PARCEL MARCH-APRIL 2013

www.PARCELindustry.com

Improving E-Commerce Shipping Services…

Even in Offshore Locations.

Page 22

Transportation Solutions Section

Page 24

A Simple Roadmap

to Deciding Which Shipping System Is

Best for You.Page 18

may be headed in a new direction, but the outlook is bright, especially when it comes to negotiating your carrier contracts.Page 14

INDUSTRYSHIPMENTThe small

www.nissancommercialvehicles.com

http://www.ocs-cw.com/english/home

MARCH-APRIL 2013 | www.PARCELindustry.com4

MARCH-APRIL 2013 | volume 20 | issue 3

DepartmentsFeatures

CONTENTS

18 Selecting and Implementing the Best Shipping Software for Your Operations When making a change in shipping systems, there’s a lot to take into account. Here’s a roadmap to help you with your decision.By Bob Fischer

22 Improving E-Commerce Shipping Services... while reducing costs for offshore and us territory locations. By Kevin Unbedacht

14 Today’s Challenges to Negotiating Great Parcel ContractsDespite these challenges, the outlook for parcel shippers is bright... if you know what steps to take.By Rob Martinez

06

07

08

09

10

11

12

13

28

30

Editor’s NoteStepping Into Spring By Amanda Armendariz

Going Global International Mail Shipping Documentation Changes By Tom Stanton

Transportation ABCs What Every Residential Shipper Should Know By Brittany Beecroft

Regional AlternativesThe More Things Change, the More Regional Parcel Carriers Stand OutBy Jim Berluti

LTL InsightsInsights on LTL Carrier Pickup and Delivery OperationsBy Joe Heilig

Spend PerspectivesHow Free Shipping Set the Tone for Holiday Shoppers By John Haber

Supply Chain PivotMardi Gras LogisticsBy Rob Shirley

Operational EfficienciesKeys to Success in 2013 and Beyond By Susan Rider

PARCEL CounselBill of Lading Pop QuizBy Brent Wm. Primus, JD

Wrap UpChange Is in the AirBy Michael J. Ryan

PARCEL

Transportation Solutions Section Starts on Page 24!SPECIAL

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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MARCH-APRIL 2013 | www.PARCELindustry.com6

t’s hard to believe that I’m sitting here trying to pen the editor’s note for our second issue of the year already. Where does time go? Before you

know it, our much-anticipated spring will have fl own by, the lazy days of summer will be over, and hundreds of logistics professional will be converg-

ing in Chicago for our annual PARCEL Forum. We, along with the PARCEL Forum advisory board members, are currently in the process of selecting the

conference sessions. As it seems happens every year, we receive so many fan-tastic session suggestions that our only problem will be choosing which ones to

include! Keep checking www.PARCELForum.com to stay abreast of the conference sessions and to register.

We’ve got plenty of new things going on at PARCEL, too. Starting in mid-April, we’re going to be doing a little something we’re calling “Tuesday’s Tip.” Each Tuesday, we’ll send

out an e-blast with a brief (but helpful!) tip or commentary from one of our industry experts. Topics will range from contract negotiation to international shipping to warehousing, just to name a few. If you’re not already signed up for our e-newsletter, scan the QR code to the right or simply visit www.PARCELindustry.com and click the newsletter tab at the top of the page. By doing so you’ll be sure to be included in this new offering.

I hope you enjoy our March/April issue, and that the articles found within are helpful to you. I welcome feedback, so please contact me at any time. As always, thanks for reading PARCEL.

Stepping Into Spring

EDITOR’S NOTE AMANDA ARMENDARIZ

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FOLLOW @PARCELmedia

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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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We goofed! In our January/February issue, we mentioned that Part Two of Roman Hlutkowsky’s article, Best Practices to Ensure Proper Technology Implementation, would be in the March/April issue. It will actually appear in the April e-newsletter. Sorry for any confusion!

march-april 2013 | www.PARCELindustry.com 7

n September 2012, the United States

Postal Service (USPS) made changes in its

export forms require-ments so that they are

more in compliance with US export compliance reg-

ulations. Perhaps it is time to review some export/import basics

for companies making small pack-age shipments via the mail.

CN22 yes: This form must be used for all First Class International Mail items, small packages, Priority Mail International Small flat rate boxes, Mail bags, and cer-tain Express Mail International items that contain goods or merchandise. This form must also be used for First Class Mail or Priority Mail envelopes weighing 16 ounces or more, exceeding ¾ inch in thickness or containing goods or mer-chandise, i.e. other than documents. The form is to be completed in duplicate at retail and single form via PC Postage and other approved systems. Export records are to be kept for five years.

CN22 No: This form is not to be used for shipments 1) valued over $400 2) Requiring an export license per 15 CFR or 22 CFR 3) shipments of goods to Iran, Sudan or Syria or 4) shipments of goods to Cuba or North Korea other than gift parcels or humanitarian donations.

CheCk the box: There are seven choices to identify your shipment: 1) The first box identifies documents. This would be applicable if your shipment were over two

pounds or over ¾ inches thick. 2) The sec-ond box identifies goods being exported for samples. In most cases samples are pro-vided free of charge to a prospective seller however they still have a value i.e.; pro-duction costs. Often these are only rep-resentative of a fully valued item. Some import regulations such as the US allow samples not for sale to enter informally free of duties and taxes. 3) Merchandise is the general category of dutiable/tax-able goods that are not gifts, humanitar-ian donations or hazardous materials. 4) Dangerous goods included infectious sub-stances shipped between laboratories, pre approved and labeled radioactive mate-rials, properly labeled human or animal specimens and lithium batteries installed in equipment — see USPS international mail manual for further details. 5) Gifts: Items shipped free of charge — generally to a home address. These usually pass free of duty and taxes. 6) Humanitarian dona-tions: This is one of the few types of things that can ship to Cuba or North Korea. 7) Other: I am not sure what would fit this category.

DetaileD DesCriptioN: The details required for the description are depen-dent upon the harmonized classification applicable. If the harmonized classifi-cation for a particular item and a par-ticular destination makes a distinction between black jackets and white jack-ets, the description needs to identify whether the jacket being shipped is black, white or other. So get some help on the correct harmonized number to make sure your shipment exports and imports smoothly. A detailed description

is different than an item description. It’s important that a full description and value for each item is included on the customs form.

Qty/wt/value: The number of units shipping, their weight and the transaction value of the goods belong in this section. The transaction value is generally the price paid or payable for the goods. Even though an item is free of charge it still has a value for Customs purposes. This is the cost of buying or making the product if no sale takes place.

hs tariff: This is the harmonized tariff number applicable for the product. There are a number of US resources to help you determine the classification for the prod-uct. The harmonized tariff schedules of the United States can be identified online at: http://www.usitc.gov/tata/hts/. Currently, an HTS code is only required for commer-cial shipments that are mailed thru the USPS. Normal B to C not for resale items are not considered commercial shipments. We recommend classifying your goods to identify the correct tariff rate. p

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

going GLobALBy tom stanton

international mail Shipping Documentation Changes

Want to learn more about Country of Origin and NOEEI: 30.37 A and H? Scan to read the full article!

march-april 2013 | www.PARCELindustry.com8

e know the value of

shipping with the Big Two.

What many ship-pers may not real-

ize are the benefits of looking outside the box

of the Big Two and utiliz-ing an alternate carrier that specializes in residential delivery and returns. Similar in concept to a regional carrier, whose focus is on a particular zone based segment of shipments, residential and parcel return carriers focus on mode-based shipments. Regardless of zone, the goal of these car-riers is to provide quality B2C (and C2B) e-com-merce solutions as well as depth into the mail supply chain.

The network concept is similar to FedEx’s SmartPost and UPS’s SurePost, utilizing the USPS for the final mile. These residential carriers bypass postal sortation centers and “inject” the ship-ments directly at the DDU (Destination Delivery Unit) so the package is ideally as close to the customer as possible for the final delivery. A selling point with some residential carriers is the seamless move-ment of the packages; the packages are not held at one location but rather con-tinue to move through the network until delivery. As well, handling is always a consideration, given the target package metric for SmartPost/SurePost is the res-idential package weighing less than five pounds. Handling can vary per carrier, but often the bulk mail pieces and lightweight

shipments travel in sealed containers until they reach the DDU to ensure ship-ments of that size are not lost or damaged.

Who can benefit from mode-based ship-ping carriers? Realistically anyone with a dense residential or returns profile. Like SmartPost and SurePost, the niche carri-ers do not assess Residential or Delivery Area fees. With the average increase in these fees for 2013 around 7.5%, elim-inating them is advantageous to keeping costs competitive. E-commerce is ideal for mode-based carriers as well as phar-maceutical companies, fulfillment houses, publishers, and financial institutions. These carriers can move parcels, BPMs,

and flats — domestically, internationally, and into Canada. And given their partner-ships with the USPS, they deliver to mil-lions of residential addresses, including rural routes and Post Office Boxes.

