Parcel September/October 2013

WHAT TO SEE AT THE PARCEL FORUM! PAGE 17

PARCEL

SEPTEMBER-OCTOBER 2013 www.PARCELindustry.com

Taking a Good Look at the Market — and Your Data Some common sense steps you can take to make sense of the happenings in the parcel industry… and how they affect you.

Page 24

Confused about FedEx SmartPost,

UPS SurePost and other deferred residential parcel options? Don’t be.

Page 20

Moving toward global sales and sourcing.

Page 7

Parcel

coNteNts

september-october 2013 | volume 20 | issue 6

Features

Departments 06 editor’s Note

The Importance of Education

By Amanda Armendariz

07 Going Global

Moving Toward Global Sales and Sourcing

By Tom Stanton

08 transportation Abcs

Staying Current with the Parcel Carriers

By Baris Tasdelen

20 confused About Fedex smartpost, Ups surepost and other Deferred residential parcel options?

Here’s a rundown from which almost any logistics professional can benefit. By Rob Martinez

10 spend perspectives What’s in Store for the Remainder of 2013?

By John Haber

12 regional Alternatives Gaining Ground

By Ted Kauffman

14 supply chain pivot Red Flag

By Rob Shirley

16 operational efficiencies

Do You Need a Software Tune Up?

By Susan Rider

17 What to see at the pArceL Forum!

24 taking a Good Look at the market — and Your Data

It can be daunting, but here are some common sense steps you can take to make sense of the industry — and how it affects you.

By Doug Kahl

Wrap Up’s back!

After being gone for the past couple of issues, this column has returned with some great, easy-to-read insight into the parcel market. Don’t miss it!

Page 34

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september-october 2013 | www.PARCELindustry.com

32 pArceL counsel

Negotiations: Three Observations of a Transportation Attorney

By Brent Primus

PARCEL president chad griepentrog publisher marll thiede editor amanda armendariz

[ amanda.c@rbpub.com ]

circulation director rachel chapman [ 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 ]

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EDITOR’S NOTE AMANDA ARMENDARIZ

The Importance of Education he annual Labor Day barbeques and picnics have come and gone, which means that summer is unofficially over, even if the calendar and the weather don’t agree. I personally am looking forward to the cool, crisp days of fall for many reasons, one of which is our annual PARCEL Forum.

You see, I love trade shows like this because it offers such a wonderful way for industry professionals to get to know one another, to mingle and ask questions, to attend sessions regarding topics they may not have known they needed education on, only to walk away with a new idea that will aid their organization. As professionals, continuing to seek out education, no matter where we are in our careers, is vital, and shows like the PARCEL Forum are fantastic ways to do so.

But even if attending shows like the forum doesn’t fit with your schedule or your budget (although, I must say, if you can make the case to attend, you definitely should!) it is our hope that PARCEL magazine itself serves as this educational resource for you and your colleagues. We are constantly striving to offer features and columns on the most pressing topics in the industry, and we feel that if you walk away from every issue with just one new tidbit of knowledge, we’ve done our job.

I’m particularly proud of the articles in this issue; the UPS SurePost/FedEx SmartPost comparison article on page 20 is a great read for anyone confused about deferred residential parcel options, and it’s an easy-to-read glimpse of how these services could fit into your shipping mix.

Then on page 24, we have a great look at how really analyzing the market (and your data!) can have far-reaching implications on your bottom line. This article comes at just the right time, as professionals are finalizing their 2014 plans.

And along those same lines, if there is something you’d like to see more of in PARCEL please don’t hesitate to drop me a line at amanda.c@rbpub.com, and I’ll do my best to see that we cover it.

As always, thanks for reading PARCEL.

Are you signed up for our e-newsletter?

If not, what are you waiting for?

As of press time, these were some of our most popular articles from recent e-newsletters: Successfully Combating Carrier Surcharges Time for the Carriers to Man Up: Pre-auditing Their Service Performance Who Has Time for Regional Carriers?

To get great articles like these emailed to you on a monthly basis, just scan the QR code above, or go to www.PARCELindustry.com and click on the “Newsletter” tab a the top of the page.

Tuesday’s Tip

Have you signed up for our Tuesday’s Tip feature yet? If not, you’re missing out on some great information emailed to you every week! Don’t worry, we know you’re busy, so these tips are brief and easy to read — but yet much-needed information for any transportation professional!

All you need to do is sign up for our e-newsletter and you’ll get this information emailed to you every Tuesday.

CONNECT WITH US Like us PARCEL FOLLOW @PARCELmedia Join PARCEL Magazine Group 6

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

GOING GLOBAL

BY TOM STANTON

Moving Toward Global Sales and Sourcing re you getting calls for international orders from your Internet site? Is your sales team starting to move toward worldwide distribution? This article summarizes some of the steps any company can take to export your products, expand your manufacturing offshore, and/or broaden your sourcing internationally with minimal difficulties. Transportation spending and Customs/Trade skills are critical to making these things happen without wasting money and time.

Step One: Internal Resources: What sort of international trade and transportation skills and knowledge does your team have? Your team probably knows domestic trucking and small package contract management pretty well but it may have never delved into the depths of exporting or Customs issues. In order to do be successful at international shipping you need to know the harmonized classification (schedule B number), the Commerce Control List classification, and the country of origin of the goods you are planning to ship. Each of these elements can be either very simple or quite complex. In order to make international shipments effectively, you need international shipping skills. Whatever skills your team does have, you need to recognize them and build on them. We are offering introductory training again this year at the PARCEL Forum in October.

Step Two: Compliance Procedures and Policies: Many companies today start shipping internationally in response to

Internet orders or efforts toward sourcing internationally without putting any policies and procedures in place to ensure they are in compliance with import and export laws. This is like running a marathon without training first — this is going to hurt! By establishing internal policies for compliance and control of international importing and exporting, your company will be prepared to “hit the ground running.” For example, if you are planning to ship to Canada or Mexico, your internal procedures should instruct the purchasing department to obtain country of origin information on all parts and components it purchases so that you are able to fill out a NAFTA form identifying which items are US/CA/MX made.

Step Four A: Target Customers: Maybe you have had potential customers from X country express interest in your products.

If you think that shipping to X is a good idea, then you need to do a few things to ensure your products can get to the end user at a reasonable cost and in a reasonable time frame with minimal hassle to them. This means you need to find out whether your products are allowed to ship to the target country, the transportation cost to your customer, and any duties and taxes he/she will have to pay. The authorization to ship is critically important to you and the “landed cost” of the transaction is very important for the end user.

Step Four B: International Suppliers: Perhaps you are not exporting at this time but international sourcing is your issue. If you are going to be obtaining products from a foreign supplier there are a few key elements you need to consider: classification, duty, and transportation costs. Connecting with a good US

Customs broker and forwarder is essential in this process. They can help you define the costs of shipping and duties for the landed cost of the item(s) you want to import. You need to match up the costs you are being quoted by the foreign vendor with what you could obtain on your own.

Step Five: Returns: This final step of planning for return shipments to you or to your vendor is often not addressed until it becomes a problem. A wise shipper/importer has a plan in place to handle returning or returned goods. There are a lot of resources to help you such as the Reverse Logistics Association.

Summary: In this article we have reviewed some critical steps that a company needs to take toward global sales and/or sourcing. There are a lot of details and skill needed to minimize transportation and Customs duties and tax costs that make it worthwhile to take a critical look at your company’s staffing and international trade skills to avoid wasted expenses and potential penalties. You need the right information and tools to get your shipping done right the first time! For further details please visit this year’s PARCEL Forum or see my previous online PARCEL articles by scanning the QR code below or visiting http://tiny.cc/GoingGlobalArchive.

TOM STANTON, AFMS, LLC, International Analyst can be reached at 503.246.3521 or Tom.stanton@AFMS.com.

You can read Tom's previous articles by scanning here.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

7

TRANSPORTATION ABCs

BY BARIS TASDELEN

Staying Current with the Parcel Carriers s a transportation or logistics manager, one of your many responsibilities includes making sure your parcel contracts are in good shape, which covers having favorable rates and lowering risks and liabilities.

