Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Those looking for a "steady as she goes" transport climate should steer clear of parcel. E-commerce's explosive growth has translated into enormous traffic gains. There are all sorts of new ways to get packages into people's hands. Meanwhile, shippers in the business-to-business (B2B) segment continue to face escalating rates and ancillary charges as giants UPS Inc. and FedEx Corp., which dominate the B2B parcel shipping world, push for ever-higher revenue.
Parcel consultants like Rob Martinez, all of whom held executive positions with various carriers before hanging out their shingles, frame themselves as the shippers' wingmen. Martinez has logged 25 years in the business, the last 15 running his own shop. Like other consultants, Martinez said his firm can help shippers with a myriad of functions, including assisting—to some degree—in contract negotiations. In an interview with DC Velocity Executive Editor Mark B. Solomon, Martinez said the deck is stacked against B2B shippers and it will take creativity and extra effort (and a little outside help) to win at the table.
Q: Several years ago, UPS and FedEx said they would no longer work directly with parcel consultants. How have consultants worked around that edict, and have the carriers backed off from that hard line?
A: UPS and FedEx will work with third-party consultants for matters unrelated to pricing, provided the consultant, shipper, and carrier sign a three-way nondisclosure agreement. However, the restriction remains in place for rate negotiations and third party-led bids. We've heard that some firms have closed their doors, and others have pivoted to other services. Even if consultants aren't allowed to negotiate pricing directly with the carriers, the good ones can still offer tremendous value in areas like distribution analysis, dimensional pricing and accessorial impact studies, RFP (request for proposal) templates, negotiation strategies, DC site studies, modal/carrier optimization, automation recommendations, and invoice auditing.
Q: UPS has struggled to master its peak season operations in the wake of rapid growth in online shipping. It's been suggested the company choose between driving market share through aggressive pricing and focusing on improving its return on invested capital at the expense of market share. Given the current landscape, what would be your recommendation to the company?
A: In 2013, UPS and FedEx dealt with a deluge of packages tendered during Christmas week, severe weather conditions in several U.S. states, and an abbreviated peak shipping season. An estimated 2 million packages were delivered late. UPS delivered exceptional service last peak, but it came at a cost of $200 million over 2013. UPS is well down the road in planning for Christmas 2015. While it will continue to assume the burden of higher costs associated with holiday deliveries, it will also strive to recover costs from its customers. For example, high-volume e-commerce shippers will be assessed a "peak season" residential surcharge this year.
Q: As we speak, UPS and FedEx are a couple of months into their programs to impose dimensional weight pricing on packages measuring less than three cubic feet, which is a large chunk of their mix. Are parcel shippers changing their packaging strategies, or will they grin, bear it, and pay up?
A: At this time, many shippers have been slow to analyze cost increases attributed to dimensional pricing. Shippers will find that package optimization carries benefits such as reduced fuel consumption and vehicle emissions. Some will enjoy lower transportation costs. For many, however, there will be significant rate increases. We estimate, on average, a 17-percent rate increase on packages affected by the new policies.
Q: Much has been made of UPS and FedEx's dominance of the B2B parcel market. But B2C (business-to-consumer) shipping has become a larger share of the overall mix. In B2C, there is strong competition from the U.S. Postal Service (USPS) and possibly from the likes of Amazon.com, which may establish a dedicated shipping network. Given the different dynamics of B2C, are competitive concerns about the FedEx-UPS duopoly overstated?
A: First off, Amazon is decades away from being a significant competitor to the national private carriers. In fact, it may never reach that level. USPS is a formidable competitor in B2C. However, though USPS plays in B2B, that segment will continue to be ruled by FedEx and UPS because their networks and systems do the best job of serving that market. Unfortunately for shippers, FedEx and UPS are focused on revenue and yield management, which means finding more ways to extract money from their customers.
Q: Do you see regional parcel carriers moving the needle in a significant way? Is there a marketplace need—or is it viable from a business standpoint—for a national network knitted together by the various regionals?
A: The regionals are growing because they offer alternatives to FedEx and UPS. Regionals have simple contracts with more flexible terms and volume commitments, 10 to 40 percent rate savings over FedEx and UPS, more favorable dimensional divisors, and fewer surcharges. That said, regionals haven't moved the needle in a significant way. Shipware estimates they account for less than 4 percent of U.S. parcel volume. Our recent survey on shippers' use of regional carriers reveals that less than 30 percent of high-volume shippers use them. Most of those allocate less than 10 percent of their shipments to the regionals.
A "national regional network" is not going to happen anytime soon. There are too many problems to work out. Who owns package custody? How are systems to be unified for tracking, reporting, and invoicing? What if a carrier cannot handle heavy freight? Most importantly, how is revenue allocated so it makes sense to all parties?
Instead, what is evolving are strategic partnerships between a handful of regional carriers in the areas of business development, lead sharing, and shared operations. An example of the latter is a warehouse-sharing agreement in Pennsylvania between Pitt-Ohio and [regional parcel carrier] Eastern Connection.
Q: If you were speaking to a roomful of parcel shippers on ways to mitigate the price increases that are in place or are looming, what advice would you give?
A: Shippers must utilize multiple concurrent strategies. These include improving pricing through rate negotiations, optimizing package routes by mode/carrier, implementing least-cost/best-way automation, reducing packaging costs, minimizing returns, zone skipping, and exploring postal and regional options.
Shippers should work with carriers to reduce the carrier's operational costs. Carriers link their pricing to the costs of supporting a customer. Shippers should identify components of their business that are raising their cost profile and work with the carrier to reduce its investment in handling the business.
Another approach is to think regionally. It's no secret that many businesses are migrating from globally centralized distribution to multiregional DCs in an effort to put product closer to the customer and reduce transportation costs and transit times. Companies that do both effectively enjoy an enormous competitive advantage in the marketplace.
Also explore the many shipping alternatives out there. Many shippers sole source to FedEx or UPS for convenience or to maximize revenue-based incentives with the carriers. They may forget that cost reductions and service improvements can be achieved by adding more service providers to the carrier mix.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.