is able to offer fulfillment of any local delivery or logistics need in the Southwest. INTELLIQUICK DELIVERY drivers are sharp, seasoned professionals who understand that they are making an impression on customers and business associates every time they make a delivery for a valued client.

COMPANY PROFILE

Before INTELLIQUICK DELIVERY, no one else had combined state-of-the-art computer and communications technology with the lessons learned from the rise of national express companies to optimize customer service. INTELLIQUICK DELIVERY has become the “High Touch – High Tech” partner of choice in the Southwest. INTELLIQUICK DELIVERY has also emerged as a leader in the legal and mobile notary services fields over the last 15 years. Our legal couriers are experienced in the special handling of court filings, complaints, subpoena and process services and have earned the trust and respect of paralegals, lawyers, judges and government officials. For immediate assistance with any of our services, call us toll free at 888-IQCANDO (888.472.2636) or visit our website at www.IQcando.com.

www.iqcando.com 888.472.2636 MAY-JUNE 2014 | www.PARCELindustry.com

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COMPANY PROFILE

The Vision of Ground Shipping Has Changed You may have glanced at the possibility of a regional carrier handling your small packages in the past, but shippers are encouraged to take a second look at the regional option now more than ever. Regional carriers offer a choice that is flexible, cost-efficient and more personalized.

This was PITT OHIO’s vision when they launched their small package service in 2009. They found shippers are looking for an alternative when they inevitably begin to feel pressured by the small package giants whose assessorial charges continue to climb.

Flexibility and convenience was missing from the picture, so PITT OHIO put significant focus on offering flexible solutions based on a customer’s specific need. Shippers appreciate the wiggle room this company’s ground service offers. If it doesn’t fit, this regional powerhouse will still get it shipped. With an operation that doesn’t include conveyer belts, PITT OHIO is able to handle the hard-to-handle items such as pales, rakes and liquids and really anything you can imagine (envision).

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When it comes to personal service, regional carriers offer more than you bargain for. Your package is more than a barcode scanned number because PITT OHIO focuses on providing a personalized customer service experience for every shipper, large or small.

A recent survey shows regionals are approximately 20% more cost-effective than the nationals for overnight and two-day deliveries. Where the nationals of the small package world have over 50 assessorials, regional shippers, including PITT OHIO, have as few as 15.

Organizing your small package shipping is a big job, but you don’t always need a giant to handle it. Take a second look at the regional option for your small package shipments. The choice is yours.

www.pittohio.com 800.366.7488

COMPANY PROFILE For 23 years, LSO has earned among the best on-time delivery records and lowest damage claim rates in the industry. As the Southwest’s leading regional parcel carrier, LSO’s service area covers all of Texas, Oklahoma, western Louisiana, eastern New Mexico and Mexico. Headquartered in Austin, Texas, LSO offers a full range of next-day, day-definite guaranteed deliveries, plus extended pick-up times and early morning delivery options. Competitive rates and customer focus make LSO the high-service, high-value shipping provider.

Unlike other carriers, LSO ships packages point-to-point, with no conveyor belts that can damage shipments. While fewer miles and fewer hand-offs mean LSO packages arrive on time and in great shape. With real, live customer support and flexible shipping solutions to help businesses grow their customer base, LSO helps customers drive revenue and seize new opportunities. For more information, visit www.ShipLSO.com or call 1.800.800.8984.

www.ShipLSO.com 800.800.8984

COMPANY PROFILE

US Cargo: a Regional Small Package Carrier Specializing in Customized Solutions.

U.S Cargo is a diversified ground services provider offering high-value, low-cost solutions. Some of the services we offer to customers include dedicated courier, final mile, pool distribution, multi-piece parcel and light-weight LTL opportunities.

At U.S. Cargo we offer a personalized approach and commitment to meeting and exceeding our customer’s needs.

We specialize in being flexible when it comes to your shipping your small packages. The ability to offer customized solutions for our customers is what differentiates our company from the others. We are able to handle inventory pick/pack and distribution, management of dedicated transportation systems and white glove delivery including assembly and installation of computer equipment. These are just a few of the solutions U.S. Cargo can provide, but we have the ability to work with you on a solution that best fits your supply chain.

