Category Archives: Logistics

Learn from FedEx and UPS and Avoid Package Fail This Year: Part II

In yesterday’s post, we noted that 2013 retail saw a massive package fail with packages being delivered two weeks or later than expected. The situation was so bad that, as reported in The Washington Post, Amazon, UPS offer refunds for Christmas delivery problems.

We also asked what really happened, and how can all carriers learn. In our attempt to answer this, we noted that Jim Tompkins penned a good piece over on in the Tompkins International Blog on “Realism and Final Delivery for Holiday 2013” where he noted that there were five really big factors that were going to impact final delivery and yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013, even though both UPS and FedEx should have predicted all of the factors.

So how can carriers fix the mess they helped create? According to Jim, carriers need to do a better job at three things:

 

 

  • peak planning
  • contingency planning
  • communications

 

 

 

And he’s right, especially where communications are involved (as the big shipping companies should have known by December 21, after being storm-stayed for 2 days, that they were in crisis and should have communicated that fact), but planning alone won’t be enough as next year could again bring the situation where the number of packages in the network overloads the entire capacity of the network.

So what do UPS, FedEx, and other carriers have to take away from this to avoid major package and delivery fails this year?

  • plan for peak
    At some point, unless you’re (on the road to be) going out of business, you’re going to hit peak capacity. Plan for it. Be sure you can operate at peak efficiency during this time.
  • plan for disruption
    Be it weather, strike, or some other unplanned natural or man-made catastrophe, you’re going to experience a major disruption — and, thanks to Murphy’s Law, it is going to occur at the worst possible time. Have contingency plans in place.
  • plan for partners
    Not only will the disruption strike at the worst possible time, but it will result in your load exceeding your peak capacity. At this point, you have two options — accept that some deliveries will be late (and some customers will be really upset and possibly leave you for your competition) or offload some of the load to a partner with whom you have a bi-lateral contingency agreement. For example, if UPS and FedEx would have planned ahead, they could have offloaded a large number of packages to traditional 3PLs and local delivery services who were both under-capacity and looking for work. In order to take advantage of peak season, retailers need their goods on the shelves by black friday. So, the carriers that deliver to retailers will have likely made their last delivery by mid-December. There’s no reason that they can’t be used as the long-haul carriers from DC to DC, which was a big part of UPS and FedEx’s problem. Plus, most local delivery services, that often make their living couriering documents and local office supplies, are probably not going to be that busy by mid-December when office managers and legal departments start going on vacation. They could pick up from a local DC and act as additional delivery staff — they just need a hand-held scanner. Similarly, when traditional carriers hit peak capacity in November and have problems making delivery times due to weather or equipment failures, excess could be offloaded to FedEx and UPS which often only hit peak capacity during the big retail rush.

Murphy’s law, with a little help from Mother Nature’s black swan, will insure that any carrier that does a reasonable job of running their business will hit peak, will get disrupted, and then will not have the capacity to recover without help — especially if the retailers do not do anything to dispel the myth that waiting until the last minute to shop online is a good idea. So plan for this, and line up some help as part of your disaster-relief contingency plan. Then maybe you won’t end up with a tractor trailer of egg on your face. Just a thought.

Learn from FedEx and UPS and Avoid Package Fail This Year: Part I

As summarized in Martin Murray’s Logistics/Supply Chain blog on About.com, 2013 retail saw a massive package fail with packages being delivered two weeks or later than expected. The situation was so bad that, as reported in The Washington Post, Amazon, UPS offer refunds for Christmas delivery problems. (Specifically, customers of Amazon who failed to get their deliveries by Christmas day received $20 gift cards and refunds on shipping charges and UPS is refunding shipping costs. FedEx, on the other hand, is only going to work with people affected.) According to the Washington Post article, the delays were due to a combination of bad weather, shoppers waiting until the last minute, and the overwhelming surge in online buying. (A UPS spokeswoman said the volume of air packages in our system exceeded the capacity in our network.)

According to Mr. Murray, the situation with ordering from online retailers probably won’t improve next year, unless the major parcel carriers understand that people order late, they order a lot, and they expect it on time. SI agrees that an understanding will help, but only if they do something about it.

So what really happened, and how can all carriers learn? Jim Tompkins penned a good piece over on in the Tompkins International Blog on “Realism and Final Delivery for Holiday 2013” where he noted that there were five really big factors that were going to impact final delivery and yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013. What were the factors?

  1. 26 Days Between Thanksgiving and Christmas to Shop
  2. 26 Days Between Thanksgiving and Christmas to Deliver
  3. Growth of Online Shopping
  4. Retailers’ Behaviour
  5. Weather

As Jim notes, factors 1, 2, and 3 were based on fact, well-known, predictable and non-controversial. They pose significant challenges, but ones that have been around since the WWW, created by Bernes-Lee in 1990, began to be used commercially in 1991 (and definitely since Amazon.com and eBay launched in 1995). These should not have been that much of an issue.

