Opinion: Safe at Home: Small Package Carriers Are Essential to E-Commerce

By Debra Phillips

ational Small Shipments Traffic Association

We live in a society of instant gratification. With drive-through windows for fast food, automated banking machines and even fast-drying nail polish, we are all looking for ways to speed up the processes that make up our daily life. The advent of the World Wide Web adds a new dimension to this quest for convenience, allowing consumers to purchase everything from airline tickets to furniture via the Internet.

In addition to the many e-tailers that have emerged in recent months, many traditional retailers have also begun offering merchandise online. While this allows companies to take advantage of brand loyalty and increase sales through multiple channels, it also forces new and established companies to become proficient at home delivery.

Because e-commerce is all about the ease of doing business and the ability to receive goods quickly, prompt delivery is vital. News magazines are filled with articles reporting the demise of dot.coms that failed to recognize the importance of physical distribution. For those companies with seasoned logistics professionals on staff, the good news is that there are tremendous technological tools at their disposal, allowing shippers greater visibility of their product at all times and in increasingly smaller units. This technology also makes it easier to manage a high volume of smaller shipments.

The bad news is that there are still relatively few options for companies relying heavily on small package carriers to deliver their goods to the end user. In response to increased demand, new players are emerging. FedEx Corp (FDX) has launched a new home delivery service through its FedEx Ground — formerly RPS — operation. Airborne Express has announced plans to begin offering ground home delivery service in spring 2001. Traditional providers of home delivery are also adding new services to meet the unique requirements of e-commerce, such as UPS's (UPS)system for handling returns.

Even less-than-truckload carriers are making home deliveries. Earlier this year, Yellow Freight System announced plans to offer home delivery options. At a recent meeting of the National Small Shipments Traffic Association, Roadway Express (ROAD) reported that its home-delivery business, a service the company does not market aggressively, has increased 105% compared with less than a year ago.

Shippers are pleased at having more options, but this is clearly an example of needing something yesterday. Further, only time will tell if there are enough providers to meet the demands of a networked economy. With online purchases expected to exceed $17 billion in 2001, it would appear that shipper concerns about capacity in the small-package arena are legitimate.

While e-commerce has certainly impacted the small-package market, the trend toward regional distribution and smaller shipments has been growing over the past ten years. As businesses began to look at ways to increase efficiency in the supply chain, inventories began to shrink. Robert Delaney of Cass Logistics reports that in 1999, inventories grew 4.6%, but sales grew by 9.2%, or twice as fast. The Colography Group also stated recently that the transportation market that is growing fastest is the under-700-mile segment.

A real-world example of these trends can be found in OshKosh B’Gosh. This company, the 1999 winner of Nasstrac’s Shipper of the Year Award, converted 95% of its LTL freight to small package for greater operational efficiencies and cost savings. As a result of this initiative, OshKosh B’Gosh eliminated palletizing and shrink-wrapping expenses as well as reducing labor costs and overhead expenses.

Whether a company seeks to improve customer service, expand its marketing reach or gain operational efficiency, small-package distribution is an important tool and a vital link in today’s supply chain. While technology is revolutionizing how shippers manage their small-package shipments, relationships are still the key to success. Small-package carriers, and the trucking industry as a whole, have made tremendous strides in the past decade in finding new ways to work with shippers to improve supply-chain efficiency. Nasstrac supports this type of cooperation and believes that it will continue to be important in the years to come as both shippers and carriers face the challenge of an increasingly demanding consumer market.

Debra Phillips is executive director the National Small Shipments Traffic Association in Washington, D.C., which represents companies that ship small packages as freight in less-than-truckload quantities.