Category Archives: Logistics

U.S. Small Package Courier Costs Skyrocketing on January 3, 2011

Small businesses and businesses that rely heavily on couriers (for document bundles and demo equipment transport) be warned! On January 3, 2011, both FedEx and UPS are decreasing the divisional factors used to calculate dimensional weight for Ground and Air packages that are 3 cubic feet (5,184 cubic inches) or larger. The factors will decrease from 194 to 166 for shipments within the US and from 166 to 139 for international ground shipments to Canada.

You’re probably thinking what’s the big deal? That’s only a 1.17% change for in-country packages and a 1.19% change for packages to Canada? Right? Well, yes and no. Mathematically, the change is small, but you have to remember that couriers charge based on dimensionalized weight and the price increases approximately linearly with weight. Thus, as per this article on new dimension and weight shipping factors in MultiChannel Merchant (that deserves a hat-tip for being among the first to pick this up) if you have a large parcel with an actual weight of 6 lbs (with a list rate of $29.50) that used to dimensionalize to 14 lbs (with a list rate of $55.90), it would now dimensionalize to 16 lbs (with a list rate of $65.40), which increases your cost by 17%.

In other words, unless you can “grandfather” in the current dimensionalization factor into your renewal agreements, your shipping costs could easily go up by 15% to 20% across the board as a result of that 1.17% change in the dimensionalization factor.

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Logistics Carriers: Black Boxes are Coming

As per this recent article over on Logistics Management, all five leading U.S. trucking companies endorse EOBRs for commercial trucks. The rationale: to verify legal duty status of their drivers.

Schneider National, U.S. Xpress, Hunt Transportation Services, Knight Transportation, and Maverick USA are endorsing the “Commercial Driver Compliance Improvement Act” (S. 3884) put forward by Senators Mark Pryor (D-Ark) and Lamar Alexander (R-Tenn) which, if passed, would require (commercial) trucks have electronic on-board recorders (EOBRs) within three years. The companies have formed the industry coalition “Alliance for Driver Safety & Security” to urge Congress to pass legislation designed to improve highway safety.

The alliance believes that EOBRs will improve safety on our nation’s highways by applying technology to document driver compliance to the hours of service rules because early evaluation of the Comprehensive Safety Analysis (CSA 2010) data suggests that carriers with higher levels of hours of service compliance have lower crash involvement.

But will they really verify legal duty status? And, more importantly, will they really improve highway safety? If your truck has two drivers, will a box tell you who was driving? And if a driver really wants to push through, I’m sure it won’t be long before someone figures out a way to bypass them, just like your best car thief can bypass any car alarm or lojack in 60 seconds (or less). But more importantly, how will it directly improve highway safety. While it’s true that a tired driver is more likely to get into an accident than an alert driver, how is a black box going to determine if a driver is tired or not? Every driver is different. If the driver didn’t sleep the night before due to illness or personal stress, the driver might tire in just a few hours on a crowded highway. But if the driver got a great night’s sleep, is rested and relaxed, doesn’t have to deal with demanding driving situations, and breaks every few hours, he or she might be able to easily drive 12 hours in a day, especially if he or she gets the next day off.

While I’m all for safety, I can’t help wondering if there is an ulterior motive by some of the bigger players to bankrupt the smaller players. These boxes are going to cost at least 500 per truck, and there are going to be installation, maintenance, and training costs on top. This could break a small carrier operating on a razor-thin margin, and offer no additional security or safety if the carrier’s drivers are professional self-conscious drivers who always obey the rules and keep good books.

But what do you think?

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When Looking To Your Norther Neighbor …

… don’t forget to look to the east as well!

A recent blog on ocean freight over on the Logistics Management site noted that, while the long term viability of U.S. West Coast ports is being called into question lately, Canada’s two leading Pacific Rim ocean cargo gateways are thriving. To date, the Port of Vancouver in British Columbia had an overall tonnage increase mid-year of 20% and the neighbouring port of Prince Rupert has sailed safely through the receding global economic storm, reaching its highest volume throughput since 1997.

What disappointed me is that the article completely neglected our major eastern port, Halifax, where container throughput climbed 41.4% this year. Specifically, container throughput in first quarter climbed 41.4% to 99,450 TEUs from the same quarter last year. While this doesn’t yet put Halifax on par with Prince Rupert (as one TEU is about 12 register tons), Halifax is gearing up for growth. The Port Authority and the Federal Government are investing 73 Million to improve the port’s infrastructure to handle the world’s biggest ships. Plus, with the second largest natural harbour in the world, there’s lots of room for expansion!

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Reverse Logistics Tips from World Trade Magazine

A recent article in World Trade Magazine, “Reverse Logistics: Money Tree or Money Pit?”, had some good suggestions on how to streamline your reverse logistics supply chain to reduce costs and increase customer satisfaction. Quoting a recent study from the Aberdeen Group that found that best-in-class firms reduce return times by over 75%, increase customer satisfaction by 15%, and reduce repair costs by 10%, the article noted that companies best-in-class in reverse logistics have a few things in common.

  1. Standardized Return & Repair Processhodge-podge processes drive up costs
  2. Ability to Recover Costs from Suppliersa contract that allows for the recovery of costs is one thing, the ability to recover those costs is something else
  3. Real-Time Information Retrievalwhen a customer calls, it is imperative to be able to provide them with an update on their return status
  4. Multi-Channel Visibilityreturns can be initiated in the store, on the website, or over the phone, and can be shipped from the store, a reseller, or the home

This leads to the following best practices:

Multi-Channel Visibility

Customers expect a seamless experience. The ability to return an item ordered online to a store or an item bought at a store over the phone if the store is far away is critical. This requires the returns system to be integrated across all of the channels.

Centralized Returns Facility

Reverse logistics goes more smoothly through a dedicated facility which is set up to allow for sorting, testing, repackaging, and shipping of goods to repair centres or supplier distribution centres. These facilities can provide a way of visually identifying common problems quickly and efficiently. Consider the example of the weed whacker manufacturer who was able to identity the reason for a 266% increase in returns by noticing that the switches were white instead of blue, which was the colour of the approved switch.

Quick Problem Identification

Considering that 70% of goods returned as defective actually work, it’s imperative to quickly determine which goods are truly defective and need to go to the repair centre and which goods can be repacked for resale. In addition, with many of today’s products being (built-in) battery powered, many times the problem is just a bad battery, and the repair is as simple as swapping out a defective battery for a good one — something that can be done in the returns depot, saving an expensive return to the repair centre.

Since even the best efforts to improve quality won’t eliminate defects entirely, and since customers will continue to return products that aren’t really defective (or that just need a new battery), it’s important to have a streamlined reverse logistics process to ensure customer satisfaction stays high while costs stay low.