As e-commerce took center stage during last year�s holiday season, parcel shipping was in the spotlight. What effect did this have on parcel operations? That�s just one question we evaluated as we analyzed the 2000 Parcel Shipping & Distribution Best Practice Survey results. The survey, which is distributed to Parcel Shipping & Distribution readers in the spring, asks questions about the technology as well as management side of small shipment operations. The results of the survey indicate industry trends along with establishing a national benchmark. No other survey evaluates the parcel shipping process from warehouse to dock to customer. We, the staff of Parcel Shipping & Distribution, thank those of you who took time from your busy schedules to complete and return the surveys. On with the results.
Is the hype for real?
Parcel shipping and distribution operations are undergoing change � the hype of e-commerce is for real. Even though on average only 5% of total sales by our survey respondent companies are being generated via the Internet, there is a shift to customer-centric operations as evidenced by investments and performance standards.
Fiscal resources are being earmarked for e-commerce sites; such investments were the most often mentioned planned purchase within the next 18 months and were the fourth most common technology now in place.
Not only is upper management investing in e-commerce technology, it is using criteria driven by e-commerce to evaluate your logistics group�s performance. As customer expectations for immediate, reliable product delivery escalate with the use of the Internet, two criteria, shipped-on-time and customer satisfaction, were the fourth and fifth most common performance measurements used by management.
Another indicator that the Internet is reshaping the parcel shipping industry is the more interactive role the customer plays in the process. From 1998 to 2000, nearly 20% more managers believe in-transit visibility is important to the customer, bringing the total percentage to 81%.
The true value
Last year�s holiday season made many in the business world realize the true value of a shipping department � it can keep or lose a customer. However, those involved in the process already believed the shipping department creates value � 82% of management, a 5% increase from 1998. For those who don�t believe, it simply is a matter of corporate mentality, since the non-believers come from every type and size of business. Not believing in the true value of the shipping process can spell despair for businesses. The majority (75%) of those who don�t believe doesn�t track customer behavior and therefore doesn�t know when a customer defects and why.
The customer-centric process
As management begins to understand the value of the shipping department and the importance of developing a customer-centric operation, customer loyalty and satisfaction become critical elements of success. While the majority of companies have defined and measure customer loyalty and know when a customer defects and why, less than half (47%) of you receive detailed customer satisfaction information regarding your parcel shipping departments. For the companies that haven�t addressed customer loyalty and behavior, it is once again a matter of corporate mentality rather than a particular business type or size. The one element that does tie these �non-believer� companies together is that the person heading up the parcel process reports to someone other than the president, vice president or director of manufacturing/operations.
Keeping the best
E-commerce may be reshaping how we do business, but the foundation of the parcel shipping process remains the same � picking products from the warehouse, packaging, labeling, manifesting and handing them over to a transportation company for delivery to the customer. Even though investments in e-commerce sites ranked first, the other top four investments will be in labeling, warehouse management, radio frequency and shipping systems.
As managers and directors of parcel operations, you are constantly trying to improve the process. When asked where you were concentrating efforts, your number one response was in improving productivity, followed closely by improving accuracy or reducing the error rate. The third most given improvement area was monetary, with picking/packing, quality and system integration rounding out the top six.
Negotiating � still an art form
Negotiating rates continues to be an essential element in reducing overall parcel costs. Overall, express rates are discounted 28%, while non-express rates are discounted 25%. The deepest express discounts were negotiated by retailers (36% discount), followed by manufacturers (32%), printers (25%) and finally wholesalers (21%). On non-express rates, manufacturers negotiated the best discounts at 31%, followed by printing (23%), wholesalers (19%) and retailers (17%). Of course, total company sales affects negotiating position. Companies with less than $10 million in sales received discounts for express averaging 22% and non-express at 18%. The largest companies with sales over $100 million received 36% and 31% discounts for express and non-express, respectively.
For those companies who negotiated better than the average non-express discount, most of their shipments (30%) were in Zones 4-5. Alternatively, those companies with less than average discounts shipped most parcels (35%) to Zones 2-3.
The controversy continues
There has been an ongoing debate in the industry about shipping systems supplied �free� by the carriers versus multi-carrier systems you buy from vendors. Well, the debate will continue. According to survey results, carriers give better discounts to those using their shipping systems. Therefore, those companies using carrier-provided systems realize a transportation cost of 7.35% of sales. Companies opting for vendor-supplied systems have a transportation cost of 8.22% of sales. However, if you evaluate labor as a percentage of sales, those with carrier-provided systems fare worse with a labor cost of 12.13% of sales. Alternatively, companies using vendor-supplied systems realize a labor cost of only 10.32% of sales.
Who are the survey respondents?
Those responding to the survey were as diverse as the companies that process small shipments. Forty-two percent of the respondents were from manufacturing businesses; 14% from wholesale operations; 10% from retail companies; 6% from printers; and 28% identified �other� as their business type.