The average parcel contract gets negotiated or reviewed every two to three years. Between each negotiation, there are significant

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changes in the carriers’ rules. This article will cover some of the changes that took place in recent years.

LIST RATES UPS has two different sets of published rates. “Daily Rates” is the more favorable rate sheet, and it is offered to shippers that have been UPS shippers since before 2011. “Standard Rates” are offered to newer shippers. When comparing two contracts, this small detail will cause a major gap between the total spend.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

Also, you should know that FedEx and UPS list rates are different. On the Ground service (and Home Delivery for FedEx), the rates are identical up to 70 pounds. Above 70 pounds, there is a five cent difference.

However on air services, the two carriers’ list rates are completely different. As a result, the same level of discount from each carrier would not yield the same net spend.

FUEL SURCHARGES Historically, UPS and FedEx have been using an identical fuel

index, which meant that their Air and Ground fuel surcharges (FSC) were the same. Last November, UPS shifted its fuel index, which resulted in a delta between the UPS and FedEx FSC. At lower fuel prices, the UPS FSC is higher compared to FedEx. At higher fuel prices, the UPS fuel surcharge is lower. If you are comparing proposals from the two carriers, you need to keep this gap in mind.

As of August 2013, the UPS Air FSC is 1.5% higher than FedEx.

DIMENSIONAL WEIGHTS Both FedEx and UPS switched to using dimensional weights many years ago. However, the list dimensional factor keeps going down, causing the rated weights for your packages to go up. There is not a way to get away from dimensional weights; however, you should try to reduce the damage by taking a few steps. First, you should optimize your box sizes so you do not pay for shipping air.

Next, you should negotiate a higher DIM factor, and if it makes sense, a threshold for the cubed packages.

AGREEMENT TERMS Carriers are trying to push terms in the agreement that tie the shippers’ hands. Early termination penalties prevent the shipper from switching carriers or even renegotiating the agreement before three years pass after the agreement is signed. In most cases, this time is too long, and it creates an unnecessary risk for the shipper. There are already terms in the parcel contract that tie the incentives to the parcel spend so that the shipper keeps the business with the carrier.

Another clause often added to agreement terms is the guaranteed service waiver. The shippers pay a premium for their packages to arrive at a specific time. The Guaranteed Service Refund is one way to keep the carriers accountable for being timely, and you should not give away that right.

SUMMARY Parcel carriers come up with new services, new rules, and new surcharges regularly. While negotiating or reviewing your parcel contract or while comparing

proposals from two carriers, you should carefully read the service guides and the agreements and understand the terms you are signing to avoid paying more and to prevent long-term grief.

Baris Tasdelen is a Sr. Transportation Analyst with enVista, a leading supply chain consulting and IT services firm, delivering innovative solutions that improve profitability, enhance customer service and reduce waste from source to consumption. enVista’s unrivaled consulting experience, deep vertical industry expertise and comprehensive solutions portfolio, enable clients to leverage one strategic partner that consults, implements and operates across Supply Chain, Transportation, Retail, IT and ERP. p

BARIS TASDELEN is a Sr. Transportation Analyst with enVista, a leading supply chain consulting and IT services firm, delivering innovative solutions that improve profitability, enhance customer service and reduce waste from source to consumption.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

9

SPEND PERSPECTIVES

BY JOHN HABER

What’s in Store for the Remainder of 2013? n last issue’s column, But while stocks in general are in record Internet. The legislation, which easily I discussed recent eco- territory, both UPS and FedEx reported passed in the Senate in May 2013, connomic results as well as lackluster quarters and signaled eco- tinues to sit in the House. Many large and poor earnings announce- nomic troubles ahead. One of the main small businesses are opposed to the legisments from the two largest areas of exposure continues to be inter- lation and on August 21, executives from domestic parcel shippers, national growth, which drives substantial 11 companies — a cross-section of cataloguers within the B2C, B2B, and OrderUPS and FedEx. Wall Street volumes and profits for UPS and FedEx. continues to fly high; however, I also provided an update on the sta- Fulfillment space — went public with stocks have pulled back a bit as tus of The Marketplace Fairness Act. their concerns regarding the legislation. the S&P 500 is just shy of 4.0% This legislation provides a practical way The American Catalog Mailers Association off of the 52 week high (based on for state, county, and local governments (ACMA), The Direct Marketers Association the August 21, 2013 closing price). to collect sales tax for goods sold on the (DMA), and The Electronic Retailing

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SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

Association (ERA) are also opposed to the legislation and would like to see the bill simplified by easing some of the administrative requirements required for collecting and auditing these taxes. One thing is certain — the bill is extremely controversial, and there’s a possibility the bill will not make it to the floor of the House for a vote. Many representatives are concerned their positions will alienate their core constituents. We’ll continue to monitor the situation for the remainder of the year — if it is passed it will have a big impact on shippers of all shapes and sizes.

The July retail sales report was released on August 15, and the data suggests that the US economic outlook for the remainder of 2013 may be dreary. This follows the UPS and FedEx forecasts — both companies see economic trends before many other companies since they are moving a big chunk of the gross domestic product through their networks. Both Wal-Mart and Macy’s recently announced slower

than expected growth and communicated doubts that consumers will spend enough in closing out 2013 to lift the still-subpar US economy. The Wal-Mart announcement is particularly troubling as they account for nearly 10% of total nonautomotive spending in the US. It expects economic strains in the US and abroad to squeeze its shoppers for the remainder of 2013.

Concerns over Obamacare continue to weigh heavily on the economy. UPS recently announced it is dropping healthcare coverage for up to 15,000 employee’s spouses. UPS cited the rising costs of healthcare, combined with the costs associated with the Affordable Care Act. We’ll continue to monitor Obamacare developments for the remainder of 2013 as it also will have a huge impact on shippers and consumers.

Crude oil has also resurfaced as a major economic concern for shippers and consumers. Turmoil in Egypt, as well as many other Middle Eastern countries

has driven the price of crude over $100 a barrel. Some economists are forecasting costs to rise as high as $120 a barrel by the end of 2013. Even though Egypt is not a huge producer of crude, the geographic locations of Egypt and the Suez Canal play a huge role in the worldwide oil markets.

It appears we’re still in a period of economic uncertainty as we close out the summer, with a variety of factors contributing to a slow recovery. We’ll continue to monitor new developments and keep you updated on trends that will impact parcel shippers and the cost of moving goods in next issue’s Spend Perspectives! p

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

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

11

Regional AlternAtives

By Ted Kauffman

gaining ground he fundamental advantages of ground delivery for shippers have been well-documented for many years. Today, due to continued economic uncertainty, changes in the supply chain, and an increased demand for business-to-consumer (B2C) service, ground delivery is gaining traction in the marketplace.

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Overall, ground delivery — a deferred service as opposed to priority overnight (usually by 10:30 a.m.) — has been growing steadily over the last decade as air revenue continues to slip.

What aRe the FactoRs Behind this tRend? cost savings. While the economy is still soft, cost containment remains the mantra at most corporations. The idea that it has to be there overnight may still apply at times, but the prevailing mindset today

september-october 2013 | www.PARCELindustry.com

is “let’s go cheaper, even if it’s slower.”

Shippers save substantially with ground service while carriers cut back on more expensive air transport, associated with rising fuel costs, and enjoy greater profits. b2c Growth. While the volume of ground service continues to increase for business to business, the increase is even more dramatic in B2C shipping. This is tied to an explosive growth in e-commerce, with Amazon.com as a prime example, and this is enabled through an industry shift

regarding the supply chain: More regional distribution centers are now located closer to shippers, and they use ground transport to make residential deliveries.

Increased Efficiency. Compared to air transport, ground service is more reliable.

Fewer exchange points result in less margin for error, better damage control, and fewer claims.

