It’s time to reconstruct the mousetrap.
That’s good news for shippers locked into a predetermined carrier — complete with multiple touch points, unnecessary fees and less-than-optimal networks — for their delivery services.
By its fluid, evolutionary nature — the e-commerce explosion; consumer purchases made from tablets, smartphones and other mobile devices; more-flexible, customer-centric return policies — the retail industry has never been more challenging or ripe with opportunity to enhance the consumer experience.
Although they’re not the entire narrative, the numbers alone present a compelling storyline. In 2012 U.S. retailers rung up sales of over $3 trillion. E-commerce sales comprised 7.3% of this total, representing the ninth consecutive yearly increase in percentage of overall sales, and experts predict this will eclipse 10% by 2016.
The rising tide of online sales, nearing $300 billion annually and fueled primarily by retailers producing more than $100 million/year in e-commerce sales, boasts a yearly growth rate exceeding 25% and outpaces overall retail growth by three to four times.
This consumer clout shows no signs of weakening; in fact, studies show that shoppers are ratcheting up their demands, from expectations for free shipping to the convenience of hassle-free returns policies.
Which begs the question: What’s the state of your direct-to-consumer (DTC) delivery network?
More specifically, are transit speed and reliability, transportation costs and shipment visibility at optimal levels?
Beyond Brown and Ground
It’s a straightforward goal: Deliver products to customers quickly and at the best cost—all backed by complete visibility that reduces calls for WISMO (Where Is My Order?). But depending on which carrier you’re using, shipments encounter many stops and starts, which can cause delays, increase costs and jeopardize customer service.
The major carriers are, not surprisingly, UPS and FedEx. Their products and services basically fall into the following buckets: air expedited, core ground and postal integration for residentially destined parcels.
In the DTC transportation world, UPS offers not only well-known commercial air and ground products (each tacks on a surcharge for residential delivery), but also two economy postal-integration products.
These products — UPS SurePost, a residential ground service focusing on parcels greater than one pound, and UPS Mail Innovations, which moves parcels less than one pound — rely on the U.S. Postal Service (USPS) for final-mile delivery through the USPS’s Parcel Select work-share discount program. With either product, shipments move in different paths within the UPS network of sort and distribution centers.
FedEx is structured similarly, with its own core expedited air products and its ground product, FedEx Ground. Unlike UPS, FedEx has one postal-integration product. FedEx SmartPost, the largest USPS parcel work-share partner, injects hundreds of millions of parcels annually into the USPS network, relying on saturated final-mile delivery six days per week. The target parcel profile is “lightweight” (one to five pounds), though parcels outside this range are also included.
In an interesting paradox, UPS and FedEx, the two largest postal integrators and USPS partners, are also USPS competitors. Also noteworthy is the concept of “channel conflict” among these two behemoths — that is, engineering networks to protect higher-margin products. Their postal-integration products offer an economical yet slightly slower delivery experience than their core commercial air and ground products. So, if you could receive comparable delivery times from a lower-cost product, which would you choose?
The USPS offers several products enabling sophisticated work-share scenarios that maintain the pseudo-federal agency’s focus on its core strength—the final mile—while distinguishing it from other carriers. The USPS recognizes a simple concept: Focusing on final mile, residential delivery yields more work-sharing options, thereby deflecting costs, growing profits and increasing volume.
The primary USPS products are Priority Mail, for packages over one pound, and First Class Mail, an affordable service for packages weighing up to 15.99 oz. with delivery in three days or less. Extending the work-sharing concept, the USPS offers several discount options based on preparation (e.g., presorting by ZIP Code, facility or mail-class schemes).
DHL Global Mail and Newgistics also provide delivery services in partnership with the USPS. DHL focuses on parcels less than one pound; Newgistics handles parcels both under and over one pound. Both operate networks independent of the larger integrators and rely on a national network of regional parcel carriers to inject parcels into the USPS network.
UPS SurePost and Mail Innovations, FedEx SmartPost, Newgistics and DHL Global Mail all are postal integrators, providing a residential delivery option with a common partner — the USPS. On any day, on any mail carrier route, parcels injected from all five of these can be present in the USPS network.
The closer the injection is to the consumer, the greater the discount, with the greatest discount occurring for injecting at the local post office, or DDU.
Optimal Help for the Optimal Mousetrap
Monitoring costs and efficiency while meeting your customers’ demands and optimizing speed of transit can be daunting to the point that choosing a carrier trumps any consideration of ensuring an optimal transportation network.
Although the major carriers present plenty of options, putting all of your eggs in one basket — a single carrier — limits the potential benefits.
Partnering with a third-party logistics (3PL) provider opens many doors for your distribution strategy. 3PL providers have unique insights across the entire supply chain and the expertise to drill down into the specifics of shipping patterns, the nuances of consumer behavior and your objectives. As a result, you might be in unfamiliar territory: using multiple carriers and services.
3PL providers can design a combination of delivery and return options to best fit your product mix, transit expectations and visibility needs.
Although most 3PL providers are very knowledgeable about UPS and FedEx, a select few have the same degree of knowledge of final-mile delivery, which is so crucial in today’s environment.
The bottom line is, being locked into a contract with a particular carrier might ensure that your products are delivered to your customers. But surcharges and fees, combined with a lack of visibility and onerous restrictions, can hamstring your network.
So, are you ready to rebuild your mousetrap?
Jaris Briski is GENCO’s General Manager of Integrated Parcel Solutions.