In terms of annual sales, 23% of survey respondent companies had less than $10 million; 21% had $10-$24 million; 10% had $25-$49 million; 12% had $50-$99 million; and 34% had $100 million or more. Warehouse size varied as well. Thirty-seven percent had less than 30,000 square feet; 25% had 30,000-74,999; 17% had 75,000-199,999; and 21% had 200,000 or more square feet.
Forty-two percent of survey respondents reported having 10 or less full-time equivalent workers in their logistics processes; 17% had 11-20 workers; 11% had 21-50; 11% had 51-100; 9% had 101-200; and 10% had more than 200 workers.
Of all parcels shipped by our respondents, 73% are US business to business; 15% USbusiness to residential; 4% to Canada; 3% to Mexico; and 5% to other international destinations.
Thirty-two percent of parcels are shipped express (one or two day). Retailers used express the least (18%); followed by printers (24%); wholesalers (30%); manufacturers (31%) and all other business types an incredible 45%. A company�s revenue also indicates its use of express versus non-express. Businesses with less than $10 million in annual sales send 28% of their volumes via express service, while companies with sales in excess of $100 million shipped 39% one or two-day delivery. Ten percent of logistics professionals rely on more than one carrier for express deliveries. The majority (55%) of survey respondents used UPS one or two day delivery.
Survey respondents reported, on average, shipping 20% of volume to Zone 1; 33% to Zones 2-3; 27% to Zones 4-5; and 20% to the outermost zones. If companies zone skip, they typically have 2% more volume going to the farthest zones.
Only about 20% of people surveyed have planned purchases for the next 18 months. Those working in manufacturing facilities and those working for companies with less than $10 million in annual sales are more likely to plan for future purchases than other business types. The businesses least likely to plan future investments are wholesalers, with only 10% planning future purchases.
Other bits of interest
� The type of business most likely to outsource warehouse functions is printers.
� Companies with sales of $100,000 or more are most likely to outsource warehouse functions.
� 24% of companies outsource an average of 9% of their fulfillment processes.
� Retailers are most likely to outsource fulfillment.
� Only 3% outsource 100% of their warehousing and fulfillment.
� 54% do not generate any business from an e-commerce site.
� Companies with less than $10 million in sales average 3% of sales from e-commerce.
� Companies with sales of $100 million or more average 7% of sales from e-commerce.
� Companies that generate more than 25% of sales from e-commerce ship most products business to residential and ship 34% of parcels via express service.
Until next year
After the upcoming e-commerce holiday season and new Parcel Post rates, the results of our next survey should continue to shed light on the ever-changing small parcel shipping industry. The industry is counting on you to help us set standards and identify trends. Again, we thank you for taking the time to help set industry standards and ask you please fill out and return the survey when it comes with an issue of Parcel Shipping & Distribution next spring.
Is the hype for real?
Parcel shipping and distribution operations are undergoing change � the hype of e-commerce is for real. Even though on average only 5% of total sales by our survey respondent companies are being generated via the Internet, there is a shift to customer-centric operations as evidenced by investments and performance standards.
Fiscal resources are being earmarked for e-commerce sites; such investments were the most often mentioned planned purchase within the next 18 months and were the fourth most common technology now in place.
Not only is upper management investing in e-commerce technology, it is using criteria driven by e-commerce to evaluate your logistics group�s performance. As customer expectations for immediate, reliable product delivery escalate with the use of the Internet, two criteria, shipped-on-time and customer satisfaction, were the fourth and fifth most common performance measurements used by management.
Another indicator that the Internet is reshaping the parcel shipping industry is the more interactive role the customer plays in the process. From 1998 to 2000, nearly 20% more managers believe in-transit visibility is important to the customer, bringing the total percentage to 81%.
The true value
Last year�s holiday season made many in the business world realize the true value of a shipping department � it can keep or lose a customer. However, those involved in the process already believed the shipping department creates value � 82% of management, a 5% increase from 1998. For those who don�t believe, it simply is a matter of corporate mentality, since the non-believers come from every type and size of business. Not believing in the true value of the shipping process can spell despair for businesses. The majority (75%) of those who don�t believe doesn�t track customer behavior and therefore doesn�t know when a customer defects and why.
The customer-centric process
As management begins to understand the value of the shipping department and the importance of developing a customer-centric operation, customer loyalty and satisfaction become critical elements of success. While the majority of companies have defined and measure customer loyalty and know when a customer defects and why, less than half (47%) of you receive detailed customer satisfaction information regarding your parcel shipping departments. For the companies that haven�t addressed customer loyalty and behavior, it is once again a matter of corporate mentality rather than a particular business type or size. The one element that does tie these �non-believer� companies together is that the person heading up the parcel process reports to someone other than the president, vice president or director of manufacturing/operations.
Keeping the best
E-commerce may be reshaping how we do business, but the foundation of the parcel shipping process remains the same � picking products from the warehouse, packaging, labeling, manifesting and handing them over to a transportation company for delivery to the customer. Even though investments in e-commerce sites ranked first, the other top four investments will be in labeling, warehouse management, radio frequency and shipping systems.
