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.

Buy Online Pickup In Store: Retail in Evolution

Yet, the store remains a core focus of the buying experience. That’s how it should be. The in-store customer is typically more loyal and tends to buy more than the online shopper.

A robust strategy for “Buy Online, Pick Up In Store,” or BOPIS, can offer the best of both worlds. BOPIS expands a retailer’s online exposure while preserving and deepening the in-store experience. In fact, retailers find that is common for shoppers to buy more product once they arrive at the store to retrieve their online orders. 

A well-designed BOPIS retail program also helps reduce delivery costs because the customer is going to the product, not vice-versa. Consumers prize the ease and convenience of the transaction, especially when the COVID-19 pandemic has made contactless interactions more of the rule than the exception.

Responding to a New Retail Landscape

For retailers with limited resources and insufficient time spent mastering alternate fulfillment methods, the real world suddenly became a very different place in 2020. Many have been challenged to adjust to an unfamiliar “fractured fulfillment” model where products are ordered, fulfilled, and distributed from anywhere to anywhere. It is difficult for retailers to strike the right balance of inventory levels that satisfy in-store shoppers and ensure product availability to support online channel growth.

Retailers often over-order store inventory to avoid the risk of stock-outs. This raises carrying costs, and shrinks inventory  available to allocate to online channels. 

Moving ahead with an ill-vetted BOPIS strategy can make things worse. Customers assured of a product’s in-stock status on a retailer’s website will be displeased if they take time to visit the store only to find the item isn’t available. This could damage a brand’s reputation, especially if word spreads quickly on social media.

Visibility is the pain point. Many retailers lack proper visibility into the inventory flow from their partners to effectively plan and execute an error-proof BOPIS strategy. Without visibility, retailers will continue to prioritize avoidance in-store stock-out scenarios, and will continue to absorb excess and costly inventory.

A strong 3PL provider arms retailers with superior, actionable data that improves inventory visibility without forcing them to increase levels of safety stock. The endgame is to manage appropriate safety stock thresholds for both in-store and BOPIS experiences so the customer is satisfied in either scenario. 

Personalized Solutions Require Visibility

Each retailer is unique, and each shipper-retailer partnership is unique. Working with good data, an experienced 3PL partner creates customized plans to achieve optimal results. Progress and outcomes are constantly measured and refined so fill rates achieve acceptable thresholds. Changes to the plan can be implemented quickly should circumstances change – and they often do. 

For example, a plan could require the partners to issue electronic order acknowledgements indicating changes to item quantities and arrival dates within a specified time of receiving an order. It could call for transmission of advance ship notices within two hours of a shipment’s departure so visibility is optimized. Fully leveraging distribution center connections to stores optimizes shipping flexibility to react quickly to customer behavior. 

It is still most profitable for stores when customers pick up their orders in-store, but the busy holiday season could make it difficult for consumers to get to the store. Data generated by zip codes can identify areas of strong online ordering and in-store activity. This offers retailers insight into how to best position inventory for timely and accurate distribution.

For example, a retailer wants to offer one- to two-day deliveries but its transportation providers are challenged to consistently hit those targets. It may be more feasible to ship that order out from a store versus a fulfillment center. This could require shippers to invest in a drop-shipping strategy to support an e-commerce strategy where goods are brought directly to the store level. All this strategy is grounded in visibility.

This holiday season will be like no other. In-store buying will still be prevalent. However, more consumers have adopted online ordering after being required to do so in the early days of the pandemic. BOPIS utilization will be strong this holiday, but it will continue long after peak season and even after the virus passes. Consumers want options. It is critical for retailers to comply, but to do so efficiently.

Master Your BOPIS Revolution

The last mile is the most complex part of e-commerce fulfillment. It is also the most important. The last mile makes or breaks everything that came before it. That final delivery is the moment your customer will remember your brand most. How well do you finish?

A BOPIS strategy is just one of several last-mile offerings that shippers and retailers are expected to deliver. Done right, it reaps brand loyalty, lower costs and profitable opportunities for new market share. However, it requires a specialized level of resources and knowledge. It also requires skills and vigilance to ensure flawless execution.

We created The BOPIS Revolution: Navigating the New Never Normal to highlight some of the things you need to keep in mind when approaching – or modifying – your BOPIS strategy. Watch our SME Roundtable for a deeper dive into the ways we drive top line revenue results through personalized solutions driven by technology and expertise.

