At one time you would drive past an airport's freight tarmac and see up to seven airplane tails in the air. Purolator, Emery, Burlington Air Express, Airborne Express, DHL, Federal Express and United Parcel Service all played a role in the air express market and shippers benefited from the available capacity and competition. Once scale of operations and quality of service became the drivers of survival, competitors consolidated or went out of business. As a result you now see only two of those airplanes at the airport today: FedEx and UPS.
So what are your options? Most (if not all) of you have evaluated (if not implemented) a conversion of air express to ground parcel or truck to rail in order to reduce your cost of transportation. Many companies are evaluating their overall supply chain and looking to near-source production, bringing it back home. New purchasing reports indicate this trend is taking place not only to reduce logistics costs but also due to late delivery and manufacturing quality issues. In addition, a renewed focus on regional distribution centers instead of centralized distribution will position inventory closer to consumption in order to support less expensive means of transportation.
A key component of the newly modeled supply chains will be a cost-effective transportation network. How you manage a sourcing event for a service that is controlled by a virtual duopoly is different than sourcing a commodity that has a number of viable competitors to choose from. Yesterday's practices won't cut it in today's world. And the sourcing lessons you learn in dealing with today's parcel market will bode well for you if, or should I say when, further consolidation comes to the LTL, truckload and potentially other transportation segments.
A number of resources have spoken through PARCEL magazine, the website or The PARCEL Forum to provide you with valuable insight on how to:
• Gain visibility and understanding of your distribution patterns
• Evaluate your package characteristics and how to make packaging improvements
• Review your agreements and understand the terms & conditions tariffs
• Obtain access and actually use carrier reporting tools that are available to you
• Make improvements to your order, shipment and compliance processes
The above are still core best practices, each playing an effective role in your parcel sourcing strategy. As we transition to a supplier marketplace dominated by the few, you will no longer be competing against the carrier. You will be competing against the shipping marketplace for the best available programs. How do you position your business to obtain best results?
First, if you are not implementing the five bullet points above, then do so. If you can't, then get help.
Second, educate yourself and network. Block off time each day to keep abreast of current industry news through reading or industry-related internet sites. Network through attending The Parcel Forum, join CSCMP, ISM, or other peer-based organizations. Take full advance of local chapter meetings, national events and the information resources they all provide. What you learn can give you a competitive edge.
Next, be open-mined to expanding the number of viable alternatives you have to choose from. Invite the USPS to participate in your process. If your business is moving to a decentralized distribution environment, consider the role a network of regional carriers managed through integration technology could play in your supply chain.
Finally, go one step further and consider the suppliers perspective. Not just how they will evaluate the shipping characteristics of your business; but, also consider what impact your business will have on them. Read their annual report, study their 10-K, find out what leading industry research analysts have to say in order to identify the risk factors suppliers are facing. Then conduct an objective analysis to determine whether your business mix will have a positive or negative impact on their business risks. In your negotiations, accentuate the positive and minimize the negative in order to differentiate your business.
Why go through all this time, effort and trouble? Because the competition in the shipping marketplace is changing.
Doug Kahl can be reached at KahlDouglas@tranzact.com.
So what are your options? Most (if not all) of you have evaluated (if not implemented) a conversion of air express to ground parcel or truck to rail in order to reduce your cost of transportation. Many companies are evaluating their overall supply chain and looking to near-source production, bringing it back home. New purchasing reports indicate this trend is taking place not only to reduce logistics costs but also due to late delivery and manufacturing quality issues. In addition, a renewed focus on regional distribution centers instead of centralized distribution will position inventory closer to consumption in order to support less expensive means of transportation.
A key component of the newly modeled supply chains will be a cost-effective transportation network. How you manage a sourcing event for a service that is controlled by a virtual duopoly is different than sourcing a commodity that has a number of viable competitors to choose from. Yesterday's practices won't cut it in today's world. And the sourcing lessons you learn in dealing with today's parcel market will bode well for you if, or should I say when, further consolidation comes to the LTL, truckload and potentially other transportation segments.
A number of resources have spoken through PARCEL magazine, the website or The PARCEL Forum to provide you with valuable insight on how to:
• Gain visibility and understanding of your distribution patterns
• Evaluate your package characteristics and how to make packaging improvements
• Review your agreements and understand the terms & conditions tariffs
• Obtain access and actually use carrier reporting tools that are available to you
• Make improvements to your order, shipment and compliance processes
The above are still core best practices, each playing an effective role in your parcel sourcing strategy. As we transition to a supplier marketplace dominated by the few, you will no longer be competing against the carrier. You will be competing against the shipping marketplace for the best available programs. How do you position your business to obtain best results?
First, if you are not implementing the five bullet points above, then do so. If you can't, then get help.
Second, educate yourself and network. Block off time each day to keep abreast of current industry news through reading or industry-related internet sites. Network through attending The Parcel Forum, join CSCMP, ISM, or other peer-based organizations. Take full advance of local chapter meetings, national events and the information resources they all provide. What you learn can give you a competitive edge.
Next, be open-mined to expanding the number of viable alternatives you have to choose from. Invite the USPS to participate in your process. If your business is moving to a decentralized distribution environment, consider the role a network of regional carriers managed through integration technology could play in your supply chain.
Finally, go one step further and consider the suppliers perspective. Not just how they will evaluate the shipping characteristics of your business; but, also consider what impact your business will have on them. Read their annual report, study their 10-K, find out what leading industry research analysts have to say in order to identify the risk factors suppliers are facing. Then conduct an objective analysis to determine whether your business mix will have a positive or negative impact on their business risks. In your negotiations, accentuate the positive and minimize the negative in order to differentiate your business.
Why go through all this time, effort and trouble? Because the competition in the shipping marketplace is changing.
Doug Kahl can be reached at KahlDouglas@tranzact.com.
