Earlier this week FreightWaves reported that regional parcel carriers are confronting a historic opportunity to pick up e-commerce business as FedEx and UPS seek to widen margin with price hikes and volume caps.
According to ShipHero co-founder Nicholas Daniel-Richards, shippers are still scrambling to find technology and fulfillment solutions to manage their parcel moves for this year’s peak retail season. Founded seven years ago, ShipHero provides software-as-a-service, or a SaaS-based warehousing management system, optimized for e-commerce and this year began offering fulfillment from its nine warehouses in the United States. In September, the company shipped 3.9 million labels through its software and physical fulfillment network.
E-commerce shippers look for new ways to accelerate data flows from sales channels to their physical inventory and transportation partners. This year has been especially challenging for e-commerce shippers as unpredictable demand has strained parcel carriers’ networks, degrading service.
“We’re dealing with customers who are either switching from 3PLs or changing out their own internal systems,” Daniel-Richards said. “We’ve never had a busier sign-up period [for the SaaS platform] than the past week. Typically every year it starts to slow down around mid-September because companies are not changing out their logistics setup by that point. In mid-to-late September, everyone thinks, ‘This is what we’ve got.’ But there’s still a lot of people shifting around right now in terms of new accounts created. Last year we were seeing 20 new SaaS accounts per month — last week alone we had 30 sign-ups.”
On the fulfillment side, more than 100 companies per week are becoming ShipHero customers and moving their inventories into ShipHero facilities. Daniel-Richards said that many e-commerce shippers are so desperate for warehousing space and fulfillment services that at the end of sales calls the shippers will inform him they have already told their suppliers to send product to ShipHero facilities.
Luxury and designer apparel, home entertainment products, political merchandise and general gifts have all surged in volume in the past month.
One of the reasons that Shiphero has been able to grow its new fulfillment business so quickly is its hybrid model: It has three of its own warehouses and uses six facilities owned by 3PLs. ShipHero’s warehouse management system runs in all of its locations.
Daniel-Richards said that shippers are dealing with multiple logistics bottlenecks as they ready inventories and secure capacity for what is expected to be a record-breaking e-commerce peak season. Parcel carriers are limiting 3PLs’ and shippers’ ability to buy packaging supplies like boxes to a four-week supply based on the highest volumes shipped in the past two weeks, Daniel-Richards said.
“We’re looking at a 4x volume increase based on inventory coming in and sales performance so far,” Daniel-Richards said. “We’re having to buy packaging material outside of our carriers because we feel like the carriers are way underestimating how much stuff is going to ship.”
Even supposedly automated communications with parcel carriers have been difficult for ShipHero and its customers. ShipHero connects to major parcel carriers via application programming interface (API) to generate quotes and labels and pull visibility data for its end users. Daniel-Richards said that ShipHero has seen a massive increase in support tickets from customers who are trying to get information from the carriers. In a normal period, his tech team may see 10 carrier-related support tickets per week, but lately it’s been 250 to 300.
“There’s definitely more friction for our end customers so we’re building additional redundancies,” Daniel-Richards said.
Just as the largest parcel integrators are using their leverage over their customers to abruptly renegotiate prices, Amazon has placed unilateral restrictions on Fulfilled by Amazon (FBA) customers who use Amazon to house and ship their inventories. Earlier in the summer, while it was adjusting its operations to maintain network velocity for critical goods, Amazon limited the kinds of items that were eligible for Prime shipping. Those customers who were burned by Amazon at a critical period are now building resilience in their fulfillment capabilities by turning to third parties like ShipHero.
“It’s all about resilience, which seems to be the word of the season,” Daniel-Richards said. “Shippers are still looking for redundancy. If Amazon says, ‘We’re not shipping these things,’ now they have another solution in play. Our customers have to find a solution so they don’t get fired; they have to find a solution so they don’t have a bunch of customers hating them if they can’t ship for the holiday season. A good third of the customers coming in are basically shifting to us now — even though they may also be using some other service — to add resilience.”
ShipHero is also reaching upstream to help its customers move their freight into its facilities, working with 3PLs and trucking carriers on securing capacity in a very difficult market.
“Right now you have two ways a trucking carrier conversation goes,” Daniel-Richards laughed. “It goes like this: ‘Yes, we have capacity, you need to jump on it now’ or, ‘You’re hilarious, speak to us next year.’ There’s no in between.”