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PARCEL
E-CommerceIs on the Rise — Are You
Selecting the Right Order Management
System for Your Multichannel Business
Page 20
Automationand the Art of
E-Commerce Order Fulfillment
Page 18
HOW DO THE CARRIERS
STACK UP?Our Survey Respondents
Share Their Thoughts!Page 14
Ready?
PARCELBUYERS’WISH LISTFOR 2013
Page 28
NOVEMBER-DECEMBER 2012 www.PARCELindustry.com
november-december 2012 | www.PARCELindustry.com4
november-december 2012 | volume 19 | issue 5
DepartmentsFeatures
conTenTS
14 How do the carriers Stack Up?Our annual survey asks our readers to rank the carriers on a variety of aspects — here are the final results.By Amanda Armendariz
18 Automation and the Art of e-commerce order Fulfillment E-commerce is fundamentally changing the nature of the retail supply chain. Here’s how you can stay ahead of the game.By Bill Leber
20 How to Select the right order management System for Your multichannel businessChoosing an OMS is a big step — tread carefully. By Curt Barry
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editor’s noteThe Growth of E-Commerce By Amanda Armendariz
Going Global US Export Rules and the Small Package Shipper By Tom Stanton
Transportation Abcs Three Ways to Accurately Forecast the General Rate Increase By Brittany Beecroft
PackagingSustainability, Innovation, and the Packaging IndustryBy Jay F. Perdue
Parcel PerspectivesPARCEL Forum AnalysisBy Peter Starvaski
Ship rightSurvey Highlights How Leaders SaveBy Karen D’Andrea
Supply chain PivotThe Calculus of ValueBy Rob Shirley
PArceL counselThe New Highway Bill and Transportation Broker Surety BondsBy Brent Wm. Primus, JD
Extras26
28
PArceL Forum re-capIt was PARCEL Forum’s last year at the Hyatt Regency O’Hare in Chicago before heading to downtown Chicago in 2013, and what a fantastic show it was!
buyers’ Wish ListThere’s still time to create your wish list for the new year, and this will give you a head start!
Parcel
Coming in the next issue…SOLUTIONS for your Warehouse and Material Handing
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com 5
president chad griepentrog
publisher marll thiede
editor amanda armendariz [ [email protected] ]
circulation directorrachel chapman[ [email protected] ]
marketing cierra bauer
creative director kelli cooke
advertising ken waddell [608-442-5064 ][ [email protected] ]
Josh Vogt[ 785-320-7950 ][ [email protected] ]
PARCEL (ISSN 1081-4035) is published 6 times a year by RB Publishing Inc. All material in this magazine is copy-righted 2012 © 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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ship happen...
s I was going through this issue in preparation for our upcoming print date, I was thinking how much things have changed with regards to
holiday shopping in just a few short years. Of course online shopping has been around for years now, but I remember even four or fi ve years ago, I still made the vast majority of my holiday purchases in bricks and mor-tar stores. Ordering online was almost a hassle — I had to pay for ship-
ping, wait for the item to arrive (hoping that it would get there in time for Christmas, and since I must be a distrustful person at heart and often
doubt the estimated arrival date for standard shipping, I’d fork out the extra money for two-day shipping and grumble about it in the process), and, more often than not, I’d miss my delivery since I was at the offi ce, so more time was
spent going to pick it up on my lunch hour the next day. So it’s no surprise that I ordered online only if it was something that I couldn’t get in a store.
How things have changed! I feel like that saying, “The greatest thing since sliced bread” is now outdated, and we should change it to, “The greatest thing since online ordering with free two-day shipping.” Well, perhaps that’s taking it a bit too far, but it’s amazing how much retailers have changed the online shopping experience in just a few years. Whether it’s Amazon’s two-day ship-ping with my Prime membership, or Target offering free shipping with the use of their RedCard, my holiday shopping is 90% done, and it’s not even December! It’s such a relief to have the packages delivered right to my doorstep (and, since I work at home now, I don’t have to worry about miss-ing any deliveries) and entirely skip navigating the toy aisle at Target. That might not mean much to some of you, but considering the fact that I would have a two-and-a-half year old watching my every move, saying, “Who’s that for, Mom?” and look at me expectantly while I try to come up with some plausible explanation without ruining the magic of the holiday for her, is it really any surprise that I consider online shopping the key component in a stress-free holiday season?
And I’m clearly not the only one out there who feels this way. E-commerce continues to grow at an astounding rate from year to year, so if you feel like you’re struggling to keep up, never fear. We’ve got some great pieces in here to help you optimize your business for the e-commerce experience, which means you’ll make customers happy while improving your bottom line — a win/win for everyone! And don’t forget to check out our carrier survey on page 14. With all these online orders being placed every day, FedEx, UPS and the USPS are busier than ever. How did they rate in the minds of our readers when it comes to things like on-time delivery, refunds for late delivery, and more? Check it out, and if you’d like to share your thoughts on the matter, just scan the QR code at the end of the article to leave a comment!
In 2013, e-commerce is certain to grow even more, so we at PARCEL will do what we do best: keep you updated on all aspects of the small shipment industry, e-commerce and otherwise.
As always, thanks for reading PARCEL.
The Growth of E-Commerce
EDITOR’S NOTE AMANDA ARMENDARIZ
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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:
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november-december 2012 | www.PARCELindustry.com 7
mall package shippers exporting non-controlled or non-licensable com-modities from the United States that are neverthe-less classified EAR99 on the Commerce Control List need to be aware
of the following factors: A) embargoed/restricted countries,
B) “listed” consignees or shippers, C) des-tination-prohibited imports, and D) classi-fication and value.
A) Country restriCtions: The first thing you might notice
on your export order is the destination country. In most cases exports to Cuba, North Korea, Iran, and Syria are prohib-ited. Furthermore, you are prohibited from supporting embargoes of Israel. For exam-ple, you cannot send a certificate of origin that states the products are not products of Israel. A number of other destination country restrictions can be identified at www.bis.doc.gov/policiesandregulations/05forpolcontrols/chap5_embargo.htm
B) shipper/Consignee restriCtions:
A list of those firms and individu-als whose export privileges have been denied is available at denied Persons List. Some denied persons are located within the United States. So, if you believe a person whose export privi-leges have been denied wants to buy your product, you must not make the sale. You need to report the situation to the US Bureau of Industry and Security (BIS) Office of Export Enforcement. If
you have further questions, you can con-tact BIS’s Office of Enforcement Analysis at 202.482.4255.
The entity List is found in Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR). This is a list of parties whose presence in a transaction can trigger a license require-ment. The entity list specifies the license requirements that apply to each listed party. These license requirements are in addition to any license requirements imposed on the transaction by other pro-visions of the EAR.
The Treasury department Specially des-ignated nationals and blocked Persons List is maintained by the Department of Treasury’s Office of Foreign Assets Control. They administer and enforce economic and trade sanctions against targeted foreign countries, terrorism sponsoring organiza-tions, and international narcotics traffickers.
The Unverified List is composed of firms for which BIS was unable to com-plete a check on the end use of the com-modity being exported. Firms on the unverified list present a “red flag” that exporters must inquire about before making an export to them.
destination prohibited imports: Due to various national interests, local coun-tries may restrict the products you intend to export or limit their importation with an import license requirement. The value of the order and the destination coun-try must be reviewed in conjunction with the importer and/or a local party familiar with the import laws. For example, Mexico prohibits exportation of chocolate to their country, Switzerland prohibits importa-tion of lottery tickets and Greece prohib-its importation of playing cards. A wise
shipper double checks with the carrier, the consignee, and a local customs broker to ensure there will be no difficulty in clear-ing the commodity being shipped. Even though the value of your product may be small, such as $100, shipment via small package may require an import license or an import bond and duty payment prior to release to the consignee. A thorough (46 page) docu-ment regarding European Union import restric-tions of all sorts is available by scan-ning this QR code.
