Holiday Shipping 2020: Will Your Parcels be Picked Up and Delivered on Time?

Days after “Black Friday” UPS put holiday shipping restrictions on Nike and Gap and directed drivers to stop Cyber Monday pick-ups at other large retailers that are already exceeding parcel volume forecasts through booming online sales.  

In a year marked by a pandemic-driven shift in consumer buying habits that has driven consecutive quarters of record e-commerce growth, parcel networks have been at or near capacity for months. An unprecedented holiday peak has been on the radar, but as expected, early promotions and efforts to bring parcel volume forward could never be enough.

And in the midst of a monumental peak period, the parcel carriers continue to adjust their strategy to not only drive revenue growth in high demand e-commerce service areas, but also protect volume and achieve competitive advantage as Amazon’s delivery networks continue to evolve. 

Let’s look at some of the latest developments in the parcel shipping environment. They may affect your ability to delight customers this holiday season – and continue serving them well through 2021 and beyond.

E-Commerce Bloats Parcel Volume Beyond Capacity

Demand for the 2020 holiday peak shipping season is forecast to exceed 86 million packages a day – about 7 million packages outside current parcel network capacity. These estimates are validated by the National Retail Federation’s estimate that online shopping increased 44 percent during a five-day stretch that included Black Friday and Cyber Monday. 

Both UPS and FedEx prepared retail shippers for tight holiday shipping capacity, issuing advice for holiday shippers and encouraging clients to “shop earlier than ever with special offers or other incentives.” Yet, before December even dawned, both carriers were enforcing volume agreements and applying peak season charges and accessorial fees that create additional order fulfillment cost for shippers. 

In this environment it is critical that you have real-time understanding of your parcel shipping activity. While volume outside agreed-upon levels or historical averages may result in added cost during other parts of the year (as it did with COVID peak surcharges), packages exceeding a shipper’s determined space simply will not be served – at least until additional capacity becomes available.

Shipping Delays: Expect, Forewarn and Facilitate

Based on the recent trends observed, the average package delay rate during the 2020 holiday season may range between 14 percent and 18 percent. Consumers in densely populated cities can expect delays as high as 25 percent to 30 percent. 

Unless you create an expectation of delayed delivery, this can be a real problem for customer experience. Proactive communication with your customers about anticipated delays is one of the most important steps in preserving holiday shipping experience.  Use your website and email communications to help set expectations. 

That said, as consumers’ expectations on speed evolve, we are seeing an increased willingness to wait for a delivery, especially if it means free shipping. According to BoxPoll, more than half of consumers opting for free shipping (57 percent) considered five-day delivery to be “fast” – that’s up 8 percentage points compared to last year. One-third of respondents in the weekly survey said that seven-day delivery is “acceptable” at minimum.

Retailers are positioned to capitalize when they maintain awareness of shipping characteristics, alternative service models and, of course, their customers’ expectations. A “no-rush” option is a familiar part of the Amazon order process, and now other brands are following suit, even offering incentives for delayed or “slow service.” If a consumer considers five-day service “fast,” are you driving up cost by offering more service then they need?

FedEx Counters Amazon’s E-Commerce and Logistics Buildout

The FedEx acquisition of ShopRunner complements the actions that we have seen FedEx taking to remain relevant in e-commerce as Amazon continues to strengthen its logistics and fulfillment capabilities.  

The move reinforces the FedEx position as the anti-Amazon solution for companies seeking an Amazon alternative. Some of the carrier’s other recent activity following the same strategy includes:

  • Acquisition of GENCO to form the basis of Fulfillment by FedEx
  • Moving to a seven-day-a-week delivery schedule
  • Severing ties with Amazon for delivery to focus on other e-commerce volume
  • Pulling SmartPost deliveries into the Home Delivery network to bolster density and profitability.

With the global parcel market positioned to more than double by 2026, fueled by e-commerce growth and further accelerated by COVID-19, both FedEx and UPS will need to continue adding value to retailers’ unichannel solutions to keep volume when Amazon opens their delivery network to third party shipments. Amazon suspended its delivery service earlier this year due to the pandemic, but it is expected to reopen in the near future.

Of course, the parcel carriers are among an ever-growing contingent of organizations devising new strategies to compete with Amazon. Just in time for the holidays, WalMart is dropping the $35 minimum on free shipping for e-commerce purchases of electronics, toys and clothing made for participants in its WalMart+ membership program. The move – and the program – are both designed to compete with Amazon Prime.

Are You Positioned to Compete?