BUT WHICH GROUND SERVICE BEST MEETS YOUR NEEDS? UPS and FedEx. Among the industry giants, UPS does the most ground volume.

Federal Express arrived later in the ground game, launching FedEx Ground (originally RPS) in 2000. Today, air volume continues to decline for both of the national giants, and domestic ground service is now FedEx’s only source of growth. Typically, ground service deliveries for both UPS and FedEx range from next day to five days.

U.S. Postal Service. In 1913, Parcel Post was introduced as a cost-effective service of the USPS. Today, as the Internet has dramatically reduced the

Postal Service’s mail volume, and USPS revenue continues to decline, the Postal Service still does a good job of “going the last mile” at the lowest price point. Yet its services are limited, with the “sweet spot” being light-weight shipments (under five pounds). Given these dynamics, USPS is looking for “workshare” arrangements, including consolidators to sort the mail and regional couriers to deliver it to the local post office. In this sense, many regional carriers view USPS as more of a partner than a competitor.

Regionals. Regional carriers have always relied on ground transport for not only deferred service but also priority and nextday. Today, while they may not yet have the national reach of the giants, they offer distinct advantages:  Faster. As regionals expand their footprint, they can provide guaranteed, next-day service in Zones Two, Three, and Four.  Less expensive. Deliveries cost 10% to 20% less than the giants.

 More flexible. Easier to negotiate customized plans.

Of course, a trademark of the regionals is personalized service. And now, with advanced technology, regional quality is on par with and sometimes superior to that of the nationals.

Looking ahead, we expect the regionals to increase their market share of the ground business as more shippers become aware of this alternative. We also expect the regionals to further expand their national footprint.

In fact, we have seen the start of a network of “Super Regionals,” and this may become another force to reckon with in the future. p

TED KAUFFMAN is the chairman of Eastern Connection, the largest regional small-package overnight carrier on the East Coast, covering over 5,000 ZIP Codes in the Northeast. The company, which has 17 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, SameDay, Second-Day, Logistics & Warehousing, Trucking, and Expedited Mail. Visit www.easternconnection.com.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

13

SUPPLY CHAIN PIVOT

BY ROB SHIRLEY

Red Flag have written several articles for PARCEL about tech firms that are approaching the supply chain in new ways.

Amazon’s overall strategy is becoming clearer and is by no means just in test phase.

Jeff Bezos founded the company in 1994 and is President, CEO and Chairman of the Board with over $61 billion in annual revenue

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for 2012. Bezos is also in the process of buying the Washington Post.

They have successfully disrupted multiple industries in both product and service sectors. Their approach is a two pronged strategy of cheaper and faster for both products and services.

In addition to dominating the book business in print, e-reading, and audio, Amazon owns the hearts of customers with its “prime service.” There are now 10 million prime customers spending $79/year

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

for unlimited and free guaranteed two business day delivery, free usage of thousands of videos (movie & TV) and free access to hundreds of thousands of books.

Everything they do to improve and expand includes the idea of selling that service too. Providing e-commerce for others to sell products, warehousing and fulfillment, cloud services, storage lockers and e-commerce services all took this path.

They invented and patented the “one click system,” invented the Kindle,

were voted the most trusted company in America this year, and have 89 warehouses in the one million square foot range (with many more planned, like three in Texas, for instance).

Electronic commerce purchases passed $1trillion in sales last year. They have only a six percent share, by looking through the telescope the other way, they have 94% upside potential. If anything, growth is accelerating with predictions of dire effects for shopping malls. In 1995, when Amazon got under way, right after the web was first available, its sales were non-existent.

Amazon has introduced Amazon Fresh in Seattle and LA offering same day delivery of 100,000 grocery products by uniformed Amazon drivers. Amazon Fresh is just like other Amazon services that provide a dual reason for existing; in this case it gains the density to offer same-day delivery for items that are much more profitable than groceries. For groceries, it incorporates an easy-to-use reorder system for items that one always needs to buy again.

It is rumored that some venture cap- 1. Are you offering enough value to keep italists are even asking new startups your customers from switching to exactly how they will not be flattened by them? Ask your sales people to select the Amazon juggernaut as a key question key customers for a roundtable disto considering investment. cussion. Consider making those cusAmazon’s success is going to have tomers permanent advisors. You will an effect on every single player in the need a lot of good input. supply chain.

2. How do you figure out who to talk to at Amazon to offer your product or service? Go to Google, input services.

YOUR CUSTOMERS ARE CONSIDERING amazon.com for contact info and THREE POINTS: reach out to them. There may be a lot a. Can Amazon help me by replacing of possibilities for carriers and product your service? (Yes, YOUR service.) sellers. Be careful with your margins b. Can we make money being a service and work hard for the right terms. provider or product seller with Amazon? c. What should we do to compete We are lucky to live in the USA where with Amazon?

Jeff Bezos has been asked if he is going capitalism has created the greatest competto buy UPS, USPS, or FedEx. He says no itive environment of all time. Creativity and and my personal opinion is they will not innovation are becoming more and more make a big carrier purchase because they important. p are building same-day services that will innovate and compete with all carriers.

Same day delivery providers may have ROB SHIRLEYÂ is President of ExpresShip, a strategic the most risk here. Some points worth consultancy in the global supply chain; contact him at rsxpship@gmail.com or visit www.xpship.com. considering:

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

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OperatiOnal EFFiCiEnCiES

By SuSan RideR

do You need a Software tune up? his is the was being done by everyone. What comperfect time ponents have a failure opportunity? Is of year to your back-up working? How often do you review all the test it? Recently, working with a comsoftware that pany in California, we checked the daily runs in your facil- backups and, voila, they were blank. The ity. Make a com- IT department went through the motions plete list and create every day to back up critical systems a spreadsheet of devel- but never checked to see if the backopment date, last update, ups were really happening or were corplatform, etc. Reviewing rupted. Another company, after a review, functionality is very impor- found out 90 days before the software tant with all the changes company closed that their software was taking place in Omni-channel being obsolete. Ouch, 90 days to select, Distribution. If you are not look- implement and learn a new system. The ing at an Omni-channel effort and think company ended up being held hostage this article isn’t for you, think again. In by the freelance developers who left the today’s world software is “the bones” of closing software company. most operations. What will happen if With all the acquisitions and mergers your hard drive decides to quit or gets that have taken place in the supply chain corrupted? What type of fault tolerance space it is very important to stay conplan do you have in place? Have you nected to your software user group. Some tested it recently? All too often, compa- end users are getting smart and startnies have gone through the expense of ing blogs or LinkedIn groups themselves. mirrored computers and elaborate back This way you know the collection of comup plans only to realize when it’s really panies that are going through the same needed it failed. Recently, this hap- steps you will need to go through should pened to a top company in the Consumer the company end-of-life your software. It Products Group (CPG) world. After find- is also a great place to find freelance suping out from the IT person that all the port people and programmers. It gives you equipment was installed at go live but a another avenue should something happen mock switchover failure was never per- and also gives you a longer window to preformed, I just shake my head. pare for a selection and select and impleI know it is work and effort but your fail- ment a new piece of software. ure plan should be tested and reviewed After reviewing your tune up check annually. You will appreciate your efforts list of both software and hardware comwhen the time comes for the back-up ponents don’t forget any embedded strategy to be put in place and everything software within a said application that works as planned. is needed for the application to run If you haven’t already done so, develop properly. Also, review any third party a hardware and software tune up check software that is a part of the applicalist. During the infamous Y2K scare this tion. You may want to set up a grading 16

september-october 2013 | www.PARCELindustry.com

scale color coded for each item so that you can visibly see at a glance what areas need attention throughout the year. Green, yellow, orange and red, with red being the critical ones. This checklist also becomes a handy tool for budgeting, which usually takes place this time of year. When reviewing a software that has now been no longer supported by the new company that acquired your initial software provider, please realize going to another product the company owns is a complete new install with interfaces, etc. And no matter how attractive the company tries to make it look, it will be a task and you may not get what you were looking for, which is usually an opportunity to upgrade functionality and enhance your operation with new abilities.