Shippers currently using FedEx and/or UPS, and considering a shift to a res-idential carrier, must watch how pulling volume from their current agreement can affect their Earned Discount tiers and sub-sequent costs. Earned Discounts are based on cumulative base transportation spend (the occasional UPS agreement will also include select accessorial charges in the cumulative total, which as we will see, can be even more detrimental to costs if a shift

in carrier occurs). Structure of the basic Earned Discount includes spend from Domestic and International Air, Ground Commercial, Ground Residential, and any applicable SmartPost/SurePost ser-vices. This spend includes Returns reve-nue. A shipper with 84% of their volume in Home Delivery or Returns must be cog-nizant of their thresholds and watch that pulling volume from FedEx or UPS does not yield a net rate increase as they drop to a lower tier with less aggressive incen-tives. With UPS, especially, the drop from the second to first tier can be significant — some shippers seeing more than a 20% net increase in cost as they fall off tier. If

Residential accesso-rial spend is included in the thresholds, when you remove the volume, you also remove the rea-son for the Residential fee, and net costs could further climb.

One other item to consider is package

weight. Residential carriers will take up to 70lbs, but as we can see from SmartPost/SurePost costing models, once a shipment crosses over 10lbs Ground Residential/Home Delivery networks become more cost effective. A good blend of each residential shipping option is ideal if the structure of your agreement can support it. p

Brittany Beecroft, MBA, Manager of Parcel Services for AFS. 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 regularly with some of the largest shippers in the world and is a sought after speaker and consultant.

transportation ABCsBy Brittany Beecroft

What every residential shipper should Know…

With the average increase in these fees for 2013 around 7.5%, eliminating them is advantageous

to keeping costs competitive.

march-april 2013 | www.PARCELindustry.com 9

t’s been 30 years since Eastern Connec-

tion opened its doors on Valentine’s Day in

1983 as a regional par-cel delivery service. Since

then, we’ve lived through dramatic events and industry

changes, including the advent of the Internet, a major strike by

UPS, terrorist activity, and the void left after DHL, the perceived lower-

price alternative among the industry giants, suspended domestic services.

What hasn’t changed in three decades is the need among shippers to have an alternative way to deliver their goods. Cast as David against Goliath, regional carriers offered a business model that was different from the giants: a ground service that provides later pickups and earlier deliveries at a lower price. Today, regional carriers continue to apply this business model and gain market share because of another dynamic that hasn’t changed: Time is money, and companies looking to cut costs are increasingly not satisfied with business as usual.

Let Revisit the Age-oLd AdvAntAges of the RegionALs

CostWith lower operating expenses and a reli-ance on ground versus air transport, the regionals have always offered better pric-ing than the giants. This includes not only lower base rates but also fewer accessorial charges and hidden fees, such as earlier deliveries and special handling charges. Many of these charges aren’t transparent

Regional AlternAtivesBy Jim Berluti

The More Things Change, the More Regional Parcel Carriers Stand out

that their service is more reliable than their poorer cousins can provide.

But Let’s exAmine myth vs. ReALity First, regionals are expanding their scope. Today, they cover almost 90% of the nation’s ZIP Codes — and that footprint is expanding.

Second, what about the notion that nationals provide a higher quality service? Actually, the regionals, with fewer exchange points, have always had less margin for error. And now they can provide technol-ogy on the same par as larger competi-tors. With web-based shipping, barcoding, mobile scanners, and integrated shipping systems, technology is becoming a com-modity. Accordingly, you should determine how your carrier shapes up in terms of on-time and intact package delivery.

Finally, let’s be clear about this: No one is suggesting that the regionals will replace the nationals. Rather, it’s a ques-tion of finding the right combination of complementary services that meet your particular needs.

So do your homework. Weigh your options. Put your carrier to the test. Because today, more than ever, it’s good to have options when it comes to deliver-ing the goods. p

JiM BeRluTi is President & CeO of eastern Connec-tion, 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 Over-night, same-Day, second-Day, logistics & Ware-housing, trucking, and expedited Mail. For more information, visit www.easternconnection.com.

to shippers, but they add up. The bottom line? Recent surveys show that regionals are approximately 20% more cost-effec-tive than the nationals for overnight as well as two-day deliveries. That can translate into millions of dollars of savings.

FlexibilityRecognizing the time-sensitive nature of many businesses, regionals have tradi-tionally offered later pickups and earlier deliveries. Most regional services are open 24/7, often operating even when airports are closed. Around-the-clock services are particularly important to those compa-nies that are open all night and those that require critical shipments such as med-ical supplies first thing in the morning, before the standard 10:30 a.m. deliver-ies. This flexibility applies to next-day ser-vice as well as deferred service, where the regionals can often guarantee two-day delivery compared to three or more days with the giants.

PersonalizationIt’s hard to quantify the value of person-alized service, but shippers tend to prefer dealing with friendly, familiar customer service reps who don’t make them feel like they’re just a number. Sometimes, this includes the ability of the driver to enter “beyond the threshold” into a business or home.

These built-in advantages of regional services have been well-documented. Why, then, haven’t the regionals made greater inroads against the nationals? Certainly, the nationals offer one-stop ser-vice that covers all zones in the country and abroad; they also enjoy a perception

march-april 2013 | www.PARCELindustry.com10

ack in the late seventies when

I worked as an Industrial Engineer for

LTL carrier Ryder Truck Lines, the Senior Vice President of Operations

had on his desk name-plate one word, “Service.” It

sent a simple but concise mes-sage to everyone: the only thing LTL carri-ers have to offer their customers is service. How true, if you think about it: LTL truck-ing is relatively simple. Carriers provide a service of moving a product from point A to point B and delivering it in the same con-dition as when it was picked up at point A. This article will go into depth about the service beginning at point A and ending at point B the pickup and delivery function (P&D) of LTL trucking.

The primary objective of any P&D opera-tion is to ensure that all loaded shipments are delivered and all assigned pickups are accomplished in a timely and efficient manner. To that end, the key objective is to minimize drive time (sometimes known as windshield time) and miles between each customer stop. P&D routes can be categorized into three types:

LTL InsIghtsBy Joe Heilig

Insights on LTL Carrier Pickup and Delivery Operations

Urban an inner city route such as downtown Atlanta with short runs (less than one mile) between stops.

Metroa route in areas outside of downtown but within a major city’s metropolitan area.

Peddle a route which encompasses small towns or communities, usually significant distances from the driver’s terminal.

Carriers typically develop routes for a driver to make up to 20 or more stops in a day. An urban route may have more stops due to reduced miles (50-60) and depending on the location of the termi-nal, while a metro route driver may drive 90-100 miles, and a peddle route may encompass 150-200 miles or more.

In most cases the routing of delivery stops is more efficient because the carrier already knows all the stop locations and can route the driver in the most effective travel path. However, delivery appointment stops can require a carrier to totally revise the stops and may result in a less than optimal route. The normal procedure is for a driver to empty his unit of deliveries at the farthest point of the route before start-ing to make pickups. Pickup stops in many instances require backtracking on the route as pickups are relayed to the driver.

Carriers collect cost data on each stop. In years past, it was as simple as a driver manifest on a clip board, but today the most high-tech carriers utilize on board computers and hand-helds. Carriers measure the drive time between stops, time at the stop, and delays. P&D route metrics include stops per hour, miles per stop, and shipments per stop. The metric that can have the most impact on your pric-ing is shipments per stop. It costs a typical carrier $120-130 per hour to have a P&D unit on the street. When a driver utilizes 30 minutes to make a stop (driving and time at the stop) then the stop cost would be $60. If two shipments are picked up, then the average allocated cost per shipment is $30; however if six shipments are picked up, the average shipment cost would be $10. Keep in mind it may take a little longer to load six ship-ments versus two, but the cost alloca-tion point is made.

The carrier’s P&D operational cost will typically absorb 12-15% of a shipment’s revenue depending on size of the ship-ment and length of haul. Therefore, the P&D operation is vital since it is the start and end of all shipments.

