Is there anything stranger in the supply chain than the parcel shipping market?
I say that after just getting back this week from two good days at the Parcel Forum 2023 in Nashville, at the original, mammoth and of course at times exasperating Gaylord Resort and Convention Center, a short walk away from the Grand Old Opry.
Gilmore Says.... |
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| A small army of consultants exists to help parcel shippers large and small. Many of those consultants used to work at UPS or FedEx, often in either a sales capacity or in one of the carrier’s pricing/revenue management departments. |
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Those who have been to any of the Gaylords will understand my use of the term “exasperating” from the challenge of successfully navigating your way around the property, with the way back some place in the building never seeming to be the reverse of how you got to the starting point.
I called the parcel market strange for this reason: though things are changing, as I’ll discuss below, the market is still of course dominated by UPS and FedEx. The rate structures these two parcel giants are highly complex, made more so by an ever-increasing number of fees and surcharges, e.g., “peak season” fees that despite a shipper having a contract with either or both of the carriers can just be added on to your agreed upon rates.
Each carrier of course has a bevy of services (e.g., overnight, ground, two day, international, many others). The rates are further segmented of course by weight (under one pound, 1-9 pounds, etc.). Shipping distances also have be factored in, with “zone” values assigned based on those distances which also drive the price.
Adding to the complexity, a few years back UPS and FedEx rolled out so-called “dimensional pricing,” which in great simplicity means that if the dimensions of the shipping carton exceed certain thresholds versus the weight of box, the rate to ship that box is increased.
How do the carriers pull this off? They have sophisticated laser dimension machines in their terminals and hubs that capture length, width and height of each box that enters the facility, with the goal of course being to capture more revenue when a package takes up a lot of cube in their trucks versus the weight, which used to be the only way they were rates. You can even have situations where a stuffed box expands enough that it changes its cube and results in a higher fee than shipper expected for that weight and box size.
In this environment, the carriers have a lot of advantage in terms of the power, information, the contracting process and more.
But there are opposing forces.
A small army of consultants exists to help parcel shippers large and small. Many of those consultants used to work at UPS or FedEx, often in either a sales capacity or in one of the carrier’s pricing/revenue management departments. Such inside insight, as you can imagine, cuts down the carrier’s advantage to some degree.
These consultants help in overall parcel strategy (e.g., single or multi-carrier approach); data analysis (with the goal often to have just as much information as the carriers), contract negotiations; packaging strategies; operations strategies (e.g., what does it really take to move from a single carrier strategy to multiple), carton size analysis; and audit services to ensure a shipper was billed correctly for each package and the service that was paid for was delivered.
The are probably a few others I am leaving out.
So it is like a giant game of chess between the carriers and each shipper, with a level of complexity unseen anywhere else in the supply chain.
 Enter the Parcel Forum, started 21 years ago by Joel Dunkel. You can be good, or you can be lucky. Dunkel has managed to be both, putting on a good show, but benefitting from the rise of ecommerce that drives parcel volumes and shipping expense higher, while the carrier-induced complexity continues to grow. That drives the need for better understanding and often help (software, consulting) to keep up.
So this was by far the largest Parcel Forum to date, both in terms of attendees and exhibitors. I will assume Dunkel will do pretty well after all the bills are paid. It is still what the industry terms a “boutique” conference, but it is certainly knocking on the “major event” door.
There is one more thing. Parcel Forum relies on vendors, mostly consultants but some from software companies and others, to deliver the content. There are relatively few shippers telling their stories.
This scenario could easily result in a level of commercialism that really diminished the value of the content. But the Forum overcomes this by a pretty strict vetting process that weeds out bad content and self-promotion from the vendor presenters, and somehow it works. The content is solid.
I attended two keynote speaker presentations and five breakout sessions, all pretty good, but I think I will save the highlights for next week.
That includes predictions we will soon see truly “dynamic pricing” in the parcel market, and how the market status quo is being disrupted by Amazon, growing regional carriers and a resurgent US Postal Service.
Can’t wait to share those conference insights next week.
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