We believe in having a hands on approach to package sorting and offer better shipment integrity than our competition

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with 1 in 6000 packages experiencing a claim.

U.S. Cargo’s comprehensive website puts visibility at your fingertips with full tracking and tracing capabilities in real time along with the ability to conveniently print your shipping labels.

At U.S. Cargo, customers are not just a number. We have a dedicated customer service team at the corporate and local station level so you are able to receive prompt and professional follow up and response. Since 1972, we have provided superior on-time service and optimal package handling and we pride ourselves in being a strong regional carrier who delivers consistent, cost-effective and reliable service and solutions to accommodate our customers.

www.us-cargo.com 614.552.2746

COMPANY PROFILE

GSO Overnight Delivery to CA, NV & AZ Golden State Overnight (GSO) is a regional overnight parcel delivery company, offering overnight delivery in California, and the metropolitan regions of Arizona and Nevada. GSO customers enjoy a premium-level of service at a substantial cost savings, providing a strong regional alternative to the national carriers.

By focusing its pickup and delivery capabilities to a specific geographic footprint, GSO is able to provide its customers with flexible late pickup options and earlier deliveries. This includes a next-day ground service across a geography that is 2-3 days with the national carriers. GSO provides overnight delivery to every address in California with an affordable ground price, and without the ever-escalating accessorial fees.

GSO’s priority services also provide a strong alternative to the national carriers—beginning with, but not limited to, a dis-

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tinct cost advantage—and extending to guaranteed 8:00am, 10:30am, and Saturday delivery options.

Rounding its strategic advantages are unsurpassed customer service and account management operations that may be tailored to fit specialized shipper requirements, as well as a consistent focus on technological innovation that ensures optimal customer interfaces, real-time tracking, POD capture, and detailed reporting capabilities.

www.GSO.com 800.322.5555

COMPANY PROFILE

The First Choice... In Last Mile Delivery United Delivery Service (UDS) has been a leader in last mile deliveries for B2B and B2C shippers for over 40 years. We provide same day, next day and routed distribution services for companies throughout the Midwest. Our team is committed to helping your company reach their goals by utilizing our expanded service area, real time GPS technology and competitive shipping rates.

online are just some our standard personalized services!

Ship Faster: Later processing times and flexible services means UDS can offer faster shipping than national carriers, while our dense, integrated Next Day routing system sets us apart from other regional carriers.

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MAY-JUNE 2014 | www.PARCELindustry.com

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Unintended Operational Consequences: Avoiding Operational Pitfalls in a Dynamic Parcel Network

By Mike Lambert As the pressure to stay ahead of the competition has increased, many shippers are working to increase flexibility in their networks. A common goal for shippers is developing a nimble network to meet the high expectations of consumers while reducing cost and improving transit time. Transportation managers are striving to meet these goals by exploring all available options.

Whether it be leveraging store real estate to conduct direct to customer fulfillment operations or implementing new carriers, shippers are aggressively challenging old norms of shipping practices. However, implementing additional carriers, services, and origin points creates operational complexity, and managers need to be aware of the potential pitfalls that can result from a more complex network. Well-meant intentions can result in increased cost and poor service if quality processes for operational execution are not deployed. In this article, we will review a few operational pitfalls related to the frequently utilized Ground and Postal Consolidation services.

Over the past few years, free shipping promotions created the need for a lowcost shipping solution for online retailers. Postal Consolidation services from carriers such as FedEx, UPS, Newgistics, and DHL Global Mail filled the need perfectly. These services are low-cost and have a longer transit as a result of utilizing the Postal Service for final mile delivery. The carriers’ rates for these services are targeted toward lower weight ship24

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ments, typically less than 10 pounds.

Heavier shipments tend to be less expensive with Ground service. As a result, the selection of the least cost service is based on the billable weight of a package. Unfortunately, many shippers may have hidden dangers in their operations that cause them to compute incorrect billable weights and thus select improper services that result in unexpected cost increases (see box below).