Can you quickly determine how your parcel shipping volume falls within your capacity agreement with your carriers? Do you know how quickly your customers are getting their orders – and whether you are meeting your delivery commitments? Can you determine which SKUs are making money – and which are not?

Ongoing awareness of evolving trends in the parcel environment – from service disruptions to capacity shortages – is integral to your ability to pivot your small package shipping strategy. 

Understanding how those trends affect your transportation cost and service to end customers requires expert analysis and actionable intelligence. The latest enhancements to our technology platform puts the power of that information at your fingertips with best-in-class visualization of data gathered across your entire supply chain.

Schedule a demonstration today to see how our clients are able to identify business trends, understand the impact of cost and service on working capital, and recognize ongoing performance improvement opportunities.

5 Tips: Curtailing the Supply Chain Bullwhip Effect

A phenomenon that quickly turns otherwise accurate forecasts into far-reaching supply chain inefficiencies, the bullwhip effect refers to the increasing swings in inventory — in response to shifts in customer demand — as one moves further up the supply chain

Accustomed to seeing ample supplies of diapers, toilet paper, and cleaning products on store shelves, consumers were in for a shock when COVID-19 began to take its toll on the world’s supply chains in early 2020. Although the barest of shelves began to rejuvenate by midyear, there are still some lingering effects (plus the potential for more shortages later in the year and into 2021). 

Blame the bullwhip effect for creating a lot of this chaos and uncertainty. 

“Supply chains allow companies to focus on their specific processes to maintain maximum probability,” Osmond Vitez writes in The Bullwhip Effect in Supply Chain. “Unfortunately, supply chains may stumble when market conditions change and consumer demand shifts.”

Here’s what companies should be doing now to avoid supply chain disruption in the future. 

5 Supply Chain Takeaways for 2021

Under “normal” circumstances, companies invest in extra capacity, inventory, labor and work shifts to minimize the bullwhip effect or to avoid it altogether. The problem this time around is that otherwise routine approaches didn’t work. Demand sensing, forecasting and other forward-looking predictions were equally as ineffective, and mainly due to the unprecedented nature of the global pandemic. 

Here’s the good news: shippers now have boots-on-the-ground experience with a fairly extreme case of the bullwhip effect. Using their 2020 experience as their guide, companies can now prepare for the next potential disruption with a better understanding of the hefty impacts that it could have on their global supply chains. 

Here are five lessons that all companies should apply toward their future supply chain management: 

  1. Communication, data sharing, and visibility trump all when it comes to minimizing the bullwhip effect. One large national retailer, considered to be a leader in supply chain strategy, opened the lines of communication by allowing suppliers to access their inventory data. The result: increased customer satisfaction, a decrease in inventory and warehousing costs, and more stable supply lines.
  2. Third-party logistics experts have proven their worth. Well equipped to handle the logistics, transportation and technology that go into a well-oiled supply chain, experts like Transportation Insight know both sides of the business (i.e., shipper and carrier), and we can demonstrate and articulate how each node in the supply chain will benefit from a specific decision. 
  1. Scenario planning and simulations actually work. Think of them as the “war games” of your own supply chain, use them to run simulations on historical data across different hypothetical scenarios (e.g., if we can’t get raw materials from country A, how will it impact the rest of the supply chain?). Getting the answers to these questions before a disruption occurs will help you be more prepared in the event of a disruption.
  1. Use dashboards and control towers to get big-picture views in real-time. The days when a warehouse manager had to wait until the end of the month for a printed performance report are long gone. Thanks to advancements in technology, the same manager can get that information in real-time and then use it for good decision-making. Being able to drill down into order profits, for instance, will help you better understand what you should actually be charging for shipping. This, in turn, helps support good margin management in any business conditions.
    
  2. Alternate sources of supply are a good thing to have. In surveying 150 senior manufacturing executives, law firm Foley & Lardner found that most expect to make “fairly drastic” changes to their supply chains post-pandemic, including a shift away from just-in-time manufacturing (JIT) and sourcing in China. In Global Supply Chain Disruption and Future Strategies Survey Report, the law firm says that of those companies that were operating in China pre-pandemic, 59% have either already withdrawn operations, are in the process of doing so, or are considering it. Many of those organizations are looking to reshore their operations closer to home in the U.S., Canada, or Mexico.

Depending on how you approach it, transportation can play a major role in avoiding the bullwhip effect in your supply chain. Through good communication and data-sharing across all supply chain partners, you’ll gain an understanding of both real-time and historical information as it relates to all points in the supply chain. The better decisions you can make, the better the odds of avoiding the bullwhip effect.    

