Posts in category: News Coverage

Weekends are shrinking for employees of parcel carriers, another disruption wrought by the inexorable momentum of e-commerce.

This month FedEx Ground announced its US operations were now running six days a week, with management pointing to growing e-commerce demand and record volumes anticipated for the coming holiday season and beyond.

FedEx has run weekend operations during previous peak seasons and will increase hours for some employees while planning to take on about 55,000 more to cope with the peak season volume. But it sees a need to extend service hours past the peak surge.

“The rise in demand for e-commerce goes beyond peak. It’s a year-round phenomenon, and we are ready to meet that demand,” said Raj Subramaniam, executive vice-president and chief marketing and communications officer of FedEx Corp.

“FedEx Ground has operated six- and seven-day operations through the holidays for several years as e-commerce has grown and, thanks to strategic investments in our network, we are now well-positioned to operate six days a week in the US all year.”

Greg Merz, senior analyst, transportation solutions consulting, at enVista, said the push towards a six-day delivery operation had been building for years. It started with residential weekend deliveries of the SmartPost and SurePost offerings of FexEx and UPS utilising the US Postal Service’s Saturday delivery service.

UPS has had six-day transport capability in place since 2017, a company spokesperson said.

“Saturday ground pick-ups enable online retail shippers utilising a ship-from-store strategy to achieve Monday deliveries for the vast majority of the US population,” she said. “Additionally, shippers across multiple industries ranging from automotive to healthcare stand to benefit from this additional operating day.”

A spokesperson for DHL Express in the US reported that the company was doing some weekend deliveries, taking international express shipments to consumers’ homes.

“Because of the higher e-commerce volume, our major hub in Cincinnati is also adding shifts on the weekends. We did that last year during the holiday season,” she added.

Mr Merz said the extension of service to six days was designed to capture and lock-in business from retailers, many of which are interested in weekend delivery.

Higher pay and lower density on weekends increase costs for operators, but the residential delivery fees they charge makes up for this, Mr Merz said. Moreover, the companies are trying to reduce overtime costs by shifting work schedules to Sunday-to-Thursday or Monday-to-Friday patterns.

Jim Barnes started Envista with his partner, John Stitz, back in 2002—and at the time, it was the two of them and a few subcontractors. Today, the supply chain consulting and e-commerce services company has more than 600 associates and $100 million in revenue.

“We [received] no equity. No venture capital. we’ve done it through, quite frankly, with a lot of grit, a lot of passion, a lot of effort for the business, and we have continued just to reinvest in ourselves and expand the business beyond just our core supply chain services and systems integration business,” says Barnes.

Barnes spoke with Chief Executive about challenges companies in the retail sector are facing with supply chain, how to compete against Amazon, and more. Below are excerpts from that interview.

What are the big challenges your clients are facing in the supply chain today?

What’s happening is that for many, many years, brands and manufacturers controlled the experience of that the consumer had, right? So they influenced the consumer and they drove the consumer behavior. What’s happening now is obviously mobile devices, the speed of information, the speed of data, the information overload that we have, is [control has] moved from the brand to the consumer.

The consumer’s much smarter today about how they buy and how they acquire products. There are a number of searches you could do in terms of educating yourself to become a smart, educated buyer, both on price, product, performance, [and various feedback]. We’re going to this personalization model where most supply chains have been, right or wrong, developed in a linear fashion of one to many. So it’s a one-to-many, so I pick one and I push it out. Well now what’s happening, from a supply chain perspective, is that we’re moving more to one-to-one.

Back in my days at Johnson and Johnson, we were trying to move to a just-in-time approach, where I could actually make one product… I’d have the demand signal for one and I made one. Now did we ever get there? No. But the mindset was, “How do you go to a one-to-one relationship?” And so that’s what retailers and distributors need to be thinking, “How do I create a one-to-one relationship with the consumer, but my supply chain also has to be optimized and has to be effective to also support that one-to-one relationship?”