Factor 4 could have been predicted too. As Jim notes, there is a clear sense among consumers that delaying online shopping is a good thing because the availability of great promotions and free shipping became more and more prevalent in 2011 and 2012 and there is no reason to buy early when it is better to wait and get a better deal. Since retailers did little to dissuade this notion, many consumers held out to the last minute to shop online hoping for a better last-minute deal.

And while the breadth of factor 5 can not be predicted in advance, there are recent precedents for bad weather that covers a wide geographical area several days in a row. As an example Jim reminds us that it was only nine years ago when an ice storm crippled Memphis and Louisville, resulting in major final delivery problems for Christmas — and with the effects of global warming (which exists, regardless of what overpaid scientists employed by mega corporations tell you*) increasing by the year, massive storms should be expected.

So what should carriers take away from this fiasco? Stay tuned for Part II tomorrow!

* With only a few exceptions, the average temperature of the earth has been increasing steadily for the last 30+ years. (See this graph from the NOAA.) Anyone who says there is no global warming is therefore a liar or an idiot. What is not known is the degree to which we are causing it with respect to pollution, etc. and the degree to which global warming is a natural part of the earth’s cycle — as an analysis of the history of the earth through extracted core segments shows that just like there were ice ages, there were also times of higher temperature. But the fact that some degree of global warming could be natural is not important — what is important is that this analysis also shows that when temperatures rise, droughts and natural disasters become more common and (mass) extinctions soon follow. Therefore, even if we are only responsible for a (small) fraction of the global warming that is currently occurring, we should be doing everything we can to minimize our impact!

Planes, Trains, and Automobiles — Which is the Safest Way to Travel?

Even though flying is still believed to be the safest mode of travel, with the death risk for passengers of commercial airlines being one in forty-five million flights, compared to the risk of dying in a train crash being one in 156,169, trains could become the safest way to travel, especially if some of the recent innovations to railroad safety are universally implemented.

Specially equipped freight cars pass over railroad tracks as sensors gather multiple data points on their condition. Rail-side detectors scan passing rail cars to evaluate their integrity. Trackside ultrasonic technology identifies internal flaws in passing wheels. These are just a few of the new technologies that have been developed to ensure rail security and prevent accidents, as chronicled in this recent article over on Inbound Logistics.

Widespread adoption of these, and other, safety technologies could result in 2012, which was the safest year ever in the United States for rail according to the AAR (Association of American Railroads), being the 10th most safest year by 2022 and make accidents a rarer occurrence than they are in aviation. According to the FRA (Federal Railroad Administration) Office of Safety Analysis, there were 10,918 rail incidents in 2012, of which 662 were fatal. Incidents include train accidents, highway-rail incidents, and other incidents. The total number of train accidents were 1,743, of which 5 were fatal. The primary causes were human factors (656), track defects (577), and equipment defects (205) with signal defects and miscellaneous causes accounting for the remaining (305) accidents. More automation and safety systems can eliminate the amount of human involvement required, greatly reducing the number of accidents due to human factors, and better monitoring systems would detect the vast majority of track, signal, and equipment failures before they led to incidents. After all, there’s a finite amount of track (of 138,565 miles in the US), a finite number of crossings, and a finite number of trains on those tracks, which can only be in one location at any time. Good automated control systems can eliminate crossing and switching incidents and head-on collisions, and better monitoring that detects 98%+ of defects before they lead to accidents will reduce the accident rate, at least on track, by 98%. The highway crossings will still be an issue, especially if a driver is dumb enough to race the lights, but more crossing bars will help there as well. It might be the case that highway crossings prevent train travel from ever being safer than airline travel, statistically speaking, but there’s no reason that rail (only) incidents can’t be all but eliminated with better technology.

Especially now that there is the incentive to do so! As the Inbound Logistics article on where safety and innovation converge points out, railroads are experiencing a competitive resurgence as an energy-efficient freight transportation option, and this means a lot of money is being pumped into rail, and this amount will increase as time goes on as operating efficiencies can make rail more competitive than truck for trips as short as 500 miles! In addition, with the increasing densification of (mega) cities, and (mega) regions that cluster multiple (mega) cities, it will soon be that the only option left for efficient transport of people will be high-speed rail. North America will have no choice but to bite the bullet and build high-speed rail systems in order to maintain its geographic competitiveness, or the best and brightest from its talent pool will migrate to growing (mega) cities and (mega) regions in Europe and Asia, especially in the finance and technology industries where time is money and people can’t afford to sit in traffic for three or four hours a day (as the net result is a complete sacrifice of their personal life).