To continue the conversation, reach out to one of our supply chain experts. Let’s talk about how we can help you evolve solutions that support final delivery strategies to control cost and consistently wow your customers.

UPS Announces Last Day to Ship

A later-than-usual Thanksgiving on Nov. 26 condenses the shipping season by almost a week. Meanwhile, continuing effects of COVID-19 drive more buyers online to fill holiday wish lists – and many of them will avoid the personal contact of store shopping altogether.

Combined, these factors predict a capacity crunch for the small package networks. Already experiencing service delays and disruptions, these networks will not see relief until after the New Year, even as parcel carriers bring on thousands of new workers.

Be mindful of the “last shipping days” announced by UPS and FedEx, but that may not be enough to avoid a disappointed holiday customer in 2021. That’s why the world’s largest retailers are turning the holiday shopping clock from Black Friday toward a “Black October.”

Navigating this year’s peak season during the middle of a pandemic will require companies to be more creative and flexible. Forward-thinking shippers should be prepared to adjust. 

Retailers Drive Christmas Creep, Protect Experience

Amazon’s Prime Days on Oct. 13-14 delivered $3.5 billion in sales to small- and mid-sized businesses, with a 60 percent uptick in sales over last year. The move expedites holiday shopping – and product shipping. It also adheres to latest guidance from UPS: “encourage your customers to shop earlier than ever with special offers or other incentives.” FedEx echoes the same advice for shippers preparing for the 2021 holiday season.

Promotions like Walmart’s “Big Save Days” and Target’s “Deal Days” are all designed to pull parcel volume forward and avoid a costly catastrophe caused by a lack of capacity in December. 

If your organization is focused on protecting customer experience this holiday season, keep these five things in mind: 

  1. It is more important than ever to make sure that you proactively and clearly communicate the potential for delays. Every year the national carriers suspend their on-time guarantees during the holiday period. Earlier this year they suspended the guarantees due to COVID-19 complications and disruptions.
  2. Retailers can ship-to-stores for curbside pickup.
  3. Retailers can also ship-from-stores to shorten the distance that the package travels in the carrier’s networks and thereby reduce the potential for delay.
  4. Shipments can be made to alternative delivery locations such as certain retail partners, your customer’s office, or to one of the many parcel lockers.


5. Finally, if you operate multiple DCs across the US, it will be important to have the right inventory at the right locations to speed delivery and avoid split orders.

In a time where lockdowns have driven e-commerce shipments to levels never seen before, companies will need to deploy an all-of-the-above strategy to navigate it appropriately.

Know the Last Days to Ship

Now more than ever, it is important to make every possible effort to avoid deadline shipments. If you anticipate a last-minute holiday rush, make sure your UPS shipments go out on or before these dates to give your parcel the best possible chance to arrive by Dec. 24:

  • UPS Ground: As early as Tuesday, December 15* 
  • UPS 3 Day Select®: Monday, December 21 
  • UPS 2nd Day Air®: Tuesday, December  22 
  • UPS Next Day Air®: Wednesday, December 23

*Note UPS advises that most UPS Ground shipments have a later “last recommended shipping dates.” Shippers can track their transit time and cost here

FedEx released its holiday schedule ahead of UPS, and both schedules align closely. We detailed 7 tips for holiday delivery success shortly after the FedEx announcement. 

Regardless of the service provider you trust with your shipments, through full transparency and good information, you can effectively manage customer expectations while also syncing with the carriers that will deliver the goods to their doorsteps.  

You Shipped it – Did it Make Money?

Protecting customer experience this holiday season will require timely shipments and thorough communications throughout the sales cycle. 

Protecting your organization’s profit while responding to these customer expectations requires additional awareness and proactive measures.

  • Be aware of the Peak Season Surcharges and more importantly the differences for UPS, FedEx, Regional carriers and now the USPS.
  • Perform a detailed analysis to estimate the surcharges financial impact and to mitigate any negative effects on profitability.
  • Identify specific SKUs that will be negatively impacted and make decisions regarding those items to protect profit margins.  
  • Raise the cost of the item.
  • Increase the free shipping threshold.
  • Pass some or all of the additional cost to the customer.
  • Ensure carriers agreements are best in class and that invoices are audited for compliance to them.
  • Make sure you have the right box sizes so that the packaging is only la
    rge enough to adequately protect items during transit.
  • Work to eliminate operational errors that create avoidable costs such as incorrect addresses, unnecessary declared value and unauthorized packages.

