10 Tips for Managing UPS/FedEx Relationships During this Time of Change

By | Shipping

Properly managing the UPS/FedEx service provider relationship has always been a challenge, but more so today than ever before. The dynamic pricing environment and COVID-driven supply chain disruptions are a handful to manage for all parties involved with both B2B and B2C parcel shipping transactions.

However, it is not just the businesses that ship products across America feeling the pain right now. UPS and FedEx are having to manage through unplanned growth, resulting in capacity constraints. Additionally, while the two mega-carriers are experiencing unbridled growth, that growth is in the lowest margin segment of their business: the residential delivery.

UPS and FedEx do an amazing job shipping nearly 40 million packages every day, and in general, provide excellent service on the ground and in the air. However, their operations and employees are realizing considerable stress in trying to provide the best service possible under difficult circumstances.

For shippers and merchants, forging a close working partnership with UPS/FedEx is crucial for managing during these challenging times. Here are some suggestions for keeping the carrier relationship strong, while at the same time, holding them accountable.

  • Put expectations in writing: Carrier representatives are the face of UPS/FedEx and it is up to the customer to take the lead in negotiating guidelines for maintaining open lines of communication between the two parties and setting expectations. To prevent misunderstandings, it is a good idea to put those communication guidelines and carrier expectations in writing.
  • Treat your sales professional with respect: It is not an easy job representing UPS or FedEx, and in most cases, your carrier representative is not directly responsible for bad things that happen. Give the carrier representative the required time to fix a bad situation, and to explain what is driving a bad result. Carrier representatives are more likely to provide excellent customer support if they are respected and treated professionally.
  • Embrace electronic interface with carrier representatives: The carrier representative position can be an overly demanding job, so returning calls to the customer in a timely fashion can be a challenge. I recommend using e-mail and texting to communicate less urgent matters with the rep and embracing Zoom-like teleconferencing platforms for discussion and review of critical matters. While the face-to-face visit is not dead, it may be on life-support thanks to client interface behavioral changes driven by the pandemic.
  • Use online problem-solving tools: Save the critical issues for the carrier representatives and use web-based, problem-solving tools for resolving issues of lesser importance.
  • Avoid accepting gifts from the carrier: Historically, the carriers have curried favor with customers via gifts and entertainment. This should be avoided as carrier performance, pricing and effective representation should be the primary factors considered when assessing the carrier relationships. Business lunches paid for by the carrier are still an effective communication platform for both parties.
  • Commit to periodic performance reviews: Require quarterly business reviews to go over carrier performance, shipping cost and carrier news/policy changes with the carrier representative.
  • Respect your negotiated pick-up time: UPS and FedEx measure the seconds between stops, and it is critical to carrier operations that drivers/parcel loads return to the terminal on time. Respect this carrier requirement by having your shipments ready for pick-up at the scheduled time.
  • Understand the rate negotiation process: Expect this process to be drawn out and be prepared to quantify your claims and positions with the carrier representative. Hold the carrier responsible for meeting progress deadlines during the negotiation process.
  • Do not share pricing proposals across the two carriers: Consider how important a solid, long-term relationship is with both carriers as there are no other integrated carrier options beyond UPS and FedEx. Mutual trust earned with a carrier can be destroyed by directly sharing a carrier pricing proposal with the competing carrier. Additionally, carrier agreements prohibit a customer from engaging in such practices.
  • Understand carrier fiduciary responsibility to shareholders: UPS and FedEx rates are a direct result of balancing what the carriers believe their customers will pay for their overall value propositions against required profit margins to support return on shareholder equity.

Having said all this, the shipper must evaluate the entire carrier value proposition, which is a combination of price, representation, and service, when determining the carrier of choice.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

Pandemic Driven Change in the Workplace: More to Come

By | Shipping

COVID is driving disruption in the workplace, and parcel carriers and 3PL providers are not immune to that change. Whether driven by management, the employee, or government, the response to the pandemic has forever changed the way we live, work and play.  We are entering a period of hypersensitivity in the workplace, especially as it applies to preventing the spread of infectious disease while at work.   That hypersensitivity will continue to drive change.