Technology is a challenge sometimes and is worrisome to the non-technical executive but there are plenty of resources available to assist in determining your needs and risk. It is certainly becoming apparent in the marketplace today that the company that focuses on technology to drive their business to the next level is the company that will end up on top.

If you are not an IT person and you don’t get the attention of the IT department from a supply chain effort, this may be a good time to develop and budget for an IT knowledgeable associate that will bridge the gap between your department and the IT department. p

SuSan rider is Owner, Rider & Associates and Logistics and Supply Chain Consultant, as well as a popular speaker at the PARCEL Forum. She can be reached at susanrider@msn.com.

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Confused About FedEx SmartPost, UPS SurePost and Other Deferred Residential Parcel Options? by rob martinez

With the meteoric growth of e-commerce — and consumer demand for free or low- cost shipping — services like FedEx SmartPost and UPS SurePost are here to stay. Residential shippers that continue to ship UPS Ground Residential and/or FedEx Home Delivery are wise to evaluate SmartPost and SurePost rates and services, in addition to other USPS service partners like Newgistics, OSM Worldwide, and DHL Global Mail.

Each offers cost-effective, non-guaranteed means of shipping non-urgent, lightweight (up to 70 pounds), businessto-consumer packages in a partnership with the United States Postal Service.

Companies like FedEx, UPS, and DHL leverage USPS Parcel Select services, a postal discount program that combines the strengths of the parcel expeditor with the vast delivery network of the USPS. The parcel expeditors handle pickup, sortation, transportation and induction to the USPS hub. USPS handles the “final mile” delivery, usually to a residence.

While transit times are not guaranteed, delivery is generally achieved within two to eight days within the contiguous 48 states, although how long it takes is highly variable and determined by unique origin/ destination pairings, service provider’s network, induction point, and other factors.

delivery, including the Residential Surcharge, which is currently $3.20 (plus fuel surcharges), in addition to many other accessorial charges. Although both SmartPost and SurePost began assessing Delivery Area Surcharges (DAS) in July 2013, the fee is only $.25 — significantly lower than the $2.15-$3.50 DAS charges for air and ground shipments.

Parcel Select services offer advantages to each of the parties involved. The shipper benefits by keeping shipping costs low in order to offer its customers an economical alternative to Ground residential delivery at a lower price point. The parcel carriers benefit by economies of scale; the more they aggregate, the more “entry” and “saturation” discounts they can earn from the USPS. The hybrid service allows the carriers to lower operating costs by consolidating multiple deliveries

Win, Win, Win! Parcel Select service avoids many costs typically associated with air and ground 20

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1.0% 21.2%

to a single point of USPS entry, while avoiding the high costs associated with residential deliveries. Finally, the USPS benefits by receiving additional package volumes and revenues, while incurring marginal cost increases since postal carriers are making mail deliveries to those same mailboxes anyway.

Parcel Select (in combination with Parcel Return, the equivalent USPS workshare program for shippers with high volumes of returns) is the single largest service by volume, accounting for 38.1% of all packages in the Shipping and Packages segment for the USPS. (Figure 1) For its most recent earnings report, package volume for Parcel Select & Parcel Return was up 8.3% over 2012, and revenue increased a whopping 19.4%.

FedEx SmartPost has been the fastest growing service segment within FedEx in

Figure 1

25.3%

USPS ShiPPing ServiceS by Package volUme (Fy2013) First Class Packages

14.4%

Package Services Parcel Select, Parcel Return

38.1%

Priority Mail & Standard Post Express Mail

Figure 2

500,000

Figure 3

FEDEX SMARTPOST ANNUAL PACKAGE VOLUME BY FISCAL YEAR (THOUSANDS)

522,726

$900

433,042

$782

$700

309,282

$630

$600

300,000

$481

$500 $400

208,315 200,000

$926

$800

366,647

400,000

FEDEX SMARTPOST REVENUES (MILLIONS)

$1000

$300

156,958

$200 100,000

$100 $0 FY2008

FY2009

FY2010

FY2011

recent years, doubling and even tripling YOY volume growth over its Ground unit.

Fedex SmartPost has achieved an aggregate volume increase of 233% since FY2008. (Figure 2.)

At nearly 533 million packages delivered in 2013, SmartPost volume was just under half of FedEx Ground’s FY2013 package volume of just over 1 billion packages.

Revenue growth at SmartPost has been equally impressive. Nearly $1 billion in revenue in FY2013, SmartPost achieved 92.5% revenue growth since 2010.

(Figure 3.)

Note, as UPS financial statements combine multiple service categories, we are not able to report on specific SurePost growth. However, the UPS annual report for 2012 includes several instances in which the company discusses the rapid growth of the product.

An interesting side note regarding UPS SurePost is the significance the product played during recent UPS/Teamsters contract talks. Since UPS SurePost packages are aggregated and inducted for USPS postal carrier delivery, Teamster negotiators view SurePost with extreme caution since it could have a negative impact on union labor. Simply put, it takes packages away from Union drivers and puts those packages in the hands of USPS postal carriers.

As a result, the final master labor contract places several important restrictions on UPS SmartPost that you can read by scanning this QR code.

FY2012

FY2013

FY2010

FY2012

FY2011

FY2013

ARE ALL PARCEL EXPEDITORS THE SAME?

WHAT ABOUT PRICING?

Categorically, they are not the same.

Infrastructures vary greatly, which of course impacts how quickly and where your parcel is entered into the USPS delivery stream. Some companies consolidate packages and won’t send a truck to larger sorting facilities or USPS entry points until the truck is mostly or entirely full, leading to additional delays.

While FedEx SmartPost utilizes a network of 25 SmartPost hubs that distribute scheduled loads into all three types of USPS entry points (Network Distribution Centers, or NDCs; Sectional Center Facilities, or SCFs; and Destination Delivery Units, or DDUs), UPS SurePost packages are transported via the UPS Ground network and are always inducted at the DDU, the closest postal facility to the consignee’s place of residence.

Rates can vary, too. Packages inducted at the DDU receive the best pricing from the USPS. However, it costs the parcel aggregator more to deliver to the DDU than further upstream in the USPS network.

FedEx SmartPost and UPS SurePost published rates are similar, but not exact.

Each matches its published Ground pricing up to nine pounds for the contiguous US. (Zones 2-8). FedEx SmartPost rates are provided in Figure 4.

It’s important that shippers understand that at 10 pounds and higher, FedEx SmartPost rates are actually 36% higher than FedEx Ground and FedEx Home Delivery services.

ZONES

2

3

4

5

POUNDS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

$5.84 $6.23 $6.35 $6.77 $6.45 $7.07 $6.60 $7.25 $6.78 $7.33 $6.95 $7.55 $7.27 $7.75 $7.54 $7.94 $7.69 $8.13 $10.79 $11.09 $11.16 $11.54 $11.46 $11.90 $11.75 $12.18 $11.96 $12.52 $12.17 $12.92 $12.34 $13.11 $12.45 $13.51 $12.60 $13.69 $12.77 $14.17 $13.00 $14.63

$6.41 $7.33 $7.71 $8.10 $8.42 $8.55 $8.70 $8.93 $9.06 $12.51 $12.62 $12.78 $12.94 $13.12 $13.31 $13.35 $13.73 $14.14 $14.67 $15.17

$6.69 $7.49 $7.95 $8.47 $8.81 $9.01 $9.22 $9.39 $9.55 $13.35 $13.45 $13.76 $14.03 $14.29 $14.74 $14.98 $15.59 $16.41 $17.02 $17.69

6

Figure 4 7

8

Z

H

P

A

M

NonContiguous U.S.