C) ClassifiCation and Value: The Federal trade statistics reg-
ulations require that any exported item valued over $2,500 per classification be reported electronically for statisti-cal purposes via the Automated Export System (AES). A total shipment valued at $6,000 with three different clas-sifications valued at $2,000 each is thus exempt from electronic report-ing and the language “no schedule B required, individual classifications less than $2,500 each” can be cited on the export air waybill. From a practi-cal standpoint it is recommended that you classify all items you are exporting, add this information to the commercial invoice, and transmit the information to the agent who will be clearing the goods in the destination country. p
Tom STanTon, AFMS, LLC, International Analyst can be reached at 503.246.3521 or [email protected].
going GLobALBy tom stanton
US export rules and the small package shipper
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com8
hile
being able to
mitigate the General
Rate Increase is the hope of
every shipper, organi-zations must take the opportunity to evalu-ate all aspects of their carrier agreement and structure it so that it more accurately refl ects their shipping profi le. After all, you should only pay for the service you receive — and not a penny more. Let’s look at some of the unexpected charges you may experience with UPS and FedEx so you can lessen the impact of the increases.
IMPACT OF INCREASES TO TRANSPORTATION AND MINIMUM CHARGESStated increases aren’t always what they seem. As we see base rates increase, we know the Minimum Net Package Charge is increasing as well. From 2008-2013, the UPS Ground Minimum Net Package Charge increased almost 40%, from $4.20 in 2008 to $5.84 in 2013. In 2009, UPS and FedEx announced a 5.9% increase for Ground; the actual Ground Minimum Net Package Charge increase was 8.8% ($4.20 in 2008 increased to $4.57 in 2009). Similarly in 2011, the announced net Ground increase, inclusive of fuel, was 4.9%; the actual increase to the Minimum Net Package Charge was 6.8%. The mini-mum charge impacts the average ship-per more than any other single zone and weight Ground rate. We want to
watch the actual YOY increases on mini-mums and negotiate their reductions to ensure the discounts offered by our car-riers are close to the discounts we are receiving. If your shipping profi le lends itself to being near the minimum charge more and more each year, that discount effectively shrinks as the minimum net charge grows.
What does this mean to you? The fl oor is dropping in terms of packages being subject to the minimum charge — the higher the minimum, the more pack-ages affected by it. If your packages dim, with the reduction to the divi-sor from 194 (2008) to 166 (2013), a package moving FedEx 2 Day, 5lbs, Zone 8 — dimming at nine pounds in 2008, 11 pounds in 2013 — will see a 67.6% increase in freight cost. Not quite the 3.9-5.9% announced year over year.
IMPACT OF ACCESSORIAL CHARGESWhile most of us focus on increases in freight costs to our bottom line, the pending increase to fees cannot be overlooked, especially if your product requires an Indirect Signature Label (up 12.5% in 2013 to $2.25 for FedEx). Delivery Area Surcharges on Domestic Air will increase from 7.5% for Commercial DAS to 8.3% for Residential to 7.7% for Extended (FedEx; UPS is up 7.5% for Extended). Address corrections are tak-ing a heavy increase at 9.1% for both UPS and FedEx. If you get the address right with FedEx, but your account num-ber is wrong (or it’s missing entirely) plan to see an $11 charge on your invoice (10.0%). The Domestic Air Residential
Delivery Charge for UPS and FedEx is up 6.7% for 2013 ($3.20).
IMPACT OF ACTUAL VERSUS DIMENSIONAL WEIGHTWe understand what dimensional weight is, and how it is calculated, so let’s look at an example of how it impacts cost. Let’s take a FedEx International Priority package, Zone D, Actual Weight 5lbs, 14x12x10 Dimensions. In 2010 the dim divisor was 166, so your fi ve pounds package dimmed to 11 pounds with a gross freight cost of $153.19. Same package in 2012, after two rate increases and a change in dim divisor to 139, now dims at 13 pounds with a gross freight cost of $190.92 — a 24.6% increase in freight cost. If we were to back up to 2008 we’d see a freight cost of $127.23 and an increase of 50.1%.
CONCLUSIONThree key points to remember as we enter the 2013 General Rate Increase are 1) Rate increases are greater than they appear, and Minimum Charges aren’t so minimum; 2) Accessorial Charges increase at varying rates with the GRI; and 3) Actual versus Dim weights — with just a small adjust-ment you could save thousands. p
BRITTANY BEECROFT, MBA, is the Small Parcel Pric-ing Manager for AFS, based in Shreveport, LA. Prior to joining AFS, Brittany spent 12 years at FedEx as a Strategic Pricing Analyst, analyzing over 5,000 agreements in her FedEx tenure. She consults regu-larly with some of the largest shippers in the world and is a sought after speaker and consultant.
TRANSPORTATION ABCsBY BRITTANY BEECROFT
Three Ways to Accurately Forecast the General Rate Increase
november-december 2012 | www.PARCELindustry.com 9
Sustainability, Innovation, and the Packaging Industry
s consumers are becoming more
and more environ-mentally conscious, entrepreneurs will be
more likely to develop new products, technolo-
gies, and processes that will enhance or replace
ones that we have now that are harmful to our environment. I
am excited about Ecovative Design’s new technology (see sidebar) not only because it makes packaging material that replaces its synthetic counterpart, but it also can be grown in any shape in about a week. Nothing needs to be harvested from the earth for the manufacturing process. It is cost-competitive, and it can be composted into your garden.
Another great product on the market is the biodegradable packing peanuts made from industrial grade corn. It pro-vides the same protection capabilities as its polystyrene peanut counterpart. Starchtech, a Golden Valley, Minnesota company not only manufactures these biodegradable packing peanuts but also goes a step further by making available a cost-effective machine that allows you to make your own biodegradable peanuts with their special rice-sized pellets. A pallet of pellets can make the equivalent of 23 pallets of peanuts, allowing for a smaller carbon footprint in the delivery of the peanuts. So, one truckload of pel-lets is equal to 23 truckloads of peanuts, saving the cost of both fuel and labor.
One of the up and coming materials that not very many people are using is packaging products made of bamboo.
Dell is already using packaging made from bamboo to ship some of their mini netbooks with plans for more products to be using bamboo packaging in the future. The reason Dell likes this product is that it is very strong. It has a tensile strength similar to that of steel, making it a perfect material for protecting their products in transit. Again, this is a bio-degradable product that is cost-effec-tive and very sustainable. According to the American Bamboo Society, bamboo, which is a member of the grass family, can grow up to 47 inches in one day in optimal conditions but generally grows about one to two feet per day. I think that more companies need to be look-ing at bamboo for their packaging needs since it has so much potential.
Subaru decided in 2004 to create zero landfill waste from their plants. They asked everyone in the company to come up with ideas of how to reuse, recycle, and eliminate waste. It was and still is a success because they were determined to make it happen. The
shipping industry can do its part to be friendly to the environment by seeking out and using biodegradable, reusable, recyclable, and sustainable products. All it takes is for buyers of packaging products to be aware of what is avail-able to them and then support the manufacturers of these types of items. Innovators such as Ecovative Design will continue to produce new technolo-gies that are good for the environment because there is a demand for them.
The future of sustainable packag-ing looks promising with all the new advancements being made. Next time you are ready to buy new packaging prod-ucts for your shipping operations, you may be surprised at how many options you have for sustainable products.
Jay F. Perdue is passionate about packaging because he handles other people’s packages all day and every day. He is a driver for UPS for 26 years and is in the top four percent of drivers with 26 years of safe driving. Contact him at [email protected].
By now, most of you may have read about the agreement in late June 2012 between Sealed Air Corporation and Ecovative Design. Ecovative is the brainchild of Eben Bayer and Gavin McIntyre, and they make EcoCradle Mushroom Packaging. This innovative product is made of mushroom roots and agricultural waste. Sealed Air will be the exclusive licensee to expedite the production, sales, and distribution of Ecovative’s EcoCradle Mushroom Packaging.
Sealed Air is a world leader in specialty materials; one of which is protective packag-ing. Their interest in this new Mushroom Packaging shows that the new technology will become an important part of their portfolio of sustainable packaging options.
PackagIngBy Jay F. Perdue
november-december 2012 | www.PARCELindustry.com10
n this edition of Parcel Perspectives I thought I’d share some knowledge from
this year’s PARCEL Forum, which was a great success. My congratulations to every-
one who helped organize the event. I’m look-ing forward to next year’s show and I’m glad to
see that it will be moving to downtown Chicago. I presented at the show again this year, and the
topic was the use of Analytics. I had about 25 peo-ple attend the presentation. I won’t bore you with
the details, but what is interesting are the questions I received during the presentation. There were three rea-
sons why the attendees in my session were interested in an analysis of their parcel data. These were:
Now there are scores of other reasons to do analysis, and the show had some very reputable firms exhibiting a variety of invoice analysis services, but the attendees at this particular presentation were primarily interested in those three analyses.
