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When a company is built on relationships with small, individually owned companies, those relationships are not to be forgotten, even in an age of massive everything. And Jim VanderMeer and his colleagues at Access Business Group did not forget their locally owned carriers when the founders of parent company, Alticor, launched a new sister company, Quixtar, which uses the �massive� Internet to help independent business owners (IBOs) capitalize on the most inexpensive communication technology since... hmmm, I don�t know � the soup can and string?
VanderMeer is Transportation Manager for Access Business Group, the logistics and manufacturing subsidiary of Alticor, which also is parent to Amway Corporation (a global direct selling company) and Quixtar Inc. (a North American business opportunity company). Access Business Group�s principle business is to provide distribution services as well as some manufacturing for its sister company, Quixtar. Access Business Group utilizes 90% to 95% of its capacity supporting Quixtar. However, for the parcel shipping industry, it is Access Business Group�s unique transportation model that is turning the spotlight on this group of companies.
In Days Gone By
Ten years ago, you would have seen VanderMeer working in the distribution side of the business, but as the company evolved, VanderMeer moved to the transportation part of the logistics chain. There, he and his colleagues created what the U.S. Postal Service believes is the only transportation model using local carriers to deliver bulk shipments into the Postal Service�s Destination Delivery Units (DDUs). �We are the largest non-consolidator delivering more than two million packages annually into DDUs,� explains VanderMeer. Moreover, it was no small feat to develop this unique model.
Prior to the launch of Quixtar, Access Business Group delivered 100-pound packages, on average, to its IBOs, who then, in turn, delivered products to their downlines (other individually owned businesses that sold Amway products to customers). The delivery model was to truck shipments to local transportation companies for �last mile� delivery. These local transportation companies became known at Access Business Group as its Private Carrier Network (PCN). The cost of transportation was minimized, as the private carriers were very efficient at delivering 100-pound shipments.
Remodeling a Business
With Quixtar�s online business model, instead of delivering to a few IBOs, Access Business Group had the challenge of delivering more parcels to more IBOs and also directly to their customers. The average weight of a parcel shipment decreased to 20 pounds, a weight that did not quite fit into the PCN�s way of doing business at a reasonable price. �A 100-pound delivery became a 20-pound delivery,� notes VanderMeer, �and our private carriers struggled with the fact that it was taking them more time to deliver the same amount of packages.�
Building a New Model
Not wanting to sever relationships with a group of dedicated, small transportation companies, VanderMeer looked for a resolution. �The key for us was to maintain our Private Carrier Network because they make great deliveries at a very economical price.� And, lo and behold, it was at this time that the Postal Service was launching its Destination Delivery Unit (DDU) program, Parcel Select. VanderMeer married the two. By giving PCNs multiple shipments to drop into DDUs, VanderMeer solved the weight issue. By consolidating deliveries to the DDUs, Access Business Group could now give a private carrier five 20-pound shipments, the equivalent of the heavier shipments the PCN needed to be cost-competitive.
�We got our profile back, and we gave our packages back to the Private Carrier Network,� states VanderMeer. �When we looked at it, we were adding maybe 10% more miles to a route, but delivering 50% more packages. We were able to give the private carriers that revenue back.�
The Only One of Its Kind
Simply put, the model works like this: Access Business Group line hauls shipments to the private carriers, generally arriving at about 5 AM. Shipments are off-loaded and then sorted directly onto PCN delivery vans or straight trucks. The private carriers deliver directly to IBOs as well as customers, but only shipments that weigh in excess of 40 pounds, a weight that works with the PCN business model. Any shipments less than 40 pounds go to the DDUs.
�The [less than] 40-pound rule means you typically have three boxes or less going to a home,� explains VanderMeer. �[The rule] really maximizes the use of the Postal Service so they don�t have 50 boxes to deliver to a household. It keeps the integrity of the delivery very high.� When asked why Access Business Group does not deliver into the DDU itself, VanderMeer replies, �Typically the private carrier is driving right past the DDU to deliver to a residential home; they deliver both in the same van or straight truck.�
Second-Day Service at Great Cost
Service is incredibly fast and reliable in this model. Once dropped into the DDU, the Postal Service delivers 36% of the parcels the same day (or next day from the time of shipment from Access Business Group). The following day (or second-day delivery) an additional 62% are delivered, resulting in 98% of all shipments being delivered in two days. �Those second-day deliveries are typically overnight routes such as a carrier who delivers to North and South Dakota. There are so many miles in those states that it takes them two days to deliver all of the packages,� notes VanderMeer. Interestingly, 99% are delivered within three days and 99.5% within four days. �
There are 26 PCNs delivering from about 66 locations throughout the US for entire domestic coverage (excluding Hawaii where Access Business Group makes final delivery). About 51% of all packages (31% of all orders) are delivered by the PCN and another 15% of packages (21% of orders) are dropped by the PCN into the DDUs. So, 66% of the 13.5 million total packages (52% of the six million orders) shipped by Access Business Group annually move through the PCN. VanderMeer also uses national carriers (currently UPS and FedEx) for 25% of packages (33% of orders) as well as a consolidator for 9% of packages (15% of orders), which also are dropped into the Postal Service DDU. With both the PCN and a consolidator, the Postal Service handles 24% of all packages (36% of all orders) for �last mile� delivery.