Hawaii

Puerto Rico

Alaska

Military

$7.00 $7.09 $7.21 $14.31 $14.31 $14.31 $14.31 $14.31 $7.88 $7.98 $8.27 $16.92 $16.92 $16.92 $16.92 $16.92 $8.36 $8.55 $9.13 $19.14 $19.14 $19.14 $19.14 $19.14 $8.79 $9.12 $9.80 $20.53 $20.53 $20.53 $20.53 $20.53 $9.11 $9.50 $10.32 $21.64 $21.64 $21.64 $21.64 $21.64 $9.28 $9.78 $10.55 $23.13 $23.13 $23.13 $23.13 $23.13 $9.54 $10.04 $10.85 $26.49 $26.49 $26.49 $26.49 $26.49 $9.863 $10.37 $11.38 $28.27 $28.27 $28.27 $28.27 $28.27 $10.04 $10.91 $12.09 $29.79 $29.79 $29.79 $29.79 $29.79 $14.21 $15.85 $17.53 $32.70 $32.70 $32.70 $32.70 $32.70 $14.55 $16.86 $18.56 $34.99 $34.99 $34.99 $34.99 $34.99 $15.12 $17.87 $19.80 $37.53 $37.53 $37.53 $37.53 $37.53 $15.77 $18.95 $21.08 $40.09 $40.09 $40.09 $40.09 $40.09 $16.59 $19.93 $22.29 $42.67 $42.67 $42.67 $42.67 $42.67 $17.39 $20.95 $23.46 $45.20 $45.20 $45.20 $45.20 $45.20 $18.00 $21.67 $24.30 $47.34 $47.34 $47.34 $47.34 $47.34 $18.93 $22.80 $25.58 $49.69 $49.69 $49.69 $49.69 $49.69 $19.81 $23.80 $26.87 $52.20 $52.20 $52.20 $52.20 $52.20 $20.67 $24.80 $28.16 $54.70 $54.70 $54.70 $54.70 $54.70 $21.58 $25.77 $29.47 $57.28 $57.28 $57.28 $57.28 $57.28

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

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ZONES POUNDS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

2

3

$5.84 $6.23 $6.35 $6.77 $6.45 $7.07 $6.60 $7.25 $6.78 $7.33 $6.95 $7.55 $7.27 $7.75 $7.54 $7.94 $7.69 $8.13 $13.49 $13.71 $13.76 $14.04 $13.98 $14.30 $14.19 $14.51 $14.35 $14.76 $14.50 $15.05 $14.63 $15.19 $14.71 $15.49 $14.82 $15.52 $14.94 $15.97 $15.11 $16.31

4 $6.41 $7.33 $7.71 $8.10 $8.42 $8.55 $8.70 $8.93 $9.06 $14.75 $14.83 $14.95 $15.07 $15.20 $15.34 $15.37 $15.65 $15.95 $16.34 $16.71

5 $6.69 $7.49 $7.95 $8.47 $8.81 $9.01 $9.22 $9.39 $9.55 $15.37 $15.44 $15.67 $15.87 $16.06 $16.39 $16.57 $17.02 $17.62 $18.07 $18.56

6

8

9

10

11

AK

HI

PR

12

13

US APO/FPO Territories

$7.00 $7.09 $7.21 $22.23 $22.23 $22.23 $22.23 $11.30 $7.88 $7.98 $8.27 $24.71 $24.71 $24.71 $24.71 $12.40 $8.36 $8.55 $9.13 $26.82 $26.82 $26.82 $26.82 $13.73 $8.79 $9.12 $9.80 $29.45 $29.45 $29.45 $29.45 $15.47 $9.11 $9.50 $10.32 $31.96 $31.96 $31.96 $31.96 $17.81 $9.28 $9.78 $10.55 $34.65 $34.65 $34.65 $34.65 $20.60 $9.54 $10.04 $10.85 $36.98 $36.98 $36.98 $36.98 $23.17 $9.863 $10.37 $11.38 $38.24 $38.24 $38.24 $38.24 $26.13 $10.04 $10.91 $12.09 $40.93 $40.93 $40.93 $40.93 $28.50 $16.00 $17.21 $18.44 $46.27 $46.27 $46.27 $46.27 $31.16 $16.25 $17.95 $19.20 $48.65 $48.65 $48.65 $48.65 $32.86 $16.67 $18.69 $20.11 $50.63 $50.63 $50.63 $50.63 $35.82 $17.15 $19.49 $21.10 $52.60 $52.60 $52.60 $52.60 $36.76 $17.75 $20.21 $22.31 $54.68 $54.68 $54.68 $54.68 $38.61 $18.34 $20.97 $23.48 $65.59 $65.59 $65.59 $65.59 $40.44 $18.79 $21.69 $24.32 $59.09 $59.09 $59.09 $59.09 $42.19 $19.47 $22.82 $25.60 $61.73 $61.73 $61.73 $61.73 $44.13 $20.12 $23.82 $26.89 $64.40 $64.40 $64.40 $64.40 $46.08 $20.75 $24.82 $28.19 $66.89 $66.89 $66.89 $66.89 $48.05 $21.60 $25.79 $29.49 $69.28 $69.28 $69.28 $69.28 $51.40

Figure 5 UPS SurePost’s published pricing matches FedEx SmartPost up to nine pounds — a mirror of its Ground pricing — within the contiguous US. However,

22

7

pricing above nine pounds and non-contiguous US is significantly higher with UPS SurePost than FedEx SmartPost.

(Figure 5.)

Rather than applying a fixed increase above 10 pounds (like SmartPost’s flat 36% increase), UPS increases SurePost

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

rates by $5.55 (or more) over Ground published pricing. (Figure 6.)

WHAT ABOUT DISCOUNTS? Volume shippers should work with their carrier reps to negotiate discounts off published rates. What incentive should you receive? Of course, carrier pricing depends on many factors, including package characteristics, pickup and destination delivery density, proximity of your DCs to processing facilities, parcel volumes, competition, sales commissions, cost to service your account, and many other items. That said, it’s not unusual to hear of high-volume shippers that have negotiated SmartPost incentives well into the 70s.

Other negotiable items include surcharges (fuel, DAS, non-machinable charges, and others) as well as reductions to minimum charges. Shippers should measure the impact of the minimum charges as it is often an important point for negotiation. Volume shippers should be able to negotiate

2013 UPS SUREPOST PUBLISHED RATES

2013 UPS GROUND PUBLISHED RATES

ZONES WEIGHT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

2

$5.84 $6.35 $6.45 $6.60 $6.78 $6.95 $7.27 $7.54 $7.69 $13.49 $13.76 $13.98 $14.19 $14.35 $14.50 $14.63 $14.71 $14.82 $14.94 $15.11

INCREASE $

ZONES

8

$7.21 $8.27 $9.13 $9.80 $10.32 $10.55 $10.85 $11.38 $12.09 $18.44 $19.20 $20.11 $21.10 $22.31 $23.48 $24.32 $25.60 $26.89 $28.19 $29.49

2

$5.84 $6.35 $6.45 $6.60 $6.78 $6.95 $7.27 $7.54 $7.69 $7.94 $8.21 $8.43 $8.64 $8.80 $8.95 $9.08 $9.16 $9.27 $9.39 $9.56

ZONES

8

$7.21 $8.27 $9.13 $9.80 $10.32 $10.55 $10.85 $11.38 $12.09 $12.89 $13.65 $14.56 $15.50 $16.39 $17.25 $17.87 $18.81 $19.76 $20.71 $21.67

Figure 6 a minimum reduction at least $3.00 off minimum charges (2013 minimum charge is $5.84) for packages under

2

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55 $5.55

My personal experience is that FedEx SmartPost offers higher discounts than UPS SurePost. However, UPS representatives have made the argument that SurePost rates are higher because it’s a better product than FedEx SmartPost. They advise shippers to consider that SurePost parcels are distributed through the UPS Ground network, and moreover, are always inducted at the DDU — the final postal facility closest to the recipient. Therefore, transits are more predictable and consistent.

However, any pricing advantage FedEx SmartPost has enjoyed might be changing.