We’re going to see, regardless of what Trump does from a tariff perspective, you’re starting to see people trying to compress time. And so by compressing time, it allows you to move to more that one-to-one relationship. Now if I’ve got lead times of 90 to 180 days, it’s very, very difficult. The reality is that we need to compress time. And so retailers are sort of starting to wake up saying, “Wow, how do I compress time?”

It seems like a Herculean task to compete against Amazon because it’s like everything, anywhere anytime, and you can get it in about two days. What do you say to your clients who are trying to win that battle?

I gave a speech on “How to Compete Against Amazon,” at a conference in Nashville. Look, you’re not going to beat Amazon. You’re not going to go pop up 50 distribution centers, you’re not going to go bring up AWS. But the reality is that Amazon today, their e-commerce business, it’s a loss. They’re not making money on retail, they’re making money on AWS versus really making money on e-commerce fulfillment. But what they’re doing is, their AWS, they’re creating brand adapters. I mean, the reality is that Amazon today has… look, let’s just call it rough-and-tough, a $6 billion Prime business. And for what? They haven’t sold you anything yet. They’ve just set an expectation that they’re going to deliver to you in two days, and they’ve got your money. Think about it. That’s a $6 billion business. That ranks Amazon in the top 100 retailers in the world, and they haven’t yet done anything. They just managed an expectation, or they created an expectation for you.

Advances in technology, increasing globalization, and the growth of e-commerce are upending the traditional freight bill audit and payment industry. Most notably, the hard savings from credit recovery or adjustments identified in the audit process, while still essential, no longer are enough to meet many clients’ needs. “That’s just table stakes,” says Dave Wedekind, senior director, global operations with Indianapolis-based enVista, a global consulting and software solutions firm focused on optimizing supply chain efficiencies. “Clients are looking to glean additional value from the audit and payment processes.”

The invoice and other documents that are part of the freight payment process can offer valuable insight into the financial impact of transportation within the organization’s supply chain. Freight payment and audit solutions providers offer analytical tools that help companies leverage this data to develop strategies to better manage their supply chains.

For many companies, a finely tuned supply chain has become an essential competitive tool. They leverage data from the freight audit and payment process to avoid unfavorable hits to their bottom lines, and to unlock working capital, either through improved operational efficiencies or improved cash flow, says Jeff Pape, senior vice president, head of product and marketing for global transportation with U.S. Bank.

BRINGING THE TEAMS TOGETHER
Another shift is “the push for cross-collaboration between a company’s logistics, finance, sourcing, and marketing teams,” says Hannah Testani, chief operating officer with Intelligent Audit, a freight audit and payment company. These groups work together to understand the insights transportation data can provide, such as market penetration, budgeted versus landed costs, and the profitability of shipping certain items or SKUs, among other factors.

And, as more shippers operate around the globe, they can wind up with silos of disparate freight bill information. Many look to their freight bill audit and payment providers to bring this information together, so they can make better sense of it and even leverage it to reduce costs or better manage their supply chains.

Also of concern to many shippers are increases in assessorial charges for additional services, such as special handling requests. “We’re seeing more complex pricing structures and increases in those costs,” says Nick Fisher, director of sales with AR Traffic Consultants. The freight audit process can help companies keep tabs on these costs.

E-COMMERCE’S GROWING IMPACT
In addition, the growth of e-commerce impacts both shippers and freight bill audit and payment providers in several ways. More companies are focusing on small-parcel shipments, which often had been the least managed mode. “Everyone knows their truckload and LTL spend, but parcel often falls to the side,” says Sarah Eggleston, director, national sales with Sunset Transportation.

Another shift resulting from the proliferation of e-commerce shipments is the growth in volume LTL ratings, says Brian Thompson, chief commercial officer with SMC³, a less-than-truckload (LTL) data and solutions provider. Given a tight market, more shippers will start looking to volume LTL as another transportation option, he says.