The first topic, dimensional weight analysis, can directly impact what you spend with the carriers. The ultimate goal is to affect the packaging you use so that you can reduce the additional handling charges, large package surcharge, or the actual dimensional weight. Two individuals from a large retailer were in the audience and they discussed one of their product
parcel PersPectiveBy Peter StarvaSki
parcel Forum analysis
1) Dimensional Weight Analysis
2) Shipping Personnel Performance
3) Location and Stocking of Distribution Centers
lines: Bicycles. They were getting hit hard with the carrier’s ‘additional handling charge.’ This is currently an $8.50 fee with either UPS or FedEx that is assessed, amongst other han-dling factors (such as the shape of the packaging container), when the longest side exceeds 60 inches, or the second lon-gest side exceeds 30 inches. The operation teams of this retailer reduced a few inches off their current packaging and were saving over $100,000 a year with the change to this one product line.
This topic also received a lot of attention at the show. While I was not able to attend his presentation, I talked to Dean Arnold from National Instruments at the networking event. Dean pre-sented a case study that included how NI was able to cut their parcel spend by hundreds of thousands of dollars by focusing on reducing their dimensional charges.
From an analytics view, this type of analysis is solely dependent on your shipping system’s ability to not only determine the shipping charges and fees, but to also con-sume information from the order entry system so that the analysis can be performed based on SKU, or product line, or some other order-based data that allows the shipping oper-ation to provide feedback to the other stake-holders in the business. Quite often data is passed back to an ERP system that has this information, but the data passed back is total freight charges, tracking number, carrier/service, etc. Flags for dimensional weight and individual surcharges may not be sent back to the ERP system. Should the amount of data being passed to that system increase? Or should you augment the data being sent to the shipping software? Given the myr-iad carrier/service/surcharge combinations, it may be a sim-pler task to just pass operational and order information to the shipping system (especially given the dynamic nature of the shipping charges.)
The second topic, shipping personnel performance, sur-prised me a bit. My topic had been announced as controlling your operational costs. It actually makes perfect sense that a company would want to analyze the operational performance of the warehouse through their shipping system. The system is providing a time stamp for each shipment processed. It is also capturing the workstation and the user. Individual perfor-mance of each shipping station can be determined, as well as
how quickly a dock or bay is turned around when the carrier is manifested. This analysis could be drilled down further to determine performance for domestic versus international shipments or standard versus dangerous good shipments and provide hard data to be used to determine if the busi-ness would benefi t from spending money on improving the data integration to the shipping system and reducing manual steps in the process. Or it might simply prompt an investigation into why Mary can get twice the shipments processed that Bob can.
Lastly, the third area that received a lot of attention dur-ing the presentation was the use of data to provide heat maps of where shipments were being delivered to. As ship-pers successfully negotiate contracts, reduce their sur-charges, and improve their warehouse effi ciencies, one of the biggest areas left for reducing their spend is to reduce the distance required to get the goods to the consignee. An analysis of origin to destination by SKU or product line can inform the shippers where to move inventory. Another large retailer, for example, noticed a signifi cant quantity of Mother’s Day and Father’s Day promotions were being shipped to Florida. While the retailer has a distribution center in a neighboring state, a large percentage of the shipments were not originating from the closest DC. A sim-ple shift in that seasonal inventory has resulted in signifi -cant cost savings for them.
The second part of this analysis is related to where they should consider opening their next distribution cen-ter. This is even more interesting when you start to con-sider the regional carriers (who had a large showing at this year’s PARCEL Forum). How much could you benefi t if you were able to directly induct your packages to OnTrac’s Reno Nevada hub and enjoy next day delivery along the entire west coast at ground prices?
While these are just three areas (from literally dozens dis-cussed), I fi nd it interesting how the focus changes from year to year and based on the demographics of the partici-pants. We’ve already reserved our booth for next year, and we are looking forward to another great show, this time in downtown Chicago. p
PETER STARVASKI is Director, Product Management at Kewill.
It actually makes perfect sense that a company would want to analyze the operational performance of the warehouse through their shipping system.
november-december 2012 | www.PARCELindustry.com12
ship rightBY Karen D’anDrea
survey highlights how Leaders saven September of this year, we asked small and mid-sized
shippers in the retail, wholesale trade, and
e-commerce industries what their most pressing
challenges and opportuni-ties were. The findings paint
a picture of what it takes to prosper in today’s environment.Many companies have already
taken steps to increase efficiency and save. A full 27% report that they
are already using transportation man-agement software to help optimize ship-ping performance. When you look at the shipping landscape, the value of such technologies is clear.
} Organizations rely on more types of transportation than ever before, and managers need to make sure that items are shipped the right way, at the right price. Methods include:} Parcel Ground (71%)} Parcel Express (62%)} Freight and LTL Carriers (58%)} Air Freight (35%)} Ocean Freight (23%)} Rail Carriers (10%)
} With so many modes of transportation, it makes sense that most shippers sur-veyed use multiple carriers.} 59% use 2 – 5 carriers} 17% use 5-10 carriers} 11% use more than 10 carriers
} The number of options employed by savvy shippers leads to the need for more in-depth rate comparisons and additional administrative support.
Most survey responders spend up to $500,000 a year on shipping. And when
asked to name the most important ship-ping factor, these managers and depart-ment heads ranked two areas above all others: automation and information.
The need to automate outbound ship-ping processes was ranked at the most important factor by 35% of all compa-nies. For many, additional automation could streamline package preparation, simplify rate comparisons, and standard-ize business rules across departments.
The second most important concern cen-ters on information. In this survey, 32% of responders ranked reporting and dash-boards on carrier performance as the most important shipping factor. Such informa-tion could make it easier to identify waste, validate carrier charges, and gain a big-picture view of shipping expenses.
When you consider that transportation costs can average six to 10% of over-all company revenue, it’s not surpris-ing that automation and information are seen as such valuable additions. Many small and mid-sized organiza-tions understand the opportunity, but look at shipping management software as a solution that only works for larger organizations. As a result, they don’t have the tools in place and must deal with fragmented processes, unexpected fees, and poor compliance on a day-to-day basis. Compare that to the 27% of small and mid-sized businesses who already have the software needed to optimize, integrate, and automate their shipping processes with the highest degree of real-time visibility and control.
Despite the fact that a quarter of those surveyed use a transportation manage-ment system, there is indication that even with those shippers, there is an opportunity to better utilize technology. The survey uncovered that challenges
exist across the entire supply chain, from carrier selection to cash flow opti-mization. Three examples highlight the potential for waste and inefficiencies.
} returns handling. Up to half (48%) of respondents process returns manually, adding cost and unnecessary errors to a function that already drags on profits.
} carrier data storage. Nearly three-quar-ters of businesses (72%) store data related to shipping and carriers in mul-tiple databases. In such cases, compa-nies may not have access to all of the information they need to respond to cus-tomer inquiries or management requests in a timely, cost-efficient fashion.
} expense management. Most organiza-tions analyze carrier invoices either weekly (37%) or monthly (36%). And as noted above, this usually involves organizing, collating, and comparing statements for up to five or more dif-ferent carriers. In addition to the obvi-ous administrative cost, the lack of a single-view makes it harder to compare rates and service levels.
With higher rates taking effect in a matter of weeks, this is an ideal time for managers to assess their current ship-ping operations. Special attention should be paid to areas that require redundant effort, steps that involve manual processes, functions that are difficult to control, and points where you may be overspending.
Given the advantages of today’s lead-ing transportation management systems, it makes sense that a full 22% plan to invest in new technologies in the year ahead. p
Karen D’anDrea is Director, Logistics Solutions and Services, Pitney Bowes.
november-december 2012 | www.PARCELindustry.com 13
The Calculus of Value
AirNeT’s uNique sTreNgThs:
} Only air carrier to allow GPS made by all three certified technology companies — Crossbow, On Asset, and GTX, allowing AirNet to leapfrog barcodes. The GPS device is placed within the package.
