Information Technology Helps Speed Parcels, Improves Efficiency, Service Providers Say

This story appears in the April 22 print edition of Transport Topics.

Package delivery has become an information business, with technology creating greater visibility into the supply chain, allowing fleets to become more efficient, decrease ground transit times and provide near real-time tracking for shippers and receivers, according to interviews with several service providers.

What’s more, increased automation is allowing carriers to cut down on manual entries, improve driver routes and offer specific delivery windows for both business and residential deliveries.

“The data is as important as the package,” said Jack Levis, director of process management at Atlanta-based UPS Inc. “Technology has raised our service levels to the highest they’ve ever been. If we deliver your package even one minute late, we have an analytics tool that will point out that you didn’t get it, the operation that failed and even the employee that failed.”

UPS has launched its My Choice program, which notifies users that a package is on its way. Intended recipients can then schedule a two-hour delivery window or request the package be held at a UPS facility or redirected to a neighbor.

UPS also uses predictive analytics to anticipate delivery patterns and can warn several days out which routes are going to have too much or too little work.

“It isn’t just a matter of building the tools; it is a matter of building ways to communicate that information,” Levis said.

That information-sharing is critical for UPS’ My Choice automated program to work.

“With My Choice, we can predict a four-hour delivery window, and that is based on historical delivery patterns, but you can pick a two-hour window we have to deliver it in. Imagine the driver having to manage that,” Levis said.

To communicate with drivers, UPS changed the handheld computer they use — called a DIAD, for delivery information acquisition device — which communicates preferences in customers’ My Choice accounts, reducing 8 billion manual entries annually by drivers.

As a result of My Choice, UPS said, it has reduced delivery attempts by 40% and is boosting customer service. My Choice has gained more than 2.6 million members since October 2011.

“It is the fastest-growing product UPS has ever brought to market,” said David Sisco, director of retail and consumer goods marketing for UPS.

To improve service, UPS also relies on predictive analytics to anticipate vehicle failures.

“The advanced analytics look mathematically at the data to see which data changed prior to a failure,” Levis said. “If you can get that right nugget, you can predict the failure before it happens. It is cheaper to replace something that is working than to wait for it to fail and wait for packages that don’t get delivered.”

To boost information sharing, FedEx Corp. has launched Sense-Aware — a hardware- and software-based system using GPS and cellphone technology to give shippers real-time data on a package’s location. The devices also measure temperature, barometric pressure and light. Their batteries can last anywhere from four days to 45 days, depending on frequency of use.

“It is an information business, and being able to have that near real-time information lets you make adjustments in your supply chain,” said Chris Swearingen, a marketing manager at FedEx, based in Memphis, Tenn.

SenseAware also lets shippers track their packages before they enter the FedEx network and after they leave it. Users can log onto FedEx’s website to track a shipment’s history through the coding devices shippers place on their packages.

“Instead of digging through 50 e-mails to see how you responded to a particular situation, you have it all in one report,” said Swearingen, adding that SenseAware’s prices start at $59 per month per device.

“It is critical you have movement status updates every few hours. Once you get it delivered, it is critical you enter that delivery information to make it available the same day of delivery,” said Rick Mathews, vice president of specialized services for YRC Freight, based in Overland Park, Kan.

The global marketplace also plays a significant role in package delivery.

Robert Mintz, a spokesman for DHL Express, whose U.S. headquarters is in Plantation, Fla., said growth in the business-to-consumer segment of e-commerce is leading the company to increase its collaboration with shippers, including information sharing.

“Electronic data helps . . . speed the process of sending key customer data to expedite the clearance of shipments through customs,” Mintz said.

The growth in e-commerce has affected growth along certain trade lanes for DHL Express.

“For example, Australia is now one of our largest trade lanes. To meet this increasing demand and provide transit savings of one day for most major metros in the U.S. and Australia, we added a new aircraft in 2012 with several flights a week between the U.S. and Australia.”

Doug Kahl, founder of Integrity Logistics Consulting Group, based in Phoenix, said more freight is shifting to ground transport.

“Carriers have invested in their networks and improved their ability to give reliable ground service,” he said. “Shippers are looking to save money and, given the reliability levels, they can plan accordingly and ship ground.”

To take advantage of ground rates, shippers are becoming more strategic.