To help shippers protect profit on every customer and every order, we created “You Shipped it … But Did You Make any Money.” Open it today for more guidance on making sure your peak season ends in the black.

BOPIS: What Does It Mean for Shippers?

Linearity is on the way out. So is the shipper’s control of the supply chain. E-commerce has spawned the “omni-channel fulfillment” model where orders, distribution and deliveries occur from anywhere, anyone, and at any time. The traditional supply-push scenario with shippers calling the shots is giving way to a demand-pull approach with consumers in control of the transaction.

The “Buy Online, Pick Up In Store” (BOPIS) concept has become a key part of the asymmetrical, demand-pull world we live and work in. Who ever imagined a consumer ordering an item on an electronic device, having a retailer immediately pick and pack the product at one of multiple locations, and having it ready for the consumer’s arrival at a pre-arranged time, typically within a few hours and sometimes under an hour? 

Experience Depends on BOPIS Excellence

The COVID-19 pandemic is driving BOPIS toward mainstream adoption. Contactless interactions remain the order of the day – especially during the holiday season as health-conscious consumers continue to minimize time spent shopping in confined spaces. But BOPIS and other alternate fulfillment practices will outlast the pandemic. They will become permanent additions to the logistics landscape.

To execute an effective BOPIS strategy, shippers must understand retailers’ two overarching objectives: 

  • Ensure a seamless customer experience regardless of the order touchpoint.
  • Maintain adequate in-store inventory while expanding digital buying opportunities.

It is essential for retailers to have the right goods always available, and at the right place at the right time for the consumer. The “right time” could involve shipping to a residence or to another physical location. It could mean an in-person brick-and-mortar sale. It could mean BOPIS, or its first cousin, “Buy Online Pick Up at Curbside” (BOPAC). It could be a drop-shipping model where the shipper delivers directly to the store, thus minimizing the need to hold inventory in a space-constrained facility.

Striking the correct balance between in-store and digital inventory is just as critical. In-store customers are typically more loyal and buy more per visit than online customers. Retailers are loath to broaden their digital channels if doing so threatens to siphon off in-store activity.

Allowing both scenarios to thrive requires elevating visibility and analytics tools to new heights. A clear line of sight across the ecosystem allows shippers to align production with the retailer’s current replenishment needs. Analytics like Machine Learning and Artificial Intelligence also provide shippers with vital clues about consumers’ future buying habits so they and their retailer partners can stay a step ahead.

Technology is only as productive as the knowledge of the people managing it. Seasoned third-party logistics specialists understand how to design and implement a consistently successful BOPIS program that leverages cost-effective automation. They have worked extensively with all stakeholders, and can quickly adjust the go-to-market processes to optimize outcomes and avoid costly missteps.

Final Delivery Drives Loyalty or Brand Damage

Online fulfillment is a fast-paced, often-unforgiving business. You are only as good as your last delivery. The margin for error narrows still further in a BOPIS transaction. Failing to execute an order after the consumer was assured the product was in stock and went out of their way to retrieve it is a breach of the “trust covenant” between the stakeholders. A BOPIS-related stock-out can seriously damage both brands, especially if a negative review spreads on social media.

The good news for shippers is that mastering this intense pivot point should result in enduring brand loyalty from consumer and retailer alike. Consumers prize convenience, and will favor retailers who make the BOPIS experience as easy as “pulling up and popping the trunk.” This goodwill extends to the products they pick up and take home.

Retailers, meanwhile, know how complicated it is to make life easy for today’s consumer.  Shippers who consistently execute will become sticky to the retailer. Product quality is obviously important. However, consumers often cannot discern between the nuances of multiple products of similar craftsmanship. What they do know, and will remember, is how, when and where they received their product. Or why they didn’t. That is how your brand will be remembered. In today’s world, logistics, more than any part of a shipper’s business, is becoming the competitive differentiator.

Navigate the New “Never Normal”

Planned properly, the BOPIS fulfillment model is a valuable tool in the highly competitive e-commerce space. 

The devil is in the execution.

