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For parcel shippers and carriers alike, the holiday season is a grueling stress test. Many retailers ship the majority of their orders in the last two months of the year, ramping up daily volumes and straining carriers’ capacity. Order volumes spike and backlogs develop, causing Aunt Nelly’s sweater or Timmy’s chemistry kit to arrive sometime after Christmas.

By all accounts, the number of late holiday deliveries directly relates to the extraordinary growth of e-commerce orders, most of which move via the parcel carriers FedEx and UPS and the U.S. Postal Service (USPS). Since late 2013, when a sharp spike in e-commerce shipments caught them off-guard, parcel carriers have taken steps to better prepare themselves for holiday traffic. Depending on the carrier, these have included requiring shippers to provide more detailed forecasts; hiring tens of thousands of temporary workers; expanding weekend and evening service; adding more trucks, planes, and warehouse capacity; modifying shipment routing; limiting the number of parcels they accept immediately before Christmas; and levying peak-season surcharges to help cover those additional costs.

Still, e-commerce parcel volumes continue to exceed forecasts, and evidence suggests that carriers are still struggling to keep up. Sixty-one percent of consumers polled for shipping technology specialist Pitney Bowes’ 2018 Global eCommerce Study said they were frustrated last year by some element of holiday shopping, such as late deliveries, inaccurate tracking, and high shipping costs. Significantly, that’s up from 47 percent in the previous year, says Lila Snyder, Pitney Bowes’ executive vice president and president, commerce services. And 80 percent of respondents surveyed for parcel spend management specialist Green Mountain Technology’s 2018 Annual Benchmarking Report on parcel transportation said on-time performance was their key concern during the 2017-2018 peak shipping season.

Late deliveries are partly due to the conflict of carriers’, consumers’, and shippers’ interests, according to Joe Wilkinson, senior director of consulting for enVista, a global consulting and software solutions firm. The main factor is consumer behaviour—late orders that flood the system at the 11th hour. Shippers that encourage or enable last-minute orders and those that provide carriers with inaccurate forecasts bear some responsibility too. Carriers, meanwhile, can’t build networks to accommodate holiday peaks, which can be three or four times their normal volumes, and operate them all year round, he says.

Other factors that contribute to late deliveries include insufficient labor—hard to avoid with today’s low unemployment rate—and winter storms that can delay not just last-mile deliveries, but also the cross-country truckload or intermodal linehaul portion of a parcel’s journey, Snyder notes.

It’s unlikely, therefore, that late deliveries can be completely eliminated. But there are some steps shippers can take to reduce the risk of holiday-season snafus. They include the following:

Hone your forecasts. It’s hard for shippers to predict what the customer will buy, says Katie Parker, director of strategic solutions at Green Mountain Technology, yet it’s more important to get forecasts right in peak season than at any other time of year. “When parcel shippers underestimate the volume and timing of their shipments, it affects carriers’ ability to plan and manage their peak-season operations,” she points out.

To avoid “underpredicting,” some shippers give carriers forecast ranges. It’s best, though, to continue to adjust forecasts and ensure they’re as accurate as they can make them, right up until a few days before Christmas, Wilkinson advises.

Manage customers’ expectations. Increasingly, consumers expect to be able to place orders a few days before Christmas and still get guaranteed delivery before the holiday. But the more packages that enter the system as the clock winds down, the harder it is for carriers to meet those expectations. That’s why the major carriers stipulate that certain rules and service guarantees do not apply during peak season.

One way shippers can reduce volume in those final days is to work with their carriers to set earlier cutoff dates. Merchants may be reluctant to do that, though. If 40 percent or more of a company’s annual sales are holiday-related, Snyder says, “every day matters, so retailers will want to push as close to that edge as they can.”

Another option is to offer incentives like discounts to encourage customers to order earlier in the season. Spreading orders over a longer period helps both shippers and carriers allocate their resources so as to avoid bottlenecks in their operations, Parker says. And if a package is delayed, the shipper and carrier will have more time to fix the problem before the holiday deadline.

