MTAC Pulse of the Industry – May 2014 Package Services – John Medeiros IMpb Requirements – Shipping Services File Timeliness In our January Pulse of the Industry Report, Parcel Shippers expressed their gratitude to see that an IMpb Final Rule Federal Register Notice (FRN) was published and gave recognition to many of those USPS Staffers who put a lot of hard work into. Finally, we had a document in black and white and had closed the door on more than a year of dialogue to modify the IMpb Rules. Now a short 5 months later, USPS wants to add an element tied to Non‐Compliance Fees that USPS agreed would not be an element tied to such fees, File Timeliness. While fully vetted in Task Team 19 and MTAC’s Visibility and Service Performance Focus Groups moderated by Jim Cochrane, USPS stated file timeliness was not an issue and would not be tied to the 3 tolerance threshold for Non‐Compliance fees. • A Unique Trackable Barcode • An Address and or Zip + 4 in the File • Shipping Services File Version 1.6 or higher The FRN did state files needed to be transmitted prior to acceptance but there is no reference to file latency, fees or penalties tied to it. It was only 5 months ago, so why has something that wasn’t an issue then, become an issue now? Parcel Shippers get it! USPS needs to have the file with addresses for Sorting on PASS or DSS equipment. If an address is needed and it isn’t there, USPS needs look up a scheme or rehandle the piece by a Scheme‐Qualified Clerk, the non‐
compliance fee is appropriate. Yet USPS IMpb Compliance Metrics Reporting Tools already appear to be throwing pieces out for file lateness, which ultimately would result in Non‐Compliance Fees. The tools are triggered by the first scan event, which many of us know can take place well before parcels get sorted at the DDUs. So Parcel Shippers could be assessed fees and still have their files arrive in plenty of time for DDU Package Sorting. Is it fair to assess a fee when USPS has the addresses in the file for the primary purpose of sorting packages??? There is also some confusion on whether or not the first scan even is accountable at the piece level or the file level. Some shippers are seeing large groups of packages not counted as compliant giving reason a scan may be tied to a file and not a one to one correlation to an individual piece. We need more clarity to flush this out. Another concern is USPS only uses about 35% of the addresses received in files, however the Reporting Tools report on ALL pieces. Given the July IMpb Address Tolerance Thresholds will be at 95%, this means USPS is positioned to assess fees on 60% of addresses it never ran past PASS/DSS equipment, effectively charging a fee for addresses not used or needed. Is it fair for USPS to assess a fee when it opted not to use an address? Did USPS suffer any revenue loss in this situation? Since USPS tends to pass these fees on as Postage Adjustments they carry with it an underlining principle, Postage Adjustments are for Revenue Protection and can not be punitive in nature. Simple Solution There is a relative easy solution that would be fair and acceptable for Parcel Shippers. Create a scan event specific to the PASS/DSS equipment, if the file is not there and or an address or zip + 4 not present when it is needed, the non‐
compliance fee would be applicable. MTAC PTR/eVS Users Subgroup Meeting Fortunately, USPS is trying to get feedback from its Users in effort to try to move forward with File Timeliness holding a kickoff meeting for a Subgroup on Friday, April 23rd. USPS has proposed the following: File Timeliness Criteria: Valid file received 3 hours before the first USPS physical scan event or Valid file received by 0300 CT the next calendar day and Valid Shipping Partner Event with address information received 3 hours before the first USPS physical scan event PC Postage users and many Manifest Shippers often don’t know what products will be shipped until an order comes in, as they do throughout the day, so providing files 3 hours in advance is not practicable or doable in many situations. One Manifest Software provider said if USPS imposed a 3 hour window, then many of his customers would simply ‘turn off’ USPS shipping methods at 2 or 3PM and