Transportation Insight specializes in designing and executing supply chain strategy adjustments that empower you to provide the final mile delivery options required to wow end customers.

We created “The BOPIS Revolution: Navigating the New Never Normal” to offer insight into the many variables involved in meeting consumers’ evolving demands for service. Read it today to understand the strategies that we can help you leverage to enhance customer service, grow market share and increase competitive advantage.

Last Days to Ship? 7 Tips to Meet Holiday Deadlines

According to MarketWatch, Deloitte is forecasting a 1% to 1.5% year-over-year sales increase for the upcoming holiday season, during which time total retail sales will be about $1.15 billion (between November 2020 and January 2021). Meeting holiday shipping deadlines will be more important than ever.

“E-commerce sales, which have been strong throughout the coronavirus pandemic, are expected to climb 25% to 35%, reaching $182 billion and $196 billion,” Deloitte predicts. “Regardless of the scenario, however, consumers’ focus on health, financial concerns, and safety will result in a shift in the way they spend their holiday budget.”  

Here are seven tips for making sure your holiday packages get to their destinations on time.

7 Tips for Holiday Delivery Success 

The new realities of the current shipping environment have created ongoing service delays and disruptions, both of which have compounded into an overall capacity crunch for small parcel carriers. Working through this issue will require forward-thinking companies to adjust accordingly.

For example, shippers will need to be more creative and flexible to cope with the combination of COVID and the normal peak season. FedEx, UPS, and other carriers are hiring a lot more workers for the season, but we still expect to see some capacity issues. With the uncertainty, it will be more important than ever to inform customers when to expect shipments and be extremely transparent. 

Here are seven tips that will help you get your packages to their destinations on time: 

  1. Know the cutoff dates. FedEx’s last days to ship calendar is online here and UPS publishes its holiday deadlines here. The USPS plans to release its cutoff dates for holiday shipping sometime in October. Be sure to factor in these last days to ship dates when planning your holiday shipments. 
  2. Talk to your carriers. Proactively communicate with carriers regarding any expected increase in volume and any additional equipment requirements (e.g., feeders or bulk-type pickups). This will help your carriers plan ahead and provide some assurance that there will be capacity to accommodate your volume spikes (or, allow you to make alternative arrangements). 
  3. Next, talk to your customers. Companies should proactively communicate anticipated delays and properly set customer’s expectations on their websites and in any email communications. This could be as simple as featuring the holiday cutoff shipment dates prominently on the first page of your website. 
  4. Know the limits. Shippers should clearly understand any potential volume limits or caps that may be put in place by the carriers. Because these constraints can impact your ability to deliver on time, be sure to discuss them with your carrier. 
  5. Explore your options. Shippers should also understand their carrier options and negotiate favorable agreement terms to properly leverage all national, regional, and postal carriers. Having a “Plan B” in place is always a good idea during the busiest times of the year. 

  1. Start your product promos early. Don’t wait until the last minute to kick off your holiday promotions. Starting early will help you pull volume forward to avoid peak shipping periods and allow time for expected delays. 
  2. Factor in holiday business schedules. For example, USPS is closed for all of the major federal holidays. With delivery times varying between its services, knowing the cutoff dates and hours of operation are both important. 

Maintaining Transparency  

Reflecting on how parcel carriers performed for the 2019-20 holiday shipping season, UPS’ SurePost and FedEx’s SmartPost both assured 100% delivery for holiday orders that were shipped on or before December 14 or 9 (respectively). However, we also saw that as the cutoff date approached, those commitments slipped. This is something to keep in mind as you lay out your plans for the 2020-21 season. 

Using the tips outlined in this article, you can strike a nice balance between growing your company’s holiday sales while also letting customers know that there is a risk of passing the carrier’s “suggested date” for accepting pickup for a Christmas delivery. Through full transparency and good information, you can effectively manage customer expectations while also syncing with the carriers that will deliver the goods to their doorsteps.  

Peak Season Performance Requires Visibility

To make sure holiday shippers are aware of the latest trends affecting their transportation cost management, we convened a roundtable of our parcel experts. Watch or listen to our webinar “Peak Season: Are You Ready?” to hear Todd Benge, Robyn Meyer, Toni Caputo, Bernie Reeb and myself address the unprecedented challenges emerging his year.