Tame the Bullwhip: Manage the Demand Waves

We examine the steps you can take to build a responsive supply chain management system in our latest Supply Chain Masters Series digital event. 

Watch the webinar to learn best practices for collecting, retaining and analyzing supply chain data. We also highlight the business intelligence solutions that drive continuous improvement and proactive strategy adjustment. 

Click the link below to learn supply chain strategies that minimize risk and protect your profitability today and tomorrow.

Logistics Outsourcing? 4 Things Your Partner Needs

Depending on the logistics outsourcing approach that your business deploys, make sure your provider’s skillset aligns with your organization’s needs. 

In today’s environment, supply chain practices are taking central focus. Recovery will depend on adaptive response to global pandemic, economic turmoil and a sharp shift in buying practices and delivery needs. 

A lot of companies don’t have a complete understanding of what their partners should be providing. Outsourced solutions supplement your internal response to these dramatic shifts. When your partner exhibits these 4 Outsourcing Must-Haves they have the buy-in to keep you in the game.

Your partner can’t deliver? Better understand why.

Outsourcing Must-Have No. 1: Responsiveness

If you are not with a responsive partner that is able to enact change quickly within your supply chain, you are setting up yourself and your company for failure.

What does it mean to have a responsive partner? Your broker or 3PL should have a regular cadence for response. This is more than a quick, timely email follow-up when there is a problem – although that is important.

More than that, a responsive partner lends an empathetic ear to what is happening within your organization. That is fundamental to internal communications within the partner organizations, and it streamlines the ability to enact change that delivers value back to you – and your customer. 

A global pandemic validated the vital importance of having a responsive partner able to deliver value in the face of your individual disruption. 

Outsourcing Must-Have No. 2: Visibility

Not long ago, visibility was on the wish list. Today, it is a must-have for doing business.

Global supply chains have become so complex with the myriad of partners that exist around the world. Even if you only have a domestic North American supply chain, it is still quite complex.

Whether you outsource logistics, manufacturing or human resources, your partner should be able and willing to provide you with visibility to your data. It is valuable beyond belief. 

Accessing that data – as well as meaningful analysis of it – requires technology. You should have access and visibility to what is happening down to the SKU-level, in terms of historical trends in the shipping market with parcel, LTL, truckload and warehousing costs. 

If you are trying to make a decision on outsourcing part of your business, there is data that is going to help you with those decisions. If you do not have access to that data – or if you cannot get it quickly, you are with the wrong partner. 

Outsourcing Must-Have No. 3: Agility

Look back at the first half of 2020. How many supply chains were turned upside down? Right or wrong, so many risks for the future have emerged.

For example, what happens if, culturally, we decide not to continue doing business with China? What if a big portion of your market does not want to buy from a company that sources from China? 

With strategic alignment to your business and operational agility, your partner has the ability to anticipate market changes and provide a response plan that mitigates any emerging threats to your profitability. 

Whether achieved through their own technology stack or internal alignment, your partner needs to have the flexibility to adjust as your business changes.

Look at the retail world. In the early stages of COVID-19, every retail store closed apart from the essentials. That spurred panic for organizations still trying to figure out ways to sell products. It forced the traditional retail model further toward e-commerce. 

Companies that have really thought about their supply chain were able to begin using their retail footprint to fulfill from stores. Ship-from-store strategies kept inventory moving without requiring moves from distribution centers scattered throughout the country. 

That helped Levi Strauss expand its e-commerce business 25 percent during its second quarter, including a 79 percent uptick in May. About one-third of that online demand was fulfilled by stores. Doing that requires a massive change. If you do not have the internal resources of Levis, you need a partner that can support you. 

Outsourcing Must-Have No. 4: Expertise

Global networks are complex, Technology is changing rapidly. Your supply chain drives many moving parts across your business. A world-class partner should provide expertise in managing each of these dynamics – in addition to its core executable value. 

What does that mean? You need a partner that is delivering expertise around technology, process, innovation and their experiences in other industries.

A supply chain master that manages hundreds of supply chains across diverse verticals, service models and geographies has the ability to apply strategies that deliver optimal logistics performance across a broad variety of operational environments.

That broad experience means that when there’s a new technology, innovation, or process that might improve manufacturing, our supply chain leaders are looking for ways to apply best practices in retail or distribution arenas.

If you are in a monitored outsourcing model focused simply on tactical execution, expertise has limited value. 

However, if you are looking for a truly strategic, orchestrated relationship with a partner, expertise keeps your company moving forward in a disruption-filled marketplace.

What Sets Your Partner Apart?