Ship differently. For some shippers, it may be worthwhile to up their holiday delivery game, even if it costs more. One that has adopted this approach is the book publisher Penguin Random House (PRH), which mostly sells to distributors, independent booksellers, and specialty retailers. PRH ships about 400 million books a year, via a combination of truckload, less-than-truckload (LTL), and parcel service, according to Annette Danek-Akey, senior vice president of fulfilment. UPS is the publisher’s main parcel carrier.

As the holiday season approaches, PRH implements its “2-Day Rapid Replenishment” programme for independent bookstores. Beginning Oct. 1, bookstores that place their orders by 3 p.m. will receive them within two business days. The two-day transit program, now in its eighth year, is standard throughout the season. “We recognize the importance of bookstores’ receiving product to support their holiday-season sales, so we’re willing to increase our transportation cost to make sure they get their orders in two days,” Danek-Akey says. That short-term increase produces long-term benefits for PRH: The programme has been instrumental in generating “great sales” from independent bookstores, she notes.

Filling a truckload and dropping those packages into national and/or regional parcel carriers’ networks across the country can help to lighten the load on local infrastructure, Wilkinson says. Good communication helps to speed the parcels to their destination. Penguin Random House, for example, uploads package-level detail to UPS as it finishes loading a trailer. This expedites processing at the sortation centre because the parcel carrier can decide how to handle the packages before the truck arrives.

Another way to reduce the burden on carriers’ networks is to deliver some consumer orders via LTL service to stores and then use ship-from-store and pick-up-in-store strategies. This adds to a seasonal increase in store labour costs, but it also reduces miles, “touches,” per-piece transportation costs, and in some cases, days in transit. Positioning inventory closer to customers—for example, in regional distribution centers—provides more flexibility while reducing transit times.

Diversify your carriers. Spreading parcel volume across multiple carriers can help to assure capacity at busy times. Green Mountain Technology’s benchmark report found that more shippers are doing just that by shifting to regional carriers, which have a smaller geographic footprint but usually offer faster transit times and experience fewer bottlenecks, Parker says.

Wilkinson agrees that diversifying carriers can be a smart way to increase flexibility but cautions against approaching regional carriers only when the going gets tough. Capacity is very tight for them, too, during the peak season, and they will have to give priority to their existing customers. Having a year-round business relationship allows for advance planning and makes it more likely that your holiday shipments can be accommodated.

Communicate early and often. If there’s anything e-commerce has proven, it’s that consumer preferences and demand can change quickly. That’s why regular proactive communication throughout peak season is important. Pitney Bowes, which helps many merchants with labeling and tracking of parcels, routinely sees consumers tracking their packages nine or 10 times during a delivery period. This shows “how hungry they are for more information than they typically get,” Snyder says.

The rise of e-commerce, technology and big data has brought big changes to the retail industry—and big opportunities for Carmel-based software and consulting company enVista LLC.

The privately held enVista, founded in 2002 by Jim Barnes and John Stitz, started as a two-person operation with first-year revenue of $1.4 million. Through organic growth, enVista now has some 535 employees at offices around the world, more than 1,000 customers, and projected 2018 revenue of $97 million.

Over the past 15 years, the company has seen average annual revenue growth of 22 percent and has landed on IBJ’s 25 fastest-growing companies list in both 2015 and 2018.

And enVista sees plenty more growth potential.

“It’s been a pretty crazy ride,” said CEO Barnes.

EnVista serves customers across multiple industries, including distribution, logistics, manufacturing and food/beverage. But about half of its revenue comes from retail alone, and in 2015 enVista launched what it calls its Unified Commerce Platform—software that allows retailers to manage their in-store point-of-sale systems, e-commerce, inventory and customer information from a single platform.

“We really uncovered needs in the area of unified commerce, and really helping companies put their e-commerce strategy together and how they go to market with it,” said Stitz, enVista’s managing partner.

The company’s typical retail client has annual sales of $500 million to $2 billion, and enVista’s client list is diverse, including Evansville-based Shoe Carnival, menswear retailer Brooks Brothers, novelty-store chain Spencer Gifts, outdoor-gear retailer Cabela’s, and both Petco and PetSmart.