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5 Reasons Why USPS Is the Best Hope for UPL Adoption

By | Shipping

The UPL is an automated, electronically connected network of parcel lockers, usually managed by a single entity, that can accept parcels across multiple parcel carriers/retailers or users. No such truly universal parcel locker networks of any size exist in the US, although the concept is gaining popularity in some smaller European countries.

Why Does UPL make sense?

  • It allows the parcel carriers to consolidate costly residential deliveries at a single, automated, and secured pick-up point.
  • The UPL is environmentally friendly as it will drive the reduction of delivery vehicles on our congested streets.
  • Consumers are generally concerned about the theft of unsecured, released e-commerce shipments outside of their home. The UPL is a totally secured delivery option for the consumer and provides 24/7 access to support recipient pick-up.
  • The consumer can request direct shipment from a merchant to the UPL or redirect shipments to the UPL via carrier delivery apps.
  • Return shipments can be dropped off at the UPL.

The enormous cost of privately developing a UPL network is a problem, and as a result, the parcel carriers have been more inclined to develop retail access point relationships with national retailers. However, this type of retail store-based, consolidated pick-up solution is fraught with problems.

Why is UPL Difficult?

  • Retail access points are limited to the store’s operating hours and do not provide 24/7 consumer access.
  • Shipments holding for pickup at a retail access point are normally not stored in secured venues within the store and in most cases, visible to the public.
  • The consumer must wait in line for the store associate to process their transaction as handling a parcel pick-up is just one of many tasks a store associate must support.
  • Dedicated pack & ship stores offer a superior service experience for the consumer versus access points like Walgreens and CVS. However, you must still interface with a store associate to retrieve your package, which is becoming a less optimal solution for a consumer that prefers a totally automated solution.

Why is USPS the Perfect UPL Solution?

Our US postal service offers the best solution for the development of a national UPL network, for the following reasons:

  1. The USPS already operates nearly 30,000 post office locations that in most cases, could support an outdoor UPL with 24/7 access.
  2. US Post offices are conveniently located and normally fully developed retail venues with consumer-friendly ingress/egress and abundant parking.
  3. The timing is perfect for the USPS to coordinate further development of its GOPOST parcel locker initiative and morph their small, proprietary parcel locker network into a universal parcel locker solution.
  4. The USPS could reduce operating cost and improve the consumer experience by consolidating some of their services via an automated, UPL solution.
  5. It makes sense for UPS, FedEx, Amazon, and the USPS to join forces and share the cost of developing a single, universal parcel locker network. The two mega-carriers, UPS and FedEx, have historically rejected any type of partnership that would comingle operations to reduce operational cost and drive consumer convenience. However, the two carriers recently worked together on developing the Corona Virus distribution solution here in the US. Quite possibly, this joint initiative will open the door to more collaboration, that could lead to the private carriers linking with the USPS, to mutually sponsor the development of a UPL network.

Whatever you call it, Carrier Agnostic, Universal (UPL) or Carrier Neutral, the timing and circumstances are right for the USPS to take the lead in developing the Universal Parcel Locker concept, across America.

About the Author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

The Drone Delivery Challenge

By | Shipping

It was in February of 2014 that Jeff Bezos announced on 60 minutes that Amazon was developing the technology to support a residential drone delivery solution. Fast forward to 2021, and Amazon is still testing residential delivery via drones, while UPS’s focus is on the business delivery. FedEx is also in the game, but to a lesser extent via a partnership with Wing Aviation.

Drone Delivery Solutions Have Been Slow to Develop

Why aren’t drones used in mainstream logistics and fulfillment? There have been numerous barriers to successfully developing residential drone delivery solutions, with commercial deliveries being easier to implement.

  • Drone technology continues to evolve, and the service providers will be able to take advantage of superior, new technology if they wait for the technology to further develop before they go to market.
  • The commercial and residential deliveries are two very different opportunities and require different solutions.
  • Government regulation continues to slowly advance in support of commercial drone delivery.