If you have a responsive partner that is agile, flexible and able to deliver visibility and a deep bench of experience – hold on to it. These are prerequisite traits for a successful service relationship.

It also helps to know some of the traits that set a logistics provider apart in the marketplace. Three capabilities really elevate the performance of your entire supply chain. We detail these qualities during “The Logistics Dilemma: Insource vs Outsource.” 

Watch the webinar today. Hear real world scenarios where our clients have realized elevated value from:

  • Trust
  • Transparency
  • Strategic alignment

Your organization works every day to fulfill strategies focused on meeting the needs of your customers – and deliver additional value along the way. If your partner does not have alignment to and understand your strategy, how can you expect them to align and create more value for you?

Open the webinar and learn more about what sets a Supply Chain Master apart.

3 Outsourcing Models. Which is Right for You?

Digging deeper into outsourcing options, the situation gets a little more gray – especially in the complex supply chain and transportation management environment where so many aspects of your business can be affected by diverse nodes across your network.  

If you are reading this blog, you probably know what is involved with insourcing your supply chain management. Let’s explore three approaches to outsourcing. The model that best fits your business depends on your goals.

  1. Complete, Monitored Control

If complete in-house operational management is at one end of the spectrum, monitored outsourcing is on the opposite end. This is the throw-it-over-the-wall type of outsourcing.

That’s the original equipment manufacturer that says, “Hey, I need to make this widget. Here are the specs. This is how many we need. This is when we need them.”

You might examine activity once a quarter, once every six months, maybe only once a year. If something breaks, it is very hands-off.

A lot of times in logistics management, there’s not a lot of differentiation in that monitored outsourcing. A lot of times, it is going to cost a lot less and yield a lot less added value. In this scenario, you don’t have the management resources or the people you need it to manage a business function, so you put that completely on your service provider.

  1. Orchestrated Outsourcing 

With an insourcing environment, you have complete control, but you also face the most cost in the staffing of expertise, technology resources and all those strategic drivers in your supply chain performance.

In an orchestrated outsourcing approach you relinquish a measured amount of activity.

A lot of 3PL relationships today operate in an orchestrated model. You are relying on a 3PL, maybe it’s a broker that executes shipments, but you are still managing them. You have staff assigned to oversee their performance, track those shipments and make sure that 3PL is doing the things they need to do.

There is a lot more review, a lot more interaction, and of course, you are still driving that strategy piece.

  1. Hybrid Model 

You can often realize the most benefit through a hybrid approach. Here, you outsource key functions and access expertise-driven intelligence that supports ongoing improvement. You give up a measured amount of control, but develop a strategic trust that can help you determine service adjustments as business demands change.

In a hybrid approach, our logistics experts might be on site with you, right in there operating in your supply chain. As things change, minute-by-minute, hour-by-hour, day-by-day, as your partner, we are there ready to pivot our objectives as well.

This creates a strong strategic alignment, and it allows for a lot of trust and transparency. We operate as your logistics department, utilizing performance monitoring processes that help you hold our team more accountable for results. 

What Outsourcing Approach is Best for Your Business?

Understanding your company‘s internal people, process innovation, technology, and culture helps you decide whether to insource or pursue orchestrated, hybrid or monitored outsourcing.

You can start with one model and adjust with emerging change – in business strategy, human resources, marketing or supply chain disruption. The challenge is, as we saw in the first half of 2020, things are changing at a pace we have never experienced before. 

Having a strategic partnership in place can help you adjust the control you want to have. More importantly, in that close partnership you will always realize more value in responsive communications and rapid deployment of alternative supply chain strategies.

If you are deciding whether supply chain management is best insourced or outsourced for your business, watch our webinar, The Great Dilemma: Insource versus Outsource.  It shares four things your logistics partner must be able to deliver, as well as company traits you need to understand before making a decision.

Insource or Outsource Supply Chain? 4 Questions to Ask Yourself

If you are a growing company and are not already asking that question, you will soon – especially considering all the changes we’ve experienced in our economy recently. 

When weighing pros and cons of this important operational decision, start with a look in the mirror. Who are you as an organization?

You examine closely potential partners for any outsourcing relationship. You should pursue the same due diligence within your own organization. Knowing where your business stands in key areas can help you decide if the time is right to insource or outsource.

Here are four things you need to know about your organization – and any of your partners – to drive your insource/outsource decision. 

  1. Do We Have the Supply Chain Talent?People are the driver behind success. This is incredibly important in today’s supply chain environment. There’s so much change happening in the marketplace you have to stay on the cutting edge

    How do you stay on the cutting edge? Experienced people with tons of drive, in terms of learning and bringing innovative ideas to your organization.

