5 Challenges Third Party Logistics (3PL) Companies Face Shipping Parcels

Many businesses today have decided to focus on their core competencies. According to Jim Collins, in his book, Good to Great: Why Some Companies Make the Leap… and Others Don’t, companies that are good-to-great companies employ the “Hedgehog Concept” which is based on an understanding of the following:

• What are you deeply passionate about?
• What can you be the best in the world at?
• What drives your economic engine?

If each of the above were circles, the Hedgehog Concept would be at the intersection.

If we bring this concept to warehousing product, fulfillment, and shipping, how many companies could claim to be the best in the world at it? Certainly, a few, like amazon.com or Zappos, are world class; however, many companies choose to outsource this function to a third party logistics company (3PL). A 3PL normally performs all the functions of our warehouse shipper but has some unique requirements. Imagine a warehouse on steroids. 3PL’s often ship thousands of packages a day for many different clients. Some have their warehouses divided for a dedicated section for each client with a separate shipping system in each area, like a mini-storage facility. Others have conveyor belts throughout the warehouse brining the packages to a central shipping area. Almost all of them have multiple shipping stations. Here are few of the problems they face:

1. Since 3PL’s are shipping packages to their customer’s customers, they often charge the freight to their customers account numbers. A 3PL could have hundreds of different account numbers and they need to make sure that packages are shipped correctly. Some do this by having business rules that receive data from the 3PL information technology system to insure that the correct account number is charged.
2. Because 3PL’s ship for a wide variety of clients, they receive their shipping files in a wide variety of formats. They may get an excel spreadsheet or a file with addresses to ship to or they may get an entire order file with line items to pick. They need a shipping system that can import orders in many formats. They could be flat files, xml, ODBC, or other formats. Flexibility is critical.
3. I once spoke to the owner of a 3PL that had over 40 free carrier provided systems. I asked him why he was willing to invest in technology when he had free systems. He told me that it was nearly impossible to keep track of all the data for shipping. Imagine running a $100 million corporation and having to ask your vendors for the data to create a monthly financial statement. He had to ask his carriers how much he was spending and try to compile all the data. He wanted consolidated reporting that would provide him with the information he needed to run his business.
4. Everything that a 3PL does is tracked so that they can bill their customers, so every shipment needs a job number. And there is no room for errors, so job numbers have to be validated.
5. Speed is critical; the fewer keystrokes the better. 3PLs want automation so they can process parcels as quickly as possible.

16 Types of Warehouses that Ship Small Parcels with UPS, FedEx, and Other Carriers

Warehouses that ship small parcels are different than the other types of shippers that I have discussed so far. They ship a much higher volume of packages, from hundreds to thousands of parcels a day. They can be manufacturers, distributors, or third-party logistics companies (3PL). A 3PL is a company that provides outsourced logistics services (more about 3PL’s in a future post).

Small parcels are packages that weigh less than 150 pounds and are typically shipped with UPS, FedEx, DHL, Regional Carriers ( Lone Star Overnight, Eastern Connection, OnTrac,), and the US Post Office. Parcel shippers may also be Less-Than-Truckload (LTL) shippers or full truckload shippers. The way parcels are processed is very different than LTL shipments. Each parcel has a separate tracking number and label. A LTL shipment is usually a pallet with many boxes and shrink-wrapped. The pallet is shipped as a single unit.

Companies that ship small packages send them directly to consumers (business to consumer or B2C) or to businesses (B2B).

Examples of B2C shippers include the following:

• books (Amazon.com)
• apparel and accessories(LandsEnd, Zappos)
• gift baskets and mail order (Harry and David)
• sporting goods (Callaway, TaylorMade)
• electronics (Best Buy)
• medical supplies (Liberty Medical)
• computers (Dell, Apple)
• drugs, vitamins (CVS,GNC)

Examples of B2B include the following:

• industrial supplies (Grainger)
• pharmaceuticals (Merk)
• automotive supplies (Michelin)
• office supplies (Staples)
• fasteners, bolts, rivets (Fastenal)
• electrical components (Westinghouse, Allied)
• industrial valves (Asco, Kingston)
• industrial chemicals (Dow, BASF)

Because of the sheer volume of packages that a typical warehouse sends, these shippers tend to be very sophisticated. Throughput and accuracy are the most important attributes that they look for in processing. Features that warehouse shippers look for include the following:

• Speed
• Multiple user processing
• Integration with Enterprise Resource Planning (ERP) or Warehouse Management Systems (WMS)
• Business rules
• Error checking
• Mode optimization
• Integration with material handling systems, such as conveyors, scales, label printers
• International processing capabilities
• Reports

I will be discussing many of these software features in future posts, so stay tuned.