Several shippers have recently reported receiving very competitive SurePost pricing proposals, better than ever before. p

INCREASE %

ZONES

8

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5.55 $5.55 $5.55 $5.60 $5.92 $6.23 $6.45 $6.79 $7.13 $7.48 $7.82

2

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 69.9% 67.6% 65.8% 64.2% 63.1% 62.0% 61.1% 60.6% 59.1% 59.1% 58.1%

8

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 43.1% 40.7% 38.1% 36.1% 36.1% 36.1% 36.1% 36.1% 36.1% 36.1% 36.1%

one pound (resulting in a minimum charge of $2.84), and at least $2.00 minimum reduction for packages at one pound and above (resulting in a $3.84 minimum charge).

ROB MARTINEZ DLP is President & CEO of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. He welcomes questions and comments, and can be reached at 858.879.2020 ext. 114 or rob@shipware.com.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

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Taking a Good Look at the

Market — and Your Data It can be daunting, but here are some common sense steps you can take to make sense of the industry — and how it affects you. By Doug Kahl This year we witnessed another turbulent time in the freight audit and payment service sector. A reprise of a situation from a decade ago when two companies collapsed. Fraud, embezzlement, bankruptcy, and lawsuits. This has all the trappings of another great John Grisham thriller. Or, in the words of baseball legend Yogi Berra, “It’s déjà vu all over again.” With tens, if not hundreds, of millions of dollars at stake this is unfortunately no laughing matter. Particularly for those companies affected by the latest situation.

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Before you run for cover and turn off the lights on a decision to outsource audit and payment services, let’s look at the current state of the market and some common sense steps you can take. Steps that will do two things. First, to help you mitigate risk through your service provider selection process. Second, so you can have access to well-audited transportation data — an accurate and comprehensive data set that will allow you to improve budget forecasts, optimization and execution, and provide you a competitive advantage.

september-october 2013 | www.PARCELindustry.com

Where We Are TodAy From all the published industry reports that come out each year, there are a handful that stand out. One of them is American Shipper’s annual report on freight settlement and payment. This year’s report, “Transportation Payment Benchmark Study: Making Dollars and Sense” provides some interesting survey insights.

In one of their reported figures, the survey showed that 26% of the respondents outsourced domestic audit, while only 22% outsourced payment. For international services the percentage of companies who outsourced was even lower. That’s interesting when we consider the higher level of complexity involved with international shipping. The implication here is that the vast majority of companies are handling audit and payment in-house.

Companies who pursue an in-house audit and payment option do so through one of these options: their ERP or financials reporting system, a module to their TMS, a legacy in-house system, or, the popular deployment options of using spreadsheets or doing no auditing at all.

Those options certainly provide a safe harbor for a company’s treasury. They may also be a more costly way of doing business and lead to less effective transportation execution decisions.

Case in point. A second figure from the survey pertained to the cost of processing and paying a freight invoice. (As readers of PARCEL, note that these are freight invoice costs. The transaction cost for small parcel invoices at the transactional level will be less expensive.)

MeThod of Processing Outsourced In-house Systems In-house Manual

cosT for doMesTic

cosT for inTernATionAl

$3.33 $5.23 $11.05

$6.24 $7.89 $15.18

Other industry sources have quoted the cost of internally processing and paying a freight bill to be in a range from $10 to as much as $50.

ouTsourcing decision sAfeguArds In lieu of the bankruptcies and court cases, much has been written this spring and summer regarding steps you can take to better protect your business when choosing to outsource your freight audit and payment program.

Increase your due diligence on a provider’s financial condition. Insist on audited financial reports and statements.

Respect the confidentiality of the service providers. As a logistician, these reports should go directly to a qualified financial analyst in your organization for review. Team up with Finance so they provide you with a professional assessment of financial condition, liquidity, and strength of the provider. september-october 2013 | www.PARCELindustry.com

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Expand the scope of references. A standard question I see on all Requests for Proposal is for three client references of similar size and scope to their organization. No problem. Why not investigate with the carriers how promptly and accurately they are paid from the provider? When you attend industry conferences or attend association events, are the providers also participating? Reputable providers don’t hide, they are involved and often lead. More importantly, when you participate, you will be able to ask others what they think and share the experiences they have had with these suppliers.

Insist on a bill payment process that provides a system of checks and balances. Some of the key steps include: • Recognition of authorized carriers — verification of carriers who are to be paid • Distinct and secure accounts that prevent comingling of funds • Limited access to the account — consider a single person for administrative access and a select few with readonly access • Separate individuals involved in receipt and disbursement of funds Include language in your audit & payment agreement that covers what will happen with your funds, the timing of those transactions, separate accounts so there is no comingling of your cash with another of their clients, corresponding transaction and disbursement reports.

Proper due diligence in light of this year’s events cannot be overstated. You can execute a sound sourcing program to identify and mitigate potential risk in order to take advantage of the cost savings potential that exists. Not to be missed is a key quote from the authors of the previously mentioned survey, “The payment process is increasingly more than ensuring bills are paid accurately and on-time.

The information generated from the process is valuable in and of itself.”

Let’s turn our focus to that value and the impact that well audited invoice data can have on your supply chain and logistics planning.

Where to From here?

From the Chief Supply Chain Officer, to the Vice President, the Divisional Manager, and Transportation Planner; everyone is drowning in a sea of data and in dire need of a lifeboat of information.

In their book Competing on Analytics: The New Science of Winning, Thomas Davenport and Jeanne Harris wrote that companies need help interpreting and using data.

The implementation of systems has now arrived at a place where companies have accumulated a tremendous amount of information and that the next step is to figure out what to do with it. Being blunt, a smart human still needs to interpret the data.

But before you can interpret the data, you need to ensure the data set is clean, accurate and comprehensive. You

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september-october 2013 | www.PARCELindustry.com

start by pulling freight information from a variety of carriers, in various paper or electronic formats, some of which may require translation mapping in order to download into a current in-house system. You want the database to include inbound and outbound, domestic, and international, all freight terms, and all modes of shipping. Let’s add in another layer of complexity as you look to match your shipment authorization or manifest against the carrier invoice file. You have, as Davenport and Harris may say, successfully accumulated a tremendous amount of information! Now, all you need to do is figure out what to do with it. Then, interpret it.

This is where the true value of an audit & payment program comes into play. The quality of the data is so much better. Coming back to the beginning of the article, it will help you to improve budget forecasts, optimization and execution, and provide you a competitive advantage.

Some examples: General Rate Increase Study: No need to rely on announced averages. You will have comprehensive database with accurate costs at the individual shipment level. You can apply the newly published rates by every zone and weight break to your shipment distribution data and identify exactly what your cost increase going into next year will be. No averages, no guesses, no random samples. A precise cost impact on which you can set your budget.

Network Design Project: Whether you are looking to bring offshore production back to North America or trying to determine where to locate a new distribution center here in the states, the result from your modeling is predicated on the quality of your data. Your transportation costs are baked into your network design. Getting this exercise right is of paramount importance and could have the biggest cost impact on your organization.

“What if…” Analysis: You have a special promotion coming up and you want to know what it would cost to upgrade your standard deferred service to an expedited service level. You see a potential competitive advantage to win market share. Yes, we all know that expedited will be a more costly method of shipping. But if you can’t trust the accuracy of your current data, the negative impact on margins will be multiplied.

For some, this has been an unsettling year in the audit & payment industry. For all, being open to finding sources of cost savings in a slow growth economy, mitigating risk through improved sourcing practices, and increasing data quality to efficiently run your supply chain and compete in today’s marketplace is crucial. p

DOUG KAHL is a Vice President with enVista, a comprehensive supply chain consulting and leading transportation services management organization.

Doug can be reached at dkahl@envistacorp.com, 602.334.6233, or visit enVista at the PARCEL Forum, Booth #516 in Chicago, October 7-9. Visit www.envistacorp.com for more information.

SEPTEMBER-OCTOBER 2013 | www.PARCELindustry.com

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CASE STUDY

Sustainable Parcel Spend Management Green Mountain Consulting partnered with a well-known retailer with store and internet sales channels to develop and deliver a sustainable parcel spend management solution. GMC prepared a short and long term road map for reducing cost and improving their customer experience while taking into consideration their network constraints and strategic objectives.