This digital event shares strategies to help you protect profit and enhance customer experience. Watch it today to make sure you are getting charged correctly and manage the capacity risks that threaten to derail your performance.

Use Logistics to Compress Cash-to-Cash Cycles

Logistics is the lifeblood of any organization. It connects suppliers, manufacturers, intermediaries, carriers and end customers with actionable data based on historical transaction patterns. Yet too often corporate leaders view logistics as a cost center instead of a competitive advantage. We find the best way to overcome that perception is to connect the dots between our deep skill set and the positive financial outcomes we can deliver for our clients.

When Transportation Insight talks about logistics as a competitive advantage, we refer to the speed to serve as much as the cost to serve. Time is money.  Companies implementing strong logistics strategies typically turn their inventory faster. They need to rely less on safety stock throughout every level of the supply chain, which is itself a cash burn. They keep goods in motion so they reach consumption points faster, and turn capital quicker.

Reduce Cash-to-Cash Cycle, Free Up Operating Capital

For definition, cash-to-cash cycle time examines the number of days of working capital an organization has tied up in managing its supply chain. The faster the cash-to-cash cycle, the fewer days an organization’s cash is unavailable for other investment. According to American Productivity and Quality Center (APQC) research, the top performers have 60-day cycle times. The bottom performers clock in at about 120 days+.

Reducing cash-to-cash cycle time involves eliminating factors (such as inventory) that tie up operating capital. Effective organizations optimize inventory to free up capital while maintaining enough stock to satisfy customer orders. This can be accomplished through a well-designed demand forecasting, comprehensive company-wide inventory optimization strategy, supported by logistics that aligns roles and responsibilities in the supply chain, and identifies processes that can be streamlined.

Streamlining order-to-cash processes can also reduce cash-to-cash cycle time because faster invoice processing and receipt of customer payment decreases the amount of time that an organization’s capital is unavailable.

Make no mistake, there are some logistics people who love inventory because it covers some of the “stumps in the water,” as we like to say. But safety stock exists because businesses struggle to match their inventory needs with final demand. Safety stock is also an impediment to optimal cash flows.

But in a lean world, there is no such thing as “safety stock.” Everything turns in its own time, and on its own velocity. Thus, it is critical to identify and root out supply chain inefficiencies at the front end. Are you optimizing inbound shipping lanes, whether domestic or international? Does your inventory strategy balance your costs with meeting customer delivery expectations? Do you have the technology and expertise to effectively manage your product velocity and shrink the cash cycle?

Companies have multiple customer channels. You may have a traditional B2B channel, an e-commerce channel, or a hybrid. Each channel may have its own dedicated inventory. They also have their own cash-to-cash cycles. They are certainly going to have their own logistical challenges. A capable logistics partner like Transportation Insight can support the unique needs of each channel to achieve the most financially desirable outcomes.

Mastering Logistics to Meet Consumer Demand

There are companies that have succeeded in re-inventing the wheel. Then there are others that prospered by improving on legacy processes. Walmart wasn’t better than any other retailer. It offered the same brand of toothpaste and laundry detergent as others did. Sam Walton’s genius lied in focusing on logistics to get goods to the shelves, and in customer’s hands, faster and cheaper than anyone else.

By putting the right product, in the right place and price, when and where the consumer wanted, Walmart accelerated cash returns for manufacturers and for itself. It also turned out to be a lethal combination-for other retailers.

Mastering the competing dynamics of transportation and inventory requirements can be a complex undertaking. You need to weigh the importance of improved working capital with ensuring that goods are always available when and where your customers need them. This is our forte.

Each day, we bring our data platforms, deep understanding of carrier networks, rate negotiating and auditing expertise, and decades of accumulated industry experience to bear to solve these problems. We are quite candid with customer feedback, and what we hear most from our clients is that we take challenges like these off their hands, provide them with rich analysis, and enable effective decision-making.

For more information, read “Move to the Front” today.

Service Merchandise omnichannel fulfillment

Master Omnichannel Fulfillment, Enhance Experience

Retail has changed a lot in nearly four decades since Service Merchandise – and its catalog – was familiar in households across North America. Still, many of the retailers’ leading-edge concepts are just as applicable in an e-commerce age that requires customer service capabilities across multiple channels.

Let’s look at some supply chain practices that can support an omnichannel service that enhances the experience of your customers – whether they are shopping in-store, online at their desktop on their smartphone or by telephone.