} Package vulnerability is improved because everything is hand-sorted with no mechanization at hubs.
} Package valuation can be up to $1,000,000 for anything, including jewelry, artwork, and data tapes.
} Not integrated with a ground operation, therefore a strong partner with local and regional carriers.
} Favored by high time/value customers: life sciences, medical devices, aerospace, security sensitive, government, banking, entertainment, hazardous materials, and high-tech.
et’s assume you were able
to offer custom-ers a reduction
of their cost if they invited other cus-
tomers to join them on the same high-speed
point to point service they were enjoying. How would you do it? Probably the
same way AirNet is — by using a particular
method or system of reasoning that you would remember from a calculus course.
Frank DiMaria, head of marketing, explains, “AirNet now flies to 80 cities five nights a week from principle hubs
in Burbank, Chicago, Columbus, Denver, St. Louis, and Teterboro, NJ. Customers began requesting specific flights that originated from those destinations. We introduced Scheduled Package Delivery (SPD), which is always faster than ground service and often less in cost. This ser-vice uses a fleet of Cessna 210s that are fast, reliable, consistent, and inexpen-sive. Once we have an anchor customer, we offer to reduce their cost if they help us attract additional customers on the same flights. The local and regional carri-ers have also proven to be great partners
for attracting customers and speeding delivery to and from the airports.”
They have a large fleet of 121 air-craft, including the world’s largest fleet of Cessnas (68), 24 Beechcraft, 13 Bombardier Learjets, 12 Piper Navajos, and four Mitsubishi Marquise. The com-pany was founded in 1974 to serve bank customers by moving high value checks to the Federal Reserve in order to speed moving funds. Electronic checks became legal in 2004 under the Check 21 Act and AirNet adapted to the market by gaining customers with medical nuclear devices, lab specimens, and high technology prod-ucts requiring speed and accuracy. They also designed and operated a Next Flight Out service in 2000 and successfully sold that division this year.
Speed is gained by flying into smaller airports and using much less ground time since there are no large mechanized hubs because positive hand-offs are done for each package. This process allows the air-craft to take off later and land earlier than global carriers. They fly about 200 flights per night, serving over 2,500 markets. The airports they utilize are visible on their website. Airnet’s service level is well over 99% and they are certified ISO 9001.
It is refreshing to see that our demo-cratic and capitalistic marketplace is still innovating options to serve customers. p
The local and regional carriers have also proven to be great partners for attracting customers and speeding delivery to and from the airports.
rob shirley is President of ExpresShip, a strategic partner in the global supply chain. Contact him at [email protected].
supply Chain piVoTBy RoB ShiRley
november-december 2012 | www.PARCELindustry.com14
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
eighty-two percent of our respondents have used Fedex within the past year. Here’s how Fedex rates in the opinions of our readers:
Customer Service
On-Time Service Performance
Claims Processing
Refunds for Late Delivery
Pricing
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
13%
48%
33%28%
34%
27%
28%
26%
37%
28%
09%
31%
14%
29%
09%06%
07%
30%59%
53%
31%
11%04%
04%
Fedex
Delivery Performance(driver courtesy, package handling):
(published rates for service levels, willingness/fairness of negotiations)
How Do tHE
Our annual survey asks our readers to rank the carriers on a variety of aspects — here are the final results.By Amanda Armendar i z
carriers stack Up?
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com 15
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
People love to give their opinions when it comes to companies they deal with on a regular basis, and our readers were no exception. We’d like to thank everyone who participated in this survey for giving us their insight about the major parcel carriers. From customer service, to on-time delivery, to refunds for late delivery — our read-ers weren’t shy about rating the carriers. Some results were impressive, like how a full 59% of respondents rated FedEx’s on-time service performance as excellent. Others, however, could use improvement. As you look through these results, do you fi nd yourself nodding in agreement, or do you have a different view of the carriers than some of your peers? If you’d like to leave a comment on these results, scan the QR code at the end of this piece.
Eighty-four percent of our respondents used UPS within the last 12 months. Here’s how they rate:
Customer Service
On-Time Service Performance
Claims Processing
Refunds for Late Delivery
Pricing
36%25%16%
24%
34%
28%
30%
28%
24%
36%
29%
12%
14%
35%
52%
52%
29%
15% 04%
39%
09%
01%
21%
08%
UPS
Delivery Performance(driver courtesy, package handling):
(published rates for service levels, willingness/fairness of negotiations)
november-december 2012 | www.PARCELindustry.com16
The lawsuit brought by AFMS in response to UPS and FedEx’s policy to prevent shippers from working with third-party negotiators (3PNs) is scheduled for trial in 2013. If you had a crystal ball, who do you believe the ruling will favor?
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Good
Fair
Poor
Excellent
Not sure/no opinion
Negative
Positive
YoUr ThoUghTS oN ThE PArcEl INdUSTrY
Sixty-nine percent of our respondents used USPS within the last year. Here are their thoughts on the carrier:
Customer Service
On-Time Service Performance
Claims Processing
Refunds for Late Delivery
Pricing
USPS
Delivery Performance(driver courtesy, package handling):
do you think UPS’ proposed merger with TNT would be an overall positive or negative to the parcel industry?
(published rates for service levels, willingness/fairness of negotiations)
22%
31%
32%
43%
36%
42%
21%
28%28%
Third-party negotiators
UPS/FedEx
54%46%
23%
14%
09%
15%
12%
30%
33%
29%
29%
36%
54%
19%
27%
07%
18%14%
36%
15%
november-december 2012 | www.PARCELindustry.com 17
Continued growth of e-commerce business and pressure to do same day delivery
Fuel
Labor costs
The dim factors and overall carrier pricing.
There seems to be no tangible realtionship to the annual increases which are seemingly controlled by UPS & FedEx. If the increases were more in line with CPI, it would be more understandable. Of course, they are private (non-government) enterprises and they can do as they please.
Shippers have to pass this expense along if we are going to remain competitive on price.
Lack of competitive forces to mitigate UPS / FedEx continual upward pricing strategy.
All the additional fees that the carriers keep adding.
For those that modified their primary carrier in 2012, here were some reasons why:
Do you think that the cost of trans-portation will be a greater percent-age of gross company revenue in 5 years than it currently is?
Do you think that there is enough competition in the parcel delivery market to keep pricing reasonable and service good?
YES: 35% NO: 65% YES: 84% NO: 16%
Don’t know how anyone can compete with FedEx and UPS for ground parcel. DHL tried and could not make it. Only having these two really is driving costs up... year after year.
We need a third nationwide domestic carrier
It would be helpful if one of the regionals would consider expansion. I believe that there is a strong market for an alternative, even if the alternative offers less capability.
There is always room in any market for competition.
I don’t think the answer is with regional shippers. Smaller size com-panies can’t afford to divide up their parcel shipments among several shippers. I think the answer is to find a way to bring back DHL.
The regional carriers need to band together in some fashion to provide an alternative.
Short of more carriers entering the market to create more competition, nothing.
Some believed it would be due to these factors:Those who said there wasn’t enough competition offered the following thoughts:
03% Changed our level of service (i.e., air to ground)
05% Reduced the number of carriers used
11% Rebid transportation and a different carrier(s) won
18% Dissatisfied with service
13% Diversified to use more carriers
50% Needed to achieve better pricing
The top three biggest complaints about the respondents’ primary parcel carrier were:
12.2% Pricing
12.2% Fuel Surcharges
44.0% Accessorial charges
Do you agree or disagree with your peers’ assessments? Scan the QR code to leave a comment!
november-december 2012 | www.PARCELindustry.com18
By Bill Leber
ply chain to deliver more products faster, literally from mobile device to doorstep in a matter of hours, not days.
Strain on Supply ChainFrom the moment a customer places his or her online order to when that order gets picked, packed, and shipped, every step in the process must be handled efficiently, consistently, and cost-effectively. In e-commerce, it is the distribution center that pro-vides most of the customer experience. The DC is the store.
Simply delivering goods is no longer an adequate mission for the fulfillment center, and customer satisfaction must be a leading priority. Take, for example, relentless SKU prolif-eration. Internet retailers need to support an ever-increasing selection of merchandise that typically includes fast moving items along with an ever-growing assortment of many very slow moving items. How these SKUs are picked and handled presents two very different operations.