    The supply chain talent gap is already big, and it is only going to get bigger. Companies are fighting for the top talent, and it is difficult competing against companies with unlimited budgets – Amazon, Apple, DHL or Transportation Insight.

    Are you confident that your company has the ability and the resources to attract and retain top-tier supply chain experts? As a mid-market or small market company, it is not going to be easy to get.

    And it’s not just the talent. What is your bench strength? Is your supply chain resource depth going to be able to rise to challenges and power your company’s disruption-filled environment? 

    The intelligence, and the experience that these people have is critical, but it also comes down to raw numbers. If you are a growing organization, maybe at one point, one person with the experience and intelligence necessary to do the job can effectively handle every step of your supply chain. 

    As you scale your business, you may need more than one person. In our webinar we talk about how possessing the agility to scale up your organization rapidly can make a big difference in the responsiveness you need to deliver on sales. 

    Other organizations experiencing their own growth face those same needs for people. That exacerbates the talent gap.
  2. Do We Innovate Processes by Nature?As you continue to scale your business to meet demand, are you confident that you have the processes in place to not only support that, but also innovate within those processes over time? Is that driven through KPIs? Or through the talent that you have?

    Many organizations are not set up to consistently advance innovation and measure that evolution. Companies like Amazon have process innovation inherent in their DNA, but not everyone has it at their core.

    The first half of 2020 has been a stark reminder: processes that were sufficient yesterday may not position you to compete tomorrow. To respond rapidly during a global economic disruption, a dynamic shift to e-commerce, or even a simple hiccup, it is necessary to evolve.

    As you do, collecting and monitoring data around process change determines whether you are heading in the right direction or toward more required adjustments.

  1. Do We Have the In-House Technology?The speed of change in technology is nearly impossible to keep up with unless that is your primary focus. Does your current technology platform support your supply chain management now? Will it continuously evolve with you as your customers’ demands change?

    You can build your technology stack, maintain it in-house, and join the race with the Joneses of the Technology World – SalesForce, Microsoft and Amazon. This generates a need for ongoing capital investment. 

    Unless you are a technology company, this might not be your area of expertise. One of those technology companies will sell you a base solution and customize it at added cost.

    Alternately, you can realize cost effective value working with a partner built on technology to suit your specific business needs. Be mindful of the cultural effects a new partnership might create. 

    Change management is a huge piece of the insource versus outsource conversation, but it can also allow you to redeploy current resources toward supporting your core competency. 
  2. Does this Fit Our Culture?Culturally, what does your organization look like? How do you make decisions? Is it a top-down, “You’re going to do what I tell you to do,” or a bottom-up, “Hey, I want ideas, bring the ideas.” 

    Are you seeking internal innovation or are you more focused on your core competency? Do you build or buy to solve challenges? What will our culture tolerate? What will it support? What does it really need?

    You have to be honest with yourself, and your company, and your partners. Having this perspective is imperative to the success of any relationship. 

    You could be the best company in certain spaces, but outsource certain things that you are not good at, culturally. To do that, you have to understand your organization. Even though Amazon is extremely good at what it does, it also recognizes the areas where it is not good. That drives focused Amazon investment into supply chain improvement opportunities.

    Understanding your culture will also help determine how you work with your partners, and whether your organization is in a position to realize success from an outside relationship. 

Master the Logistics Dilemma: Insource vs Outsource

People, process innovation, technology and culture. Before deciding whether to insource or outsource supply chain management, develop a clear understanding of these four aspects of your own organization. Keep them in mind when considering potential partners.

For more insight that can help you determine whether your company is better suited to insource or outsource logistics activities, watch our webinar in Transportation Insight’s Supply Chain Masters Digital Event Series. 

Open the webinar today for real world examples of companies evolving their supply chain strategy for growth. You will also get insight on the three types of strategic outsourcing approaches and four things that your logistics partner must be able to deliver.

Where is zip code 99999? A Piece of Clean Data Makes a Big Difference

Of course not. It doesn’t exist. In fact, the highest real zip code is 99950, for Ketchikan, Alaska. Still, if you scour your database, there’s a good chance you’ll find more than a few 99999 zip codes. 

Most organizations find that it’s been entered as a placeholder in their shipment database. If shipments go as planned, what’s the problem? If your strategy calls for automating your processes, you’ll encounter serious challenges created by a lack of data accuracy. Let’s talk about how data becomes inaccurate and what you can do about it.

