2017 Parcel Express Roundtable: Paying for peak performance

It can be hard to believe that very much happens in a year, but that theory is put to the test when it comes to the parcel express market.

In fact, over the past 12 months we’ve seen major changes in pricing from the parcel duopoly of FedEx and UPS; the accelerated emergence of regional parcel players; and don’t forget we’re all watching the increasing power and reach of e-commerce giant Amazon as it grows its own delivery capabilities globally.

These developments require parcel shippers to do whatever it takes to stay on top of their parcel game from both a financial and operational perspective. To help them along, Logistics Management has gathered Jerry Hempstead, president of Hempstead Consulting, a parcel advisory firm; David Ross, transportation and logistics director at investment firm Stifel; and Rob Martinez, president and CEO at Shipware, an audit and parcel consulting services company.

Over the next few pages, our experts offer their insight into what’s driving parcel market trends and offers some practical advice for how shippers need to re-adjust to ever-changing market conditions.

Logistics Management (LM): How would you describe today’s parcel marketplace?

Jerry Hempstead: All of the parcel carriers are doing well in volume and earnings—even the USPS is making money if you back out the Congressional mandates. And it’s clear that e-commerce is driving the volumes. To top it off, service levels this year are at record levels and are predictable and consistent.

My observation is that there’s no statistical difference between the service performance offered by FedEx and UPS across a year’s worth of activity, although FedEx offers a faster delivery on ground to about 25% more city pairs than UPS. This pressure on speeding up the promise and refining the networks to make the magic happen will only improve the consumer experience in parcel services.

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Merchants scramble as shipper goes bankrupt

Major retailers are scrambling to work out contingency plans to get their merchandise to stores as the bankruptcy of the Hanjin shipping line has thrown the retail supply chains around the world into confusion.

Hanjin, the world’s seventh-largest container shipper, filed for bankruptcy protection Wednesday and stopped accepting cargo. With its assets frozen, ships from China to Canada were refused permission to load or unload containers because there were no guarantees that tugboat pilots or stevedores would be paid. It’s also been a factor in shipping rates rising and could hurt trucking firms with contracts to pick up goods.

While some retailers’ holiday merchandise has probably been affected, experts say what’s most important is that the issue be resolved before the critical shipping month of October.

Degree of uncertainty

“Retailers always have robust contingency plans, but this degree of uncertainty is making it challenging to put those plans in place,” said Jessica Dankert, senior director of retail operations for the Retail Industry Leaders Association, a trade alliance with members including Best Buy, Wal-Mart and Target.

Plano-based J.C. Penney said Hanjin is one of several ocean freight carriers it uses and when it learned there might be a problem it began to divert and reroute its containers. It said it uses “a variety of transportation methods and ports” and does not expect a significant effect on the flow of merchandise.

Target Corp. said it is watching the situation closely, and Wal-Mart said it is waiting for details about Hanjin’s bankruptcy proceedings and the implications to its merchandise before it can assess the effect.

As of Friday, 27 ships had been refused entry to ports or terminals, said Hanjin spokesman Park Min. The company said one ship in Singapore had been seized by the ship’s owner.

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