Some WMS/TMS systems determine the actual physical weight of a carton based on the system weight of a carton’s SKUs and carton tare weight. Unfortunately, many managers may find that the system weights of the SKUs or packaging material are incorrect. In fact, this is fairly common for shippers who have a vast and rapidly changing SKU assortment. Add to this the fact that many retailers are decentralizing

the shipment of product from distribution centers to stores, and the complexity to manage system weights increases exponentially. As a result, a shipper may be shipping cartons that are actually heavier than their system computes and therefore improperly utilizing more costly services.

Carriers will weigh the parcels, and if the physical weight is determined to be higher than the manifested weight, they will bill the package at the higher weight.

Carton dimensions also impact the choice of service in a rate shop system.

For example, UPS considers dimensional weight when computing billed weight for its SurePost service, similar to its Ground service. The dimensional weight can potentially drive the billable weight over nine pounds and thus makes it more costly to ship a package SurePost versus Ground.

FedEx does not consider dimensional

Some of the operational issues that cause this are as follows: } } } } }

Incorrect system SKU and package tare weights Invalid system carton dimensions Lack of system rate shop capabilities Operator errors and poor quality control processes Non-optimal carton size usage

weight for its SmartPost service as they do for Ground and Home Delivery. FedEx computes a balloon weight or oversize weight for SmartPost that corresponds to higher billable weights and rates. The Balloon rate is utilized when any package that is less than 20 lbs. measures more than 84 inches but less than 108 inches in combined length plus girth. Balloon packages are rated at the 20 lb. rate.

Oversize is any package that measures more than 108 inches but not more than 130 inches in combined length plus girth.

An extraordinarily high rate is applied to Oversize packages.

Carriers also bill a Non-Machinable surcharge for their Postal Consolidation services based on the size of a carton.

This surcharge can negate any savings achieved with SurePost or SmartPost versus Ground service. The carriers will assess a Non-Machinable fee to packages with one of the following attributes: } Any package with one dimension measuring more than 34 inches } Any package with any two dimensions each measuring more than 17 inches } Any package weighing over 35 lbs } Any package in a cylindrical shipping tube.

As you can see, carton dimensions are an important component for calculating the correct billable weight and selecting the least costly service. If the carton dimensions in a shipper’s system are not well maintained, then there is a high likelihood of incurring higher shipping costs than expected.

System rate shop capabilities may also create an operational pitfall. Older systems may not apply the proper rating rules during a rate shop, especially for newer carriers and services. While system updates are often available, a shipper may have chosen not to upgrade in the past. For example, an unsuspecting manager may find his shipping cost spiraling out of control because his system doesn’t calculate or consider dimension in selecting carrier services! A recent and impactful example that shippers will need to address is FedEx’s announcement that effective January 1st, 2015 the three cubic foot threshold for Ground shipments

will be eliminated. Shippers will need to ensure the new FedEx Ground DIM weight calculation is updated in their shipping system to properly rate packages.

Operator errors can also create issues for managers. These errors typically result from poor process design and lack of quality checks. Some operations may require that an operator manually weigh packages to determine actual package weights.

It is very possible that an operator can weigh packages incorrectly, resulting in the potential of an incorrect service selection. Retailers with “ship from store” operations should be especially cognizant of this potential operational pitfall since the management of the shipping operations decentralized across the country. To minimize issues, managers should ensure processes have quality controls to validate package weights and measures; along with developing processes that minimize employee errors.

Shippers should also pay close attention to the carton sizes that are being utilized in their packing operations, especially shippers with a vast assortment of small and large SKUs of varying weights.

Many times a shipper may discover they are wasting money shipping more air than products. In this case, dimensional rules typically apply to the billable weight as referenced above and are the root cause of incorrect service selection. Managers can identify the carton sizes that are most frequently impacted by dimensions on the billed weight and determine if the carton or packing processes can be reengineered.