Dirty Data Drives Supply Chain Inefficiency 

Depending on the solutions in use, a database may fill in 99999 if no zip code is entered, or 99999 may have been entered rather than taking the time to look up the correct number. While a placeholder zip code may not be a fatal problem, it’s likely an indicator of deeper issues. That’s one reason industry experts estimate that data is faulty in 35 to 40 percent of supply chain systems.

For example, look at a company’s fundamental systems such as the Item Master, Customer Master and Vendor Master. They must be comprehensively reviewed and corrected. Basic data such as dimension and weights could be filled with default numbers. That means there’s been a lack of validation of the data that’s been input. The lack of accurate, clean data leads to expensive inefficiency through mistakes and a lot of manual handling. 

While individual data problems are not good, they are also a symptom of the more significant challenge of potentially suspect data. Without the right numbers as a baseline, it’s impossible to make accurate strategic decisions. If you’re looking at adding or repositioning distribution centers, rationalizing your product lines, or myriad other initiatives, clean data makes all the difference. 

Clean data is also essential for implementing automation, artificial intelligence and other emerging technologies. Poor data quality can lead to problems with carrier compliance, shipment tracking and predictive and prescriptive analytics. As shipments generate more and more data in real-time, quality data is essential. It’s also vital for decision-making and sharing with strategic partners to drive benefits across your shipping eco-system.

Solving the Dirty Data Problem

How do you correct the zip code 99999 problem in your company? 

The key is to evaluate the integrity of data collection and management programs continuously, not only against your internal requirements but also in relation to external demands. Does your organization have the capability to dig deep into your data collection and management programs, identify challenges and fix them with internal resources? Or will the organizational structures and culture prevent you from making the necessary changes? Third-party analysis may be required to identify the data issues that will derail your competitiveness.

To find out more about ensuring your organization is prepared for next-generation technologies, read our resource guide, AI, Blockchain, Machine Learning: Is Your Data Ready?

Improve E-Commerce Experience Without Sacrificing Profitability

With Amazon commanding 47% of U.S. e-commerce sales and on track to grow its online sales by 20.4% to $282.52 billion, pursuing this formidable opponent makes sense to a lot of companies. Unfortunately, many of them are sacrificing profits in their attempt to compete, with transportation and fulfillment costs consuming a large part of their budgets.

Opportunity or Liability?

In many cases, the risks of racing Amazon have literally turned into liabilities, effectively slowing progress and forcing companies to rethink everything from their online order interfaces, shopping cart conversions, and final-mile/same-day order fulfillment management.

The brick and mortar world has really ramped up its game, but Amazon has conditioned us, as end consumers, that those efforts just are not good enough.

4 Practices to Protect Profitability

The good news is that there are steps that companies can take to improve e-commerce strategies without sacrificing profitability. Here are four that your company can start using today: 

  1. Develop an above-par order fulfillment strategy. Amazon built its order fulfillment strategy around offering choices to its customers. In doing so, it made the online shopping experience all about the customer and his/her decisions. The e-tailer provides high levels of supply chain visibility as shipments move from Point A to Point B, maintains good inventory control, and understands its cost to serve. One good metric to use, when judging the efficiency of your order fulfillment processes, is the “Perfect Order,” or one that is on time, complete, intact, and includes the right shipping paperwork. In an environment where order fulfillment can comprise over 60% of the typical warehouse’s total direct labor, even small gains in this area can lead to profitability improvements
  1. Now, deliver on that strategy (on every order). Not only does shipping have to be free and fast, but if it includes a hovercraft and a promise to get a package to your doorstep within an hour, then all the better. We’re at a point where anything less simply doesn’t meet customer expectations. There’s little (if any) room for error on this step. Retailers that want to convert digital consumers know that competing on price and customer experience just isn’t enough anymore; they have to also be able to compete on speed and choice. Handled improperly, same-day delivery can be a logistical nightmare and major risk for retailers. It’s also a necessary evil for them, and something that they all have to be able to do for at least some of their customers. Making that happen requires locations and/or warehouses positioned close to those buyers; a modification of existing fulfillment procedures; a smart, profitable BOPIS strategy; and ensuring that the right product is in the right place and at precisely the right minute.