Next time, I will discuss a LTL carrier’s dock operation. p

JOE hEILIg has over 35 years in the transportation industry. he has served as a senior transportation Analyst with enVista for eight years. he has also held numerous positions with major LtL carriers including Director of Industrial Engineering. Joe may be con-tacted at 803.708.8657 or jheilig@envistacorp.com.

the carrier’s P&D operational cost will typically absorb 12- 15% of a shipment’s revenue depending on size of the shipment and length of haul.

march-april 2013 | www.PARCELindustry.com 11

Spend PersPectivesBy John haBer

ack in December, I emphasized how

free shipping positively impacts customer satisfac-

tion. When shoppers are happy with both product pricing and shipping costs,

they reward the retailer with: more visits, an increase in

number and value of purchases, more shares/referrals, better reviews, increased loyalty and more repeat business.

This past holiday shopping season is proof in point.

According to the National Retail Federation, uncertainty over Washington’s fiscal cliff negotiations constrained holi-day shoppers — 2012 holiday sales grew a scant 3.0%. All told, the U.S. Census Bureau’s Retail Sales Report found that the retail growth rate for December 2012 was the lowest since January 2010. Looking ahead, we can expect simi-lar growth concerns. The National Retail Federation is predicting 2013 retail industry sales to grow 3.4%, a growth rate of almost 20% less than the prelimi-nary 4.2% growth seen in 2012. January 2013 retail sales grew a measly 0.1%, negatively impacted by tax increases and higher gasoline prices.

The European outlook for 2013 is extremely disconcerting. The UK’s Centre for Retail Research predicts flat retail growth somewhere between zero and 0.5% in volume terms and 2.83% in finan-cial terms. While this projection includes online sales, the institute warns that brick and mortar retail will suffer at the expense of online sales. To further retails concerns in the UK, on Friday, February 15, the UK

How Free Shipping Set the Tone for Holiday Shoppers

Office for National Statistics announced retail sales fell by 0.6% in January 2013. This is the fourth consecutive monthly drop and has sparked fears of an unprec-edented “triple dip” recession.

While holiday season retail sales were generally low, e-commerce sales are the one bright spot. In mid-December, com-Score reported that e-commerce spending for the first 44 days of the holiday season was $33.8 billion, up 13% over the previ-ous year. The NRF’s digital division Shop.org reported that online sales grew 11.1% during November and December 2012 and that 2013 online sales should con-tinue to grow between 9.0 and 12.0%.

What’s more, comScore also singled out the week of December 9-15, 2012, as the heaviest five-day online shopping period on record breaking all records with four individual days logging more than $1 billion in spending. The second week in December is particularly impor-tant for e-commerce because it’s the last week for shoppers to buy online and still feel comfortable that their gifts will arrive on time.

As a further incentive for holiday sales, Amazon and some other retail-ers offered free two-day shipping. In fact, on December 11, Amazon.com, Inc. extended the ordering deadline for Free Super Saver Shipping by two days. This enabled customers to place orders through December 18 with free deliv-ery by Christmas on millions of items across electronics, toys, sporting goods, books, music, clothing, kitchen, tools and more. Amazon Prime members were able to place orders up until 7:00 p.m. EST on December 21 to receive

deliveries by December 24 using Free Two-Day Shipping.

It’s no surprise that Free Shipping Day on Monday, December 17 (up 76% to $1.013 billion) was one of the busiest days of the holiday season with nearly 1,700 merchants offering free shipping by Christmas Eve through FreeShippingDay.com or on their own sites. In just four years, Free Shipping Day has grown from a one-off Black Friday spin-off to a bil-lion-dollar day for online sales.

Most retailers are adopting free ship-ping because it drives customers to spend up to 40% more per order and because their competitors will eat their lunch if they don’t. But free shipping is anything but free for retailers, espe-cially when it also includes pricey over-night delivery.

In order to keep free shipping from cutting into their margins, etailers are getting smart about their shipping spend. They are negotiating tough contracts with the parcel shipping services and opting for less costly last-mile delivery via the United States Postal Service (USPS). This will be increasingly tough in 2013, however, if the United States Post Office eliminates Saturday delivery beginning in August. While free shipping is here to stay, so is the importance of managing your shipping spend. p

JoHn Haber is an expert in shipping, freight and transportation spend management. in his cur-rent role he provides the vision, and the execu-tion know-how, that helps companies save 10% to 20% or more in logistics spend. contact him at jhaber@spendmanagementexperts.com.

march-april 2013 | www.PARCELindustry.com12

because the Super Bowl and some evenings had rainy weather

2. The City of New Orleans spends over $3m for this event for policing, traffic, cleanup, and ambulances

3. Over 300 trucks were used for just three parades on Fat Tuesday, final day of Mardi Gras

4. The spectators were well over a million, which is three times the population of New Orleans

5. Hotels were full for at least two weeks at full rates and minimums of three nights stay

6. New Orleans has over 3,000 bars and most never shut their doors

7. Revenue estimates exceed $600mm for the entire event

8. The highest quality floats are all built to specifications by Blaine Kern at their Mardi Gras World manufacturing facility. This is the world’s largest float design and builder. Floats are generally 13’ to 18’ wide and 50’ long

9. The largest float in history was introduced this year, called the Ponchartrain Beach (after a former theme park on the lake-front in New Orleans). It was towed by one tractor and had eight 50-foot dou-ble decker floats combined into one with about 400 Krewe members on board

10. The cleanup at precisely midnight on Mardi Gras day is a sight to behold. In the

French Quarter, an army of police with bullhorns tells the still-partying throngs thank you for coming, but time to go. If they can’t or won’t they are immediately loaded in moving van-sized paddy wagons. Following the police is the cleanup crewwho pick up every bit of trash and thenspray the streets first with fire hose-sized

pressure washers, then deodorize with a thick green liquid, then hit it again with pressure washers.

11. By the crack of dawn, the streets are immaculate. Just in time for the beginning of Lent that lasts until Easter Sunday for self-denial and fasting

Lagniappe (means a LittLe something extra in new orLeans Lingo):

a. The food is of course spectacular. My favorite is Galatoires, try the pompano

b. Brennan’s is the best breakfast youwill ever have, try Eggs St. Charles

c. ACME for oysters, best served raw

d. Mother’s for po-boys, a submarine sand-wich with attitude, roast beef is legendary

e. Central Grocery invented the muffeletta and they are still great

f. Café du Monde has fantastic beignets (powdered donuts) and coffee

g. Pat O’Brien’s invented the Hurricane, this one is a sleeper with a punch

h. Sazerac is America’s first cocktail and Ramos Gin Fizz were both invented in the French Quarter

i. Stay at the Royal Sonesta or the Monteleone, both in the Quarter

You have to see this to believe it yourself. Next year, Mardi Gras is Tuesday March 4, 2014 or try the JazzFest April 26 to May 5 this year. p

rob shirLey  is President of ExpresShip, a con-sultancy in the global supply chain and can be reached by email rsxpship@gmail.com, website Expresship.com, or LinkedIn.com.

suppLy CHAIN pivotBy RoB ShiRley

mardi gras Logistics

ardi Gras’ first year in New Orleans was

in 1857; it has since become the world’s biggest party and has been nick-

named The Greatest Free Show on Earth.

Mardi Gras means Fat Tuesday and culminates on the

day before Lent each year, but begins much earlier. In 2013 the first parade was on January 19, and the last was on February 12. The Super Bowl was sand-wiched in between on February 3.

The parades run from the spectacular to the ordinary. All have float riders, called Krewes, who toss throws such as beads, doubloons, stuffed toys, and even coconuts.

Most of the parades are owned by Krewes who also have elaborate balls replete with royalty. Some are all men, some all women, some mixed, occasionally exotic, and some can be joined for a small fee.

Parades also have marching bands; some have been in the same parade for over a hundred years.

The spectators are mostly family-oriented with chairs, ladders, coolers and barbeques with a very festive scene for children and adults. In the French Quarter the scene can be wild with lots of partying and some things that need to be seen to be believed.

Schools, banks, libraries, and any busi-ness that doesn’t actually serve Mardi Gras are closed Monday and Tuesday.

The logistics behind this show are so massive that I had to personally attend again this year to provide the details:

1. There were a total of 62 parades in just Orleans Parish. Many were rescheduled

march-april 2013 | www.PARCELindustry.com 13

service. Where traditionally, retailers would buy a full truck load or full pallet once every month, they are now buying cases and smaller deliveries three times a week. This huge shift in the demand and sup-ply of goods is resulting in a new design of processes, facilities, partners, and transportation modes.

This trend is causing collaboration from trucking companies, LTL truckers, and car-riers. Collaboration will become more and more important as the industries change much more rapidly than in the past. Vertical industries such as retail, pharma-ceutical, electronics, fashion apparel, and many others are learning that the key to a successful supply chain is agility. Agility may require more partners, such as 3PLs and transportation companies.