Consider this specific example of a shipper who encountered some of these pitfalls. An online retailer ships an array of decorative accessory products for the home. Conducting a strategic assessment of its network and service goals, the retailer concluded that implementing FedEx’s SmartPost service was a wise decision. The service would minimize the cost to ship to customers who choose free shipping. The service made sense for shipping low weight and low value products. For Black Friday, the retailer offered two sofa pillows as a “Door Buster” item, a $10 product to attract customers to the retailer’s website. The retailer shipped the two sofa pillows in an

18 x 18 x 18 carton. The carton’s physical weight was seven pounds. The retailer shipped 20,000 packages in a single day utilizing the low cost SmartPost service.

Unfortunately, the retailer’s shipping manager was unaware that the carton dimensions were not entered into the warehouse management system properly and as a result the system did not compute a balloon weight. As a result, the system selected the SmartPost service based on the package’s actual weight of 7 pounds.

However, the carrier computed a balloon weight of 20 pounds plus a non-machinable surcharge! The shipper’s SmartPost rates were four times higher at the balloon weight versus the seven pound rate, and FedEx Home Delivery service was actually half the cost. The package could have shipped for less and faster using Ground service — a costly error!

These are just a few examples of operational pitfalls to consider when utilizing multiple carriers, services, and origin points in your network. The added complexity aids shippers in meeting their customers’ cost and service expectations. However, managers must diligently examine their operations to ensure they execute as intended. Shippers should examine all components of their warehouse and transportation management systems to understand the service selection process and ensure accuracy of the inputs that influence it. They should also review the procedures of the packing and shipping employees to ensure the likelihood of waste and process errors are eliminated. Metrics should be established to analyze service selection performance and identify potential issues / root causes on an on-going basis. Once a shipper has evaluated these areas and implemented the proper business intelligence, they can be confident they are on the road to managing their parcel spend optimally.

MIKE LAMBERT is Vice President of Strategic Solutions for Green Mountain Consulting. In this role, Mike is responsible for the development and execution of all strategic Parcel Spend Management solutions which include spend analysis, network optimization, and contract management. Mike can be reached at mlambert@gmcps.com.

MAY-JUNE 2014 | www.PARCELindustry.com

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REDUCING RETURNS: An Ounce of Prevention Is Worth a Pound of Cure

By Ayal Latz

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In a previous article penned for PARCEL (There’s Gold in Them Hills, May/June 2013) we discussed how online retailers can leverage a good returns process to increase customer satisfaction, lower costs and even improve the bottom line. In this article we focus on the front end. What can online retailers do to prevent returns in the first place?

Let’s start with the assumption that returns are an inherent part of any e-commerce business. Each industry, company and product has individual characteris-

tics that will affect the intrinsic rate of return. For example, apparel retailers typically expect a higher rate of return than does a book retailer. With apparel, the buyer may not be entirely sure if an item pictured on the website is the right color, size or will really fit in a flattering way until it is received and tried on. When you order a book online, you are pretty sure that you want that book.

You will not be disappointed if the book is printed on one size paper or another.

Given this understanding, some level of returns should be built into the financial model depending on the category being sold. As long as the return percentage is within a tolerated range, the model is ok. Exceed that range and your financials take a beating. The focus of this article is to address issues that can reduce the tolerated percentage of returns in order to improve the bottom line and become more profitable. Fewer returns than are expected/budgeted lead to a positive impact on your financials. This can be accomplished by being proactive.

ENSURE QUALITY. One of the first opportunities in the process is right at the beginning, when inventory arrives at the fulfillment center. Set up and adhere to a thoughtful quality control process to ensure that the product you are selling is of the expected quality. Inspect a percentage of all stock that arrives. This percentage may vary by product category and vendor; i.e. if you’ve had problems with goods coming from a particular vendor or factory in the past, the percentage should be higher. If you find problems with the initial inspection, expand to a greater percentage. You should not only look at the quality of the item but also confirm that labeling is correct and points to the correct item in your system.

For example, if the item is a Large but labeled as a Small you can certainly expect lots of returns if not corrected.