And if railroads don’t keep up with safety improvements on their own, because of the money involved, legislation will eventually help them along. For example, legislation passed in 2008 requires that all railroads implement positive train control (PTC) technology on main lines used to transport passengers and toxic-by-inhalation material by 2015. This technology, designed to automatically stop or slow a train before certain types of accidents occur, should go a long way towards reducing fatal accidents.

But it sounds like legislation isn’t required, as the rail industry is already pushing for stricter safety standards than the government requires. One example, as outlined in the Inbound Logistics article, is that the AAR Tank Car Control Committee has already petitioned the US Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) to adopt higher standards for DOT-111 tank cars carrying packaging group type I and type II commodities (which include explosive liquids such as crude oil and ethanol).

In other words, while the rail industry has a way to go, one day rail could be as safe, or safer, than air. Let’s hope it gets there because the rails are again The Road to Riches. The various forms of the automobile may have temporarily overshadowed them, but their glory days have returned.

The First World Postal Services are in Trouble, But …

Royal Mail in the United Kingdom was founded in 1516.

The first post-master general was appointed in the US in 1775.

Canada Post was founded in 1867.

But yet it’s Canada Post that could be the postal service to show how struggling postal services may yet survive in the twenty-fist century!

As reported in this post over on The Economist Blogs, Canada Post, also looking at large pension shortfalls (to the tune of 6 Billion), is the first of the big postal services to make the drastic changes required to keep financially viable in the new world of online advertising, billing, and payments and private delivery services. It appears that Canada Post is going to be the first to eliminate home mail delivery — putting everyone on community mailboxes.

Home delivery to the 5 million households who still receive it will be phased out over four years, beginning in 2014. They will join the 3.8 million households that already go to a group mailbox to collect mail and parcels. (Canada’s remaining residents collect mail from building lobbies, public and private post offices, or rural mailboxes.)

Unfortunately, staying alive will also result in 8,000 postal workers being cut from a postal staff of 55,000. Hopefully the private parcel delivery services will continue to grow, especially with the growth of online commerce in Canada (led by Amazon and it’s recent introduction of its Prime Service in Canada), and pick up a large number of these displaced workers.

Now, the home mail delivery alone, estimated to save 500 Million a year, won’t make that much of an impact against a 6 Billion pension shortfall, but it’s a good start, especially if Canada Post’s savings projection of 700M to 900M a year by 2020, from all of the changes it plans to make, comes true.

Why are Your Inland Shipping Costs in China so High?

As this recent article over on South China Morning Post on Last Mile Transport’s Heavy Load for Truckers implies, it’s probably poor planning on your part.

Specifically, it’s expecting that China carriers can move your product from A to B as fast as North American carriers can get your product from C to D, where the distance from A to B equals the distance from C to D. Although China’s transportation infrastructure is much better than India’s transportation infrastructure, it’s still not on par with the US which gets a 4.14 ranking (out of 5) compared to China’s 3.61 (as per the World Bank’s Logistics Performance Index).

Not only is transportation infrastructure insufficient in some parts of mainland China, or overcrowded in many of the big urban areas, but there is also the restriction that trucks can’t be on the highways after midnight. (In the US, the worst you have to deal with is speed limits that drop 10 mph at night. As long as the driver hasn’t reached his daily driving limit, that truck can drive all night long.)

As a result, when you insist on unrealistic schedules, with penalties for late delivery, you end up costing the logistics company needed revenue that it needs to cover the highway and first-tier road fees, as 95% of the country’s highways and 61% of it’s first-tier roads are toll roads (and the company has to use these roads to ensure reasonable delivery times as the free roads are typically dirt roads not suitable for transport trucks). As a result, knowing that it’s going to be late on a significant number of deliveries unless it illegally drives on the highway at night (which will result in harsh fines), and, as a result, get hit with a large number of penalties, the logistics company has to increase its base rates to absorb the expected losses to stay in business.

Thus, if you acknowledged the reality of the transportation situation that Chinese logistics companies have to deal with, accepted slightly longer delivery times, and planned accordingly, you could reduce your mainland China logistics costs — especially if, instead of using one of the almost 10,000 small or mid-sized companies that can’t take advantage of economies of scale and end up absorbing a lot of empty miles, you use one of the few large companies that have enough trucks, and warehouses, to minimize empty miles and use their scale to their advantage. (Plus, shifting more to the bigger carriers will allow them to become financially stable enough to acquire some of the smaller carriers where their footprint is weak, and this should further decrease costs in the future. Furthermore, when the market sees consolidation working, some of the mid-sized carriers will likely merge to offer more cost-effective options. China is big enough that it can support dozens of major carriers, not just a handful like some of the smaller global marketplaces. As a result, even with significant consolidation, there should still be ample competition to keep prices low.)