Five Specific Factors Affecting Drone Delivery Adoption

Disparate Technologies: No single technology or platform has emerged as dominant, so the various participants are focusing on different technologies and solutions. This is not about refining existing, universally accepted platforms and tech. This is about designing and implementing new technology, which is an arduous process, especially with very few professionals in the space with any kind of serious experience. Moreover, tech advancements have not been able to adequately address the problem of short flight duration, resulting in a limited range for drones.

Residential Delivery Challenges: The consensus has been that rural home delivery should be a natural fit. However, with limited range capability, rural drone deliveries would need to be launched and received from mobile dispatch platforms, close to the address, which means the rural residential delivery is only partially displaced.

Releasing a drone-dropped parcel in immediate proximity to a designated spot, and close to a designated home access point (porch or front door), is also still a challenge.

Furthermore, multi-unit residential complexes and towers would not be suitable for drone delivery.

Business Delivery Opportunites: Drone delivery will simply not work in dense urban environments for obvious reasons. However, hospital and campus-like developments that can designate landing pads should work very well to accommodate drone delivery. This is exactly the focus of UPS’ Flight Forward initiative, which should be successful as health care service providers will likely pay handsomely for immediate delivery of life-sustaining medications and products.

Inclement Weather: Wind, rain, snow, and delivery in ultra-cold temperatures will limit drone delivery operations.

Incongruous Regulations: While slow to develop, we are seeing regulatory changes that support drone delivery. Line-of-sight rule requirements are being relaxed in test markets and must be eliminated, for drone delivery to develop beyond the testing stage.

Very recently, the FAA’s Part 135 certification was a critically important development in support of drone delivery and includes the following relaxed rules:

  • Out of the operator’s line of sight (with appropriate approvals)
  • Over people
  • With cargo weighing more than 55 pounds
  • At night

UPS has already been certified via part 135 for their Flight Forward service, but local municipal ordinances could still restrict drone operations.

If not now, when?

The slow development of drone delivery has further confirmed that designing and implementing new and complex technology takes a long time. However, the question begs: how long is too long?


About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

(Q&A) DynoSafe: Open Architecture Platform for Unattended Home Delivery

By | Shipping

The home delivery is the most important component of the e-commerce value proposition and we are starting to see that value proposition challenged via efforts to redirect residential deliveries to retail access points for consumer pick-up.

Personally, I do not want to go to Walmart or Walgreens to pick up my on-line purchase as I prefer to have those items, including groceries and meals, delivered to my house, and securely released if I am not home to accept the delivery.

It is obvious to me that the solution is a personal, residential smart-box (lockbox) that is based upon an open architecture platform that can universally accept and secure, home-delivered parcels, perishable groceries and meals from any carrier or merchant. One such product is DynoSafe.

I have many questions about personal smart boxes that support the released, unattended home delivery and CEO/Founder of DynoSafe, Rebecca Romanucci, has agreed to answer those questions.

Dean Maciuba (DM): Tell us about DynoSafe and how it works?

Rebecca Romanucci, DynoSafe (RR): DynoSafe is an IoT, smart home, temperature-controlled lock-box safe that secures to your home, protecting your deliveries from theft and the elements and from exposure to organisms that can cause illness, such as the virus that causes COVID-19.

DM: You are saying that DynoSafe is also a temperature-controlled personal storage system, correct?

RR: That’s right. When you place an order, you assign a desired temperature for the order. When the delivery is made, it quickly adjusts to that preassigned setting.

DM: So then, is DynoSafe a technology or personal storage solution, or both?

RR: It’s both! DynoSafe is a smart-home IoT device, that is intended to interact with other smart devices, like smartphones, Alexa, and all smart devices. It also can interact with delivery robots, electric AI vehicles, and drones. The locking mechanism, temperature control components, and more are controlled through the app. A person can easily use DynoSafe for personal storage and access control for outgoing and incoming items. Codes can be provided to whoever wishes to make a delivery or pick up an item to be sent out.

DM: How might your average porch pirate feel about DynoSafe?

RR: The idea came about when I mailed $500 of product to a customer. She said she never received it, so of course, I pulled another $500 of product off my shelf and mailed that to her, this time with her signature required at delivery. A week later, one of my nurses received a call from the porch pirate who stole the items off of her porch. I was out over $1,000!