As managers and directors of parcel operations, you are constantly trying to improve the process. When asked where you were concentrating efforts, your number one response was in improving productivity, followed closely by improving accuracy or reducing the error rate. The third most given improvement area was monetary, with picking/packing, quality and system integration rounding out the top six.
Negotiating � still an art form
Negotiating rates continues to be an essential element in reducing overall parcel costs. Overall, express rates are discounted 28%, while non-express rates are discounted 25%. The deepest express discounts were negotiated by retailers (36% discount), followed by manufacturers (32%), printers (25%) and finally wholesalers (21%). On non-express rates, manufacturers negotiated the best discounts at 31%, followed by printing (23%), wholesalers (19%) and retailers (17%). Of course, total company sales affects negotiating position. Companies with less than $10 million in sales received discounts for express averaging 22% and non-express at 18%. The largest companies with sales over $100 million received 36% and 31% discounts for express and non-express, respectively.
For those companies who negotiated better than the average non-express discount, most of their shipments (30%) were in Zones 4-5. Alternatively, those companies with less than average discounts shipped most parcels (35%) to Zones 2-3.
The controversy continues
There has been an ongoing debate in the industry about shipping systems supplied �free� by the carriers versus multi-carrier systems you buy from vendors. Well, the debate will continue. According to survey results, carriers give better discounts to those using their shipping systems. Therefore, those companies using carrier-provided systems realize a transportation cost of 7.35% of sales. Companies opting for vendor-supplied systems have a transportation cost of 8.22% of sales. However, if you evaluate labor as a percentage of sales, those with carrier-provided systems fare worse with a labor cost of 12.13% of sales. Alternatively, companies using vendor-supplied systems realize a labor cost of only 10.32% of sales.
Who are the survey respondents?
Those responding to the survey were as diverse as the companies that process small shipments. Forty-two percent of the respondents were from manufacturing businesses; 14% from wholesale operations; 10% from retail companies; 6% from printers; and 28% identified �other� as their business type.
In terms of annual sales, 23% of survey respondent companies had less than $10 million; 21% had $10-$24 million; 10% had $25-$49 million; 12% had $50-$99 million; and 34% had $100 million or more. Warehouse size varied as well. Thirty-seven percent had less than 30,000 square feet; 25% had 30,000-74,999; 17% had 75,000-199,999; and 21% had 200,000 or more square feet.
Forty-two percent of survey respondents reported having 10 or less full-time equivalent workers in their logistics processes; 17% had 11-20 workers; 11% had 21-50; 11% had 51-100; 9% had 101-200; and 10% had more than 200 workers.
Of all parcels shipped by our respondents, 73% are US business to business; 15% USbusiness to residential; 4% to Canada; 3% to Mexico; and 5% to other international destinations.
Thirty-two percent of parcels are shipped express (one or two day). Retailers used express the least (18%); followed by printers (24%); wholesalers (30%); manufacturers (31%) and all other business types an incredible 45%. A company�s revenue also indicates its use of express versus non-express. Businesses with less than $10 million in annual sales send 28% of their volumes via express service, while companies with sales in excess of $100 million shipped 39% one or two-day delivery. Ten percent of logistics professionals rely on more than one carrier for express deliveries. The majority (55%) of survey respondents used UPS one or two day delivery.
Survey respondents reported, on average, shipping 20% of volume to Zone 1; 33% to Zones 2-3; 27% to Zones 4-5; and 20% to the outermost zones. If companies zone skip, they typically have 2% more volume going to the farthest zones.
Only about 20% of people surveyed have planned purchases for the next 18 months. Those working in manufacturing facilities and those working for companies with less than $10 million in annual sales are more likely to plan for future purchases than other business types. The businesses least likely to plan future investments are wholesalers, with only 10% planning future purchases.
Other bits of interest
� The type of business most likely to outsource warehouse functions is printers.
� Companies with sales of $100,000 or more are most likely to outsource warehouse functions.
� 24% of companies outsource an average of 9% of their fulfillment processes.
� Retailers are most likely to outsource fulfillment.
� Only 3% outsource 100% of their warehousing and fulfillment.
� 54% do not generate any business from an e-commerce site.
� Companies with less than $10 million in sales average 3% of sales from e-commerce.
� Companies with sales of $100 million or more average 7% of sales from e-commerce.
� Companies that generate more than 25% of sales from e-commerce ship most products business to residential and ship 34% of parcels via express service.
Until next year
After the upcoming e-commerce holiday season and new Parcel Post rates, the results of our next survey should continue to shed light on the ever-changing small parcel shipping industry. The industry is counting on you to help us set standards and identify trends. Again, we thank you for taking the time to help set industry standards and ask you please fill out and return the survey when it comes with an issue of Parcel Shipping & Distribution next spring.