The growing parcel industry is changing rapidly as the online retailers are scram-bling for business. Online sales generated $202 billion in revenue during 2011 and are projected to grow over 60% during the next five years. Two day delivery will not suffice with the new demographics emerg-ing as an impactful buying generation. Two day delivery is not quick enough or accept-able; this generation demographic wants the products they order NOW! They are the entitlement generation and will go else-where if they don’t get the service they expect. Therefore, the online retailers are searching for ways to deliver product faster.

The top two initiatives on the list of retailers in 2013, as reported by the Retailers Association, are service innova-tion and improved delivery to customers. Online retailers, along with brick and mor-tar retailers, will be focused on innovation and creating better customer experiences in order to grab market share.

CSCMP reports in its State of Logistics Report that logistics cost increased by $1.2 billion in 2011 and is equivalent to 8.3% GDP. Transportation cost rose 10.4% in 2011; some of the rise in cost is attributable to the increase in fuel cost, loss of capacity, and increase in fees. The transportation industry continues to be hit by several areas that will have a dramatic impact in the future. Hours of service for the trucking industry has had tremendous impact, along with new CSA regulatory laws and aging truck drivers decreasing the pool of available drivers, which has caused concern. The aging transporta-tion infrastructure in the United States will continue to impact the transporta-tion industry including our roadways, rail, and ports.

The key to success in the future will be agility. The ability to respond quickly and to be agile with products, services, and pro-cesses will lead to success. Collaboration will have significant impact in the future as companies who have been adversar-ies in the past look to partner for mutu-ally beneficial opportunities. Technology will continue to impact our futures. The need to stay informed and abreast of new changes will become more impactful as the industry responds in a more rapid pace than ever before. 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.

OperatiOnal EFFiCiEnCiESBy SuSan RideR

Keys to Success in 2013 and Beyond

he economy has been vol-

atile to say the least in recent

years. Changes are happening rapidly all

over the industry. Looking into a crystal ball, what is

happening in the future, and how do you prepare for success

in 2013 and beyond? Thinking out of the box about your

processes and operation is absolutely nec-essary. Evolution is the key, because those that don’t evolve risk becoming extinct. The business world is cluttered with com-panies that didn’t respond to changing environments, trends, and demograph-ics. The newspaper industry is an exam-ple of an industry that didn’t evolve quickly enough in response to the demand for online information. The movie rental industry is another.

Most recently, Blackberry’s demise with the emergence of smartphones is another great example. In contrast, a company that absolutely thinks out of the box is Amazon. Amazon, an online retailer who started with just books as a business model, saw it coming, saw the evolution and was the first to set themselves apart with the intro-duction of the Kindle. Just remember what Albert Einstein said regarding the defini-tion of insanity: You can’t continue to do what you have always done and expect a different result. Therefore, if your bottom line is bleak, distribution cost rising, ship-ping cost escalating, it is time for a re-engineering and to start a new evolution of your distribution center network.

A trend that is affecting many in the supply chain is smaller orders with faster

MARCH-APRIL 2013 | www.PARCELindustry.com14

to Negotiating Great Parcel Contracts

ChallengesToday’s

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Despite these challenges, the outlook for parcel shippers is bright... if you know what steps to take. By Rob Martinez

GRI HISTORY UPS AIR FEDEX AIR UPS GROUND FEDEX GROUND1998 3.30% 3.50% 3.60% 3.70%1999 2.50% 2.80% 2.50% 2.30%2000 3.50% 0.00% 3.10% 3.10%2001 3.70% 4.90% 3.10% 3.10%2002 4.00% 3.50% 3.50% 3.50%2003 3.20% 3.50% 3.90% 3.90%2004 2.90% 2.50% 1.90% 1.90%2005 2.90% 4.60% 2.90% 2.90%2006 5.50% 5.50% 3.90% 3.90%2007 6.90% 6.90% 4.90% 4.90%2008 6.90% 6.90% 4.90% 4.90%2009 6.90% 6.90% 5.90% 5.90%2010 6.90% 5.90% 4.90% 4.90%2011 6.90% 5.90% 5.90% 5.90%2012 6.90% 5.90% 5.90% 5.90%2013 6.50% 5.90% 5.90% 5.90%

Average 1998-2005 3.25% 3.16% 3.06% 3.05% Average 2006-2012 6.68% 6.23% 5.28% 5.28%

Table 1

SO you ship lots of packages and spend tons of money with the parcel carriers. Millions even. You’re a big customer. You’ve been invited to their hubs. And to major sporting events. Once a year, you get a visit from a high ranking title from Atlanta or Memphis. You’ve even been

assigned a dedicated, national account representative who’s in your building all the time.Then why do you feel like such a small fi sh when it comes time to negotiate your

parcel contract?Make no mistake about it. It’s harder now. And you’re not alone.In our 2011 PARCEL Survey on Pricing & Benchmarks, by a margin of 4 to 1, ship-

pers feel it’s harder today than ever to negotiate parcel contracts. Asked why, the top four responses were: 1) Lack of competition within parcel provider market; 2) Carriers’ focus on yield management; 3) Pricing has become commoditized; and 4) FedEx and UPS have a tacit agreement to avoid pricing wars.

Part One of this article addresses several challenges to negotiating best-in-class par-cel agreements in today’s margin-focused market. Part Two provides suggested strate-gies and solutions.

PART ONE – CHALLENGES FEW NATIONAL PARCEL PROVIDERSWhen I started my career in the parcel business, there were multiple carriers compet-ing for parcel volumes. In addition to FedEx and UPS, there was Airborne Express, DHL, Flying Tigers, Burlington, BAX Global, Emery and even Purolator. Now we’re down to only two national private parcel carriers in the US — FedEx and UPS.

Of course, it’s diffi cult to create negotiating leverage with little competition in the market, especially when those companies’ stated focus is on margin improvement, i.e. making as much money as possible on every shipment.

RISING PARCEL COSTS As competition in the parcel market has winnowed, annual rate hikes have sharply increased. A study of FedEx and UPS annual rate increases refl ects a shift in the mar-ket pricing around 2006. Rate increases for the most recent eight years (2006-2013) are roughly double the previous eight years (1998-2005). See Table 1.

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In addition to freight rate hikes, shippers have seen dozens of new accessorial charges over the past decade, many of which did not exist prior to 2006. Accessorial charges — like Delivery Area Surcharges, Fuel Surcharges, Weekly Service Fees, Large Package Surcharges, Additional Handling Service charges and the like — now account for as much as 30% of a shipper’s overall costs.

Other service guide changes have caused rates to increase dramatically. Ground minimum charges, for example, have increased an average of 6.3% since 2006. That’s a hike of 53.7% over the last eight years. See Table 2.

Shippers have seen several changes over the years on dimen-sional rating. In 2007, UPS and FedEx adopted the Air dimensional freight policy for Ground shipments over three cubic feet. And of course in 2011, the dimensional divisor changed from 194 to 166 for both Air and Ground. These changes accounted for hundreds of millions in new revenues for the carriers.

Complex and Constraining parCel agreements Today’s parcel agreements are more complex and conditional than ever. In general, rate charts are multi-dimensional, based on service level, weight and zone. Packaging and billing options can also come into play to determine discounts (or loss of dis-counts). Freight incentives are based on a set of published pricing, which of course changes annually. The structure of incen-tives is tiered and based on service levels and rolling revenue bands. Revenue bands are based on gross transportation charges — prior to discounts — and exclude accessorial charges. Minimum charges mitigate discounts, as do dimensional charges. And there are dozens of important terms and condi-tions that can affect your parcel rates.

Additionally, volume shippers are seeing many constrain-ing elements in today’s parcel agreements. Several clauses

are often inserted to minimize defection to alternative carriers. These include diversion and minimum net charges penalties as well as early termination agreements. In each of these three cases, a shipper would literally have to pay the carrier finan-cial penalties to divert business to another provider, failing to achieve minimum revenue objectives, or terminating the car-rier agreement prior to term expiration.

Uneven playing FieldOne of the biggest mistakes I see repeatedly is a shipper com-ing to the negotiation table unprepared. Very often, carriers know more about a shipper’s distribution than the shipper. Not too surprising since the carriers “own” your shipping data. Moreover, shippers often don’t understand the impact of terms and structure of their carrier agreements.

Perhaps most importantly, shippers lack benchmarks. Benchmarks provide data points from other companies for comparative purposes. For example, imagine going into a negotiation knowing that you were being charged 20% more than three out of four shippers with similar spend and pack-age characteristics. How much better prepared would you be when your carrier rep says, “You’re getting the best deal in our district”?

Finally, many shippers lack analytical tools to better under-stand distribution metrics, package characteristics, or the impact of pricing actions (new proposal, general rate increase, etc.).