Porch Pirates go for the easy take, like an unattended box exposed on the porch. With DynoSafe, they don’t know if there is something inside or not. DynoSafe also secures to the porch, has a built-in alarm, similar to a car alarm, that will sound if the container is lifted or if the lock is jimmied, and an alert will be sent to the owner’s smart device, warning them. It will not be easy to lift and toss into a car.


DM: Have the major parcel carriers agreed to integrate your access technology into their delivery platforms and can smaller, last-mile delivery companies easily integrate with DynoSafe?

RR: At face level, technical integration is not a barrier for utilizing DynoSafe. DynoSafe can be functionally utilized by all major logistics/fulfillment companies without the need to directly integrate. In fact, our testing in Seattle and Scottsdale has revealed 100% success of deliveries by all major carriers, including FedEx, UPS, grocery deliveries, third-party logistics companies, restaurant food deliveries, and more. We have never needed to instruct on how to use DynoSafe. In fact, we have never even used a sign.

However, due to the functionality of our smart device, we will offer integrations that allow even more functionality and convenience for both the provider and customer. Abilities like access to delivery and recovery times, temperature logs, and the ability to pre-cool the device before delivery will all be functions that will available to providers who partner with us.

DM: Are you still in the developmental stages of the solution or are you operating in any countries/markets?

RR: We are in the final steps of software completion and are in discussion with manufacturers and distributors regarding licensing opportunities. We have been approached by non-US countries and recognize the opportunities that DynoSafe will not be limited to one market but will solve the unattended delivery problems in multiple markets such as grocery, pharmacy, restaurant food deliveries, and all e-commerce retail delivery and returns.

DM: Is it the consumer that purchases the DynoSafe solution or do the parcel carriers/e-commerce merchants offer the service?

RR: Our research and relationships with retailers have demonstrated that the grocery industry is currently the market that is most negatively affected by ‘attended delivery’. Grocery delivery logistics are inefficient, forced to accommodate ‘customer-driven’ delivery windows that have excessive fuel, labor, and truck consumption during high-peak traffic time periods. We are rolling DynoSafe out as a B2B model, licensing with manufacturers who will sell white-box DynoSafe to (grocery and other) parcel carriers and e-commerce merchants.

DM: What might a consumer expect to pay for DynoSafe and what if they do not have an electrical outlet close to where they want to place the storage unit?

RR: We are in discussion with manufacturers at this time. The cost per unit will be dependent on the final design and features that the manufacturer chooses to include. The base unit is affordable both to the retailer and the consumer. Most homes constructed after 1960 include an outlet on the porch and installing an outlet is approximately $100-$120.

DM: Consumer purchasing behavior has changed dramatically because of COVID-19.  What will the impact be on DynoSafe and will consumers be less inclined to retrieve their e-commerce shipments at a retail access point?

RR: The pandemic has catapulted e-commerce, years ahead of what was predicted. Online food and beverage sales are now predicted to top $100 billion in 2021 and become $250 billion in a few years. 90% of those who currently order groceries online are expected to continue to do so, even after the pandemic. For now, it appears that customers want a mix of options, shopping in brick mortar stores, ordering online and picking up at the store, and ordering online for delivery at home.

DM: Given the temperature control capabilities of DynoSafe, the perishable products market must be a huge opportunity for DynoSafe?

RR: That’s right. Perishable items have always been more expensive to ship and deliver to customers. Grocers are eager to roll out DynoSafe to have an unattended delivery solution. Currently, grocery deliveries are completed at the grocer’s inconvenience, during high traffic time periods using inefficient logistics, and by placing the bags directly onto the porch, which is far from hygienic, and at the inconvenience of the customer, as they must be home to retrieve it immediately, and they place these bags directly onto their kitchen countertops. Unattended delivery into a DynoSafe can be delivered at the grocer’s convenience, directly inside a sanitary container, protected at the right temperature to be retrieved at the customer’s convenience.

DM: Are there numerous competitors developing their own solutions in support of the unattended delivery?