Can You Compete with Amazon? Should you Try?

Most retailers are still trying to figure out the right recipe for omnichannel. Revisiting the strategies that anchored the success of Service Merchandise, alongside modern supply chain best practices can help retailers focused on managing fulfillment costs and expanding growth across all sales venues.

Companies have to decide where they want to play. With more service comes more cost. You have to understand your customer base and understand who you want to compete against. Can you compete against Amazon at a national level? Maybe not, and if you try you may bankrupt yourself.

With customers’ rising expectations for free shipping and 2- or 3-day delivery, retailers need to be able to design a distribution network where every customer in the U.S. can be reached within two days.

For companies that have brick and mortar locations, the question becomes: How do you leverage all inventory assets to decrease customer lead time – and do it cost effectively?

That requires analysis, good data, good tools and people who know how to interpret that information.

A 21st Century Hurdle

One obstacle facing today’s retailers that Service Merchandise didn’t have to deal with: massive SKU proliferation. While the retailer probably carried a significant number of SKUs in its backroom, it also knew that most of its customers were not walking in the door with the goal of buying 10+ items.

This didn’t pose a problem until the definition of “convenience” changed. The world’s super centers caught onto the shift and started carrying dozens of different “similar” items – all on the sales floor.

At that point, all that a shopper had to do was walk in, fill a cart, and walk out the door.

In today’s landscape, if you are competing against retail and e-tail giants, it is critical to understand the profit performance of each product you offer, particularly in light of any associated fulfillment and delivery costs.

Model Networks to Manage Mistakes

Modelling exercises help retailers determine cost trade-offs versus service before you start an initiative. This can allow you to determine where to guarantee 2-day delivery in certain areas, while offering longer service time and lower cost in other areas.

One of the core benefits of network modelling: you can do all the what-if scenarios so you know how the network reacts before you invest dollars and make a mistake.

Data-driven network modelling is also an asset when disruption threatens the order-to-cash cycle. This type of proactive modelling allows a shipper to identify response options before disaster occurs and jeopardizes successful final delivery.

Leverage the Right Resources

Most retailers may not have resources to manage massive amounts of data and then turn around to review and reproduce network designs every six months or faster – all while managing a separate returns network and a separate dot-com network.

Many organizations cannot afford to obtain the people, obtain the tools and manage to keep them. If you do have a staff on site, those people may not always be needed for network design or analysis. You end up re-tasking them with other things so they are not staying fresh on their modelling skills, and when it is time to update the model – what if they are working on other critical projects? That work falls by the wayside.

Another downside of an internal modelling team: They get to know your business, and how it works. There’s a tendency to get into a modelling rut, modelling within your constraints rather than challenging “sacred cows”.

Someone outside your organization knows what other companies have done, what works and what doesn’t, – and they’re not limited by your constraints. That’s why consulting companies exist. They can think outside the box and apply your constraints rather than operating under assumptions.

Master Your Domain

Retail companies in particular should focus on their strengths.

Buying the best products and marketing to customers is the core competency of most retailers – not transportation and logistics. In that case, an outside expert can offer an unbiased, view informed by supply chain best practices effective in varied industries and many different retail organizations.

Hire an outside expert that can leverage fulfillment expertise, data and supply chain planning to help take care of customer delivery demands, so you can focus on the retail areas where you excel.

Manage Fulfillment Cost, Support Prime Performance

We are in an era where higher fulfillment costs continue to erode retail margins. It’s time for stores to think harder about how to fulfill orders across all channels, while also factoring in parcel transportation costs and how to package in a way that minimizes dimensional charges.

The complexities of omnichannel fulfillment and all the requirements that come along with it drives many retailers to rethink store layout plans, network design and support partners. Applying the Service Merchandise approach to customer experience in the 1980s could give today’s retailers a competitive advantage in the marketplace.

To help retailers understand how Service Merchandise delivered experience and omnichannel excellence we created “Prime Before Its Time: The Service Merchandise Experience.”

Download the guide to learn how the retail innovations of yesterday can help you deliver a prime performance today.

Omnichannel: 3 Ways Service Merchandise Got it Right

In its heyday, Service Merchandise was a retail force. With 413 stores and $4 billion in revenues at its peak, the company singlehandedly turned the “catalog showroom” shopping experience into one that consumers flocked to for fine jewelry, electronics, toys, and other merchandise. 