“What we are seeing right now is more of a planned expedited shipment instead of an emergency expedite,” said YRC’s Mathews. YRC is capturing that business with its time-critical offering, which is at least a day faster than its standard ground service and is growing at double-digit rates, the company said. To increase the speed, the service moves under a separate, dedicated load plan and utilizes sleeper teams.

“We load a lot more directs, so we will bypass distribution centers,” Mathews said, adding that YRC counts weekends as time-critical service days, allowing YRC to pick freight up on Friday and move it between 2,000 and 2,500 miles for half the cost of an airfreight move.

Laura Peterson, vice president of marketing for Phoenix-based OnTrac, said the move to ground shipping is benefiting regional carriers that often can provide the same number of transit days as priority service, but at a ground rate.

Regional carriers service only a specific area — OnTrac’s consists of eight Western states — but carriers can use that to their advantage.

“We can ship overnight at ground rates up to 400 miles from a package’s origination point. By keeping our packages on the ground, we keep costs down, and our regional hub-and-spoke model allows us to operate more efficiently throughout our service area,” Peterson said.

Kent Szalla, general manager of ground service for Pittsburgh-based Pitt Ohio, said it is easier for a regional company to extend its next-day footprint.

“You can go pretty far with next-day points, even beating UPS and FedEx,” he said.

Regional carrier Eastern Connection Inc., headquartered in Woburn, Mass., provides next-day delivery for ground rates from Maine to Virginia. Jim Berluti, CEO of ECI, said regional carriers tend to have fewer accessorial fees.

“Sometimes people get their rate and are pleased, but then they’re surprised when they get their final bill with all the fees,” Berluti said.

Accessorial charges can make up one-third of a shipping bill with a national carrier, Peterson said.

However, “with a regional carrier, there’s less overhead, so we are able to keep our costs down,” she said. “We are able to provide volume discounts, and we have fewer, less expensive accessorial fees.”

The shift toward ground shipments has affected FedEx’s earnings. The company reported that its fiscal third-quarter profit declined from a year earlier, primarily because of lower airfreight de­mands. The company said customers are increasingly selecting slower, less expensive services, and FedEx’s lower earnings reflect a 66% drop in its Express segment’s operating income, the company said on March 20.

To help streamline deliveries, UPS and FedEx — which rank No. 1 and No. 2, respectively, on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers — are leveraging the U.S Postal Service to complete the “final-mile delivery.”

“There is a little bit of a give-and-take using that model. There are cost savings, but the downside is that it is a day longer in transit,” Sisco said.

The Postal Service did not respond to requests for comment by press time.

Regional carriers also are boosting business by focusing on specific freight. Szalla said Pitt Ohio, which ranks No. 68 on the for-hire TT 100 list, is targeting freight between 70 and 150 pounds.

“There is a niche market between your standard parcel carriers and [less-than-truckloads],” he said. “We are finding we can go in and price much more competitively.”

The service works well for odd-size items, such as rakes, tires and 5-gallon pails.

“It is ideal for awkward-shaped items that would not fit on a conveyer belt,” Szalla said.

Regional carriers offer several of the same services as national carriers, such as real-time tracking and Web access.

“Technology has become much more available to all players. A lot of the advantages that the large carriers had, the regionals have now as well,” Berluti said, adding that ECI also offers Web shipping.

He said a growing number of shippers are relying on a variety of carriers and using least-cost routing optimization.

“You can determine your distribution automation based on transit time and service,” Berluti said.

Shippers also are improving their supply chain optimization, which further allows them to utilize ground shipments and choose the most efficient carriers.

“Retailers are getting more sophisticated and getting the inventory closer to the consumer,” Sisco said. “They may be shipping out of a store that is closer to a consumer versus out of a distribution center.”

The growth in e-commerce is driving many of the efficiencies carriers and shippers are realizing.

“We’re seeing double-digit growth in e-commerce compared to single-digit growth in brick-and-mortar sales,” Sisco said.

Taking packages directly to someone’s door comes with its own set of challenges, such as the type of equipment needed.

For YRC, which ranks No. 4 on the for-hire TT 100 list, one of the challenges is the lack of a dock.

“Not all of our equipment has lift gates, so we have to preplan for that,” Mathews said, adding that safety is a concern at residences.

Maximizing stops is also an issue, Sisco said: “We have to route our drivers in such a way that they’re getting to those areas in the most efficient manner.”

UPS creates maps using its internal information.

“When we’re at your house, we take a snapshot of longitude and latitude, and we end up with extremely accurate pictures of where every address is. We can use that data to make better decisions.” Levis explained.