RR: Actually, the competitive landscape is in its infancy with few participants. DynoSafe is uniquely positioned to support the temperature-controlled, unattended/released home delivery for both perishable and nonperishable products.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

The Evolving E-Commerce Value Proposition

By | Supply Chain Management

Online merchants, e-marketplaces,  parcel carriers, and technology advancements each impact the e-commerce value proposition. In simple terms, that value proposition is still based on an innovative service offering: one with multiple features and benefits that make e-commerce attractive to the consumer and drive purchasing behavior. Some of the primary components of that value proposition include:

  • Product speed-to-market
  • Free shipping
  • Easy on-line order process
  • Product availability
  • Simple returns process
  • Subscription service benefits

Component Parts of the E-Commerce Value Proposition

Let us take a deeper dive to better understand these component parts of the e-commerce value proposition:

Easy online order process

The internet changed everything, and as technology advances, it continuously becomes easier for the consumer to order products online. This saves time for the consumer and is a huge benefit in today’s fast-paced social environment.

Product speed to market

Twenty years ago, it might have taken legacy catalog retailers up to two weeks to deliver products to the consumer. Modern online retailers like Amazon saw an opportunity to differentiate their retail service offering and started delivering products faster, between 5 and 7 days, and other online retailers followed. Delivery service commitments have since morphed to 2-days for preferred subscription members and we are now seeing next-day and same-day delivery in select markets. In most cases, consumers did not demand faster transit times, it was the merchants that drove faster transit times as they realized it allowed them to differential their service offering. In the end, the consumer benefitted.

Free shipping

First of all, there is no such thing as free shipping; merchants simply bury the cost of shipping in the sale price of the product. However, there is no turning back and the merchants must now offer a free shipping option to remain competitive. In many cases, strings are attached to free shipping, like fee-based subscription memberships. Once again, the consumer has benefited.

Product availability

Merchants have realized that limited product availability turns off the consumer and turns off sales. As a result, we are seeing giant fulfillment centers constructed, that supports greater product availability, which is a wonderful thing for the consumer.

Simple returns process

The returns process for on-line purchased products was once a nightmare, and in many cases, the consumer had to pay to return products. Today, technology is making the returns process easy; it is usually free and there are thousands of access points where you can drop off a product return.

Subscription memberships

In most cases, these types of fee-based, membership relationships help to make all the new added value, e-commerce services possible, and usually offer additional benefits, so the consumer wins again.

How the Value Proposition Has Evolved

The e-commerce consumer has never had it so good, with merchants adding value at every turn via seemingly free and improved service enhancements. Allow me to detail and take a look at how the value proposition has changed and is benefitting the consumer.

Delivery, Returns and Store Pickup

  • Weekend and appointment delivery, making it easier for the consumer to directly receive their purchased product while at home, without shipment release that can result in loss due to theft.
  • Thousands of new access points make it easier for the consumer to pick-up order or drop-off returns at conveniently located retail locations.
  • Consumers can now request direct-ship from a merchant to an access point.
  • UPS and FedEx offer robust delivery apps that permit the recipient to redirect their deliveries, while in transit.
  • Parcel lockers that offer 24/7 access, are slowly becoming a pick-up and drop off option across the US.
  • The growth of forward-stocking micro-fulfillment centers is making it easier for merchants, both national and local, to offer same-day and next-day delivery, via on-demand delivery solutions.
  • Click and Collect store pick-up is now a widely available option, for the recipient that prefers this solution.
  • Electronic messaging keeps the recipient informed of shipment status.
  • Transit times continuously improve.

On-Liner Purchasing/Returns Process

  • More reliable and faster internet connectivity allows consumers to process purchase transactions in seconds, versus minutes.
  • Purchasing apps can search product cost and availability across multiple merchants, making the shopping and purchasing process faster and easier.
  • Numerous electronic payment options are now available.
  • Mobile device shopping/purchasing functionality now permits near-instant purchasing capability for the consumer, no matter where they are.
  • Tech supported returns capability is making it easier to process a returns transaction and receive near-instantaneous credits to your electronic payment platform, which may not be a credit card.
  • Electronic messaging advises the consumer of order status.
  • The growth of electronic retail marketplaces offers improved product selection options.
  • Free returns and an unencumbered returns process are now a requirement if the merchant chooses to be competitive in the marketplace.

