June 3 2014 09:53 PM

I recently attended the Operations Summit Conference which was held in Indianapolis. This conference is dedicated to the Omni Channel, E-Commerce, E-Tailers or whatever you want to call the industry. The fact is the business of placing orders online is the fastest growing segment of the retail world. As this is happening, there are new challenges being placed on the DC operations to effectively pick, pack and ship products to a customer…and be delivered to the customers ever demanding quick delivery schedule. There were three key take aways that I took from the conference and they are as follows:

1. Global Distribution: As the world gets smaller, most companies feel that the US market has been saturated and are reaching out to expand their product distribution globally. This is not a simple task because of the complexities of import and export regulations. The top export markets from the US are: Canada, Australia, UK, Hong Kong, Germany, Japan, Singapore, France, Spain and Russia. These countries seem to have savvy consumers that know what to look for. It is critical to do upfront research on all countries before you start shipping. Once a parcel leaves the US, it must be done properly for your customer to have a good experience. It appears that large shippers are handling this well because they have the resources. I realized at the conference that many of the small and medium size businesses(SMB’s) were not being well served by the parcel industry. There are many different international shipping options available to the SMB’s such as Resellers to the major carriers, USPS services through various providers and international postal wholesalers. Put some time into your research and it will help you grow your global business exponentially.

2. Complicated Rate Structures: We can thank Fed Ex and UPS for creating one of the most complex pricing platforms for all industries. The Big Two are very good at setting and meeting customer expectations. However, they have created a beast in the service offering area. Both of them offer over 70 types of service levels and 100+ assessorial fee’s…some of the best freight audit companies in the US have trouble keeping up with their portfolio…not to mention the average shipper who wears many hats. In speaking with many shippers, I wish I received a dollar for every shipper that tells me they have the best deal in the world. I would argue that if you have not used a Third Party Negotiator (3PN), then I would say you do not have the best deal…more on this in the next bullet. Customers are screaming for a more simplified tariff structure…Fed Ex and UPS need to start listening to their customers. The USPS has already gained traction by offering these simplified pricing structures…and most customers love it. The USPS Priority Mail product is truly becoming the third viable option for small parcel in the US. Their strategy to keep the pricing simple in this service offering is helping them gain market share. I realize that Fed Ex recently launched their own flat rate program but it still had a lot of assessorial charges that could be applied. The parcel industry needs to simplify the pricing structures for their services and make it easier for their customers. The notion of free shipping is driving this concept so the e-tailers can plan and market more effectively.

3. Third Party Negotiators(3PN): During the conference, I attended the pre-conference workshop on Parcel Negotiation by Rob Martinez (Shipware). This was a well attended session which means there is a high demand to work with a 3PN. As stated above, the complexities of the parcel carrier services and pricing matrix, it is essential to involve a professional to help you. Most people believe that they can just put Fed Ex and UPS against each other and get a good deal…not true. The real benefit of a highly effective negotiation is gained in the shipment detail. ..data…data…data. The 3PN’s have people with the expertise to farm through this data to find specific area’s of opportunity. You should engage these types of organizations at least once but it is still my recommendation to retain them on an on-going basis.

Most companies are looking for ways to expand their business. There is no question that the global market is a place to go. The small parcel carriers are a critical element to this process. At the end of the day, your customer wants to have a good experience which will drive them to order from you again. The use of a 3PN will help drive this strategy…now put this magazine down and develop a strategy to bring in new shipping partners!

Michael J. Ryan is the Executive Vice President at ProStar Logistics and has over 25 years’ experience in the parcel industry. He can be reached at 708-224-1498 ormichael.ryan@prostar.com
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