The ‘new breed’ of retail e-commerce consumer expects a lot more in addition to competitive prices: cross-channel ser-vices such as “click-and-collect” and “order-to-deliver;” wider online SKU offerings; in-store kiosks; consistent brand experi-ence across the brick and mortar and online storefronts; order accuracy; fast and free delivery; free returns through any chan-nel; and a mobile retail site.
Historically, the majority of the world’s consumer products have been distributed to retail stores in bulk, and the most efficient method for handling this merchandise has predominantly been pallet movement and full case selection. But now, e-commerce is fundamentally changing the nature of the retail supply chain.
As online shopping continues to compete with and, in many instances, overtake bricks-and-mortar retail, traditional retail-ers are looking for more and more ways to expand their multi-channel operations. According to Datamonitor’s Global Online Retail 2011, the global online retail sector had total revenues of $434.6 billion (USD) in 2010, representing a compound annual growth rate (CAGR) of 16.3% for 2006 to 2010. 2010 alone had a growth rate of 17.8%.
Due to this increase in online sales, many brick and mortar retailers are outgrowing this traditional supply chain infrastruc-ture. In addition to scheduled weekly store deliveries of pal-lets and cases, retailers must now factor in split-case picking, item-level touches and multi-line item sortation to fulfill fluc-tuating volumes of online orders that frequently require deliv-ery to consumers within 24 hours.
Now take these challenges and compound them with the emergence of mobile commerce, or “smartphone shopping.” The instant gratification culture that has taken over with the growth of mobile has put even more onus on the retail sup-
Art of E-Commerce Order Fulfillment Automation and the
november-december 2012 | www.PARCELindustry.com 19
Of these expectations, the consumer demand for free and fast delivery is causing supply chain managers the biggest challenge, which retailers need to closely assess to remain competitive. Factoring in also is the threat of under-stock-ing, influenced by unknown or seasonal demand. An online retailer cannot be caught flatfooted, unable to meet a shop-per’s request and risking loss of sales and goodwill.
Specific e-commerce challengeS When these consumer needs are compared to the challenges of distribution in an e-commerce environment, there are signifi-cant obstacles for fulfillment. These challenges include:
a) Large SKU counts with a very long, slow-moving tail;b) High and unpredictable growth;c) High penalty for poor performance resulting in potential brand damage;d) Uncertain business terrain that demands flexible and adaptive solutions;e) Demand for real-time and accurate inventory visibility;f) Small number of orderlines per order;g) High returns from end customer;h) Extreme peak season volumes.
As brick and mortar retailers integrate e-commerce and transform into multi-channel organizations, they increasingly are forced to separate the inventory in their supply chains. The challenge with this process relates to having the right systems in place to dynamically process orders for e-commerce chan-nels versus historical store re-stocking fulfillment.
Within e-commerce, where unpredictability is a constant factor, flexibility in the supply chain becomes critical. Flexibility can be derived from implementing the right system, one that can support the fluidity that e-commerce cross-channel services require.
FulFillment in three DimensionsE-commerce fulfillment is fundamentally a piece-pick opera-tion, which is historically a hands-on procedure. It is perhaps counterintuitive, then, that the right automation will bring about minimized manual touch, resulting in more accurate orders, improved ergonomics, lowered labor costs and travel time, less-ened returns and saved space by operating in a smaller footprint.
To be sure, a stepped approach to e-commerce automation, especially where future demand is difficult to predict, is often the best route. With scalable software and infrastructure in place, retailers can build out automation as their e-commerce business grows. In essence, the automation can be targeted. Automation that addresses specific tasks, such as picking for fast or slow-moving SKUs, can sometimes turn a better ROI than completely automating a full warehouse.
The gold standard of flexibility for any e-commerce business is to be able to easily increase fulfillment throughput and SKU density over time in a capital-efficient manner. Such an order fulfillment system should be able to scale seamlessly with a business year after year.
Data interchangeBecause of the digital nature of e-commerce, its infrastruc-ture actually permits integration of systems to help unify infor-mation across multi-channel inventory, order management, promotions, merchandising and distribution systems. Going multi-channel provides a streamlined means for interconnec-tions across all of a retailer’s divisions or business units!
E-commerce allows companies to record the relevant details of each pallet, parcel, and item being shipped. Parcel ship-ments can be tracked and proof of delivery quickly confirmed. Retailers can further analyze each customer’s transportation costs and performance, thus helping the retailer negotiate rates and improve service, organically over time.
Retailers suddenly find themselves able to record every cus-tomer transaction and track consumer behavior and sentiment. This makes possible the ability for retailers to analyze millions of data, resulting in a real understanding of what consumers are purchasing, how to get into their online carts, and how to become part of their repeat purchase cycle. The result has been the emergence of new retail supply chains that are con-sumer-focused rather than product-focused.
The emerging solution for efficient and timely e-commerce order fulfillment is one base on an integrated WMS driving an automated storage and retrieval system, married in the end to efficient goods-to-person piece picking technology. Systems using fast shuttle or robotic bin technology can ensure that real-time inventory is always accurate so that when customers place orders, confirmations of the pick and pack process can be provided back to the consumer in less than 30 minutes.
With the emergence of such automated systems, fully inte-grated to a retailer’s online customer interface, a new level of flexibility and efficiency, above and beyond the capabilities of con-ventional automated and manual material handling systems, can now be realized for the movement of retail e-commerce products.
Parting thoughtsE-commerce, and now smartphone shopping, is fundamentally changing the nature of the retail supply chain. Distributors must learn how to adapt to rapidly expanding and changing e-com-merce conditions. Efficiently optimizing inventory, storage space, labor, costs, and time in e-retailing is required to attain not only customer satisfaction, but a profitable operation.
The key to managing this challenge is automated warehous-ing and distribution technology that has the speed to provide almost immediate feedback to consumers as to the status of their orders, along with the flexibility to adapt to changes in supply chain systems, distribution networks, and processes. p
Bill leBer serves as Director of Business Development for North America at Swisslog. Prior to joining Swisslog, Bill worked 26 years for Ciba Specialty Chemicals in a variety of roles including manufacturing, logistics, sales & marketing, business development and general management. Bill received his B.S. degree in Chemical Engineering and an MBA in Management from Rensselaer Polytechnic Institute.
november-december 2012 | www.PARCELindustry.com 19
Of these expectations, the consumer demand for free and fast delivery is causing supply chain managers the biggest challenge, which retailers need to closely assess to remain competitive. Factoring in also is the threat of under-stock-ing, influenced by unknown or seasonal demand. An online retailer cannot be caught flatfooted, unable to meet a shop-per’s request and risking loss of sales and goodwill.
Specific e-commerce challengeS When these consumer needs are compared to the challenges of distribution in an e-commerce environment, there are signifi-cant obstacles for fulfillment. These challenges include:
a) Large SKU counts with a very long, slow-moving tail;b) High and unpredictable growth;c) High penalty for poor performance resulting in potential brand damage;d) Uncertain business terrain that demands flexible and adaptive solutions;e) Demand for real-time and accurate inventory visibility;f) Small number of orderlines per order;g) High returns from end customer;h) Extreme peak season volumes.
As brick and mortar retailers integrate e-commerce and transform into multi-channel organizations, they increasingly are forced to separate the inventory in their supply chains. The challenge with this process relates to having the right systems in place to dynamically process orders for e-commerce chan-nels versus historical store re-stocking fulfillment.
Within e-commerce, where unpredictability is a constant factor, flexibility in the supply chain becomes critical. Flexibility can be derived from implementing the right system, one that can support the fluidity that e-commerce cross-channel services require.
FulFillment in three DimensionsE-commerce fulfillment is fundamentally a piece-pick opera-tion, which is historically a hands-on procedure. It is perhaps counterintuitive, then, that the right automation will bring about minimized manual touch, resulting in more accurate orders, improved ergonomics, lowered labor costs and travel time, less-ened returns and saved space by operating in a smaller footprint.
To be sure, a stepped approach to e-commerce automation, especially where future demand is difficult to predict, is often the best route. With scalable software and infrastructure in place, retailers can build out automation as their e-commerce business grows. In essence, the automation can be targeted. Automation that addresses specific tasks, such as picking for fast or slow-moving SKUs, can sometimes turn a better ROI than completely automating a full warehouse.