CONFIRM ADDRESSES. Run address verification software to ensure that the address you are shipping to is complete and valid. If not, the order will be returned by the carrier as undeliverable, or worse yet, lost. The best place to incorporate address verification is at the time of order. Build it into your shopping cart so that the consumer can confirm any address discrepancies in real time. If you cannot achieve this in your cart, move the process into the backend prior to processing the order. Be prepared to hold orders while customers are contacted for clarification and correction as needed.

FULFILL ACCURATELY AND PACKAGE PROPERLY. Inaccurate shipments obviously lead to returns. Make sure that you or

your fulfillment provider is using the best warehouse management technology, barcode scanning and other means to ensure accurate picking and packing. Mistakes should be a rarity — typically no greater than one-tenth of one percent. Also, put thought into how the orders are being packaged. Take into account both protection and presentation of the items. As consumers, we all want to feel good about what we have purchased. A poor presentation leads to buyer’s remorse, which has a direct correlation to your return rate.

SPEED MATTERS! PROCESS AND SHIP THE ORDER QUICKLY! As far as the customer is concerned, this is the most important order that your company has and they want it now. You are in a race to deliver before the customer changes their mind. If you lose this race, the package is coming back. Aim for same-day shipping. This is not an easy task but is worth the effort. If you outsource fulfillment, find a provider that not only can do this but understands why it’s important.

COMMUNICATE! Let the customer know what’s going on. Tell them that you received their order and are working hard to get it to them. Let them know when it has shipped. Provide tracking information.

This will reassure them that the process is going correctly. And enable them to follow up on their own. Email or call after they have received the package to ensure that they are satisfied. Customers want information and they want you to care.

Making the customer feel valued will not only reduce returns but will build loyalty and even translate into additional sales!

What a dramatic swing of the pendulum!

CUSTOMER SERVICE. First, review your company’s strategy for this important function. Do you offer a way for your customers to contact you? Is it easy and convenient? Have you elected to limit the options that your customers have? For example, do you only offer customer service via email? Consider the value of having a full service, multi-mode customer service group. Customers that have the ability to choose their method of communication, from phone to email to chat, etc., will ultimately enjoy the experience much

more. Having live agents on the phone may appear to be costly on the surface but there is value in solving the customer’s problem immediately and on the customer’s schedule. Outsourcing this function to a call center or your fulfillment provider transforms fixed costs into variable costs. This makes outsourcing the function affordable for companies of almost any size.

TRAINING AND SAVING THE SALE TECHNIQUES. Agents who know the products and promotions inside and out can relate with the customer and provide engaging support. Empower the customer service agents with a robust, well thought out and generous Save the Sale strategy.

The dynamics of this will vary by product and promotion. Each program should be devised with the objective of minimizing returns. First, a knowledgeable customer service agent may be able to walk the customer through usage problems with their product. If the customer is not using the product correctly, the product will not perform and thus the customer will want to return. Only a properly trained agent will be able to correct this. Another effective Save the Sale technique is to extend the return window for the customer and ask them to continue to try it out.

In many cases this alleviates the customer’s concern about timing. Having extra time may lead to the customer changing their mind and retaining the product.

Depending on the circumstances it may be possible to persuade the customer to keep the product in exchange for a discount, or a coupon towards a future purchase, which may be less expensive than processing a return. Be creative. There are a lot of options.

Now we have the elements of an unbeatable two-pronged strategy. These front end best practices will lower the absolute number of returns which will improve your bottom line. Couple this will the strategies outlined in our previous article, and you reduce the absolute cost of any actual returns. The winning strategy covers both ends!

AYAL LATZ is President, a2b Fulfillment, Inc. Visit www.a2bf.com for more information.