Product Cost

  • E-commerce continues to drive an improved, and nearly seamless electronic shopping solution, which in turn drives price competition and the lowest cost possible for the consumer.
  • E-commerce, on-line purchasing models and supporting technology are creating smarter consumers, that demand competitive pricing. Retail store price gouging, with 40-50 percent profit margins, is a doomed retail model.

The Future: Mostly Good, But Not All Good, E-Commerce Giveth and Taketh Away

There are challenges out there that can and will negatively impact the e-commerce value proposition as we know it today:

  • The integrated carriers like UPS and FedEx will start being more aggressive towards migrating the ugly Home Delivery to an access point pick-up, and they are doing this today by targeting the largest e-commerce merchants with punitive surcharges, specific to the residential delivery.
  • Products that are large and bulky will continue to see additional punitive pricing measures by the carriers as these shipments take up a lot of space, are prone to damage, and difficult to handle. Consumer-based free shipping will likely go away for large and bulky items that still move as a parcel.
  • Consumers that tender a high percentage of returns will need to pay for returns service as the e-commerce merchants realize they need to better manage the bad customer.
  • The carriers will become more aggressive towards redirecting deliveries to access points for pick-up, without the consent of the recipient, as this has already started to occur on a small scale.
  • The growth of micro-fulfillment centers will also result in the increased usage of on-demand delivery services, which probably do not train or vet their drivers as well as the large, integrated carriers do. This could have a negative impact on the overall delivery experience and could be a security concern for the consumer as you have more ununiformed drivers making deliveries via their personal cars.
  • The consumer will have to be enrolled in a fee-based, subscription service with the merchant to realize the benefits of the e-commerce value proposition as we know it today.

The e-commerce value proposition will continue to change over time with an improved service offering and some compromises in the overall value proposition. Pay attention to how the various merchants are treating you and stick with those merchants that demonstrate they value you as a customer. Remember, value is a combination of both price and service.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

Micro Fulfillment: The Move to Same-Day and Next-Day Delivery

By | Supply Chain Management

Amazon continues to drive change in the e-commerce arena, aggressively growing their next-day, Prime delivery initiative. Today, it is nearly impossible for most e-commerce merchants to offer the combination of free-shipping and next-day delivery to most of the continental US, without compromising profit using costly Express delivery services. However, by 2022, Amazon is on track to support affordable next-day delivery to most US addresses and, today, offers the largest on-demand, same-day delivery network, Amazon Flex, in North America.

The question begs, what drives Amazon’s speed-to-market, competitive advantage?

  • Over 110 Giant Fulfillment Centers – No other merchant, 3PL, or parcel carrier comes close to the scope and size of Amazon’s fulfillment center network, which allows them to put more product SKU’s closer to the consumer.
  • Amazon’s Growing Last Mile Delivery Network – This network boasts hundreds of local delivery terminals and tens-of-thousands delivery vehicles/drivers, all focused on the e-commerce, home delivery.
  • Amazon Air – Amazon’s exclusive fleet of over 60 wide-body cargo jets, whose sole focus is to support positioning and repositioning of merchandise in support next-day delivery, is a huge competitive advantage.

How 3PL Companies Can Compete Against Amazon

The Amazon fulfillment advantage is overwhelming, but not impossible to compete against.

For example, large big-box merchants like Walmart and Target are using their stores as forward stocking fulfillment centers to support same-day/next-day delivery and in-store pick-up by the consumer. However, this solution is not an option for most e-commerce merchants, that possess no retail footprint. These merchants are still dependent on their existing, 2-day ground delivery model via regional fulfillment centers.

While the 2-day ground model is reliable and cost-efficient, it cannot support same-day and next-day delivery across most markets that are served via this legacy distribution model.

Two-day ground delivery is not dead, but it is old news.  E-commerce merchants and 3d party fulfillment service providers must design and embrace affordable same-day and next-day delivery solutions, if they are to take back Amazon’s speed-to-market delivery advantage.