  1. Focus on continuous monitoring and improvement. Companies can no longer wait until quarterly review meetings to uncover a problem that happened a month ago. Smart companies use daily scorecards to gather, compare and disseminate meaningful, actionable intelligence (e.g., what products were shipped? How quickly were orders fulfilled? Did we pick all of our orders yesterday? If no, how can we make that up today?). By taking an introspective look at their e-commerce operations and developing metrics based on those results, retailers can adapt faster in a world that demands speed, accuracy and delivery on promises. 
  2. Make the right transportation choices. If your company can’t access data that provides strategy around carrier contract alignment and then facilitates choosing the most economical transportation mode, it’s probably losing money. And, if it’s channeling all of its resources into getting same-day and next-day shipments out the door as quickly as possible − without worrying about whether or not those are the best and most economical decisions − it’s losing even more money. These are huge risks in an era where companies are being forced to go head-to-head with Amazon and Walmart, both of which offer same-day and one-day delivery to 72% and 75% of the total U.S. population, respectively. Retailers should be using technology (i.e., transportation management systems or TMS) to select not only the most economical mode, but also one that meets customers’ delivery expectations. Leveraging transactional audit across all modes, provides companies consolidated, visibility to know the rate they paid, identify service gaps, and improve their ability to make good transportation decisions going forward.

Following these guidelines, companies can effectively improve the e-commerce experience without sacrificing profitability − all while satisfying a lot of happy, repeat customers.

Ready to learn more ways retailers can improve e-commerce performance to satisfy customer demands for service and choice? Download Transportation Insight’s e-commerce guide.

5 Ways to Build an E-Commerce Engine that Wins

Facing stiff competition from web-based suppliers, e-commerce providers and even traditional companies, retailers must enhance the customer experience by offering variety in delivery options − and all without impacting the cost to the consumer.

In most cases, achieving this balance starts with a modern e-commerce engine that’s supported by a robust transportation and fulfillment approach.

Best Practices Achieve Competitive Advantage

Here are five critical steps for developing an e-commerce transportation and fulfillment plan that goes head-to-head with the e-tailing giants. 

  1. Make your website user friendly. This sounds elemental enough in theory, but in reality, very few companies are doing it. Success in e-commerce starts with a user-friendly interface that doesn’t frustrate customers or send them off to buy from another site. If your online store’s ordering system is cumbersome and difficult to use, no one is going to use it unless they have to. And mobile friendly is vital.
  2. Drive up online checkout rates. The retailer that isn’t boosting online checkout rates will quickly find itself struggling to survive in a sea of companies that have figured out the formula. If you ignore the need to drive down abandonment rates, all of the advertising, marketing and sales efforts in the world won’t help you compete against the likes of Amazon and other large e-tailers. Measure key performance indicators (KPIs) like page views to cart conversions in order to get a gauge on 1) current state, and 2) what you can do to drive those numbers up.
  3. Develop a same-day order fulfillment strategy. Handled improperly, same-day delivery can be a logistical nightmare and major risk for retailers. Although becoming a necessary evil that all retailers must do for at least some of their customers, making that happen requires locations and/or warehouses positioned close to those buyers; a modification of existing fulfillment procedures; and ensuring that the right product is in the right place and at precisely the right minute. Aligning BOPIS strategies with profitability is significantly important when developing same-day order fulfillment.

  1. Factor in parcel, heavy home, and customized deliveries. When it comes to bulky goods that require extra muscle and/or assembly, retailers need to factor in three different scenarios: leaving the box in the entryway of a home or apartment; placing it in the room of choice; or both, plus opening up the box, removing the packaging, and setting up the product(s). Retailers must deliver on some, or all of these, expectations for the end consumer, who is typically willing to pay for those additional services.
  2. Select the best and most economical transportation mode. Retailers don’t always have access to the data that allows them to utilize economical mode selection. Instead, they focus only on getting same-day and next-day shipments out the door as quickly as possible (without worrying about whether or not those are the best and most economical decisions). Retailers should be leveraging carrier contract agreements that align with package characteristics/shipping networks. They should also use technology (i.e., transportation management systems or TMS) to select not only the mode that is most economical and provides tracking visibility, but one that also meets customers’ delivery expectations.

By keeping customers at the center of the conversation, providing visibility to shipments, working to fulfill their needs on every order quickly, and developing a transportation plan that aligns with these goals, smart companies can position themselves as suppliers of choice in today’s competitive e-commerce world. 

Ready to learn more ways retailers can improve e-commerce performance to satisfy customer demands for service and choice? Download Transportation Insight’s e-commerce guide, Managing the Risk of Racing Amazon.

7 Pitfalls Imperil Indirect Spend Management

Indirect Spend analysis requires different processes and technology knowledge from those of direct procurement. There are more stakeholders, segment complexities, and varying levels of expertise at the suppliers. Some items are commodities, and others are specialized for a business unit and rely upon a continually changing and improving set of technologies.