Hindsight being 20/20, modern-day concerns like high inventory carrying costs, the escalating cost of expansive retail space, and the labor-intensive nature of its decidedly non-DIY showroom should have all been red flags for Service Merchandise. Despite these oversights, the company definitely had a few things nailed when it comes to omnichannel. Let’s look at three areas where Service Merchandise excelled.

Lesson 1: Sales in the Front, Fulfillment in the Back

Service Merchandise stored inventory in the backroom versus in the front of the house and basically understood the value of the omnichannel model as far back as the 1980s.

Stores aren’t meant to be fulfillment centers. Employees don’t know how to pack boxes efficiently. They rely on their own judgment about how much packing material and product to load into a box for a ship-to-home customer. That can get expensive when dimensional minimums come into play. For example: If a box is too large relative to the weight going into the box, the shipper is going to overpay. 

Service Merchandise escaped these challenges.

  • All inventory was maintained at the store level, in the back of the house, where customers couldn’t touch it until they ordered it, initially using a clipboard and written order and later using the “Silent Sam” ordering system.
  • Employees were trained on efficient fulfillment techniques: The goods were either sent by conveyor to the customers or shipped to their homes. 

“The average price of an item sold in the store was $30. The average transaction was $55, so we were selling less than two items per transaction,” says Service Merchandise CEO Ray Zimmerman. “Because they were $30 items, it was less expensive for us to handle it on a pick and conveyor basis than it was to stack it out and let the customer pick it up.”

Obstacles emerge when fulfillment creeps into a retailer’s sales floor customer-facing roles:

  • Store employees picking orders instead of taking care of customers. 
  • Aisles congested with big carts and harried fulfillment individuals trying to fill orders quickly. 
  • Online shipments packed inefficiently by store employees untrained in the fine points of fulfillment. 
  • Unnecessary touches: product is received, unpacked, put on store shelves, retrieved, repacked and shipped back out. 
  • Multiple touches create a high volume of dunnage and corrugate waste.

Just think about how far a store employee has to walk to collect all of the items from an online order, versus someone who was working in a warehouse with very high pick densities. Warehouses also incorporate technology (i.e., pick-to-light and voice options) that makes picking and packing more efficient.

Lesson 2: Technology is Integral to Omni-Channel Success.

Retail has come a long way since the 1980s, but it’s clear that Service Merchandise’s leaders had a knack for understanding their customer base and serving it well. They also weren’t afraid to invest in technology long before terms like omnichannel, automation, robotics, and Amazon were common vernacular for retailers. 

“We had a great group of IT people – and that was unique for most companies at the time,” Zimmerman says. “At the time, there was no point-of-sale system that had an alpha numeric. They were programming in BASIC language, it was very simple, but that’s how we developed all these systems.”

Those systems monitored inventory, too.

“We had to keep inventory tight and we spent a lot of time monitoring to make sure that stores were making inventory adjustments,” Zimmerman says. “If they didn’t have any adjustments, the store wasn’t doing its job verifying inventory count; if there were too many, the store was having a shrinkage problem.”

If afforded today’s technology advances, omnichannel data management and its innovative mindset, here’s what a profitable “Service Merchandise 2020” might look like.

  • An early adopter of warehouse automation, it deploys advanced technologies like robotics.
  • Warehouse pickers are equipped with wearable technology that enables them to do their jobs faster in a hands-free environment. 
  • Integrating automated co-bots, conveyors and cranes into its stockrooms, it effectively leverages technology to shorten fulfillment times and hit two-day and one-day shipping windows.
  • Leverage artificial intelligence (AI) and machine learning to optimally determine placement and levels inventory based on predicted customer demand. 

Lesson 3: Give Customers an Experience

Customers like going into stores to look at and touch products. 

Service Merchandise knew that its customers really wanted to experience a product before buying it, which meant stores didn’t really need to have all of their inventory visible and stacked to the ceiling when those customers walked in the door. 

With its part-catalog/part-showroom approach, Service Merchandise was meeting customers where they were in the ‘80s.

“The catalog was not for people to order from. It was an advertising tool – people could pick what they want and come into the store,” Zimmerman says. “If that customer drove 3 blocks to come into our store, they expected to get it. We had to be in stock every day, on every item.”