MAY-JUNE 2014 | www.PARCELindustry.com

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By Doug Caldwell

Don’t Get Taken By Surprise: Plan Now for Big Dimensional Charge Increases Coming in January Late on a Friday afternoon in early May, FedEx dropped a bombshell — effective January 1, 2015, all ground shipments, regardless of size, will be subject to DIM (short for dimensional) charges. For many shippers, this will amount to a double-digit rate increase, and that will be on top of the yet-to-be-announced 2015 rate increases (last year’s increase was 4.9%). Currently, only an estimated 15% of FedEx ground shipments — those 3 cubic feet or greater — are subject to these charges. FedEx now delivers about 4.6 million ground packages per day, so that’s 3.9 million new daily packages that will now be subject to the charges.

Although we have not heard yet from the 28

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other carriers, it’s a pretty safe bet that most will follow suit. So regardless of the carriers that you currently use, there is a very good chance that at least some of your shipments will be affected by these new charges.

First, let’s look at the events that precipitated this change, and then we’ll explore some options on how to reduce — or even eliminate — the impact of these charges.

Why the change now? For years, the carriers have experienced explosive growth in B2C shipments, and those shipments are starting to take a toll on these carriers’ pickup and delivery networks. UPS and FedEx now capture the dimensions of each shipment while in transit, and

they have taken note that many of these new shipments are in relatively large, but lightweight boxes. For both carriers, virtually all of their transportation modes — including trailers spotted at shippers’ locations, cargo planes, tractor trailer rigs and rail vans — will often physically fill up with packages long before they hit their maximum operating weight. We are even hearing reports that some carriers’ delivery vehicles are starting to “cube out” on busy days. Normally, a delivery van is loaded with the packages for the entire route in the morning, and returns to the station at the end of the day. However, if the delivery vehicle “cubes out,” the driver will be forced to return to the

are the PCFs for common DIM factors: 194 DIM — minimum 8.9 lbs per cu ft. Until January of 2011, the U.S. domestic factor for UPS and FedEx. Note that the Postal Service still uses 194, and so does at least one regional carrier — OnTrac Ground.

166 DIM — minimum 10.4 lbs per cu ft. This was the US factor for international shipments until January of 2011. 166 is the new domestic factor for UPS and FedEx, adopted in 2011. Confused yet?

139 DIM — minimum 12.4 lbs per cu ft. This is the new international factor for UPS and FedEx international shipments.

115 DIM — minimum 15 lbs per cu ft.

Not currently used in the United States, but this factor is used by some carriers in Canada, Europe and Asia.

Steps to Take Now

station in the middle of the route to reload, and costs will skyrocket. The only other alternative is for the carriers to replace their delivery fleets with larger vehicles — an extremely costly proposition.

FedEx is hoping to change shippers’ behavior with these new rules, before that becomes a common occurrence.

Here are the current dimensional factors for FedEx, UPS and the Postal Service — the higher the DIM number, the higher the potential for additional charges: To calculate the DIM, multiply the length times the width times the height, and divide the result by the DIM factor.

Round up that number, and if it’s higher than the actual weight of the package, you will pay the dimensional weight. Here’s an example of a 12 lb zone 8 ground residential shipment in a 14” X 14” x 14” box, with a DIM factor of 166: 14 x 14 x 14=2,744 cubic ins/166=16.5, rounded up to 17 lbs. Under the 2014 rule, this package would be billed at the 12 lb rate of $19.67 with fuel. If the new rule were in effect today, this package would be

billed at the 17 lb rate — $24.26 — a 23% increase.

DIM factors are really a measurement of the density of each package, expressed in pounds per cubic foot, or PCF. Here

Survey Your Current Packages Some shippers already employ in-line cubing equipment, which electronically measures the dimensions of each package. If you don’t have cubing equipment but have a large number of packages to survey, you can now rent a portable cubing station. Some shippers employ “cartonization logic” software, which optimizes the carton size for each shipment prior to pick and pack. If you don’t have either, you’ll probably need to manually survey a good cross section of your shipments. You should record the external

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MAY-JUNE 2014 | www.PARCELindustry.com

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dimensions in 1/8” increments (don’t rely on the carton manufacturer’s dimensions, which may be the inside dimensions of the box). Secondly, record the actual scale weight of the box in fractions of a pound. Finally, multiply the length, width and height, then divide the result by the scale weight, to get the lbs per cubic ft — abbreviated PCF. If the PCF is 10.4 or higher, you’re probably home free, and you shouldn’t be impacted by the changes (at least for domestic shipments). If your PCF is lower than 10.4 on some of your packages, you’ll need to look at your options.