switch to other service providers to move their packages for the remainder of the day before their packages are picked up or tendered to USPS. This would result in both business and revenue losses created by USPS itself. Obviously there is much more to understand and talk about, yet there are easy solutions at hand. Special Thanks – USPS steps up its game with more detail on tracking events Special Thanks to USPS for enhancements added to Tracking Services !!! • New Subset of ‘Attempted Delivery Events’ provides more detail of the event o 53 – Receptacle Blocked o 54 – Receptacle Full/Oversized Item o 55 – No Secure Location Available o 56 – No Authorized Recipient Available • Additional Events added with release 1.8 (April 27th) – geared at better visibility for Institutions o Colleges & Universities o Apartment & Condominiums •
New SMS Tracking – enables customer to request tracking event updates to their Smart Phones. Text Tracking Number to 28777 (2USPS). Agenda Topics Visibility/Service Performance •
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Group discussion on the progress of the MTAC PTR/eVS Users Subgroup on File Timeliness o Next Steps for File Timeliness ƒ Does USPS consider this a rule change given it was not present as an element subject to Non‐compliance Fees Unmanifested Pieces Support o USPS to provide use of Child MIDs used by other Service Providers o Help with Tracking Reports to help identify use of Child MIDs outside Parent MIDs networks •
Engineering’s work regards Progress/Plans for use of 11 digit Zip Code in IMpb for 2015 Compliance o Will USPS be ready to use a new barcode construct with an 11 digit Zip Code embedded in the IMpb •
Market Dominate parcels are not subject to Non‐compliance fee until a later date o Is there a specific date? o Do we know if the non‐compliance fee will be the same as the Competitive Products Non‐Compliance fee? o What are the next steps ? Prep & Entry/Operations • Next Steps on Network Rationalization/Network Consolidation o When does USPS plan to resume Network Consolidations? • Parcels: Hub Induction o Is USPS still set for July to introduce its Hub Network? o Will preparing 5 digit/scheme DDU containers suffice to participate in Hub Drops? o What hours of operations are anticipated? o Will FAST Appointment be required? If yes, will FAST be ready? • Load Leveling – Impact on Packages o Would Load Leveling impact service on Parcel Select/PSLW/BPM Parcels? o Would Load Leveling be service deferrals be limited to Standard Mail Parcels? Payment & Acceptance • MID Management o Discussion on Liabilities to Child MIDs. These are like Credit Cards and Service Providers have little control or visibility to use of Child MIDs outside their process. o Why is there no specific language similar to a Contract that address liability for MID use o How can USPS engage to help support misuse other than saying it becomes a Postal Inspection Service Issue • Turning Off MIDs o How can Service Provider ‘turn off’ a Child MID if a customer is no longer doing business with the Service Provider • Gateway Mapping for Services o There are no guides or references for BSA to map the correlation between Service Access to the Services they link to. Example: If a User wants Access to Manage Mail Activity what Services does that link to? Product Management o Gary and Karen always do a good job providing informative and innovated sessions. Please continue. • Hazmat Requirements for July 2014 • Returns for Packages • Need USPS Co‐chair ‐ new MTAC Work Groups in process of being established for: o Round Trip Label & Weigh on the Fly – Industry Co‐Chair, Paul Kovlakas – Pitney Bowes o Return to Sender/UAA – Industry Co‐Chair, Kevin Elkin – RR Donnelley Package Industry Related News and Articles
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Morgan Stanley 2013 Freight Survey – Bullish Economic Outlook & Tightening Capacity (below & attached) •
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Amazon, in Threat to UPS, Tries Its Own Deliveries A Postal Service Reform on Which Nearly Everyone Agrees: Ending Saturday Delivery Is E‐Commerce the Next Big Thing for FedEx? UPS Freight Making Move to Density‐Based Pricing, Chief Says Just for fun !!!