The gold standard of flexibility for any e-commerce business is to be able to easily increase fulfillment throughput and SKU density over time in a capital-efficient manner. Such an order fulfillment system should be able to scale seamlessly with a business year after year.
Data interchangeBecause of the digital nature of e-commerce, its infrastruc-ture actually permits integration of systems to help unify infor-mation across multi-channel inventory, order management, promotions, merchandising and distribution systems. Going multi-channel provides a streamlined means for interconnec-tions across all of a retailer’s divisions or business units!
E-commerce allows companies to record the relevant details of each pallet, parcel, and item being shipped. Parcel ship-ments can be tracked and proof of delivery quickly confirmed. Retailers can further analyze each customer’s transportation costs and performance, thus helping the retailer negotiate rates and improve service, organically over time.
Retailers suddenly find themselves able to record every cus-tomer transaction and track consumer behavior and sentiment. This makes possible the ability for retailers to analyze millions of data, resulting in a real understanding of what consumers are purchasing, how to get into their online carts, and how to become part of their repeat purchase cycle. The result has been the emergence of new retail supply chains that are con-sumer-focused rather than product-focused.
The emerging solution for efficient and timely e-commerce order fulfillment is one base on an integrated WMS driving an automated storage and retrieval system, married in the end to efficient goods-to-person piece picking technology. Systems using fast shuttle or robotic bin technology can ensure that real-time inventory is always accurate so that when customers place orders, confirmations of the pick and pack process can be provided back to the consumer in less than 30 minutes.
With the emergence of such automated systems, fully inte-grated to a retailer’s online customer interface, a new level of flexibility and efficiency, above and beyond the capabilities of con-ventional automated and manual material handling systems, can now be realized for the movement of retail e-commerce products.
Parting thoughtsE-commerce, and now smartphone shopping, is fundamentally changing the nature of the retail supply chain. Distributors must learn how to adapt to rapidly expanding and changing e-com-merce conditions. Efficiently optimizing inventory, storage space, labor, costs, and time in e-retailing is required to attain not only customer satisfaction, but a profitable operation.
The key to managing this challenge is automated warehous-ing and distribution technology that has the speed to provide almost immediate feedback to consumers as to the status of their orders, along with the flexibility to adapt to changes in supply chain systems, distribution networks, and processes. p
Bill leBer serves as Director of Business Development for North America at Swisslog. Prior to joining Swisslog, Bill worked 26 years for Ciba Specialty Chemicals in a variety of roles including manufacturing, logistics, sales & marketing, business development and general management. Bill received his B.S. degree in Chemical Engineering and an MBA in Management from Rensselaer Polytechnic Institute.
november-december 2012 | www.PARCELindustry.com20
november-december 2012 | www.PARCELindustry.com 21
How to Select the Right ORdeR ManageMent SySteM fOR YOuR Multichannel Business
For the past 20 years, major international IT surveys have shown that more than 50% of all large scale system projects — such as selecting and converting your business to a new Order Management System (OMS) — are not delivered on-time and within budget, and they fail to meet management expectations. Some of the reasons include lack of project management; fail-ure to clearly identify the systems requirements and select appropriate solutions; failure to esti-mate accurately the total cost of ownership for the life of the system; and communications failures throughout the process.
This article identifies general IT industry practices that will help your company select the right Order Management System for your multichannel business. The process works well for all major systems including Enterprise Wide Solutions, Warehouse Management Systems (WMS), Finance and e-commerce platforms.
Lastly, we provide insights into the benefits clients have derived from implementing OMS.
By curt Barry
november-december 2012 | www.PARCELindustry.com22
How detailed are the requirements? Can we write an excep-tion set of requirements rather than a full set? Because of the broad range of functionality a complete set of OMS require-ments may be between 1,500 to 2,000 requirements. An exception set of requirements may be more like 500 to 900 requirements. The concept of the exception set is to specify the more unique requirements for your business. This assumes you know fairly well the functionality of the prospective ven-dors to whom you’re sending the Request For Proposal.
Create request For ProPosal (rFP)In this step, your convert your requirements into an RFP for-mat. Include your company background, management objec-tives, expectations for total cost of their products and services including licenses, hardware, software, third-party hardware and software, services; training and conversion; annual main-tenance support; methodology and project planning. As much as 50% or more of the cost may come from professional ser-vices. Discuss how your team sees the project proceeding and your specific instructions for replying to the RFP.
send rFP to Vendor(s) and Get Written ProPosal resPonsesPre-qualify vendors in advance that their system provides the functionality you are looking for. Create a short list of three to four vendors if at all possible. Dealing with a larger num-ber, answering questions, and judging which to invite for dem-onstrations will be unmanageable for a larger group. Set up an Excel spreadsheet to compare vendors’ responses side by side. Set up another spreadsheet with all the categories of cost and compare the bidding vendors. Allow three to four weeks for vendors to fully answer and return responses.
Vendor demonstrationsFrom the side by side vendor comparisons of functionality and costs, determine which vendors to contact and schedule for demonstrations. We would keep that number initially to the two or three that best serve your requirements. We believe the best way to conduct the demonstrations is to script the demos and give the vendor time to prepare the demo with what you want to see rather than just letting the vendor demo it their way. Because of their broad range of function, OMS systems require at least six to eight hours to observe the functionality in detail. This is an area where companies typically often spend a couple hours and think they have sufficient exposure to make a decision, which is a mistake. During the demos, someone on the team needs to keep track of the observations versus the way the vendor answered the RFP. Adjust the vendor com-parison with the team’s observations. During the demo there may be areas where modifications are necessary. Keep track of these and follow up in detail the modifications with narrative, screen mock ups and other descriptions. There should be a “to do” list for vendor follow up, potential modifications, ques-tions, etc. An additional demo and follow up may be necessary to get the list resolved.
establish Goals and resPonsibilitiesTop management should form a steering committee to set direction, review progress, and resolve issues that arise. Appoint project team representatives from each functional area of the business. Select a person from this group to be the project manager or coordinator giving the team coordination on objectives and requirements and follow through with the vendors and outside resources. Selecting and implementing an OMS should not be an IT project solely. IT should be on the team, but we feel a manager from the user community should head up the project. Balance selection of the OMS with what functionality the business needs to grow and what systems can provide with the technology aspects of the decision (hardware, database, operating system, program languages, etc.). Formally agree on project direction and establish a project charter.
As part of the project charter, the steering committee typically wants a reasonably accurate (+/- 10%) project cost and time-line without spending months to do it. Unless your company has experience with OMS conversion, it may be harder than you real-ize to establish these two goals with accuracy. Vendor estimates are notoriously low and more aggressive than actual practice.
To do a thorough assessment of the systems, select the final-ist and plan the implementation typically takes four to six months. From the point of contract signing, OMS conversions typically take seven to 12 months to implement. Can these time frames be reduced? Sure. But remember your staff have full time jobs, and it takes considerable involvement in require-ments process, vendor demonstrations, etc.
doCumentation oF user requirements The objective is to draft the system requirements for the business and all departments using the OMS. The typical OMSs have func-tionality for order entry and customer service; credit and payment processing; order processing; warehousing functions of receiving, checking, marking, put away, replenishment to forward picking; customer order processing of pick, pack, ship, and returns pro-cessing; DC inventory control and cycle counting; marketing; mer-chandising and management reporting. OMS often do not have general ledger and other accounting functionality.
To collect and agree upon these requirements, interviews will need to be conducted by department. Then the departments’ requirements are brought together into a single document. Also collect key reports and analysis that are performed in the current system and use system data in data warehouses or spreadsheets.
It is also helpful and often essential to flow chart the pro-cesses of the current business environment in the depart-ments. This will assist you in explaining what actually is happening rather than what you think is happening or used to happen. They are also helpful to understand how a prospective system can fit in the current business environment or how the business processes need to be changed. The user departments need to review the requirements and sign off on the work prod-uct and deliverables. The steering committee should review and sign off also so that the system selection process meets their current and future business objectives.
november-december 2012 | www.PARCELindustry.com 23
Preliminary Vendor Selection FinaliStSFrom the demos arrive at the two best potential vendors as finalists. Take these two through the final steps in the nego-tiation. This will end up with the best decision for your com-pany. Draw up a list of questions and interview as many references as you can. Then schedule at least one site visit for a couple members of the team to businesses which are comparable to yours. We also recommend visiting the vendor finalists’ headquarters to meet the management team, inter-view the potential project manager that you will be working with, understand their philosophy on R&D and if there is a user group that recommends enhancements, etc. Remember generally these systems have a longer life and take eight to 12 months to install. You have expended a lot of effort; don’t shortcut these final steps.
