July 21 2006 03:10 PM

    Parcel carriers are spending billions annually on new technology to fine tune their already high-speed delivery operations. Obviously, they realize the benefits of making such a capital investment. Simply put, improvements through technology will help to reduce operating expenses; thereby, increasing profits. Ease of shipping means greater customer satisfaction. Not a tough business decision.
     
    FDX boasts that it offers a wealth of electronic tools, applications and online interfaces for customers to simplify their shipping. Additionally, its automated solutions are designed to seamlessly integrate FedEx shipping, tracking and rate estimation into customers� existing internal applications and online systems.
     
    UPS proclaims that it uses technology to increase efficiency in package delivery as well as in supply chain applications. It has spent tens of millions of dollars to automate delivery route-planning so it can optimize timely delivery and reduce route length. Previously, drivers had to map their own routes which takes time and introduces human error. Although somewhat routine, there are always inefficiencies to this manual daily planning effort. The automated route-planning system will optimize the pattern of loading packages on the trucks, a key to route efficiency.
     
    It has been reported that this software will be used in over 1,000 locations by next year. Once fully deployed in 2007, UPS believes it will save at least $600 million a year. In addition, the next generation of wireless handheld computers for its delivery drivers will be lower in cost yet higher in capability than the DIAD III it replaces. These two technological improvements will make drivers� lives easier and improve customer service.
     
    The automated route-planning system, called Package Flow, will reduce the distance driven by delivery trucks by more than 100 million miles a year, saving 14 million gallons of fuel, UPS officials estimate. This means fewer vehicles to own, load, drive, wash, maintain and repair, insure and so on. You get the picture.
    The foundation for the new system is the �smart label� affixed to packages moving through the UPS network. Remarkably, more than 90% of UPS customers generate these labels at their premises. Information from the label is transmitted to UPS before the package is even picked up by a driver. Consequently, address information on a package can be pre-processed before the physical arrival of the package at the sorting center, improving delivery operations.
     
    The �free� parcel processing equipment the carriers give to you serves one main purpose: It greatly benefits them. It is the �big hook� the carriers stick into you. They want it to be an integral part of your operation so you think twice before switching to another carrier. The carrier uses it to electronically collect information to help them plan their operations. It feeds their route-planning systems. They also maintain your shipping history so they can measure the profitability of your business. That comes in handy for their next incentive negotiations with you. It is a fact that your carrier knows more about your business than you do!
     
    As you know, base rates are routinely increased annually � along with significant increases in assessorial charges for good measure. Sure, package tracking and all the other shipping features are nice, but the industry could use some relief in pricing. Just ask non-store retailers or low-zone, low-weight shippers!
     
    The lesson is simple; technological improvements do not always translate into lower rates. Unfortunately, at this time, the parcel and express industry lacks sufficient competition to drive down base rates for all users. DHL will help, but don�t expect much change in the near future. In the meantime, let�s marvel at the carrier�s pursuit of technology and hope someday it will positively impact your bottom line.
     
    Joe Loughran is president of SmartTran, Inc. and an expert in parcel carrier rate analysis. Joe can be reached by phone at 724-934-0626 or by e-mail at loughran@smarttran.com.
     

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