So how do you negotiate best-in-class parcel contracts with FedEx, UPS and other parcel carriers?

part tWo – solUtions & strategiesdo yoUr homeWork prior to negotiationsBefore stepping up to the negotiating table, shippers need to collect and analyze shipment detail to better understand usage, costs, accessorial charges and other variables. Develop reports to understand service usage, seasonality, weight ranges, zonal distribution, accessorial costs, cost per shipment, residential/commercial mix, shipments impacted by minimum and dimen-sional charges, and other factors.

This detailed analysis gives shippers a priority list to focus on concessions that have the greatest cost savings impact.

Quantify which accessorial charges most adversely impact costs and target these charges for waivers or reductions dur-ing negotiations. Regardless of what your carrier representa-tives tell you, all accessorial fees are negotiable.

Conduct benchmarks to determine what range of discount-ing is possible and how your rates compare with other shippers

year groUnd minimUm Charge

inCrease%

2006 3.80%2007 4.00% 5.3%2008 4.20% 5.0%2009 4.57% 8.8%2010 4.84% 5.9%2011 5.17% 6.8%2012 5.49% 6.2%2013 5.84% 6.4%

average 6.3%CUmUlative 53.7%

One of the biggest mistakes I see repeatedly is a shipper coming to the

negotiation table unprepared.

Table 2

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of similar size and/or package characteristics. If you lack the ability to benchmark internally, there are a number of compa-nies that can assist you in this important process. Many third party market experts are willing to conduct an obligation-free, complimentary assessment of your current rates and terms to assess potential savings.

ExplorE AltErnAtivE CArriEr SolutionS, GAin lEvErAGEDespite its financial woes, the US Postal Service remains a via-ble alternative especially for non-urgent, lightweight, residen-tial and/or cubic shipments.

In its Q1 2013 earnings announcement, Shipping and Package Services was a bright spot for the USPS, gaining four percent over the same period a year ago. And Parcel Return and Parcel Select revenue grew 19.2% YOY.

Regional carriers such as Eastern Connection, Lone Star Overnight, OnTrac, Spee-Dee Delivery, PITT-OHIO Ground, LaserShip, TransTek, Prestige Delivery and many others offer reliable parcel delivery services at rates as much as 30% less than national carriers.

There are parcel consolidators — DHL Globalmail, Newgistics, Blue Package, Parcel Pool and others — that compete with FedEx SmartPost and UPS SurePost for Parcel Select service, with the USPS serving as the final mile delivery provider.

Leverage these alternative delivery providers — USPS, regional carriers and parcel consolidators — whenever possible in negotiations with FedEx and UPS.

However, even if you find yourself in negotiations with UPS and FedEx only, you can still effectively lower shipping costs. UPS and FedEx are fierce rivals. Use the other carrier as leverage.

It’s important to note that parcel pricing is largely predicated on “cost to serve” models at FedEx and UPS. Both carriers have become very adept at internal cost metrics, developing complex revenue management tools to forecast the profitability of a shipper’s business.

FedEx aims to shed $1.7 billion in costs over the next sev-eral years. Perhaps you can help.

Collaborate with your carrier rep. Ask for ideas to lower the cost profile of your business. Areas for exploration include increasing the use of automated tender, pickup consolidation, hub bypass options, package tender and materials improve-ments to lower claims, minimizing high-cost call centers by through online self-tracking, changes to pick up schedules and delivery routes, packaging optimization to improve truck and aircraft utilization, and dozens of other options.

nEGotiAtE, nEGotiAtE, nEGotiAtE!Use leverage in your negotiations. Meet with alternative provid-ers including regional carriers, parcel consolidators and the US Postal Service. Conduct annual bids, consider splitting your business amongst multiple providers, and meet regularly with non-incumbent carriers.

Carefully evaluate each carrier proposal. If discounts are tied to rolling averages and revenue thresholds, make sure you have the business to support targeted revenue bands. Make certain your contract includes discounts for all ser-vices. Understand the impact of minimum charges and dimensional rating. Try to negotiate waivers or caps to the annual January rate increases.

The best carrier pricing programs are often obtained through competition. If you haven’t changed carriers for some time, chances are you’re spending too much. Carrier sales represen-tatives are commissioned in part on profit margin. Therefore, most reps are not willing to offer extensive discounts unless forced to compete for your business.

Don’t get locked into constraining terms. Push back on deferral penalties, early termination clauses and other con-straining language. Try to maximize base discounts, rather than building incentives into revenue thresholds and rebates. If forced into revenue-based discounts, leave con-siderable room should you elect to move a portion of your business to another carrier.

Consider the services of third party market experts for dis-tribution analysis, contract benchmarking, and parcel procure-ment. According to Morgan Stanley’s Annual Best Practices Survey, 11% of the top 400 parcel shippers in the US have hired consultants to negotiate their FedEx, UPS, DHL and other transportation contracts. Most notably, these shippers — commanding a collective $1B in annual parcel shipping expenditures — report that parcel consultants reduced ship-ping costs as much as 49% lower from what the company had been able to negotiate on its own.

Finally, pursue long-term contracts. While you reserve the right to negotiate your contract at any time, fixed term con-tracts offer shippers rate stability and cost predictability.

While it’s clear the present parcel market presents chal-lenges for many shippers, there are many strategies shippers can pursue to reduce costs. Good luck! p

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%. Rob offers more than two decades experience negotiating par-cel contracts for some of the most recognizable brands in the world, and is a sought after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858.879.2020 Ext 114 or rob@shipware.com.

In its Q1 2013 earnings announcement, Shipping and Package Services was

a bright spot for the USPS, gaining four percent over the same period a year ago.

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When making a change in shipping systems, there’s a lot to take into account. Here’s a roadmap to help you with your decision.By Bob Fischer

Selecting and Implementing the Best Shipping Software for Your Operations

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Step I: Create a ShIppIng requIrementS “BlueprInt”The first step every buyer should take is to create a shipping requirements document or blueprint that defines both “must have” and “preferred but not required” operational require-ments. Ideally, this document should be drafted before you even begin speaking with potential vendors. The document doesn’t have to be perfect, but it is important to have a gen-eral workflow document to guide any dialogue with vendors. Shippers who do so without it can unwittingly turn the control of the conversation over to the software vendor.

Creating the requirements document may seem like a daunting task but it doesn’t have to be. One approach is to take the exist-ing documentation for your current system and use it as a starting point. Odds are that there will be undocumented changes since the document was created, but these can be noted. I would also suggest inviting operational team members to help you map the existing and future shipping workflow on a whiteboard.

As you go through this process, try to avoid thinking solely in terms of replacing the functionality of the current system. This is the time to identify current and future shipping that can deliver significant value to your business. For example:

} Are certain shipments being processed manually due to bill-ing, labeling, or documentation requirements that your cur-rent system cannot handle?

} Can your order entry department access the shipping system to quote accurate freight rates on customer orders?

} Are other departments able to access your shipping system to process non-warehouse shipments?

} Are there other carriers you’d like to add to your portfolio but are prevented by current system limitations?

} Are you planning to expand its e-commerce operations? How will your shipping system need to be configured to accommodate it?

} Are you prepared to handle new international customer orders as e-commerce business grows?

How can you be sure you’re choosing the right shipping system for your company? It’s the Number 1 question every manager faces when weighing the costs and ben-efits of replacing an obsolete system. As straightforward as the question is, there is, unfortunately, no easy answer. Shipping operations – and shipping software require-ments – are more complex than ever, and there is usu-ally no “out of the box” solution that fills most shippers needs. Selecting a solution requires a certain level of trust that the software will actually perform as planned once it is configured for your needs. However, there is a way to improve your odds for success. You can make the most informed decision by following three important steps:

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Step I: Create a ShIppIng requIrementS “BlueprInt”The first step every buyer should take is to create a shipping requirements document or blueprint that defines both “must have” and “preferred but not required” operational require-ments. Ideally, this document should be drafted before you even begin speaking with potential vendors. The document doesn’t have to be perfect, but it is important to have a gen-eral workflow document to guide any dialogue with vendors. Shippers who do so without it can unwittingly turn the control of the conversation over to the software vendor.

Creating the requirements document may seem like a daunting task but it doesn’t have to be. One approach is to take the exist-ing documentation for your current system and use it as a starting point. Odds are that there will be undocumented changes since the document was created, but these can be noted. I would also suggest inviting operational team members to help you map the existing and future shipping workflow on a whiteboard.

As you go through this process, try to avoid thinking solely in terms of replacing the functionality of the current system. This is the time to identify current and future shipping that can deliver significant value to your business. For example:

} Are certain shipments being processed manually due to bill-ing, labeling, or documentation requirements that your cur-rent system cannot handle?