THE SITUATION From a centrally located distribution center, the client shipped primarily packages weighing less than 10 pounds with a service commitment of five days or less to its customers. Ground service was utilized primarily for the deferred shipments and Next Day 3 PM Air for customer upgrades. Common to many shippers, the company was constrained by the ability to make drastic transportation management system changes in the short term.

However, over the long term the company had a goal to move from a single carrier network to a multi-carrier parcel network.

THE SOLUTION GMC developed a roadmap for the client that provided for immediate savings through implementable network and package enhancements, while also providing longer term savings opportunities through a complete network overhaul.

In the short term, GMC identified the following opportunities to implement:

Changing packaging characteristics (size and material) would allow the company to lower the weight of the existing shipments and minimize dimensional weight impacts Shifting air packages to ground where transit time was the same Consolidating multiple packages being delivered to the same store addresses on the same day Eliminating address corrections to recurring bad destination ad dress entries For the long term, GMC identified the optimal ship mode for packages based on package profile and transit time requirements. GMC partnered with the client to develop a process to procure the proper contracts with two carriers that would optimize overall parcel spend.

As a result, the client selected a postal consolidation solution to support less than eight pound shipments within five days transit, as well as returns. A parcel carrier was selected for the higher zone shipments, in addition to greater than eight pound packages and air / export services. The savings were significant.

Green Mountain Consulting, LLC, provides our clients with a customized, sustainable parcel spend management solution.

TACTICAL EXCELLENCE + STRATEGIC INSIGHT Tactical excellence in our best in class parcel audit and invoice payment services provide the foundation for delivering ongoing strategic insight for our clients through advanced analytics, network optimization, visibility solutions, and strategic project and contract management support.

GMC’s business model is to strategically partner with the mega volume parcel shipper (greater than 4 million parcel shipments annually) by becoming an extension of their existing resources, learning their business, and working weekly to deliver value within a sustainable parcel spend management solution. We bring our clients a view of the market, proprietary analytical tools, expertise, and a bandwidth they would not or could not reasonably possess on their own. We charge a fee per shipment for our services and our clients keep 100% of the savings we help them realize. Contact us today by going to our website at www.GreenMountainConsulting.com and clicking on Contact Us.

Case study

New Technology Helps DPD Deliver 2.5 Million Parcels Per Day DPD Is Deploying 12,000 Honeywell Mobile Computers Across Europe Mobile Computers Are Critical for Package Delivery Drivers; Must Be Tough Enough to Withstand Extreme Conditions and High-Tech Enough to Exchange Important Data DPD to use Honeywell’s Remote MasterMind Device Management Software to Manage the 12,000 Mobile Computers Across Europe Parcel delivery companies share a need to enable their drivers to deliver parcels in extremely wet, cold or dusty environments, while scanning barcodes, capturing customer signatures and determining the optimal route to their next drop-off. In today’s diversifying and accelerating technology landscape, these functional needs live alongside, and often compete with, potential productivity enhancements that come with a device that features a userfriendly interface. Global parcel and express delivery company DPD is equipping all of its 12,000 drivers in Germany, Austria, Switzerland, Belgium, The Netherlands and Luxembourg with a Honeywell Dolphin 99EX mobile computer. DPD also is leveraging Honeywell’s Remote MasterMind device management software, which allows its depot managers and administrators to push software updates and verify the computers are working properly from a single dashboard.

DPD arrived at their decision by prioritizing the requirements that would best enable them to not only deliver their current level of 2.5 million parcels each day, but scale for future growth as well.

“Our requirements for this significant technology investment were clear: we needed a user-friendly mobile computer, smooth scan software performance and a total solution that could help us prepare for future transaction increases,” said Peter Störring, director operations, DPD GeoPost (Deutschland). “We also needed a software system to manage our equipment, and Honeywell’s Remote MasterMind gives us a decisive efficiency advantage. Honeywell’s technology was best able to meet our needs on all fronts.”

“Honeywell has a strong track record of equipping largescale parcel delivery companies like DPD with reliable technology and hardware that drive productivity in the field,” said John Waldron, president of Honeywell Scanning & Mobility.

“Speed and accuracy are the foundation of the parcel delivery industry, and we take real pride that DPD selected Honeywell technology as the key link between its drivers and customers.”

The Dolphin 99EX mobile computer was designed with input from transportation and logistics companies to help their workers be more productive. Special features include: Ergonomic design that can be held comfortably with one hand and a customized keypad to shorten the amount of time it takes to input data;

Motion, light and proximity sensors that optimize the mobile computer’s screen and lighting for its current environment, whether it’s being used in a warehouse, truck or outdoors in bright sunlight.

The sensors also help preserve battery life, which is longer than any comparable rugged mobile device — up to 16 hours on a single charge, removing the need for drivers to carry extra batteries or fit delivery vehicles with chargers.

3.9G wireless technology for real-time voice and data communication, keeping workers connected regardless of network carrier or technology, and allowing for faster data acquisition and better tracking; Honeywell’s advanced Adaptus Imaging Technology 6.0, allowing drivers to swiftly read and decode linear and 2D bar codes and capture photos for proof-of-delivery; IP67-rating for protection when the mobile computer is exposed to dust, water, or multiple drops to concrete from as high 1.5 meters.

Of course, with such a large deployment of devices, updates and regular, efficient monitoring are critical. DPD is using the Remote Mastermind 4.0 (ReM) software tool. ReM saves time and money for enterprises by providing a single person or group of administrators one dashboard to manage hierarchies of devices across the enterprise, track device locations and routes traveled and make quick decisions regarding userreported issues — from anywhere in the world. Administrators can push software updates, access device metrics and statistics to quickly diagnose reported issues, identify operation errors from within the device pools, aggregate operation data and improve IT support to devices.

“Honeywell Remote MasterMind provides a decisive advantage of transparency in the management of equipment and helps us even at the highest utilization / peak times to remain efficient,” said Störring.

To learn more about DPD’s deployment choices, please visit go.honeywellaidc.com/DPD.

Honeywell www.honeywellaidc.com HSMNAInsideSales@honeywell.com 800.782.4263

ApplicAtion Article

Omni-channel Fulfillment: Classic Alaska Trading Company Pitney Bowes SendSuite Live Global Logistics Management Solution is a web-based shipping management solution that consolidates, integrates and automates shipping processes in multiple locations. Classic Alaska Trading Company implemented SendSuite Live across three stores, a corporate sales center and various departments to help streamline shipping operations; save time and reduce costs, from the mailroom to the shipping dock.

Summary: Classic Alaska Trading Company has been providing customers with quality outerwear to handle the harsh Alaskan winters since 1947. What started as a small surplus store selling Army/Navy gear in Anchorage has become Alaska’s premiere outfitter with five locations, 100 employees and 40,000 product SKUs. Throughout the years, the company has grown substantially but stayed true to its original mission — to meet the needs of Alaskan workers as they confront the challenges of the last frontier. Recently, that meant upgrading their online and shipping operations.

Challenge: The biggest challenge facing Classic Alaska was how to expand their ecommerce business to reach more customers with their complete selection of products. One obstacle was their outdated shipping operation. For years, they had run shipping separately — and manually — out of their five stores.

“As part of our online business expansion, we needed to consolidate all five shipping operations into a single automated system,” explains Brian Birklid, the company’s Outside Retail Manager. “This would allow us to offer our full inventory to all Alaskans, and ship them with fewer errors and greater savings.”

enter Pitney BoweS: Pitney Bowes SendSuite Live seemed made for Classic Alaska.

SendSuite Live helped unify multiple shipping locations into a single operation. The solution handles all their shipping needs, from checking residential zip codes to preparing labels, tracking packages and comparing costs across a host of carriers. Being web-based, it also allows Classic Alaska to harness the power of online efficiencies to manage costs.