That’s good news for shippers locked into a predetermined carrier — complete with multiple touch points, unnecessary fees and less-than-optimal networks — for their delivery services.
By its fluid, evolutionary nature — the e-commerce explosion; consumer purchases made from tablets, smartphones and other mobile devices; more-flexible, customer-centric return policies — the retail industry has never been more challenging or ripe with opportunity to enhance the consumer experience.
Although they’re not the entire narrative, the numbers alone present a compelling storyline. In 2012 U.S. retailers rung up sales of over $3 trillion. E-commerce sales comprised 7.3% of this total, representing the ninth consecutive yearly increase in percentage of overall sales, and experts predict this will eclipse 10% by 2016.
The rising tide of online sales, nearing $300 billion annually and fueled primarily by retailers producing more than $100 million/year in e-commerce sales, boasts a yearly growth rate exceeding 25% and outpaces overall retail growth by three to four times.
This consumer clout shows no signs of weakening; in fact, studies show that shoppers are ratcheting up their demands, from expectations for free shipping to the convenience of hassle-free returns policies.
Which begs the question: What’s the state of your direct-to-consumer (DTC) delivery network?
More specifically, are transit speed and reliability, transportation costs and shipment visibility at optimal levels?
Beyond Brown and Ground
It’s a straightforward goal: Deliver products to customers quickly and at the best cost—all backed by complete visibility that reduces calls for WISMO (Where Is My Order?). But depending on which carrier you’re using, shipments encounter many stops and starts, which can cause delays, increase costs and jeopardize customer service.
The major carriers are, not surprisingly, UPS and FedEx. Their products and services basically fall into the following buckets: air expedited, core ground and postal integration for residentially destined parcels.
In the DTC transportation world, UPS offers not only well-known commercial air and ground products (each tacks on a surcharge for residential delivery), but also two economy postal-integration products.
These products — UPS SurePost, a residential ground service focusing on parcels greater than one pound, and UPS Mail Innovations, which moves parcels less than one pound — rely on the U.S. Postal Service (USPS) for final-mile delivery through the USPS’s Parcel Select work-share discount program. With either product, shipments move in different paths within the UPS network of sort and distribution centers.
FedEx is structured similarly, with its own core expedited air products and its ground product, FedEx Ground. Unlike UPS, FedEx has one postal-integration product. FedEx SmartPost, the largest USPS parcel work-share partner, injects hundreds of millions of parcels annually into the USPS network, relying on saturated final-mile delivery six days per week. The target parcel profile is “lightweight” (one to five pounds), though parcels outside this range are also included.
In an interesting paradox, UPS and FedEx, the two largest postal integrators and USPS partners, are also USPS competitors. Also noteworthy is the concept of “channel conflict” among these two behemoths — that is, engineering networks to protect higher-margin products. Their postal-integration products offer an economical yet slightly slower delivery experience than their core commercial air and ground products. So, if you could receive comparable delivery times from a lower-cost product, which would you choose?
The USPS offers several products enabling sophisticated work-share scenarios that maintain the pseudo-federal agency’s focus on its core strength—the final mile—while distinguishing it from other carriers. The USPS recognizes a simple concept: Focusing on final mile, residential delivery yields more work-sharing options, thereby deflecting costs, growing profits and increasing volume.
The primary USPS products are Priority Mail, for packages over one pound, and First Class Mail, an affordable service for packages weighing up to 15.99 oz. with delivery in three days or less. Extending the work-sharing concept, the USPS offers several discount options based on preparation (e.g., presorting by ZIP Code, facility or mail-class schemes).
DHL Global Mail and Newgistics also provide delivery services in partnership with the USPS. DHL focuses on parcels less than one pound; Newgistics handles parcels both under and over one pound. Both operate networks independent of the larger integrators and rely on a national network of regional parcel carriers to inject parcels into the USPS network.
UPS SurePost and Mail Innovations, FedEx SmartPost, Newgistics and DHL Global Mail all are postal integrators, providing a residential delivery option with a common partner — the USPS. On any day, on any mail carrier route, parcels injected from all five of these can be present in the USPS network.
The closer the injection is to the consumer, the greater the discount, with the greatest discount occurring for injecting at the local post office, or DDU.
Optimal Help for the Optimal Mousetrap
Monitoring costs and efficiency while meeting your customers’ demands and optimizing speed of transit can be daunting to the point that choosing a carrier trumps any consideration of ensuring an optimal transportation network.
Although the major carriers present plenty of options, putting all of your eggs in one basket — a single carrier — limits the potential benefits.
Partnering with a third-party logistics (3PL) provider opens many doors for your distribution strategy. 3PL providers have unique insights across the entire supply chain and the expertise to drill down into the specifics of shipping patterns, the nuances of consumer behavior and your objectives. As a result, you might be in unfamiliar territory: using multiple carriers and services.
3PL providers can design a combination of delivery and return options to best fit your product mix, transit expectations and visibility needs.
Although most 3PL providers are very knowledgeable about UPS and FedEx, a select few have the same degree of knowledge of final-mile delivery, which is so crucial in today’s environment.
The bottom line is, being locked into a contract with a particular carrier might ensure that your products are delivered to your customers. But surcharges and fees, combined with a lack of visibility and onerous restrictions, can hamstring your network.
So, are you ready to rebuild your mousetrap?
Jaris Briski is GENCO’s General Manager of Integrated Parcel Solutions.