Special Offer PARCEL Forum

 

One new idea can pay for this conference and save your firm thousands in shipping costs. The PARCEL Forum, October 5-7th at the Hyatt Regency O’Hare, Chicago, is the only conference and exposition dedicated to serving parcel shipping and logistics professionals of all sizes.

If you haven’t had a chance to check out the entire Conference Program, Click Here. You can also download our Conference Brochure which includes a registration form if you prefer to register via mail or fax.

Many of you are dealing with shrinking (if any) educational budgets. But, we’re all in this together! That’s why PARCEL has expanded the industry-first; Conference Travel Rebate Program. You make the commitment to attend the conference, and PARCEL will make the commitment to help cover some of your travel costs ($150 airfare or $50 drive-in rebate). On top of that, your conference registration includes admission to all of our Special Event food and beverage functions such as; Opening Day Keynote Luncheon, Opening Night Networking Reception,
Carrier Roundtable Luncheon and Conference Refreshment Breaks over the three day event.

Lastly, in keeping with the theme of adding more value, PARCEL Forum has strategically co-located with DOCUMENT Strategy Forum
and Mailing Systems Technology Conference. Register for PARCEL Forum, and you are given free access to any of the conference sessions taking place at these two events as well as the DOCUMENT Strategy Forum exhibit hall which is located right next door.

Advanced Registration ends on Friday, September 18th. This is your last chance to save up to $200 on your conference registration or receive a Free Exhibit Hall Pass to meet with 60 industry-leading companies.

Oh yeah, I almost forgot one more important thing. PARCEL will be giving away a $5,000 to one lucky attendee on Wednesday, October 7th in the exhibit hall between 11am -12pm. To qualify, you must participate in an on-site program and be present in the exhibit hall at that time.

I look forward to seeing you in Chicago!

7 Best Practices for Saving Money on Shipping in the Mailroom

Corporate mailrooms are not only responsible for incoming and outgoing mail, but FedEx, UPS, USPS, DHL, and couriers. Shipping is very different in a mail center than it is in a warehouse. Shipping managers ship products in cartons or on pallets and the charges are passed on to the customers, so, generally, they don’t worry about budgets. Managers of mailing operations are often frustrated regarding their capacity to control the budget for shipping and mailing expenditures. They are often asked, especially in these economic times, to reduce costs; yet the people that make decisions about how to send an express envelope or choose the service level are not under their control. One of my readers is John Sikorski of Princeton University; he shared 7 of his best practices to save money on shipping in the mailroom. Thank you John!

1. Education the staff in departments to know which way packages should be sent by holding a shipping seminar for anybody who deals with shipping out packages.
2. Every time that the university signs a contract with the vendors we do a cost study to see the difference in prices between FedEx, UPS and the USPS.
3. Establish a cost calculator where staff can go to see which vendor cost less.  We have done this for Federal Express and UPS.  The cost calculator has options that will be true for most of the departments most of time such as Next Day Morning and Afternoon, Second Day Service and Ground Service.  We do mostly commercial address and domestic packages so the shipping calculator is only for the United States.  Within the cost calculator we also put the fuel surcharge that one of the vendors charges the university.
4. Talk to the vendors to see if there is any new programs that could save money for the university such as flat boxes or envelopes.
5. Keep informed most vendors have newsletters that are free by e-mail.  I also look for magazine that you can get online they will give you some ideas from other companies and universities.
6. Join the Postal Customer Council in your area and attend some of meetings that they have during the year to keep up with the changes that occur within the postal service and also networking with the other members at the PCC meet.
7. Combine all shipments that are going to the same university or college when using UPS in order to save on the shipping cost.