Turkey chases UPS driver around a FedEx truck http://www.youtube.com/watch?v=‐P2SaxyMrKA
Amazon, in Threat to UPS, Tries Its Own Deliveries An Alternative to Shippers Like FedEx and UPS, New Service Could Deliver Goods the Same Day as Purchased By Greg Bensinger And Laura Stevens Wall Street Journal April 24, 2014 The future of Amazon.com Inc. is hiding in plain sight in a San Francisco parking lot. Adjacent to recently closed Candlestick Park, Amazon is testing its own delivery network for the "last mile," the final leg of a package's journey to consumers' doorsteps. Trucks loaded with Amazon packages and driven by Amazon‐supervised contractors leave for addresses around San Francisco. Similar efforts are under way in Los Angeles and New York. Delivering its own packages will give Amazon, stung by Christmas shipping delays, more control over the shopping experience. It can also help contain shipping expenses, which have grown as a percentage of sales each year since 2009, according to securities filings. On Thursday, Amazon reported another quarter of skimpy profit even as sales increased 23% to $19.74 billion. Shipping costs rose 31%, and it also spent on cloud computing and new initiatives. The company reported a first‐quarter profit of $108 million, compared with $82 million a year earlier. The new delivery efforts will get Amazon closer to a holy grail of e‐commerce: Delivering goods the same day they are purchased, offering shoppers one less reason to go to physical stores. With its own trucks, Amazon could offer deliveries late at night, or at more specific times. The move is a shot across the bow of United Parcel Service Inc., FedEx Corp. and the U.S. Postal Service, which now deliver the majority of Amazon packages. It is also a challenge to Wal‐Mart Stores Inc., eBay Inc. and Google Inc., each of which is testing deliveries. Ultimately, a delivery network could transform Amazon from an online retailer into a full‐service logistics company that delivers packages for others, according to former Amazon executives. They caution that any such effort likely is years away. Delivery is a big step in Amazon's ambitions. The largest U.S. Internet retailer has branched into original video programming, set‐top boxes for streaming video, and soon, smartphones, among other things. It is unclear that Amazon will achieve its goals. UPS, founded in 1907, has a head start of more than a century. Industry observers say it will be difficult for Amazon to match the efficiency of UPS or FedEx in more than a handful of U.S. markets, simply because it will be delivering fewer packages over a wider area. Amazon quietly began rolling out the delivery network in the U.S. late last year, in packages labeled "AMZL" and "AMZN_US." Customer‐service representatives and former employees say those codes designate Amazon's in‐house delivery network. Customers who have received the packages said they appear to use a different tracking process, with no links to an outside shipper. Next up for Amazon is Treasure Island, a man‐made spit of land in San Francisco Bay. Amazon is reviewing a lease for a site on the island to house trailers and delivery trucks, according to a person familiar with the matter. From there, Amazon would dispatch trucks into San Francisco, likely late at night and early in the morning when traffic is lighter and fewer island residents would be disturbed, this person said. Amazon offered a peek at the delivery network in a recent job posting on its website. "Amazon is growing at a faster speed than UPS and FedEx, who are responsible for shipping the majority of our packages," the posting reads. "At this rate Amazon cannot continue to rely solely on the solutions provided through traditional logistics providers. To do so will limit our growth, increase costs and impede innovation in delivery capabilities." "Last Mile is the solution to this. It is a program which is going to revolutionize how shipments are delivered to millions of customers." As a prelude to the U.S. moves, Amazon has been testing a delivery network in the U.K. "We've created our own fast, last‐mile delivery networks in the U.K., where commercial carriers couldn't support our peak volumes," Chief Executive Jeff Bezos said in his annual letter to shareholders earlier this month. "There is more invention to come." Typically using small couriers, Amazon delivers packages under the "Amazon Logistics" moniker and recently acquired an option to invest in Yodel, a U.K.