Parceling out Parcel

Introduction

A true stampede for parcel technology and services is going on in the transportation market. And it’s not just consumer Omni-channel, but the B2B markets that are increasingly on-demand to support any business contingency.

Last mile and the parcel elements are expensive and have gotten more so in the last few years, in spite of the positive position parcel has in the industry. Competition has increased, fuel prices have gone down, and the labor market is better since parcel has the ‘more desirable’ truck driver jobs (drivers can usually sleep in their own bed at night). LTL and parcel are often the more profitable these days, with long haul competing against rail for the business.

Not only are parcel rates high, but the associated warehouse functions (one-each picking) that accompany this process add more cost. On top is the unpleasant reality that customers don’t want to pay for the shipping — or returns. Free shipping becomes one of the deciding factors when customers choose an online retailer. Or they delay buying until free shipping and other promotions are offered, causing swings in demand, what to say of swings in operating costs and profit.

Shippers are in great pain to deal with this issue. Very few are making any money in the game, yet the types of fulfillment and services that customers want are increasing. And of course, this becomes more acute in peak periods.

Confusion, Diffusion and Is This a Market?

The market is chock full of traditional logistics services and software firms as well as a plethora of new companies who use the web’s marketplace capabilities to bring buyers and sellers together for delivery and many other services. Although there are companies such as Postmates, Uber, and TaskRabbit running tasks (and what they do is interesting), the bulk of the parcel business — the revenue and profit — is dominated by parcel and LTL carriers. That could change in the next decade, specifically impacting the courier market — the end-delivery side of the parcel shipping segments.

Parcel was not a domain most TMS providers did much in. If you were shipping by ocean or by rail you thought in terms of container loads. Air freight was more interested in parcel, since shipments range from an entire cargo plane to just one parcel. But most parcel shippers really think quite tactically, depending on the big national (international) parcel carriers and small, local couriers, if needed. But that is changing quickly.

Parcel options are hard to decipher today. Shippers have more choice as LTL carriers are often pitching their parcel capabilities. National shippers are going regional and using regional carriers who have parcel/small package services, or are evaluating and establishing relationships with local courier firms. And of course, we have to mention Amazon. Amazon has been steadily — but with splash — building up its logistics prowess with Prime, same day delivery and now Flex. Flex can be thought of as a private fleet for Amazon to serve its Prime customers. As a shipper, Amazon is big but doesn’t represent the bulk of parcel delivery in the US and EU. But what they do is most interesting and paradigm breaking for many.

Progressive shippers are using advanced home delivery software that manages the whole outbound process for the shippers and carriers. It allows them to collaborate with customers for precise appointments — often called white glove service — so that buyers can select specific time windows for delivery. These shipments may be within or beyond the parcel concept, though. You can read more about more advanced home delivery in our home delivery library.

Solutions and Methods

Each year the parcel business grows and more options are flourishing. So more attention is being paid to parcel strategies. And analyzing and optimizing choices is what software is good at.

Shippers can purchase standalone parcel software such as Descartes’ simply named Advanced Pick, Pack and Ship or Order Express; Agile Network sells standalone parcel shipping and also integrates with JDA, Oracle, HighJump, Microsoft (and others) to provide their parcel functionality. Subscription-based TrueShip, with ReadyShipper, is another player who has secured some big etail customers to provide their shipping and returns services with ReadyReturns.

Parcel functionality can also be within a TMS solution, such as JDA Parcel within JDA’s warehouse management solution or MercuryGate’s TMS for shippers which also has a parcel option within.

Couriers have their ownTM market subsector, as well, from lite cloud solutions that allow couriers to schedule pickup and delivery with customers, to full-blown fleet management software. Shippers who use regional couriers can access them through carrier selection within their TMS or use solutions like Grand Junction which integrates shippers to their regional couriers and provides rating, track and trace, and so on. More onboarding of regional carriers is a hot topic right now due to the need for more rapid shipping. Many ecommerce providers have built warehouses or have third parties house inventory for local markets so they can meet tight delivery windows.

Shippers also expect tracking and e-proof-of-delivery. Even carriers light on software can still provide this type of capability with a smart phone. But of course, there are more advanced approaches. A cloud tracking solution or functionality that is part of a parcel ‘suite’ can allow visibility and integration from shipper to 3PL to carriers and customers to ensure a seamless end-to-end process. There are dozens of products out there, for sure.

Of course, a common approach for shippers is the use of e-fulfillment services. From international to modest-sized warehouse operators, e-fulfillment services are flourishing. Examples are the mid-sized Quiet Logistics and giant GENCO (and others) who cater to the ecommerce models well. They generally use third-party software. But a few, like Transplace, have developed their own software, which competes on its own in the TMS market.

Parcel Is Deceptive, but Not so Simple

Parcel delivery looks simple, but when you open the package you see there’s a lot more inside. Today, rating is quite important, since each parcel shipper’s rates vary by dimensions, weight, ship to address, and so on. One carrier may charge less per pound to ship to Lansing Michigan, for instance, but more for the dimension of the package. For larger parcels and multi-carton shipments, LTL to Lansing might be a better option because an LTL carrier can consolidate loads and are often en route. And they are very prominent in larger product delivery to businesses as well as consumers (think furniture and electronics). So checking rates can often reveal many more options for carrier modes and carriers. (After all, parcel is not just about consumers purchasing shoes.)

Parcel, of course, integrates with warehouse management and EDI so that packing, labeling, and communicating to the specific parties — carriers and customers — are done. Labeling should not be underrated. There are so many regulations and standards by specific commodity, country of origin, and customer. Anyone who ships packages knows the guy at the Post Office asks you if you have liquids or hazardous material in your box. And your computer shipped from a factory in Asia is loaded with labels.In the future, we will also see more RFID labeling done as more retailers turn to their suppliers to tag items.

Once a carrier is selected, the freight needs to be scheduled. This is another one of those deceptive, apparently simple features. Standard shipping rates and schedules may do for many shippers, but many customers want specific appointments. For example, urban dwellers don’t want their boxes delivered when they are not home, as theft is a big problem (especially during the holidays); a business may need a part first thing in the morning to repair manufacturing equipment; or those ultra-time-sensitive shipments like biologics need to be delivered quickly and safely. In other words, there are many options that begin with scheduled delivery appointments. Shippers can offer multiple price points for a variety of options (with the right software and the right carriers). To date the big parcel guys are not offering this, but will have responded to the time-sensitive window requirements in the future, since big shippers will turn to carriers who can offer these options — or to these next-gen options that keep springing up.

Final Thought

The parcel management market is a two-sided partnership — shippers and carriers. Both need to think through their strategies to provide exceptional services, control costs, and, hopefully, earn profits on parcel delivery. They will need to come up with a way to make, save, and at the very least, not lose money as the demand for parcel sky-rockets.