In the early days of e-commerce, retailers typically ran their online and brick-and-mortar divisions separately. That meant, for instance, that a retailer’s online and in-store merchandise selections might be quite different, and customer data collected via the retailer’s website might not be available to store employees.

But now, the trend is what the industry calls omnichannel retail—integrating operations and serving the customer seamlessly both in-store and online.

That can be tricky to manage, retail experts say.

“Now, you’ve come in with this online presence. That’s a whole different level of expertise that you’ve got to bring into the picture,” said Daniel McQuiston, an associate professor of marketing at Butler University. “It’s a tough thing to do.”

Mara Devitt, a senior partner at Chicago-based retail consulting firm McMillanDoolittle, said traditional retailers must do “a lot of heavy lifting” to succeed in this area.

“Retailers, to respond, have to develop different capabilities within their organisations,” Devitt said. “There’s all these real details that have to be worked out.”

Large retailers, Stitz said, are generally further along the path of omnichannel retail because they have more resources to tackle the issue. And retailers that originated online, like Amazon, don’t have the challenge of juggling a large network of physical stores.

The 2019 rate increases announced earlier this week by shipping and logistics giant FedEx Corp. (NYSE:FDX) contains a stark message for shippers: Easily conveyed packages will see relatively modest increases. Heavier, outsized and less conveyor-friendly shipments, by contrast, will not.

The headline numbers show a 4.9 percent increase for shipments moving via FedEx Express and FedEx Ground, and a 5.9 percent increase for less-than-truckload shipments tendered to FedEx Freight. But long-time FedEx shippers, as well as regular customers of rival UPS Inc.(NYSE:UPS) know all too well there is scant correlation between the announced rate hikes and what their actual increases will be.

Next year will be no different, at least at FedEx. (UPS has yet to disclose its 2019 rates). Rates will rise 5 to 5.4 percent for one to 50-pound shipments moving via the two next-day delivery products: Priority Overnight and Standard Overnight. That is slightly higher than its published rate increases.

The pain comes when shipments enter the 50 to 100-pound range. There, the rates for the same products jumps by 9 to 10 percent, according to an analysis from enVista, a consultancy.

The pattern holds true for 2 to 3-day delivery services. For shipments less than 50 pounds, the increase will be between 5 and 6 percent. For the heavier weight breaks, the increases are in the 9 to 10 percent range, enVista says.

FedEx’s rates for 1-pound shipments moving less than 150 miles from the origin point which is considered the benchmark for the carrier’s minimum charges, will rise between 3.6 percent for ground and home delivery services to 5.4 percent for its priority overnight letter product, according to data from Shipware, LLC, another consultancy. Rates for FedEx “Smartpost,” a product it offers in conjunction with the last-mile delivery capabilities of the U.S. Postal Service will rise 4.3 percent for shipments in the 1-9 pound weight range, SmartPost’s bread-and-butter.

The skewing towards the heavier shipments are “part of the war on large packages” that are occupying more capacity in the two carriers’ networks, according to Joe Wilkinson, a senior director at enVista. Larger packages are harder to handle and not easily conveyable. Satish Jindel, head of SJ Consulting, a consultancy, notes that bigger shipments occupy a disproportionate amount of precious space in the carriers’ physical networks that are already near maxing out.

As a result, carriers impose significant rate increases in an effort to reduce their volume. Stiff accessorial charges on those shipments have become commonplace, as has “dimensional pricing” as many large shipments qualify for it. Dimensional pricing, which calculates rates based on a shipment’s dimensions rather than actual weight, is typically more costly for shippers.

Why do transportation management systems (TMS) implementations get off track? When the implementation team doesn’t know what they don’t know. A TMS can be implemented successfully, on-time and within budget, but it takes a lot of planning and subject matter expertise, not just around the software, but around the business case, transportation operations, upstream and downstream business processes, relevant order management requirements, enterprise resource planning software, warehouse management systems integration requirements, and the ever-important change management approach.

First, let’s define TMS – this is the software used to manage purchased transportation. All too often, companies conflate TMS with vehicle routing & scheduling (VRS) and fleet management systems (FMS) with TMS. Think about them as different functional buckets; while there are a few software companies that can meet the requirements across all three, it’s uncommon that a single tool can solve all of a diverse transportation operation’s critical requirements (supporting a robust business case) in North America or globally. So, for simplicity sake, let’s just focus on TMS.