} Can your order entry department access the shipping system to quote accurate freight rates on customer orders?

} Are other departments able to access your shipping system to process non-warehouse shipments?

} Are there other carriers you’d like to add to your portfolio but are prevented by current system limitations?

} Are you planning to expand its e-commerce operations? How will your shipping system need to be configured to accommodate it?

} Are you prepared to handle new international customer orders as e-commerce business grows?

How can you be sure you’re choosing the right shipping system for your company? It’s the Number 1 question every manager faces when weighing the costs and ben-efits of replacing an obsolete system. As straightforward as the question is, there is, unfortunately, no easy answer. Shipping operations – and shipping software require-ments – are more complex than ever, and there is usu-ally no “out of the box” solution that fills most shippers needs. Selecting a solution requires a certain level of trust that the software will actually perform as planned once it is configured for your needs. However, there is a way to improve your odds for success. You can make the most informed decision by following three important steps:

march-april 2013 | www.PARCELindustry.com20

The goal is to define and prioritize the specific deliverables you expect from the new system and the metrics you can use to measure results. If your mandate is to reduce transpor-tation costs by 10%, what specific functionality is required to arrive at that reduction? If you want to reduce freight upcharges due to incorrect addresses or routing instructions, what is required in the new system and how will you measure results? These are just a few ideas to consider as you develop your requirements document.

OrganizatiOn-Wide dialOgue is CritiCalAnother best practice to ensure that the new system is deliver-ing all the value it can is to invite input from every department that needs shipping information to do its job. Although ship-ping systems are traditionally located in the warehouse, accu-rate shipping information is routinely needed throughout the organization, from purchasing to sales to order entry, customer service and finance.

How would these departments like to be able to access ship-ping information? What information do they typically use, how do they obtain it, and how could this be improved upon? What additional information would they like to have, if possible? Organization-wide dialogue may take time and generate more feedback than planned for, but it may also uncover great cost-saving opportunities that would have otherwise been missed. For example, here are some issues we commonly hear:

} “We have a shipment request sheet that is manually filled out with the ship-to address, etc., then sent with the par-cel to the shipping department where it is manually keyed into the shipping system. This process is error prone and time-consuming.”

} “We’d like to allow employees to ship personal packages at our negotiated rates as an employee perk and possibly accept their credit card as payment for freight. They won’t have to ‘run out’ at lunch to ship a birthday gift when they could do it from their desk. How can you help us?”

} “The big box stores require specific data to populate car-rier reference fields for transmission to the carrier. We do this today by having the shipping operator read free-form notes on the pick slip and depend on this information to be entered accurately into the shipping system If there is an error, we are fined by our customer. We’d like to automate this process.”

} “Customer routing guides mandate that shipments be pro-cessed freight collect and/or third party billing. Too many times we’ve erroneously shipped these orders “prepaid and add” only to have the customer refuse to pay freight as specified in the routing guide. I’d think that this could be done programmatically to eliminate the manual interven-tion. Can you help?”

These are just a few examples of areas of opportunities that, once discovered, can streamline the workflow and save costs in areas that may have been overlooked.

step ii: COmpare VendOrsOnce your requirements document is roughly complete you’re in a great position to consider potential vendors. The Internet may be helpful in your initial search, but you may also want to:

} Ask your industry peers; find out what they like and don’t like about their system

} Ask your carrier representatives about multi-carrier shipping systems they’ve seen in other customers’ sites

Carrier-agnOstiC Or Carrier-prOVided?Carriers also offer a range of free systems, which may sound very appealing as a means to get the basic job done with very little upfront investment. However, it’s wise to carefully scruti-nize what “free” means. Most of these systems may offer some level of automation and freight rating and routing, but they will not offer the same level of rate, route, or mode selection that a vendor-neutral system provides. Before you choose a carrier-provided system, consider the following:

} Will the system allow you to fully compare routes and rates between multiple carriers and modes?

} Does the carrier require you to commit to a certain freight volume and a contract in exchange for the free system? Can this commitment or contract be canceled and at what cost?

} Will you be able to integrate the system to exchange real-time data with your host systems? Who will be responsible for the implementation and updates?

} What is the availability of support after the integration and what are the service level agreements of the supporting party?

} Is the carrier willing to apply an equivalent monetary invest-ment with a vendor solution that more closely meets your needs in lieu of the carrier-provided solution?

These and other aspects are important to consider in calculat-ing the cost to implement your new system as well as your abil-ity to respond to rapid business changes. Let’s say, for example, that your competitors shift to free shipping for all customers and you find that your best weapon to compete is to add other lower cost carriers to your mix. If your carrier-provided system means you’re committed to a certain volume of freight, your options are limited. The best way to protect your business is to choose a truly carrier-agnostic solution that allows you to shift your freight dynamically, as business patterns change.

VendOr due diligenCeEqually important to evaluating the quality of each vendor’s soft-ware, it’s also critical to ensure that you’re partnering with a solid, stable company with sufficient resources to support your company for the long-term. Your due diligence process should include:} Company history, operations and financials} Technical and industry expertise} Company’s product roadmap} Product development and support resources} Customer base

march-april 2013 | www.PARCELindustry.com 21

Once you’ve determined which vendors offer the software solu-tion you require, get to know the company. Schedule a visit to their corporate headquarters to meet the staff; insist on meet-ing and interviewing the team members who will work on your project. It’s also important to visit actual customer sites where the software is in operation, preferably in a configuration that is similar to your needs.

Step III: RequeSt a One-Day plannIng SeSSIOn At this stage, you should have a very short list of potential ven-dors for your project. The best way to determine who may be the best partner is to conduct a detailed one-day planning ses-sion to review the vendor’s product, project implementation and support methodologies.

Plan to have a combination of your key operational and IT staff involved in this discussion to ensure that all critical areas, as outlined in your requirements document, are covered. The vendor should be prepared to bring their project resources to this meeting and provide a demonstration of the system, based on real world scenarios provided by your team.

Additionally, part of the exercise should be to begin to identify data mapping requirements between the shipping and other enterprise systems. Gap analysis to identify missing data mapping elements should also be discussed. The idea is not to complete this data mapping exercise at this meeting,

but to identify the right team members to create a detailed data map before implementation begins. You’ll gain great insights into the vendors’ level of expertise based on their responses and ideas generated during this one-day planning session. You should also be in a good position to identify the best vendor for your project.

BOttOm lIne — It’S a paRtneRShIpThe selection of a new shipping system is not just about pur-chasing software, it’s about building a productive partnership. Shipping software is rarely installed as a plug and play solu-tion — it is implemented as a highly configured system that is intended to perform for years. To achieve the greatest opera-tional and financial returns, partner with a vendor whose team brings in-depth technical and industry experience to the table. When you’ve chosen a partner that both develops and imple-ments its own software, you’ve gained a collaborative environ-ment that will serve you well in the long-term. p

BoB Fischer is the co-founder and CEO of Advanced Distribution Solutions, Inc., (ADSI), a provider of logistic management solutions for the supply chain industry. A recognized logistics technology expert with 30+ years experience, he has helped companies of all sizes address complex order fulfillment, shipping, and supply chain visibility challenges in domestic and international operations.

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The 2012 year was another record for e-commerce. More and more consumers are using the comforts of their homes and smart-phones to do their shopping. Retailers continue to search for ways to draw in more online shoppers with free shipping, free returns, online discounts, etc. As a retailer you have 2012 behind you and are now getting back into the planning and execution stages of making 2013 even better. You are planning on shipping more, providing better service, and making better margin.

Perhaps just as predictable as e-commerce sales increasing in 2013 seems to be the reality of the annual integrated ship-pers’ rate increases. January 2013 brought not just the New Year, but also new rates for shipping parcels from FedEx and UPS. As you dig into the fi ne print and take a close look at the new accessorial charges, you may fi nd that the increases are more than what is advertised. Your fuel surcharge may have decreased, but most likely all other charges have gone up. At the end of the day, no matter the decrease in fuel surcharge, your rates are going up again.

The areas that tend to end up with the highest percent-age increases per parcel during that yearly increase are those

diffi cult to reach areas, such as Hawaii, Alaska, Puerto Rico and other US territories, like the Virgin Islands and Guam. These areas have additional accessorial surcharges tacked on, not only for the residential and remote locations, but will often include increased fuel surcharges due to the distances these parcels are shipped.

Finding ways to reduce the cost of shipping to these areas without sacrifi cing transit time is achievable. For instance, many high-volume shippers these days are moving away from a single shipping partner model and implementing a diverse delivery model that supports a “best in class” service strategy at a competitive price. They are focused on not only lowering the cost of shipping, but also improving the service level. In order to move that direction and see the benefi ts, you will need to take a look at your technology and warehouse fl exibility. But one thing is for sure, if you put the effort into understanding all the costs and service levels associated with your shipping ser-vice, you can fi nd alternatives that will not only save your com-pany’s hard-earned dollars, but can also improve your service and transit times to offshore locations.

