How Does Global Competition Impact Your Shipping?
There is no doubt that we live in a global economy, a situation that affects many aspects of our lives. But have you ever considered the impact that global competition is going to have on your parcel shipping solution?
For an indication, take a look at your corporate goals as well as objectives. As the economy slowly improves, companies have identified revenue opportunities by targeting new international markets or through acquisition. Other organizations are currently experiencing increasing market and cost pressures, which are forcing them to reevaluate their strategies, and many have opted to either source goods from overseas or have outsourced manufacturing to low-cost alternatives.
In order to achieve these goals or counter the pressures, companies are looking for solutions that align and facilitate their corporate strategies. The correct shipping solution should enable an organization to:
� Differentiate from the competition through enhanced customer service
� Accelerate their acquisition strategies
� Leverage supply chain processes to optimize multi-brand and multi-channel fulfillment strategies
� Increase the return on assets with strategic relationships, whether they are with 3PLs or offering fulfillment services to a partner
These strategies are part of a bigger initiative, but the challenge still remains: How are these goods going to be shipped, and how does the corporation maximize the economies of scale? The ERP solution will accept the order or forecast demand, but how is this translated into a shipment and delivered to customers to meet their service expectations?
What Is the Opportunity for Enterprise Shipping?
There has been a shift in focus by executives at the larger corporations to a strategy that focuses on execution technology rather than planning. The need to focus on parcel shipping is compelling for the following reasons:
� Cutting shipping costs directly increases profitability
� Shipping can be a strategic weapon, which allows access to new markets, helping drive increased revenues and market share
� JIT supply chain pressures are driving a trend to smaller, more frequent shipments
� Shipping performance directly impacts customer service and brand image
Previously, organizations have operated in a fragmented business climate with silos of technology. Executives are looking for a new class of solutions that combine information and functions for shipping into a single solution rather than have them work in isolation.
As a result, companies are taking an enterprise approach to parcel shipping, replacing their fragmented, proprietary or legacy shipping applications with an enterprise shipping solution that provides the capability to meet the diverse needs of shipping across the corporation and around the world, from the warehouse to the desktop.
What Are the Differences Between Enterprise Shipping and Standard/Traditional Shipping?
As mentioned earlier, the move towards enterprise shipping is part of a broader initiative. These organizations worry less about rate shopping and more about customer service and operational excellence. Being able to service the customer through offering a range of options that meet their delivery requirements at the right price is one of the value propositions for the enterprise solution. An enterprise solution that is incorporated into a company�s transportation strategy introduces the additional benefit of being able to leverage buying power across the enterprise to help achieve maximum volume discounts for shipping.
Enterprise shipping systems support initiatives for enhancing customer service. The ability to offer a range of shipping options based on price and delivery date is helping drive sales. Being able to consistently meet promised delivery dates will ensure customer satisfaction. Extending visibility for shipment status to the customer and throughout the enterprise will significantly reduce inbound calls to customer service, allowing support teams to proactively focus on managing exceptions.
High performance and scalability are critical for an enterprise that is looking to expand into new markets, both internationally and domestic. An enterprise solution can incorporate the increased flow of transactions created either organically or through acquisition. For example, Mosquito Magnet, with 25,615% growth in a five-year period implemented an enterprise solution to support its ongoing growth regardless of the number of distribution facilities without further pain. Other companies like drugstore.com are implementing an enterprise solution that supports their company�s acquisition strategy, incorporating additional brands or Web stores into their fulfillment process, quickly and easily, creating economies of scales while introducing supply-chain best practices. �
The introduction of an enterprise solution that is capable of supporting multiple locations, for example, regional distribution centers will help reduce the time to market for new initiatives. These include handling new areas of business, like Internet sales, servicing international markets or managing the distribution of outsourced manufacturing, the benefits are substantial.
A trend that still continues to grow at the enterprise level is increased integration to leverage the benefits of supporting even more complex business processes. Process-orientated workflows with multi-phase transactions from order entry to billing address the scope of requirements for the enterprise. Integration with multiple ERP, CRM and WMS solutions across the organization to support wave planning operations, exception processes or expedited shipments are common. These �touch points� in a company are required to enable improved customer service and visibility across the extended enterprise, which includes sales, operations and fulfillment, customer support as well as partners/customers.
The ability to shop for services across multiple modes of transportation is another key function for enterprise shipping. To enable a company to make the right transportation decision for an order or a shipment will help meet many of the previous goals, such as servicing the customer�s delivery requirements. These benefits can only be achieved with enterprise shipping.
How Are the Carriers Responding to Global Shipping?
In the parcel carrier market, we are witnessing global competition at work. From an industry perspective, all the carriers are trying to offer to their customers a full portfolio of services across the global platform. According to Armstrong & Associates, FedEx now covers geographical areas that supply 99% of the world�s gross domestic product and UPS has �nearly global coverage.� A clear indication of this growing trend on global competition is the forecast in the difference in growth of traffic between domestic and international shipping by the carriers. For example, during 2003, UPS reported that 17% of its revenue came from international shipments or $5.6 billion. However, for 2004, UPS is predicting an increase in export volumes, which are expected to grow 8% over 2003, whereas domestic shipments will only increase in line with GDP at 4%.
DHL�s aggressive entry into the US market is having a huge impact on the larger global parcel industry. Through this acquisition, DHL is now able to compete effectively in the USparcel market and is targeting the duopoly of FedEx and UPS, who control an estimated 80% of the market. An increasing benefit to those customers competing globally will be DHL�s ability to support their international shipping requirements.
Its investments, advertising, aggressive technology integration are certainly setting the tone, showing that new player DHL is out to take market share away from FedEx and UPS. The challenge for DHL will be that most of the shipping transaction growth predicted will come from existing contracts. DHL will need to convert customers to its service to gain market share and there are two factors in its favor:
� Contracts are typically being negotiated for shorter periods and therefore come up for renewal more frequently.
� The recent PS&D Best Practices survey indicated that last year, approximately one-third of shippers switched primary carriers due to cost and service reasons.
Your Global Bottom Line
With the global economy improving, there are two aspects of global competition to consider, both of which may have an impact on your parcel shipping solution. If your company faces the challenges of extending into new international markets or is facing competition in the US from global players, an enterprise approach to shipping will enable your organization to better position itself to leverage assets and buying power to both manage costs and respond quickly. Secondly, the increased competition is pushing all the carriers to accelerate their competitive offerings on the global stage. This increased competition will benefit both the enterprise who can take advantage of the choice in carriers� service offerings and ultimately, the customer.
Peter Wharton is director of product marketing, Kewill Solutions North America. Contact him at peter.wharton@kewill.com.