Keeping Costs Down, Efficiency Up
In what VanderMeer describes as cycle delivery or cycle ordering, Access Business Group delivers only once a week to a ZIP Code to minimize transportation costs and to maximize volume going to a DDU. And it is the same day each week to the same ZIP Code. The private carriers can get extremely efficient when deliveries are consistent. Customers are also consistent, which adds to the efficiency.
Access Business Group worked with ABOL Software to develop an electronic Postal manifest that works for the PCN. Also to ensure the PCN is prepared for the next-day deliveries, an electronic manifest is sent at 11 AM via e-mail to the private carriers. This enables the private carrier to pre-determine its routes and have vans standing by for immediate on-loading.
In preparing shipments for the PCN, Access Business Group applies the delivery address label as well as two codes to help the private carrier quickly sort parcels for the DDUs. The first of the special codes is called a �drop code� that indicates whether the parcel is bound for dropping into the DDU or final delivery to a resident. If being sent to a DDU, the second code matches the parcel to a specific post office so that those parcels can be consolidated. There is little need for advanced technology in reading the labels since as workers off-load the parcels, a quick �human scan� can route the parcel to the appropriate van and location within the van.
Tracking Massive Movement
With this massive network of private carriers, national carriers and a consolidator, how does VanderMeer know where any package is at any given time? Unbelievably, he responds, �Because our deliveries are so consistent, we don�t have delivery issues.� Since the turnaround time on delivery is so short, typically a customer does not call the next day if the package has not arrived, he explains. And when they do call, Access Business Group is generally already aware of any problem and can respond to the customer.
Although few problems arise, tracking is still important to VanderMeer. For those shipments dropped into the DDU, he comments, �The nice thing about the DDU deliveries is that we have Delivery Confirmation on all the packages. We have 100% tracking through the DDU delivery model.� For those shipments remaining with the private carriers for final delivery, he talks about the advent of global positioning systems (GPS) and how �more and more of Access Business Group�s private carriers are gaining the technology so that there is visibility throughout the system.� By January, VanderMeer estimates that 50% of the PCN will be trackable through real time GPS technology available on phones. The Web site will be updated every two minutes with GPS technology � now, that�s tracking.
VanderMeer also relies on the consolidator�s and national carriers� technologies for now, but his company is well underway with advancing its technology so that IBOs can have visibility into the delivery channel. Currently, customer service representatives can view the customer invoice to determine which route the shipment was sent. Then the customer service rep uses the national carriers� or consolidators� tracking system for detailed information.
A Couple of Low Hurdles
Looking back at the building of this very successful transportation model, VanderMeer remembers two hurdles. First was working with a paper-intensive DDU program when it was first introduced. Appropriate technology, however, automated the paperwork, and the process is �very smooth.� By this fall, VanderMeer believes Access Business Group will be one of only a handful companies that are taking the next technology step and utilizing the Postal Service�s Electronic Verification System (e-VS), reducing paperwork even more. Now, a postal clerk is stationed at the Access Business Group distribution facility five days a week to verify shipments. Once e-VS goes into effect, samples will be taken at the DDU, streamlining the verification process.
The other major hurdle was helping the PCN understand how to make deliveries into the DDUs. But VanderMeer overcame the hurdle by inviting all of the private carriers into its headquarters in Ada, Michigan for a briefing on the DDU model. VanderMeer then rolled out DDU delivery with each private carrier starting with just one or two post office locations �to make sure that it worked for them from a delivery standpoint.�
It�s More than Just the Right Thing
VanderMeer and his colleagues didn�t just do the �right thing� by maintaining quality partnerships with small delivery companies when it came to offering IBOs a new �click-and-ship� business opportunity. Access Business Group is able to have 98% of its DDU parcels delivered in two days at a cost far less than what a national carrier could offer. Talk about a win-win-win; Access Business Group wins, Quixtar-powered IBOs win and small private carriers win.
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