Start planning now. You won’t want to be among the shippers who wait for their first invoice in 2015 to determine the real impacts on their shipments!

Smaller Boxes May be the Answer You will want to focus on the worst offenders first — those packages with the lowest PCF. The obvious solution is to see if smaller boxes will work. Some shippers use a limited range of box sizes, and these shippers may want to consider increasing the number of stock box sizes in inventory.

Use Less (or More Effective) Dunnage Dunnage is the term for the material used to cushion the item in the carton.

If you use less dunnage, you may be able to use a smaller carton. Styrofoam peanuts, although lightweight, have fallen out of favor with many shippers.

Crumpled Kraft paper works well (and is easily recyclable), but can add several ounces to the shipment — and that could push the scale weight into the next higher pound. Amazon and a number of other high-volume shippers have switched almost entirely to air pillows, which offer great cushioning ability.

They also weigh next to nothing, so you 30

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are not likely to push your shipments into the next weight break.

Work with a Packaging Designer FedEx has just opened a new “Tech Connect” state-of-the-art packaging lab in Memphis — good timing, considering the new rules. UPS offers a comprehensive package lab as well, and both of these facilities can help you redesign your packaging and meet the new dimensional rules, while still protecting your shipments from damage while in transit.

In addition, most carton manufacturers offer these services, and there are a number of qualified independent designers as well. A word of caution: start the conversation now, because these labs are likely to be very busy in the coming months, due to the dimensional changes.

Consider Your Carrier Options As you can see from the chart on the previous page, the Postal Service has more lenient dimensional rules than UPS and FedEx, at least for now. For instance, Priority Mail for zones 2-4 (up to 600 miles) has no DIM factor because these packages stay on the ground, while zones 5-8, which travel by air, have a more lenient 194 DIM — and the DIM only applies if the package is over 1 cubic foot.

And don’t rule out so-called regional carriers who may have more tolerant DIMs. Since regional carriers’ line haul distances are lower, their line haul cost may represent a lower percentage of their total costs, and that may be reflected in a more favorable DIM. For instance, OnTrac’s 2014 Ground DIM is 194, compared to 166 for UPS and FedEx.

Endicia Weighs In on Dimensional Changes We spoke to Amine Khechfe, co-founder and general manager of Endicia, a seller of electronic postage services, who believes the price hike will prove to be a boon for the Postal Service. “This is definitely an advertisement for them,” he said. Khechfe notes that a migration of business to the Postal Service from FedEx and UPS was already underway before the FedEx announcement. Quoting from a recent report by the Colography Group, Khechfe said that “the Postal Ser-

vice has seen 10-15% growth in small lightweight, 5 pounds and under parcel volume since 2011 where the Post Office is making the final delivery, whereas FedEx and UPS have both seen declines, giving USPS a significant share of this market.” Khechfe also believes that the dimensional change will likely cause many shippers to reevaluate their carrier portfolios. “I would definitely say that this dimensional announcement is going to put the Postal Service in the driver’s seat,” he said. “Based on Endicia’s analysis, a switch to the Postal Service will likely make sense for 12-inch-cube packages of up to three pounds, and even four pounds for larger shippers.”

Avoid Invoice Shock by Acting Now Whatever your course of action, you will want to start the planning process now.

The carriers realize that some customer changes, such as redesigning packaging, can take months to implement, and that’s probably why FedEx gave its customers nearly eight months’ lead time.

You won’t want to be among the shippers who wait for their first invoice in 2015 to determine the real impacts on their shipments!

DOUG CALDWELL is the VP of International for AFMS Global Logistics Management Service in Portland Oregon. AFMS is a leading global logistics consultancy, and can assist your organization in both understanding the impact of these changes, and in moderating their impacts. Doug can be reached at 800.246.3521, or at doug.caldwell@afms.com.