SPeciFicationS oF cuStomizationS (aSSumed minimal)We believe that companies should do everything they can to initially not modify the systems. Modifications add risk and cost and lengthen the schedule with specifications, program-ming and testing. If modifications are necessary, detail the screens, reports, calculations, etc. of the necessary changes. Put these in writing, ask the vendor to prepare an estimate of the hours, dollars and time frame required. Few vendors are going to do modifications fixed price. Work with the vendor to give you a fair bid that has a certain level of accuracy unless you change the scope. Don’t sign a license agreement without understanding as best you can the costs of modification. These costs can be major. Your company and the vendor should sign off on the specifications and estimates.
imPlementation PlanningAs part of the RFP, ask the vendor and the team to do the best possible planning for the implementation. Most vendors will want to do the detail implementation planning in the imple-mentation phase. We advocate doing as much as you can before the decision is made and contracts are signed. This will give you important observations and task lists of how much your pro-cess and business environment will change. This should become part of the business decision process. The objective is to iden-tify the assumptions about what your company will be respon-sible for; all the processes and procedures that will change, what resources are necessary; a detail view of training process; conversion of specific files; and a realistic time frame for the project. As we said earlier, over 50% of major projects are over budget and off schedule from the original assumptions.
Final Vendor SelectionEvaluate the total picture — the total cost of ownership, the fit of the system, what the vendors’ customers say about their support, and observations from site visits, etc.
Vendor negotiation and contractingWe believe that an attorney that specializes in intellectual property law should review the agreements. Review of software
licenses, professional services, and support agreements is crit-ical. Include all key decisions you have made including time-line, modification specifications, assumptions about services, etc.; these should all be part of the agreements.
a Word about Sign-oFFSThroughout this article we have mentioned places where ven-dors and the user community should sign off on deliverables, requirements, plans, etc. Since the 1970s, as general IT industry standards have evolved, sign-off on key deliverables has become a standard. It’s also the best way for you to get buy in from the management and department users.
beneFitSMost teams can come up with a soft list of benefits for mov-ing to an OMS. In today’s business climate and with the com-petition for capital, CFOs we work with want to see a Return on Investment (ROI) within 18-24 months. Frankly, this is one of the hardest steps in the process. However, here are some areas to consider:} How will customer service be enhanced? Is the online,
closely coupled website to OMS business system essential to growing your business?
} How will the new OMS improve inventory management resulting in higher initial order fill rates, improved turn-over, and reduction in aged inventory? Inventory is the largest balance sheet asset.
} How will the new OMS and resulting process reduce labor costs in the call center and fulfillment centers? Eliminating process steps and touching product less times decreases costs.
} How can barcodes throughout all the steps (inbound prod-uct and outbound customer fulfillment) reduce costs?
} How are errors reduced? Studies on errors show they cost $35 to $50 and often lose customers in the process so you lose the Life Time Value forward.
} What are the merits of the technology being proposed? Does it allow you to adopt other alliance partner applica-tions and websites that are not possible? Is the change out necessary because expense and difficulty of support-ing aging technology, databases and languages? p
Curt Barry is president of F. Curtis Barry & Company, a consultancy spe-cializing in multichannel operations & fulfillment. Services include systems selection and implementation, improving fulfillment operations through cost reduction, benchmarking, process improvement and layout and design. He can be reached at 804.740.8743, www.fcbco.com, [email protected].
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com 25
Parcel Volumes: Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l
Pricing: Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l
B2C Shipping: Shippers Indicate Increased B2C Shipments, a Negative for Mix
Product Mix: Product Mix Shift From Premium Services To Standard Ground Shipping Continues
Competition: Carrier Switching Falls Across Segments
1. Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l
2. Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l
3. Shippers Indicate Increased B2C Shipments, a Negative for Mix
4. Carrier Switching Falls Across Segments Please note that materials that are referenced here are intended for infor-mational use only, so please do not forward the content contained herein. If you should have a need to use/share the materials externally, please contact Amanda Armendariz, RB Publishing. Additionally, MS and RB have provided their materials here either through agreement or as a courtesy. Therefore, MS and RB do not undertake to advise you of changes in the opinions or information set forth in these mate-rials. You should note the date on the presentation.
Editor’s Note: PARCEL would like to thank Morgan Stanley for allowing us to reprint part of the following survey. The results are a must-read for any shipper. For the full survey results, including disclosures, please scan the QR code at the end of this article, or go to www.PARCELindustry.com and check out our content library.
Some key takeaways from Morgan Stanley’s recent survey are:
For full survey results, scan this QR code or go to the content library on www.PARCELindustry.com.
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com24
Freight Pulse:
Parcel Key Takeaways
Morgan Stanley’s survey results refl ect a stable outlook on the economy. Shippers remain constructive
on rail, while expect truck and parcel volume growth to decelerate slightly. Rail and parcel air & int’l
shippers expect accelerating pricing, while truck shippers see deceleration in pricing gains ahead.
Copyright 2012 Morgan Stanley
NOVEMBER-DECEMBER 2012 | www.PARCELindustry.com 25
Parcel Volumes: Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l
Pricing: Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l
B2C Shipping: Shippers Indicate Increased B2C Shipments, a Negative for Mix
Product Mix: Product Mix Shift From Premium Services To Standard Ground Shipping Continues
Competition: Carrier Switching Falls Across Segments
1. Shippers Expect Volume Growth to Decelerate for Air & Ground, Flat for Int’l
2. Rate Growth Expectations Decelerate for Ground, but Accelerate for Air & Int’l
3. Shippers Indicate Increased B2C Shipments, a Negative for Mix
4. Carrier Switching Falls Across Segments Please note that materials that are referenced here are intended for infor-mational use only, so please do not forward the content contained herein. If you should have a need to use/share the materials externally, please contact Amanda Armendariz, RB Publishing. Additionally, MS and RB have provided their materials here either through agreement or as a courtesy. Therefore, MS and RB do not undertake to advise you of changes in the opinions or information set forth in these mate-rials. You should note the date on the presentation.
Editor’s Note: PARCEL would like to thank Morgan Stanley for allowing us to reprint part of the following survey. The results are a must-read for any shipper. For the full survey results, including disclosures, please scan the QR code at the end of this article, or go to www.PARCELindustry.com and check out our content library.
Some key takeaways from Morgan Stanley’s recent survey are:
For full survey results, scan this QR code or go to the content library on www.PARCELindustry.com.
november-december 2012 | www.PARCELindustry.com26
“Another outstanding event with up to date and pertinent content!“Jeff Stevens | Logistics & Distribution Manager | MasterTag
Still Cool After 10 Years… By Amanda Armendariz
None of this would be possible without the support of our corporate sponsors:
The 2012 PARCEL Forum was our best yet — what a fitting way to say “good-bye” to the Hyatt Regency O’Hare, where we’ve had the conference for almost 10 years. In 2013, forum attendees will be heading to the Hyatt in downtown Chicago for the first time ever, and while we’re definitely excited for that (and, from the sounds of it, our attendees are as well!), it seems like it will be hard to top this year’s show.
We’re always a bit nervous leading up to a show — after all, anyone who’s ever attended a trade show (or put on one!) knows that there are multiple things that can go wrong. Sessions can flop, speakers can pull a no-show... the list goes on. Luckily, our forums have been a hit with attendees, vendors, and speakers alike for the last decade, and this year was no different. The sessions all rated highly, the exhibit floor was hopping, and our networking receptions and special events (like the wonderful FedEx hub tour we were taken on) were a hit.