‘inCrediBle time Saver:’ Birklid says SendSuite Live’s ability to do “price shop shipping” has been a real time and money saver. Whether shipping a product from store to store, or from a store to a customer,

they use SendSuite Live to quickly determine the speed of delivery and find the least expensive carrier -- with just a click.

In the old manual system, shipping managers had to access the major carriers separately, enter addresses by hand, get the shipping price, and then move on to next carrier — a very time consuming process. Today SendSuite Live does the price shop shipping in seconds. “What used to take 6-7 minutes for one order now takes maybe 10 seconds,” Birklid says. “When you consider we’re shipping 1200-1500 packages a month during our busy season, that’s an incredible savings in time and labor.”

automation imProveS ServiCe, aCCuraCy SendSuite Live’s automated reporting was another benefit, Birklid says. In the past, they wrote labels by hand and used a scale, meter strip and price chart to determine postage rates.

Now everything is automated. Operators scan an order form into SendSuite Live, which then creates accurate labels and saves all the information into a central database. “If a customer doesn’t receive a package on time, we now can easily track it. Before, with five stores doing things manually, we had no centralized record of shipments.”

More accurate labeling has also greatly improved customer service. During the busy four-month winter season, mislabeling packages had been a nagging problem, but no longer. “No more handwriting or simple human errors,” Birklid says.

Classic Alaska Trading Company’s consolidated shipping strategy also extends to the corporate sales office. “Across our entire business, SendSuite Live is helping us to improve customer service with better tracking, while reducing costs. That combination of greater savings and better service has made us a stronger company,” he said.

the reSult: Pitney Bowes SendSuite Live Global Logistics Management Solution helped Classic Alaska Trading Company unify their mail operation among five stores and their corporate sales office, save time and manpower with more efficient shipping capabilities, and automate many manual processes to improve mailing accuracy and customer service.

Pitney Bowes www.pbsendsuitelive.com sendsuitelive@pb.com

APPLICATION ARTICLE

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 were 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).

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.

PITT OHIO www.pittohio.com 800.366.7488

Parcel Counsel

By Brent Wm. Primus, J.D.

Negotiations: Three Observations of a Transportation attorney Over the last few years, there have been several installments of PARCEL Counsel relating to transportation contracts. Other columns have related to issues relating to loss or damage to cargo. Generally speaking, these columns have focused on particular legal issues relating to these topics as opposed to the process of negotiating a contract or the process of recovering or defending a cargo claim.

In this installment of PARCEL Counsel, I would like to share with the readers three observations from the 50,000 foot level, to use a current phrase.

My father, Lee B. Primus, was an attorney. He used to say, “The practice of law is a very inexact science.” The same can be said of contract negotiations or trying to resolve a dispute over freight charges or trying to resolve a claim for loss and damage.

In all of the houses in which my family lived when I was growing up, there was a small dime store plaster plaque roughly resembling a scroll. It read “It’s what you learn after you know it all that counts.”

I can remember as a young child staring up at it and contemplating what it meant, given its obvious illogical nature.

I knew it must have meant something, but I wasn’t sure quite what. Now, as an adult, its meaning is pretty obvious.

Over the course of the last few years, there are three observations or conclusions that I have come to that I would like to share with you. The first is that it is very important to resist the temptation to demonize the other party…even when the other party might be one of the world’s largest corporations transporting parcels around the globe.

The other party can also include those people who I believe have adopted as a 32

deliberate tactic being as obnoxious and irritating as possible…just so you will make any concessions necessary to get the deal closed or dispute resolved so you don’t have to deal with them anymore.

Nevertheless, the emotional drain and the diversion of focus and resources associated with impugning the characteristics or motives of “the other side” does little, if anything, to get to the desired result.

The second observation is that at some point it occurred to me that the other side is never going to agree with your position… even if they do. To put this in context, over the years I would often find myself exasperated when talking on the telephone to another attorney who simply refused to concede that such and such a statute or such and such a case holding would control. In these situations I used to find myself speaking louder and louder which, at least on some occasions, would end up in a shouting match with someone hanging up the telephone.

While this observation may seem obvious to the reader, it took me literally years to realize that of course they are not going to admit they are wrong or to agree with me… even if they do… since they are representing a business organization whose position they are duty bound to advocate. In other words, state your position — be it in a phone conversation, a letter, or an email — and let it be. For disputes, save the debate until you are in a structured negotiation or mediation or, worst case scenario, in court. In the meantime, hopefully the other party will have been listening to what you said and take it into account in the next round of proposals and counter-proposals.

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And speaking of listening, the third observation that I would like to share with you is an adage that was related in a meeting by a seasoned schoolteachers’ union representative: “Listen to understand, not to respond.” In thinking about this afterwards, I realized that in conversations with opposing attorneys I was doing exactly the opposite. In other words, rather than really “listening,” I was just waiting my turn to speak so that I could rebut or refute everything that he or she had just said. I have come to realize that to get a favorable resolution it takes more than simply to announce one’s position to whoever is listening.

This is particularly true in the area of contract negotiations where a lot of money can be on the table. Professional reputations can also be at stake. Be that as it may, a successful negotiation depends at least as much on knowing and understanding the other side’s position as it does on understanding that of yourself or your company.

To sum up, I would just like to say that I do realize that it is easier to preach than to practice! p

BreNT Wm. Primus, J.D., is the Ceo of Primus law office, P.A. and the senior editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content library” on the PArCel website (www.PArCelindustry.com). Your questions are welcome at brent@primuslawoffice.com.

Wrap UP

By Michael J. Ryan

parcel outsourcing he supply chain business has experienced a transformation of accepting “outsourcing” in the Warehouse and Transportation Management arenas. In fact, both of these segments have seen at least 50% of all companies utilizing 3PLs for their business. Simply put, they bring a level of expertise and value to an organization’s supply chain.

However, the parcel market has not experienced this type of change, largely driven by a transportation segment that is controlled by two major players (FedEx and UPS). Let’s take a look at each of these and explore what can happen in the parcel business.

Warehousing

billion business in the US, with $647 billion coming from the LTL and TL segments. The motor carriers in the US account for over 70% of all goods transported. The 3PL industry has brought expertise in driving out cost by effectively managing the procurement process and the execution of a transportation strategy. They offer flexibility and technology that allows for a nimble supply chain at an optimal cost.

parcel shipping The parcel segment is a $70 billion business in the US. The domestic market is controlled (85%) by two major players (FedEx and UPS). The USPS has been gaining market share(10%) in

excellent job in providing value relative to contract negotiations but there is more that can be achieved outside of the pricing game.

Parcel outsourcing has begun to take root in the US. As the 3PL and Warehousing/Fulfillment organizations continue to grow and offer up a more complete solution to their customers, we will see more companies relying on their expertise to provide a more robust “parcel management solution.” There are many common characteristics in the 3PL industry that can be deployed in the parcel industry. We will see shared contracts, mode optimization and preferred partners being used in this new outsourcing model. Are you ready to “look

The practice of outsourcing has been

The warehousing market in the US is a $130 billion business. The practice of outsourcing has been widely accepted by over 50% of all companies at varying levels. The e-commerce business is having a profound impact on this area because more DCs are being asked to expand their capabilities in handling the B2C market.

This will create more outsourcing to fulfillment companies and/or warehouse networks that need to expand their footprint.

This will also create a change in the parcel business… more on that in a minute.

widely accepted by over 50% of all companies at varying levels.

TransporTaTion ManageMenT The transportation business is an $836

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the ground business and is becoming the new “challenger” brand. The international market is a little more competitive because DHL is still a key player in the US and dominates the parcel market outside the US. With all this said, outsourcing is still not an accepted practice. The Third Party Negotiation (3PN) organizations have given us a taste of what outsourcing can do in the parcel business. They have done an

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outside the box” to find these new strategic partners? p

Michael J. ryan is the Executive Vice President at ProStar Logistics and has over 25 years experience in the parcel industry. He can be reached at 708.224.1498 or Michael.ryan@prostar.com.