DRTV News’ Sarah Littman talks to Tom Krueger of National Fulfillment Services about parcel shipping.
DRTV News Weekly: Has the parcel shipping landscape changed?
Tom Krueger: One of the biggest developments in parcel shipping over the past decade is the increased use of consolidators. Consolidators compete against standard UPS and FedEx ground services by using a special rate from USPS called Parcel Select. The consolidators sort and drive the parcels to USPS Bulk Mail Centers (BMCs), Sectional Centers (SCFs) and even local post offices (referred to as Destination Delivery Units or DDUs). Delivery times normally increase by a few days over UPS ground, but Parcel Select rates are very low so even with the consolidator’s fees added on, the savings can be 30 percent less than standard UPS rates.
Unfortunately, this year the largest independent consolidator APX Logistics closed leaving DHL’s At Home service and FedEx Smart Post as the main players. With less competition costs will rise. We also are seeing a faster rise in all rates driven by fuel surcharges. Over 10 years I expect the shipping landscape to change dramatically as parcel shippers realign their services to compete for faster shipping standards and manage increased fuel costs.
How do you determine what is the best way to ship the product?
Of course, customers want their products immediately so it’s important that the message communicated to the consumer through the advertisement and telesales scripts are in line with the actual delivery times from your distribution center to the consumer. If you’re using a slower delivery method to save money it’s important that consumer expectations of delivery are in line or you will lose your savings by paying for more inquiries on delivery times in the call center.
Weight and size of the package will determine what carriers will work the best from a cost and delivery time standpoint, and the shipping rates should be calculated and modeled before determining shipping and handling costs to the consumer. Lastly, the price of the product and the ability to insure and confirm delivery will have relevance in the method of shipment. Here are the most commonly used services:
USPS. For lightweight packages less than 3 pounds using USPS Priority Mail and USPS First Class provides a two-to-three-day turnaround throughout the U.S. at the most reasonable cost. USPS offers delivery confirmations and can deliver on Saturdays. One great advantage with Priority Mail is that USPS can supply to you a free shipping box and have over 18 different box styles you can choose from. If you’re doing significant volume, USPS can give you free custom boxes with your logo imprint.
If the product is books, CDs or DVDs, USPS offers media mail. If your product is under a pound you can ship Standard A, although your distribution center will have to sort the packages into mail sacks to the bulk mail enters to achieve the greater discounts. Costs to ship a package can be as low as 70 cents per piece. Delivery time for Standard A and Media Mail normally range between four to 11 days.
Consolidators. As discussed, DHL, FedEx and a few other independent companies offer zone-skipping services that use USPS to deliver the package for the final mile to the consumer. DHL brands their service “DHL at Home” and FedEx as “FedEx Smart Post.” They compete against UPS ground service and use a special USPS service called Parcel Select. Expect delivery times from three to 10 days, dependant upon location and service used.
UPS/FedEx/DHL. These companies’ ground services split the U.S. into zones and charge different rates depending upon the zone distance from the shipping point. Prices jump dramatically as the distance or zone increases and service standards will depend on the distance between the zones. Service standards normally range from one to six days for ground service. They offer delivery confirmation and automatically insure the shipment.
These carriers offer second-day and next-day services at a significant premium but also provide base insurance for packages.
A good distribution center will blend their carriers to take advantage of competitive rates and services in different areas of the country and can use three or more different shipment methods to create the best rate and performance for the consumer and the bottom line.
Tom Krueger is vice president of Holmes, PA-based National Fulfillment Services (<http://www.nfsrv.com>), a full service fulfillment company handling DRTV, catalog, continuity and subscription services. Reach him at [email protected] <mailto:[email protected]>