SHIPPING SERVICES While Reducing Costs for Offshore and US Territory Locations

Improving E-Commerce

MARCH-APRIL 2013 | www.PARCELindustry.com 23

Moving toward an integrated carrier postal consolidation solution for these offshore locations will lower your base rates, but be very careful as it will sig-nifi cantly increase the transit times by four to nine days or even more, espe-cially when shipping to APO/FPO/DPO

locations and remote villages in Alaska and US territory islands. Using a postal

consolidator model from FedEx or UPS (like SmartPost or SurePost) will signifi -

cantly increase transit times around service and may not be a good way to earn the loyalty

and return business of those seven million cus-tomers living offshore and in US territories.

OFFSHORE TRANSPORTATION OPTIONSThere’s a lot of ocean and just as many miles of sky between

your continental US shipping warehouses and Hawaii, Alaska, Puerto Rico, and the US territories. There are a few transportation options you could use to ship to these areas, but each alternative has their pros and cons. A brief look into each of these options will help you understand which may be best for your company.

Barging may seem a great option if you have big volume, but it is very slow given it only leaves from port a few times a week and 15 knots on the ocean takes you nowhere quickly.

Ground options like LTL or rail may be an option for Alaska, but still a very slow one. In order to line haul to Alaska, the vehi-cle would need to transverse miles and miles of nothingness and again, you will need some serious volume to take advantage of decent rates. As for Hawaii and Puerto Rico, I have yet to fi nd a road or track that can reach those islands of paradise.

That seems to leave air as the only viable way to get your parcels to these remote (yet very beautiful) locations for your e-commerce solution. Four hundred and fi fty miles an hour is much faster when compared to barging and ground transpor-tation. (I am still holding out for that Star Trek “Transporter Energize” option, although I wonder what the cost of that ship-ping model would be.) Let’s face it, these days all e-commerce customers are expecting out-of-this world transit times, even those in remote locations. E-commerce providers that are able to deliver and fi nd the sweet spot between cost and service to these locations will likely earn great loyalty and repeat business.

DIVERSE DELIVERY MODELSAs mentioned earlier, the ability for your warehouse, labeling and in-house technology to use carriers outside of the standard integrated carriers will enable you to use different options. Some areas like P.O. Boxes, APO/FPO/DPO require an alternative to FedEx or UPS ground and air solutions. Due to specifi c ship-ping regulations, only the United States Postal Service (USPS) is allowed to deliver to our Armed Forces and P.O. boxes. Using FedEx SmartPost or UPS SurePost will add signifi cant transit time to these areas because USPS Parcel Select service is used — making it very likely that there will be barging involved in

getting the parcels to their fi nal location. Offshore locations like Hawaii, Alaska, Puerto Rico, and US territories also suffer from the same issues using SmartPost and SurePost.

As you compare the options, make sure to do a detailed com-parison on all the costs and services. Keep in mind that many regional carriers heavily discount or do not have any accesso-rial charges. You may also fi nd that a regional carrier’s dimen-sional factor calculation is much higher, a good thing for you as this will help you save on your rates. Work with them on fi nding the right service level and cost balance to fi t your goals. A good regional carrier will be anxious to show you how they can balance both the cost and service level in a way that may be a better fi t for you than your current model.

That leaves you with a couple options to reduce costs and manage transit times when shipping to these diffi cult-to-reach locations. You can use USPS Priority Mail service to fulfi ll your shipping needs. The other (and less expensive) option is work-ing with an offshore regional carrier that provides a hybrid solu-tion of using air service from the 48 states and then a last mile postal consolidation service. This provides lower costs without sacrifi cing the needed excellent transit times for e-commerce.

“ALREADY GOING THERE” OFFSHORE OPTIONSIntegrated carriers own many planes, trucks, and have a pleth-ora of expensive store fronts and warehouses. They also need to pay the fuel and utility bills for all their vehicles and build-ings, all while utilizing their own exclusive and expensive logis-tics network. It’s no wonder they needed to introduce a fuel surcharge and accessorial charges years ago.

Other types of carriers exist who don’t have all the overhead that integrated carriers do. They are able to pass those savings on to you in the form of better rates. Instead of owning many vehicles and buildings, they move parcels by using a combina-tion of “already going there” partners and providing their own assets for technology, labeling, sorting, and destination trans-portation. This hybrid network of strategic partners includes trucking services, space in cargo and commercial planes, and utilizing the USPS last mile already-going-there service. One of the advantages of this type of hybrid logistics model is that the costs of each “already going there” partner is spread out over many users of their services. This lowers the regional carriers’ overhead and provides an opportunity for you to save money.

Service is equally important to costs. Good regional carriers make sure that their hybrid offshore shipping solutions are built to maximize both cost and service. Look for an offshore regional carrier that meets e-commerce transit time demands with consis-tency, lowers costs and also provides full tracking of the parcels to the fi nal delivery. You may be able to lower your costs, improve your transit times, and increase your 2013 e-commerce business p

KEVIN UNBEDACHT is President of International Bridge (DBA www.ParcelPool.com.) He has helped the company succeed in providing excellent shipping service to Alaska, Hawaii, Puerto Rico, U.S. territories, APO/FPOs. Kevin can be contacted at Kevin.Unbedacht@MyIB.com or www.MyIB.com.

ApplicAtion Article

Grow your E-commerce Business in the Canadian Market

Canada is the United States’ largest trading partner, with more than $1.8 billion worth of goods crossing the border on a daily basis. To support this valuable trade relationship, the US Commercial Service publishes a guide for US businesses inter-ested in expanding their customer base within Canada. The guide, “Doing Business in Canada: 2012 Commercial Guide for U.S. Companies” includes information and suggestions for success but the best advice can be found on the first page:

“Though Canada remains the most accessible market in the world, doing business in Canada is not the same as doing busi-ness in the United States. Canadian Customs documentation, bilingual labeling, packaging requirements, ITAR (International Traffic in Arms Regulations), and Canadian federal and provin-cial sales tax accounting can be surprisingly challenging.”

US businesses are increasingly tapping into Canada’s mar-ket with an interest in capturing a piece of the booming ecom-merce market. However, many businesses are surprised by the complexities of doing business in Canada.

In recent years, Canadian consumer’s ecommerce volume has exploded. Canadian consumers spent $16 billion on ecom-merce sales during 2010, a figure expected to increase to $30 billion by 2015. US retailers have been key benefactors with Statistics Canada reporting 60% of online shoppers have placed orders with US businesses.

Ecommerce presents an opportunity for businesses that com-plete preparations to understand the Canadian market. Consider the experiences of a retail chain that learned hard a lesson about operating in Canada. A recognized shoe giant was forced to discontinue service to Canada in 2011, citing distribution agreements with brands sold in the US, along with uncertainty and unpredictability of delivering orders to Canadian customers given customs and other logistics constraints.

An important piece of advice for US businesses is to identify an experienced logistics partner with expertise in the Canadian market. A strong logistics partner will not only transport your goods to your Canadian customers, but will serve as a compre-hensive source of guidance and solutions.

For example, a Canadian provider will anticipate your Canadian consumer’s preference to shop in Canadian dollars, and will ensure your website has the appropriate pricing and able to make currency conversions. Other areas of focus include mar-ket research and a marketing plan, a Canada-based pricing strat-egy, advertising, and the website. Many US businesses decide to integrate Canadian transactions into their existing websites, while others prefer to “localize” their Canadian presence with a uniquely Canadian site. Either way, a US business will need to

include necessary fields to capture data for Canadian customs requirements. Other important considerations:• Crossing the Border. Although the US and Canadian govern-

ments are taking steps to alleviate some regulatory and border clearance processes, crossing the border remains compli-cated, with new regulations taking effect, and existing ones being modified, with little warning. An experienced logistics provider will understand the intricacies of the border clear-ance process, and will be a participant in “trusted shipper” programs, which provide expedited border clearance.

• Reaching your Canadian Customer. Once across the border, shipments will need to enter a Canadian distribution net-work for end-delivery. While most Canadian residents live in urban areas, plans are necessary to reach consumers who live in remote regions of Canada. Canadians expect a range of delivery options. While same-day or overnight service is impossible in remote Canadian territories, your business will suffer if you cannot provide a guaranteed delivery window.