Many people still remember fondly a key aspect of the Service Merchandise experience, even if the retailer’s dominant presence has faded.

“When the company liquidated, I bought the name to keep it in the family. I put up a website – it didn’t sell much merchandise, but it got a tremendous amount of comments,” Zimmerman says. “Many wanted to tell me how much they loved watching the merchandise coming down the conveyor belt.”

Putting it all Together

Retailers are still trying to figure out the right recipe for omnichannel success. A multichannel approach to sales focused on providing customers with a seamless shopping experience — be it online, on a desktop, via a mobile device, by telephone, or in a brick-and-mortar store — omnichannel is pushing companies into new terrain when it comes to fulfillment, transportation, and delivery.

To help retailers understand how to improve omnichannel performance, we created “Prime Before Its Time: The Service Merchandise Experience.”

Download the guide to learn how the retail innovations of yesterday can help you deliver a prime performance today.

5 Red Flags for Retailers Racing Amazon

In an era where delivery choice and speed are becoming fundamental expectations for everyone, companies across most industries are rethinking how they receive, fulfill, and ship customer orders. Facing stiff competition from web-based suppliers, e-commerce providers, and even traditional companies, retailers, distributors, and manufacturers alike are challenged to enhance customer experience by offering variety in delivery options – without impacting the cost to the consumer.

Getting there isn’t easy.

Risks consistently stand in the way of retailers that want and need to deliver the best possible e-commerce experiences for their customers.

Driving Digital Growth and Retail Response

In its 2019 Retail Industry Outlook: Navigating disruption in retail report, Deloitte paints a picture of an industry where the consumer is unquestionably in the driver’s seat. “Consumers realize they can have it all. Today’s digital consumers are increasingly connected, have more access to information, and expect businesses to react to all their needs and wants instantly.”

Operating in an industry that’s in a state of constant disruption, retailers are managing through uncertain times and placing bets on what will separate the winners from the losers. “Those that can synchronize their investments to profitably empower the consumer will likely find themselves on the right side of the tipping point,” Deloitte concludes.

The good news is that the retail industry continues to thrive, with U.S. retail sales expected to rise between 3.8% and 4.4% to more than $3.8 trillion in 2019, according to the National Retail Federation (NRF), which credits high consumer confidence, low unemployment, and rising wages for driving these numbers up. The 2019 holiday season should be particularly bright, with Coresight anticipating a 3.5%-4.0% year-over-year increase in U.S. retail sales during November and December.

These positive outlooks present a viable opportunity for retailers that learn how to harness e-commerce and use it to their advantage. For many retailers, getting a piece of that pie will require a good, hard look at the red flags that are slowing down their e-commerce service and putting them out of the running for today’s “want it now” consumer. 

Red Flags that Slow the E-Commerce Profit Race

Here are five risks that consistently stand in the way of retailers that want and need to deliver the best possible e-commerce experiences for their customers: 

Risk #1:  Web-based order interfaces. Success in e-commerce starts with a user-friendly interface that doesn’t frustrate customers or send them off to buy from another site. Put simply, if your online store’s ordering system is cumbersome and difficult to use, no one is going to use it unless they have to.  

Risk #2:  Shopping cart conversions. 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. Ignore the need to drive down abandonment rates and 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.   

Risk #3: Same-day order fulfillment. 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. 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.     

Risk #4:  Parcel, heavy home, and customized delivery platforms. 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; putting it in the room of choice; or doing both of these plus opening up the box, removing the packaging, and setting up the product(s). With delivery on demand becoming increasingly prevalent, giving the customer scheduling control and providing reliable service further enhances customer experience.

Risk #5:  Selecting the best, most economical transportation mode. Often retailers don’t have access to the data that allows them to utilize more economical mode selection. Instead, many focus solely 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. This is a huge risk 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%-75% of the total U.S. population, respectively.   

The retailer that understands the transportation risks that exist in the race against Amazon are positioned to proactively mitigate them in today’s disruptive selling environment. These organizations will be best positioned to not only maintain market share, but to also prepare itself for what’s coming around the next corner. 

Ready to learn more about the risks facing retailers on the e-commerce front and how to solve them? Download Transportation Insight’s e-commerce guide, Managing the Risk of Racing Amazon.