Note: This article is also published in the November 2012 edition of Logistics Viewpoints
The holiday season is upon us again and there is a noticeable uptick in the number of articles and news items related to the growth of e-tailing. Various sources are predicting e-tailing to grow between 12% and 17% this year. The information coming from the parcel carriers is particularly interesting and provides insight into the challenges they experience this time of the year.
UPS estimates that it will deliver 527 million packages in the weeks between Thanksgiving and Christmas, surpassing last year’s total of 480 million packages. The company also plans to add 55,000 seasonal employees across the United States. FedEx expects to move more than 280 million shipments through its worldwide network, a 13% increase from last year, and the company expects to add 20,000 seasonal staff to handle this volume. Other carriers are reportedly restricting the number of parcels they will accept during the holiday period to ensure that they will meet delivery commitments.
These shipment volumes are astounding, and it highlights the importance of carrier certification programs and why carriers insist on enforcing stringent labeling and electronic communication standards. If these standards were not enforced, it would simply be impossible for these carriers to move such a large volume of parcels through their networks. Shippers who want to ship with parcel carriers have to adhere to carrier requirements; not doing so can lead to delays, lost packages, extra costs, or the inability to use particular services.
In the past, having a relationship with a single carrier, and putting in place the systems and processes to manage it, might have been sufficient. But that is no longer the case, and not only because of the risk of putting all of your eggs in one basket. Today, there are numerous factors that can drive a shipper to use multiple carriers and services, including cost, providing a consistent level of service to customers, and customer-mandated shipping requirements.
For example, we see more and more of our shipper customers using “direct injection” (sometimes referred to as “hub induction” or “zone skipping”) to provide better service to their customers and to reduce freight spend. Direct injection is where orders from multiple customers are aggregated for the first leg of their journey and then put directly into a parcel carrier network for the final delivery. This approach is particularly advantageous when shipping across borders because it can significantly reduce customs clearance costs and also simplify the overall process.
Carriers offer consolidated services where they will do direct injection on your behalf or a shipper can implement it themselves with their choice of carriers for the first leg and final mile. The latter approach provides greater flexibility as it allows shippers to choose local carriers in different countries and regions that have the best networks to serve their customers. The downside of direct injection is that it can greatly increase the number of carriers and services that an organization has to work with, each with their own set of unique requirements.
As mentioned earlier, a growing number of customers are mandating shipping requirements, such as specifying the carrier, service and account the shipper must use. This can potentially impact the entire shipping processes, particularly in highly-automated or high-volume environments, if it is not handled systematically — i.e., meeting the customer’s shipping requirements from within the shipper’s system.
The goal for shippers is to get product to the customer on time, without damage, and at the lowest cost. This puts the onus on the shipper to put the systems in place to produce the labels, documents and electronic communications in accordance with carrier requirements. Is this possible with the systems you have in place today?
Paul Murphy is the VP Product Management at Precision Software, a division of QAD Inc. and has over 18 years experience in the Supply Chain Industry. Murphy joined Precision Software in 1996 and was part of the team that developed the first iteration of the PRECISION solution. He has held various roles in Product Development, Implementation Services and Product Management.