Efforts to improve Indirect Spend management relies on a complete understanding of the wide variability in factors that affect the cost of an item, the cost of procurement and issues that arise for vendor and buyer .

7 Variables Complicating Indirect Spend Management

  1. Low Average Spend: The product volume is generally on the smaller side because of the wide assortment of product and service categories and a large number of suppliers. In this case, the procurement group is unable to coerce better pricing or terms during negotiations with suppliers.
  2. Frequent low-volume purchases: Often, the frequency of purchases of small individual values, makes indirect sourcing difficult and resource-intensive.
  3. Maverick/Uncontrolled/ Non-negotiated Spend: Maverick Spend is the purchase of legitimate goods but using unauthorized buying arrangements or unapproved suppliers. Companies understand the value of robust management of direct spend, but may not recognize the benefits of managing Indirect Spend. The fact is that cost savings for indirect procurement does not originate from a specific bill of materials, as with direct procurement. Often, companies underestimate the Indirect Spend totals and the potential cost savings. Indirect Spend purchases usually are not covered by a contract negotiated in collaboration with a professional procurement group. Items purchased outside of an agreement could be a one-time purchase of office supplies, or travel expenditures, or expenditure on critical ad-hoc technical troubleshooting services. These costs add up over hundreds of items, categories, suppliers, and transactions.
  4. Driven More by Internal Stakeholders: Indirect procurement professionals may not have any mandate over an internal stakeholder’s budget. Unlike with direct spend, the procurement group has less say concerning Indirect Spend. Internal stakeholders hold on tightly to their approved budget and spending authority. Also, many of the expenditures require in-depth industry knowledge and experience to specify a product or service. These factors and this complexity make it more difficult for the procurement function to control indirect spending. The company’s procurement team must act as an internal advisor, influencing decision-makers about optimizing spend and getting more from suppliers.
  5. Hard to Evaluate: There exists hundreds of categories, adjacent categories, item suppliers and distributors, and each mandates an exceptional understanding to procure cost-effectively and also with an eye on long-term value to the company. Each of the tens of thousands of suppliers invests in a sales team assigned to each buyer. Motivation for those sales teams may not always be in the buyers’ best interest.
  6. Measuring Suppliers: It can be more challenging to measure the quality of indirect goods and services. There might be metrics for individual vendor performance, but there are few industry standards against which to benchmark those metrics. In some cases, delivery of indirect products and services is not in a company’s ERP system, so tracking contract renewal and evaluating vendors can be spotty. 
  7. Requires Diverse Experience: Purchases are as diverse as safety products, marketing software, maintenance items, and electricity supply. This breadth of categories requires a procurement group with expertise and a willingness to learn the full range of products and services.


Indirect Spend Management Requires Broad Capabilities

Organizations working to manage Indirect Spend must maintain a variety of skill sets within the operational areas tasked with overseeing these critical budget areas. 

Facing these diverse needs, companies are often challenged to maintain the level of expertise that a trusted procurement partner can often provide:

  • Professional purchasing experience or training
  • Broad category expertise
  • Project and change management
  • Influencing, engaging and advising budget-owners (stakeholders) across the company
  • Specification, facilitation, negotiation, and supplier management
  • Data analysis, creating business insight from raw data
  • Technological know-how
  • Recognizing supply risk from issues like constraints on industry capacity, regulation, or rapidly rising demand
  • Acknowledging the market’s preference for sustainability and the ability to cost-effectively comply
  • Understanding of current market conditions and market pricing trends

Strategic Sourcing Supports Procurement Decisions

Buyers are not all the same. Many procurement decisions have an economic buyer, the person who makes the money decision, and a needs buyer, the person with a job-to-be-done.

Guidance from a procurement group can help meet the requirements of both of these buyer-types. Proper specification of the product or service delivers what conforms to the need, while aggregating volumes and dutiful negotiations keep prices low.

By employing a Strategic Sourcing mindset, these procurement experts look across all activity to address planning, supplier qualification, item specifications, technology advances, training, support, outsourcing, contract negotiation and periodic contract review. Strategic Sourcing identifies the lowest total cost − not just the lowest purchase price. It embraces the procurement lifecycle, from specification to payment.

Strategic sourcing often creates a close, partner-like relationship with a supplier to meet the needs of all buyers, and in turn, improve service to end customers. For more information on employing a strategic sourcing mindset to control Indirect Spend costs through improved procurement practices, download Transportation Insight free guide, “Uncover Indirect Spend: Control Cost with Strategic Sourcing.”