TMS Strategy & Building the Business Case

A successful TMS implementation starts about 3 – 6 months before the implementation kick-off meeting. It begins with a strategy project that documents the current state process, information, and data flows. It involves understanding the ground-level requirements through observing the “3 actuals” – the actual people, doing the actual process, in the actual place. It requires gathering data, driving towards answering the question “Where is the money?” It includes a TMS-agnostic, but functional capability aware, future state process design, which typically leads to organisational changes and task re-alignment.

The integration design must be done with supply chain IT and corporate IT so that all parties understand the level of effort required. Then, the business case items and roadmap must be agreed upon by the internal stakeholders and signed off by executives, with a toolset identified. Once this is complete, the transportation leadership team can make an informed decision about what TMS is right for their organisation.

Whenever someone tells us they need a TMS, we ask “Why?” The above process gives you the answer as to if and why a TMS is needed. This is important: Regardless of the exact details around the business case and design, organisations must go through the above exercise in order to create alignment, momentum, and a 3 – 5 year plan/justification for taking on the cost and risk associated with a highly-integrated software implementation that touches all parts of a business, including internal groups and external parties (vendors, suppliers, logistics service providers, customers, etc.).

Systems Selection & Budget

How important is the selection? Extremely. Not because there is only one TMS that will fit into the design, but because it is important to select the right partner that is willing to invest in your company. Selection projects involve a tremendous amount of time, energy, and money to do it right. During this process, the eventual buyer and seller agree upon objectives. This is a dating game. This project also validates the design and gets the buyer to a point where they understand the total cost of ownership (TCO) and refine their implementation budgets. Organizations should plan to add roughly 30 percent to their implementation budget for good measure, as there are still going to be unknowns. The selection process also includes identifying the super-user, aka the TMS administrator. We will come back to the importance of that super-user here shortly.

Project Plan

A well-run TMS selection project should take about 12 weeks, not including the time it takes organisations to contract, which probably takes another 4 – 6 weeks, depending on the speed of the legal teams. If both the strategy and selection projects succeed, then there is a greater chance that a TMS can get implemented on-time and within budget, but not necessarily.

While the legal folks are red-lining back-and-forth, it is a good time to build a detailed project plan. Please involve procurement/purchasing, materials management, the planning and forecasting group, warehouse operations, facilities, finance / accounting, IT, customer service / sales, and anyone else that will touch this implementation. There are likely other large-scale projects that will negatively impact the schedule, so try to find this out early!

Implementation Kick-Off

Now you’re at the implementation kick-off. Do you have a steering committee formed? Do you have a project manager in the business and in the IT group? Is the super-user identified with their operational responsibilities off-loaded and their calendar cleared?

The Executive Steering Committee will ensure that the leadership team has allocated the right amount of attention and focus within their parts of the supply chain. They will serve as the group to identify, manage, and pay for risks that arise throughout the implementation. They will also ensure that folks remain accountable throughout the organisation. This group should meet once a month, or at the milestones established in the project plan.

IT and the business should have part-time (50 percent preferred) resources dedicated to this project. They do not have to be super-technical, but should understand the relevant systems touching the TMS, as well as have a strong understanding of the future state design (hopefully they were part of the previous projects!) They will track tasks, keep resources focused, maintain the budget consumption, and ensure that milestones are met throughout this slog.

The super-user should be damn near 100 percent dedicated to this project. It is very difficult, particularly for shippers, to take a resource out of the transportation operations and have them full-time on this project. We have seen folks pull someone in from another group within in the supply chain, hire from the outside (takes too long), or grab someone from a supply chain rotational programme that is process-oriented, thinks like an engineer, and knows enough about transportation. Great TMS super-users are very hard to find, so developing one (and retaining them) is critical. Going into this, it is not necessary to have a seasoned super-user that already knows the selected TMS – that is over-emphasized. This person will learn the tool during implementation and be able to support the organisation on the TMS long-term, if they have the right DNA.