The Micro Fulfillment Center (MFC) Revolution

This is how the MFC model works:

  • 3rd party fulfillment organizations and only the largest retailers locate smaller fulfillment centers close to or within large metro marketplaces, nearer to the consumer.
  • These forward stocking, micro fulfillment centers can serve multiple merchants, and support same-day and next-day delivery to the consumers in the immediately adjacent metro marketplaces.
  • MFC’s tend to incorporate robotic product pick technology that drives faster order processing and lower operational cost, specific to labor expense.
  • MFC’s support fewer SKU’s versus large fulfilment centers, and usually warehouse products with high turn-over rates.
  • Ideally, replenishment of MFC’s takes place during off-peak traffic periods, and in many cases, during the late evening and early morning hours.

Delivery Service Options

  • Same-Day Delivery – The MFC model is ideally suited to be supported via a same-day, on-demand delivery solution, which matches up well with Amazon’s same-day delivery service offering, Amazon Flex.
  • Next-Day Delivery – This service option allows for the bundling of multiple delivery stops within a route and the ability to make scheduled delivery stops, which drives efficiency and reduced cost per stop. Numerous carriers offer next-day, same market delivery, to include small local delivery companies and UPS/FedEx.

MFC’s Barriers to Success

  • Land Acquisition Expense – Property within or adjacent to major metro markets is expensive.
  • Robotic Product Pick Functionality – While robotics displaces human labor costs over time, upfront cost is high.
  • On-Demand, Same-Day Delivery – This service can be costly if needed to support unbundled delivery stop routing, point-to-point deliveries.
  • Middle Sized/Small Market Support – The MFC model only works well in large metro markets and struggles in smaller markets where it is difficult to achieve any reasonable kind of delivery stop density.

The 2-day ground fulfillment model is still relevant as there is much that the MFC cannot support and the MFC fulfillment model may only be suitable for smaller SKU’s. However, while the challenges to designing and implementing low-cost micro fulfillment solutions are numerous, they must be overcome if e-commerce merchants are to successfully compete against Amazon’s free shipping, same-day/next-day, Prime value proposition.

Survival in the marketplace is a great motivator towards overcoming barriers to success, so expect MFC fulfillment models to evolve and become viable e-commerce fulfillment solutions.

About the author

Contributing editor Dean Maciuba is Managing Partner of Last Mile Experts, an e-commerce last mile CEP consultancy. He advises clients on e-commerce, last mile, and courier express & parcel matters in the US and Canada.

Questions to Ask Before Entering a Shipping and Fulfillment Partnership

By | Shipping

Starting your own eCommerce venture is a labor of love. Beginning with conceptualizing and designing products to building a marketing strategy, and finally packing and shipping your products to customers – each step gets you closer to running a successful eCommerce enterprise. As your business expands, there will be lots to do, leaving you with little time to devote to the eCommerce fulfillment process. This is where a fulfillment partner can ease your burden, ensuring you stay on top of the packaging, shipping and delivery service. If you are considering outsourcing the order fulfillment process to a vendor, here are the top questions to ask a shipping company. Also, take a look at what you need to determine yourself before selecting an order fulfillment service provider.

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Understanding the Market Conditions Behind Inventory Shortages

By | Supply Chain Management

Understanding the current market conditions sets your business up for growth. When market conditions surge in either direction, companies need to make sure they can keep up with trends and remain solvent in an evolving market. Inventory management remains crucial for both traditional and eCommerce businesses amid fluctuations in the economy and supply chains. A careful analysis of supply chain availability helps businesses predict and prevent inventory shortages during periods when supply does not meet the demands of consumers.

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Fulfillment Center Costs: What Retail Startups Need to Know

By | Shipping

If you are an e-commerce retailer, at some point you may consider enlisting the services of a fulfillment center. Partnering with a fulfillment center has many benefits, but there are a few drawbacks as well. Here we’ll focus on what factors into fulfillment center costs, specifically those that may be prohibitive for a small business looking to expand its e-commerce presence.

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