More numerous e-commerce transactions also prompt shippers to look to third-party providers to offer electronic invoice processing alternatives, says Kristy Brown, vice president, freight payment operations with CTSI-Global, a provider of world-class supply chain solutions. While ANSI X12 EDI standards remain prevalent, more freight audit and payment providers allow carriers that aren’t EDI capable to submit bills via spreadsheets. Many also allow them to upload invoices through a web portal or send them via email, to be read with optical character recognition.

And, just as technology is changing numerous other industries, it’s impacting the freight payment and audit market. For instance, many providers are preparing for greater use of blockchain technology (see sidebar, page 110).

Shippers looking for experts who can not only audit, analyze, and process their freight bills, but also leverage analytical data to improve supply chain management can turn to a range of firms, including these market leaders:

On the final day of enVista’s FUEL 2018 Conference, Adrian Gonzalez, President of Adelante SCM explained that in order to compete in the ever-changing logistics environment, the best thing companies can do is define their own competitive weapon.

Amazon’s killer weapon? Amazon Prime. According to Gonzalez, Amazon Prime members spend on average about $600 more per year than non-members. Gonzalez pointed to Amazon for the way in which customer expectations have begun shaping the supply chain.

The 2017 Third Party Logistics Study also found that 73% of shipper respondents indicated the importance of meaningful involvement of 3PLs in processes relating to supply chain transformation, with 9% suggesting significant involvement, 28% significant involvement and 36% advisory involvement. “Users and providers agreed that 3PLs could be of assistance with their 3PL industry knowledge, supply chain experience, and shipper industry knowledge.”

Looking ahead, “cost management remains important, but that’s not a growth strategy,” Gonzalez said, explaining that it tends to take a back seat to quality, efficiency, safety, customer satisfaction, and innovation.

As companies begin to prioritize logistics, Gonzalez shared five tips to make the transition as smooth as possible:

Put customers at the center of the supply chain universe.

“There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality” —Jeff Bezos, CEO of Amazon, in his 2016 letter to shareholders.

Link logistics to strategy and business plans

Provide supply chain and logistics a seat at the C-Suite table

Having a knowledgeable and experienced executive in the C-Suite who can link the value and role of supply chain management to the company’s strategy and business plan is critically important.

Improve logistics and sales collaboration

“Our ability to respond quickly and effectively to fluctuations in demand, adjust order sizes and delivery frequency as required, and provide timely and accurate visibility to orders, inventory, and other metrics are all competitive weapons. Let’s use them to our advantage!”—VP of logistics for a large food manufacturer.

Change the mindset on business relationships

In today’s rapidly evolving world, business relationships based on an outdated ‘win-lose’ mentality won’t withstand a market that demands constant change and adaptation. Only by focusing on ‘win-win’ relationships can companies drive innovation and increase their competitive edge.

Stop shoveling snow with a dustpan

Yesterday’s supply chain tools and processes take more time, more effort, and aren’t as user friendly and effective—and they’re becoming today’s dustpans. They might look the same, but they won’t work for what you need, Gonzalez explained.

With these points in mind, the challenge then becomes learning to walk the talk, according to Gonzalez.

Gonzalez quoted Michael Eskew, former chairman and CEO of UPS who noted at the CSCMP Annual Conference in 2002 that there’s been a “dynamic shift in the relationship between business plans and logistics, a shift from the perception of our industry as a back-end process to a front-end strategy that informs and supports your entire business plan.” Ultimately, “your supply chain strategy in effect becomes your business plan,” Eskew said.

Gonzalez encouraged attendees to look to software, social networking, and B2B connectivity to find supply chain innovation.

“The bottom line is that the clock speeds of every industry are accelerating, and what got you here won’t get you where you need to be. To become a company of tomorrow, you have to unlearn ‘the way we’ve always done things’ with respect to yesterday’s processes, technologies, and business models,” Gonzalez concluded.

Optimize your global transportation strategy and results with enVista. We deliver leading global transportation visibility and spend management solutions that significantly improve global transportation visibility, reduce costs and maximize transportation results for the world’s leading brands. Our experienced team of transportation management experts and former carrier pricing managers bring exceptional expertise to help you improve your operations and attain your goals.