• Managing Customer Returns. Customer returns account for roughly eight percent of a business’ total sales, the figure is substantially higher for e-commerce sales. Customer returns have become an important part of customer experience, with 85% of online shoppers indicating they would not purchase from an online merchant if the returns policy was not conve-nient. Returns management becomes complex when border crossing is involved, goods returning to the US are “inter-national transactions,” and trigger customs requirements. A well-managed returns process enables businesses to recap-ture value in secondary markets, and generates customer goodwill through fast and satisfactory transactions.

Canadian consumers have long had an affinity for American goods, and rising popularity of online shopping has brought those products within reach. Many US businesses are already tapping into the lucrative Canadian e-commerce market. Critical to success, is a well-managed plan that takes into account the uniqueness of the Canadian market and the impor-tance of guaranteed service to Canadian consumers.

Call 1.888.511.4811 or visit purolatorinternational.com

www.purolatorinternational.com

ApplicAtion Article

Streamline Your Supply Chain Through a Better TMS

The last thing your organization needs is for your transportation management system to become another information silo. But with SendSuite Live, you get a browser-based solution with virtually unlimited integration capabilities, which help break down these silos by providing instant access to information for both internal and external stakeholders across your entire supply chain.

Whether you’re shipping from a mail center, desktop, a remote work location, or in a production shipping environment, SendSuite Live helps streamline your operation, reduce costs, and manage business risks while giving you capabilities to cre-ate efficiencies you never thought possible.

Consider this: A Pitney Bowes’ customer just secured a new contract for global parts distribution from an auto manufac-turer. The customer needed a solution that could be deployed in a production environment quickly and efficiently, with inte-gration into the company’s legacy systems as well as a new SAP warehouse management system.

This company thought its options were limited, given the demanding timeline and the complexity of the solution. It was only when the customer met with Pitney Bowes that they real-ized they had a number of options. Pitney Bowes deployed and integrated its SendSuite Live global transportation man-agement system into both new and legacy systems. SendSuite Live allowed the customer to gain better cost controls through the election of best delivery options across multiple modes of transportation. More importantly, the application’s analytical tools and reporting functionality allowed different departments

– purchasing, accounting, and even the C-suite – to have access to a myriad of information which allowed the company to make better business decisions across the entire enterprise, and opti-mize their logistics network while substantially reducing costs.

The client realized Pitney Bowes had the capability to work with them to address their challenges – and create a solution that streamlined processes, sped delivery, and enabled savings while minimizing the time and effort required for integration.

Companies have a diverse range of shipping locations - ware-houses, stores, corporate mail centers, offices, distribution centers, and even remote home offices. Running a logistics operation is highly complex. Whether you’re managing parcels from the mail center, documents from the desktop or freight from the warehouse SendSuite Live offers the flexibility and scalability to address any shipping environment.

THE PB DIFFERENCESendSuite Live is a powerful web-based solution designed to guide simple to complex shipping operations to the next level in cost management, process efficiency and compliance. This robust solution utilizes a single platform to manage all transpor-tation related activities. It optimizes, integrates and automates all shipping processes while providing the highest degree of real-time visibility, control and choice throughout your operation.

SendSuite Live features an enterprise-class Service Oriented Architecture (SOA) platform designed to meet the strictest IT demands for secure, scalable and reliable processing. Built on .NET and Microsoft SQL Server, SendSuite Live can be deployed on a single server or across clustered servers for redundancy. Clients access SendSuite Live applications via a browser and systems can access Web Services via a SendSuite Live API.

Pitney Bowes knows logistics. We’ve been helping customers determine the best way to manage their shipping operations for decades. We pride ourselves in our ability to work with each of our clients to solve unique requirements, creating solutions to make their business run more productively and profitably.

Contact us at sendsuitelive@pb.com and check us out at www.pbsendsuitelive.com

www.pb.com/sendsuitelive

march-april 2013 | www.PARCELindustry.com28

am pleased to report that this installment of PARCEL Counsel marks the seventh anniversary for myself as a columnist for PARCEL magazine. On a personal note, I would like to thank all of the readers of this column for their ongoing support.

And, just for the record, I would like to say that the PARCEL family — Amanda Armendariz, Editor; Marll Thiede, Publisher;

as well as the other PARCEL columnists and writers — have been a great group of people to work with.During the last seven years, I have authored 39 columns covering a

legal point or development of relevance to parcel shippers. For this anni-versary column, I thought I would try something different and give the read-

ers a chance to test their knowledge about Bills of Lading. So, here is a pop quiz with a multiple choice question, a true or false question,

and an essay question.

1. Who issues the Bill of lading (or airbill)?

£ A. The Shipper£ B. The Carrier£ C. The Broker/Intermediary£ D. None of the above

2. The Uniform Bill of lading is still uniformly used.

£ True£ False

3. Why is this portion of the Uniform Bill of lading nicknamed “the section 7 box”?

Parcel CounselBy Brent Wm. Primus, J.D.

Bill of lading Pop Quiz

FOr FreIGHT cOllecT SHIPMeNTS:If this shipment is to be delivered to the consignee, without recourse on the consignor, the consignor shall sign the following statement:

The carrier may decline to make delivery of this shipment without payment of freight and all other lawful charges.

_______________________________________ (Signature of Consignor)

The answers for this pop quiz will be in the next installment of PARCEL Counsel… however, if you cannot wait that long, be sure to keep an eye on your email inbox to see the answers in a PARCEL e-update or exclusive e-blast.

All for now! p

BreNT WM. PrIMuS, J.D.,  is the Ceo of Primus law office, P.A. and the senior editor of trans-portlawtexts, inc. Your questions are welcome at brent@primuslawoffice.com.

www.eii-online.com

march-april 2013 | www.PARCELindustry.com30

he world is ever chang-

ing. The Pope just announced

that he is step-ping down, the USPS

is planning to stop Saturday deliveries, and

a meteor hit Russia, caus-ing many injuries. The supply

chain business is in the middle of a transformation from sourcing

in low-cost countries to a regional market strategy. This will impact all partners in the commercial world. I would like to share some thoughts on the follow-ing areas: Re-Shoring, the USPS, and international par-cel opportunities.

Re-ShoRingIn a recent study conducted by the MIT Forum for Supply Chain Innovation, 15.3% of US companies are “defini-tively” planning to re-shore their manufacturing and another 33.6% are considering bringing manufacturing back to the US. This is being driven on the premise of having their manufactur-ing closer to the customer demand. Also, in a study conducted by Deloitte, many executives are concerned about the additional risks that their supply chains are encountering and this re-shoring approach is a way to minimize this risk. This re-shoring strategy will have a posi-tive impact to the parcel business in the US (commercial and residential).

USPSThe USPS is continually growing its package business in the US. In 2012, the Shipping and Package business grew 8.7% (+$926 million) and $11.6 billion in total sales. This group repre-sents 2.2% of the total USPS volume but 17.8% of the revenue. They are in a “co-opetition” position with FedEx (SmartPost), UPS (SurePost), and DHL (GlobalMail) but compete with them too. The USPS has the largest residential delivery network in the US… and that is why FedEx, UPS, and DHL use it. The “Parcel Consolidator” model has benefit-

ted everyone involved and is making the e-commerce market a continued threat to the brick and mortar retailers. As re-shoring continues to gain momentum, the USPS is well positioned for “great-ness” in the parcel business.

inteRnational PaRcelThis segment of the business seems to be a bit more competitive. The international remailers have been around for long time and provide a great service for low value parcels. However, the real battlefield is

with DHL, FedEx, UPS, and the USPS. The private carriers have invested sub-stantially in their global networks and the USPS relies on its global postal part-ners for deliveries. DHL continues to be the market leader around the world but is a small player in the US. DHL has returned to profitability in the US mar-ket and is positioned to become a bigger player. As companies plan to re-shore in the US, there will be more international parcel opportunities from the US as they try to expand their international e-com-merce business from the most sophisti-cated supply chain network in the world.

In all due time, we will have a new Pope, (who has already been selected!), no Saturday deliveries from the USPS, and Russia will have recovered from the meteor. There is one thing for sure in the world: the parcel busi-ness will continue to change and evolve. I’m sure you have been paying attention to the

electric delivery vehicles that have been hitting the streets of some of our major cit-ies; five years from now, all parcels could be delivered by electric powered vehicles. Who would ever thought that would ever happen. What is your company doing to prepare for these “Changes in the Air” ? p

Michael J. Ryan  is Director, Business Develop-ment at DSC Logistics and has been in the parcel industry for over 25 years. He can be reached at 847.393.5862 or mike.ryan@dsc-logistics.com.

WRaP UPBy Michael J. Ryan

change is in the air

there is one thing for sure in the world: the parcel

business will continue to change and evolve.

www.parcelforum.com

www.stamps.com/parcel