As editor of PARCEL magazine (and the managing editor before that), I’ve been attending the PARCEL Forum since 2006. People sometimes ask me
if I mind traveling to the forum as part of my job. Honestly? I don’t mind it one bit. I truly enjoy the networking receptions — it’s so gratifying to chat on a personal level with people who share a professional interest (not to mention the fantastic food, drink and music that are always present at these events!). I enjoy seeing what sessions are the most popular among attendees, since that helps me judge if my editorial compass for PARCEL is pointing in the right direction. I love seeing all the attendees — some are familiar folks who return year after year, and others are newcomers who have heard great things about our show and want to check it out for themselves. And most importantly, it’s immensely satisfying being a part of an event that is considered such an educational resource for so many in the small shipment industry.
So it’s a relief to be able to say that, once again, we put on a great show — and now it’s time to start planning next year’s! See you October 7-9 in downtown Chicago!
25% of attendees ship 100,000+ packages per month and 9% ship more than 1 million a month; 89% of attendees indicate they ship internationally.
november-december 2012 | www.PARCELindustry.com 27
“There was a lot of good, relevant content to many of the presentations. They sparked some good ideas that I plan to incorporate into our program. Meeting my peer group was perhaps the most valuable thing about attending the conference. It was good to network and compare notes with other programs. Overall, it was a great event, and I plan on attending next year.”Mark J. Taylor | Sr. Transportation Analyst-Parcel | Lowe’s Companies, Inc.
“Best PARCEL Forum EVER!”Harold Friedman | SR. V.P. Global Corporate Development | Data2Logistics
PARCEL Forum ’12 Vitals489 verified attendees306 exhibitor personnel72 exhibiting companies
25% of attendees ship 100,000+ packages per month and 9% ship more than 1 million a month; 89% of attendees indicate they ship internationally.
A look At the products you wAnt
Buyers’
2013wish list
spotlight Flats Managerthe Bell and howell FlatsMgr solution automates the task of sorting outgoing or incoming flat mailpieces using the most efficient technology available on the market today. this system can displace the need for manual processing or less efficient flat mailpiece processing while increasing the quality and traceability of each mailpiece.
Bell and [email protected]
Global Transportation ManagementGet more visibility and control of your shipping operation. designed to help your organization manage logistics more efficiently, sendsuite live provides web-based services that allow the flexibility and power to effectively plan, route and manage shipments to provide a balance of service and cost reduction.
Pitney [email protected]/sendsuitelive
packaging is rarely the right size for organizations that ship a very diverse and ever changing set of products. with Box on demand any size box can be made in seconds to match the item(s) to be shipped.
Box on [email protected] ext. 123www.boxondemand.com
Packaging Made to Order – At the customer facility
Print, Mail, Ship, Track!For over 30 years, harte-hanks has been the vendor of choice to leading retailers for reliable, quality mail services. whether printing personalized mail, all styles of direct mail, to supply chain, logistics, to tracking software, harte-hanks has the capability, equipment and services to handle all your mailing needs.
Harte-Hanks, [email protected]/page/mailingservices_marketing
Yup! We can deliver that.} can dunham express deliver a 50 lb
package at a 5 lb rate? } can dunham express offer extended
next day service ?
} will dunham express cut your regional shipping costs by 10-40%?
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Dunham Express608.242.1000 www.dunhamexpress.com
Boasting the most reliable technology, award-winning support, and new USPS postage invoicing, Stamps.com is fi rmly positioned as the leader in online shipping. call or email us today to fi nd out how more than 400,000 Stamps.com subscribers save time and money using Stamps.com and the USPS.
Stamps.com Shipping [email protected]/parcel
Lower the Cost of Ful� llment and DeliveryParcelMgr from Bell and Howell lowers the cost of parcel fulfi llment and delivery by automating the tasks of reading, weighing, labeling and sorting parcels or fl ats. The fully automated system can handle the majority of parcel and fl ats postal pieces at speeds up to 5,000- 7,000 parcels per hour.
Bell and [email protected]
InsiteShip: Shipping for Manufacturers & DistributorsThe leading provider of enterprise shipping software serving manufacturers, distributors, and retailers, InsiteShip automates repetitive and challenging shipping tasks and eliminates costly errors. InsiteShip includes robust shipment planning tools such as rate shopping, pick and pack options, customer-specifi c labels, automatic email notifi cations, and automated international and haz-ardous materials documentation.
Insite [email protected]/products/ship
Do customers accidentally receive expired products or request last minute order changes? Too many shipping errors? Need visibility to inventory? Interlink Technologies can solve these problems and more with Warehouse Link (WHSe-LINK) WMS. To contact Interlink, call 800.655.5465, visit www.thinkinterlink.com or stop by ProMat 2013 Booth #3579.
Interlink Technologies800.655.5465www.thinkinterlink.com
MOO-VING THE RIGHT INVENTORY OUT THE DOOR
Package Audits Control Costs.Control your costs and save your company money with the most advanced and comprehensive parcel audit program in the industry. CTrak’s proven benefi ts include a complete automated Global audit and duplication prevention audit of all Freight and Parcel Costs, Reduced Shipping Administrative Expenses, and applied Accounting and Customized Reporting.
CT [email protected] 216.267.2000 ext. 2015info.ctlogistics.com
Stamps.com PC Postage … now with postage invoicing! IN THE NEXT ISSUE…
WAREHOUSE AND MATERIAL HANDING
SOLUTIONSFOR YOUR
november-december 2012 | www.PARCELindustry.com30
n August of this year, President Obama
signed a new Highway Bill — “Moving Ahead
for Progress in the 21st Century Act” aka MAP-
21. This 584 page document deals with many issues. In this
installment of PARCEL Counsel we will focus on just eight pages
relating to transportation brokers and freight forwarders. During the legisla-
tive process this was referred to as the “Fighting Fraud in Transportation Act of 2011.” The most controversial part of this portion of Map-21 is the increase in the amount of a broker’s surety bond from $10,000 (set in 1937) to $75,000. As a starting point, I would like to explain what a surety bond is and how it differs from insurance.
A surety bond is intended to serve as a financial guarantee whereby one entity, known as the surety, guarantees the financial performance of another, known as the principal. With regard to transpor-tation brokers, the purpose of the bond is to provide a source of payment to car-riers in the event the broker fails to do so. The surety charges the broker an annual fee for the bond. If the surety has to pay the motor carriers, the surety has the right to seek reimbursement from the principal, i.e. the broker, for the amounts paid out as the result of the failure of the broker to pay the carriers.
This is very different than when one purchases insurance. With insurance, a
person pays an annual premium, how-ever if a loss occurs the insurance com-pany does not have the right to seek reimbursement from its insured — that would defeat the purpose for which the person bought the insurance. With that in mind, insurance premiums are set by an insurance company so that over time the amount of premiums col-lected from its customers are suffi-cient to cover the claims paid out by the insurance company.
With respect to companies issuing surety bonds, they know that although they have the right to seek reimburse-ment from the broker for repayment of
any amounts the surety has to pay out. It is also understood that this right is of little value since the claim against the broker would not normally arise if the broker was financially solvent. Thus, the surety companies may require col-lateral to secure their potential liabil-ity for paying claims against the bond. The amount of collateral required can range from none at all to 150% or more of the face amount of the surety bond depending upon the financial strength of the broker.
This aspect of a surety bond is what has caused the controversy. Shippers and motor carriers have long advocated for an increase in the bond amount. Over
the years the brokerage industry has resisted this change because, amongst other things, of the fear that it would lead to the demise of smaller brokers. With the increase of the bond amount of $10,000 to $75,000, the amount of col-lateral that could be required becomes very significant. What small company has an extra $75,000+ in cash to post for a bond?
The new law also extends the require-ment for a surety bond to freight for-warders who were not previously required to have a surety bond. My understand-ing of why the bonding requirement is now being extended to freight forward-
ers is that, if not done so, existing brokers would sim-ply cease operat-ing as brokers and begin operating as freight forwarders to avoid the bond requirement.
It should also be noted that although the new law has passed, it is not to become effective until one year after it was passed, that is, August, 2013. In the meantime, the Federal Motor Carrier Safety Administration (FMCSA) has been directed by Congress to write regula-tions to implement the provisions of the new law. 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 (parcelindustry.com). Your ques-tions are welcome at [email protected].
Parcel COunSELBy Brent Wm. Primus, J.D.
the new Highway Bill and transportation Broker surety Bonds
In the next installment of Parcel Counsel we will continue our analysis of the Fighting Fraud in Transportation Act of 2011… but, all for now!