‐based parcel‐delivery service. Dave Clark, Amazon's vice president for world‐wide operations, said in November that Amazon would use its own trucks to make Sunday deliveries in London. Amazon declined to comment for this article. At San Francisco's Candlestick Park, formerly home to the NFL's 49ers, Ryder trucks are scattered around the parking lot, amid rows of bright green AmazonFresh trucks for Amazon's same‐day grocery‐delivery service. Trailers arrive each morning, and their contents are transferred to vans or trucks for deliveries in and around San Francisco, said one person familiar with the operation. The precise logistics between Amazon's "last mile" hubs couldn't be learned. Even if Amazon takes over home deliveries, it will be difficult for the company to cut the major shipping carriers out of the process entirely. Amazon still relies on them to move goods around elsewhere in its supply chain. Planning for the delivery network began several years ago, but the project took on added urgency last winter after UPS and FedEx failed to deliver Amazon packages to some customers by Christmas, according to two people familiar with the matter. Amazon blamed the carriers, but offered $20 credits to many affected customers. "What happened during Christmas cost a huge amount of money" for Amazon, UPS and FedEx, said Marc Wulfraat, president of logistics consulting firm MWPVL International, which tracks Amazon closely but isn't working with the retailer. If Amazon expands its delivery network, it would likely rely initially on cheaper, more flexible regional carriers—such as the East Coast's LaserShip Inc. and the West Coast's OnTrac— as well as the Postal Service for deliveries, according to supply‐chain experts and logistics consultants. That would affect package volumes at UPS and FedEx, potentially hurting their efficiency. LaserShip and OnTrac declined to comment. Sanford C. Bernstein & Co. analysts estimate that Amazon shipped about 608 million U.S. packages in 2013. The Postal Service handled 35%, UPS 30%, regional shippers 18% and FedEx about 17%. The distribution hasn't changed much in recent years. UPS and FedEx ground rates on average have increased 3% to 5% annually in the past five years, an incentive for Amazon to develop its own delivery service, industry observers say. Amazon cited rising shipping costs in boosting the price of its Prime unlimited two‐day shipping membership in the U.S. by $20, or 25%, earlier this year. Amazon typically pays between about $2 and $8 to ship each package, according to shipping‐industry analysts, with the cheapest option through the Postal Service and the most expensive via UPS or FedEx. Amazon shipments should account for less than 1% of revenue for both FedEx and UPS, said Jack Atkins, an airfreight and logistics analyst at Stephens Inc. That suggests Amazon's delivery network would have a limited effect on the shippers' profits, at least initially. FedEx Chief Executive Fred Smith in December said that Amazon "can unquestionably do local deliveries should they choose to do so." But he said the vast majority of packages would continue to be moved by FedEx, UPS and the Postal Service. A FedEx spokesman declined to comment further. A UPS spokesman declined to comment. Amazon's in‐house delivery efforts have experienced hiccups. Online forums in the U.K. are rife with customers reporting missed, late or inaccurate deliveries. Several packages shipped to The Wall Street Journal's San Francisco office assigned to "Amazon Logistics" arrived several days after their guaranteed delivery dates. Customer‐service representatives said that because the division is new, it is more difficult to track packages. David Steigman, a customer in San Francisco, said two recent orders of DVDs like "The Hobbit" with tracking information for "AMZN_US" repeatedly missed Amazon's own delivery deadlines. "After the first time, I asked them not to ship me anything using that service, but they did it again anyway" said Mr. Steigman. "I don't want to be Amazon's test market for their new shipping idea—that's not what I am paying for." A Postal Service Reform on Which Nearly Everyone Agrees: Ending Saturday Delivery Washington Post April 27, 2014 Even if election‐year politics were not paralyzing Congress, it would be hard to pass a major reform of the U.S. Postal Service. Heaven knows the USPS needs an overhaul: It’s losing customers and billions of dollars per year, in part because electronic communication has rendered its traditional business model — first‐class mail — obsolete. Yet postal unions, bulk mailers, rural communities and other “stakeholders,” as special‐interest groups are now known in Washington, have lobbied successfully against change. It was in that depressing context that Rep. Darrell Issa (R‐Calif.), the chairman of the House committee that oversees the Postal Service, heard testimony this month on the Obama administration’s ideas for reform. Among the points Brian C. Deese, the deputy director of the Office of Management and Budget, made was that the president favors a phase‐out of Saturday mail delivery, along with greater use of curbside mail delivery, as the president proposed in his fiscal 2015 budget. Taken together, such “streamlined delivery” would save USPS $500 million per year, Mr. Deese testified. That’s not nearly enough, by itself, to rectify the Postal Service’s financial problems, but it’s not chump change, either. More important, perhaps, ending Saturday delivery is one of the few substantial reforms that enjoys widespread, bipartisan support. President Obama wants it. Mr. Issa is in favor. A Senate committee has