Commentary: Equal footing for parcel

Although e-commerce is a large contributor to parcel companies’ bottom lines, parcel has always been an arrow in the quiver of large shippers as well.    It would be easy to witness the inexorable rise of e-commerce and conclude that parcel carriers are growing purely on the basis of expanding volumes attached to web-based retail orders.
   But the reality is that parcel has always been an arrow in the quiver of large shippers as well.
   Yes, e-commerce is contributing mightily to the parcel companies’ bottom lines. That’s both directly through delivery of packages and also associated services that integrators can cross-sell like forwarding, customs brokerage, or ground transportation outside of parcel.
   Parcel, however, is widely used by shippers of all sizes. American Shipper’s 2016 Global Transportation Management Benchmark Study, released in July, found that nearly 50 percent of large shippers (those with $1 billion or more in annual revenue) use parcel. That’s 25 percent more often than shippers with less than $1 billion in annual revenue.
   The implication is this: parcel is and long has been a vital mode for enterprise shippers to manage.
   I point this out because there was an enormous amount of activity in 2016 in the parcel segment when it comes to transportation management systems (TMS). I’ve had half a dozen TMS providers either extol their system’s ability to manage parcel now, or tell me that parcel management was a top priority on their future product roadmap.
   Not all providers are building in-house parcel capabilities. Some are partnering with outside providers who have existing connections to global parcel carriers and integrating those connections and functions within their backbone system.
   I expect this focus on parcel capability to continue into 2017. And maybe it’s time to think of the management of parcel as more closely related to other freight modes. Full disclosure: we at American Shipper have generally considered parcel to be an outlier from a procurement and execution perspective.
   The market characteristics are so different—there is a massive concentration of market share among only a handful of carriers—and the technological tools those companies provided tended to be light years better than carriers in other modes. That second part is changing, however.
   UPS, DHL, FedEx, and even USPS still have great tools, and they all invest a significant amount in remaining technologically relevant. But certain TMS tools give shippers more power than ever to manage the peculiarities of parcel shipments internally.
   These tools allow a shipper to not only print courier labels (which, incidentally, is still a problem for many enterprises), but to use their TMS to optimize across parcel and other modes in a more homogenous way. That means helping them determine if parcel is a better option for a shipment than, for example, less-than-truckload. It also means helping the shipper choose among the myriad service level options offered by parcel companies, or assisting them with strategies like zone skipping.
   The same set of judgments can be made on an international level, with certain TMSs allowing a shipper to decide, shipment by shipment, whether parcel is a better choice than using a forwarder.
   Bear in mind, use of parcel on an enterprise basis generally entails higher costs, but that extra cost can be offset by more reliable service, faster transit times, better shipment visibility, or all of the above. Faster, more visible shipments can translate into other benefits too, especially in industries where the goods being shipped are high-value and the cost of lost sales opportunities is significant.
   That’s the story in enterprise transportation management. But on the other end of the spectrum, parcel is clearly a favored mode. Small retailers, both domestic and international, tend to rely on parcel as they grow, especially since many of those retailers have seen their growth driven by direct-to-consumer sales.
   The promising news for these smaller vendors is that while TMS providers have been busy building robust parcel functionality, many of the cloud-based vendors are also targeting smaller businesses with browser-based tools that are relatively easy to implement and not cost-prohibitive.
   In effect, this has made parcel management more pronounced across the entire TMS landscape.
   E-commerce, and its related omnichannel fulfillment requirements, is driving this development. The largest retailers and manufacturers in the world are grappling with effectively meeting e-commerce demand in a way that’s not crippling to their bottom line. Smaller retailers and manufacturers are struggling to understand whether online demand for their product can be fulfilled in a profitable way.
   Those quandaries are divergent in scale of volume and distribution network characteristics for large and small shippers, but at their core, they’re very similar problems. And parcel, due to the customized nature of both product and delivery these days, has to be a viable mode option for both.
   As shippers, it would behoove you to scour the market for TMS vendors that can provide an effective parcel solution—either a standalone system, or in tandem with management of other modes. Ask tough questions about mode optimization and how incorporating automated parcel management might translate into direct and indirect benefits.
   In short, think of parcel like you would another mode, not as an outlier. The technology certainly doesn’t treat it that way anymore.