already passed a bill, by a vote of 9 to 1, that would allow USPS to end Saturday delivery. Last but certainly not least, the American public seems quite willing to sacrifice Saturday mail in the cause of postal solvency. That’s the consistent finding of public opinion polls, including a February 2013 Gallup survey showing that 63 percent of Americans support a Saturday phase‐out. Given the availability of text‐messaging and e‐mail — and given that USPS would continue to deliver packages on Saturday — it would be surprising if the surveys came out any differently. Opponents of postal reform are setting themselves against this widespread, common‐sense sentiment. Mr. Issa is said to be interested in moving a postal bill through his committee this year. Certainly the Senate’s action and the White House’s position are auspicious signs. The more tightly reform legislation focuses on the areas of consensus, specifically including an end to Saturday delivery, the greater the chances it can succeed. Is E‐Commerce the Next Big Thing for FedEx? The Motley Fool April 21, 2014 The burgeoning e‐commerce market has opened up a sea of opportunity for delivery companies. So much so that the second‐largest parcel carrier, FedEx, sees global e‐commerce as one of its biggest growth drivers. FedEx's success will depend on how well it is able to mold its services to the need of the industry, however. Let's delve deeper. Online shopping is the buzz word Online sales are rising at an astronomical pace as more and more people discover the ease of shopping from the comfort of their homes. Even cross‐border online shopping is gathering steam as it is expected to rise at an incredible rate of 200% in the next five years, most of which will likely come from China. A Nielsen survey found that cross‐border shoppers will grow from 94 million shoppers spending $105 billion in 2013, to 130 million shoppers spending around $307 billion in 2018. Not surprisingly, research firm TechNavio projects a 13.54% five‐year (2013‐2018) CAGR in the e‐commerce market. Fellow researcher eMarketer shares a similar sentiment, predicting the global e‐commerce market to generate roughly $1.5 trillion revenue in 2014, and nearly $2.4 trillion by 2017. At present, North America is the world's largest e‐commerce market with annual sales of $431 billion in 2013. However, eMarketer forecasts that this lead may be short‐lived as Asia Pacific could claim the No. 1 spot this year driven by growth in China, India, and Indonesia. The research firm expects the Asia Pacific region to record staggering business‐to‐
consumer, or B2C, e‐commerce sales of nearly $525.2 billion in 2014 against North America's $482.6 billion. The chart below shows forecasts for e‐commerce sales by region: Source: emarketer.com, Chart made by author. Increasing online retailing means a higher need for package deliveries and more business for delivery companies, provided that they tune their resources to the evolving need of the industry. FedEx is leaving no stone unturned and is realigning its business to make the most of the booming industry, which offers much higher growth compared with other conventional lines of businesses. On the right track FedEx has started offering streamlined courier services that suit the requirement of online retailers. Free shipping is a major deciding factor when people shop online. It is a nightmare for retailers, however, as more than 50% of the products sold online are shipped free. FedEx has cleverly converted this into an opportunity by launching the FedEx SmartPost service, a low‐cost residential parcel service that is suitable for light packages. The demand for FedEx SmartPost is driving the company's ground segment revenue up. In 2013, the revenue from SmartPost grew 18% while that of the ground segment rose 10%, year over year. FedEx has identified another big opportunity in local deliveries. Retailers are mostly forced to rely on smaller local courier companies that give non‐uniform services. As a solution, FedEx is working to increase connectivity in the remotest of places. It's opening new hubs and acquiring local delivery companies in the key markets of Europe, Latin America, and Asia Pacific. The company already serves more than 400 cities in China, and intends to set up a cargo hub in Shanghai to increase its footprint. With these initiatives, FedEx should be able to leverage its logistics and boost profitability further. The courier major has also developed a host of web‐based services to help brick‐and‐mortar retailers transform their businesses into high‐growth online platforms. Retailers can easily integrate FedEx's Web Services platform into their own web systems that allow them to track shipment information like the date, transit time, rate, and details of sales returns. With FedEx's Web Integration Wizard, customers can track the shipments directly via the retailer's home site. Age‐old rivalry continues Archrival United Parcel Service was quick to sense the opportunity and solidified its ground transportation ahead of FedEx. FedEx was quite apprehensive to shift its focus from its express segment, though consumer preference changed in favor of cheaper delivery services. UPS has its own economical UPS SurePost service, which is similar to FedEx's SmartPost. It also offers the feature‐loaded UPS My Choice service through which customers can get notifications regarding their deliveries, adjust delivery times and locations, and get packages delivered without a signature when not at home. More importantly, it also has a partnership with online retail major Amazon.com from which it amassed huge revenue in the holiday season last December, when the former locked orders for 36.8 million items. Quite obviously, the top courier company is now reaping the benefits. It handled an average of 16.9 million packages per day in 2013, a 4% rise over last year ‐‐ due in large part to the e‐commerce boom. In comparison, FedEx’s average daily packages stood at 4.2 million. Better late than never, FedEx has finally taken initiatives to strengthen its ground logistics and the impact of these initiatives are visible in the company's improving ground revenue. The opportunity that e‐commerce holds is gigantic, so even if UPS got a head start, the market is big enough to accommodate multiple players. The boom's a boon FedEx's strategy of addressing the e‐commerce industry's challenges is pretty smart as it lays the groundwork for higher revenues. The company is devising suitable strategies like SmartPost, offering handy e‐commerce tools, and expanding its delivery network in the key markets to strengthen future prospects. FedEx has played the right chords, and looks poised to make the most of the global e‐commerce growth. UPS Freight Making Move to Density‐Based Pricing, Chief Says Holmes said initiative being introduced to "interested" shippers. DC Velocity April 18, 2014 UPS Freight, the less‐than‐truckload (LTL) unit of UPS Inc., has rolled out a pricing program based on the density of a customer shipment rather than the traditional formula where rates are determined by the characteristics of commodity classes, or "classification." Jack Holmes, president of UPS Freight, told the NASSTRAC annual conference in Orlando this week that the new pricing is being introduced to "shippers who are demonstrating interest" in it. He acknowledged that "some people are scared off by it," preferring to stick with the pricing program they know. Holmes said that all carriers are looking at migrating to a density‐based pricing program. "It's coming, but I can't say when it would be the norm," he said. The program, which UPS Freight has been refining for several years, would substitute the classification model with a simplified model where rates would be set depending on tiers of a shipment's density. A high‐density shipment like ball bearings, which is both heavy and small, would generate a low rate per hundredweight because it occupies less space in a truck. By contrast, a product like lampshades, which are light but outsized, would be assessed a higher rate because they take up more relative space in the vehicle. Traditionally, rate classes have been defined by the National Motor Freight Traffic Association (NMFTA) and made available through the National Motor Freight Classification (NMFC). There are 18 freight classes, with products classified by weight, length, and height; density; ease of handling; value; and liability. Generally, the lower the NMFC class number, the lower the freight charge. Freight classes are designed to help shippers get standardized pricing for their shipments when working with different carriers, warehouses, and brokers. Over the decades, however, carriers have encountered problems with shipments assigned a status known as "freight all kinds" (FAK), an all‐inclusive freight class given by carriers to customers that ship commodities with varying classes. Carriers frequently assign a low FAK class to a variety of shipments that would justify a higher number. Often, shipments must be reclassified and reweighed, a time‐consuming process that, though necessary, could generate ill will between shippers and carriers. Moving to density‐based pricing would streamline the pricing mechanism, end the guesswork of FAK pricing, proffer a more equitable rate structure, and take the NMCF out of the picture, advocates have said. In addition, critics of the classification structure say it creates no incentive for shippers to adopt good pricing practices and has been a headwind for carriers to earn their cost of capital. Several years ago, William J. Logue, president of FedEx Freight, the LTL unit of FedEx Corp., said the move to density‐
based pricing would be a "game‐changer" for LTL if adopted. At this point, it is believed that adoption by UPS Freight and FedEx Freight, units of arguably the country's two most visible transportation brands, would influence other LTL carriers to follow suit. FedEx Freight did not respond to a request for comment. Density‐based pricing has been used for years in the parcel business, where both FedEx and UPS have their roots.