Supply Chain Now Radio Episode 219
The Transportation Trends Series
Presented in Partnership with Spend Management Experts
Learn More: www.SpendMgmt.com
Prefer to watch the podcast in action rather than just listen? Watch Scott and Greg as they interview John Haber for SCNR Episode 219 at the Supply Chain Now Radio Studio in Atlanta, GA.
“I’m reading the news every single day because in the world of Logistics, things change the blink of an eye.”
- John Haber, CEO of Spend Management Experts
In this conversation, Supply Chain Now Radio Co-hosts Scott Luton and Greg White welcome back John Haber, CEO of Spend Management Experts, for part 2 of the Transportation Trends series. In part 1 of the series, John talked about FedEx’s rates for 2020, and in this episode, he will do the same for UPS.
Shippers are conditioned to expect their parcel shipping rates to increase an average of 5% annually. What they may not see coming in 2020 is the fact that carriers are rolling out policy changes and establishing new fees that will drive up the total cost to ship without increasing regular rates more than the anticipated 5%.
In 2020, for example, UPS is making substantial changes to how heavy goods are priced. Prior to the changes taking effect, packages over 70 lbs. are charged an additional $24. Next year, that threshold will drop to 50 lbs., resulting in more packages being categorized as heavy goods.
Beyond pricing changes, each of the carriers is also making moves and trying approaches to addressing the market that affects all of the others. Amazon is cherry-picking the routes that it wants to handle in-house v. that it will run through other carriers. UPS is planning to pull back much of its SmartPost volume, making deliveries itself instead of having the USPS manage the final mile.
Although there are a number of partnerships where carriers are working with bricks and mortar retailers for the sake of pickups and returns, some have proven more successful than others. Kohls’ partnership with Amazon has had a detrimental effect on their earnings, while a partnership between FedEx and Dollar General looks to be far more promising. Watch for more in this area as best practices are established.
John also shared his perspective on some breaking news stories such as:
- The craziest developments in 2019: tariffs, FedEx’s changing relationships with Amazon and the USPS and truckload capacity changes
- Why the New York Times should accept FedEx founder Fred Smith’s invitation to participate in a public debate about their corporate taxes
- When you should be negotiating or re-negotiating your freight contracts (Hint: the answer is anytime)
[00:00:05] It’s time for a Supply chain Now radio broadcasting live from the Supply chain capital of the country, Atlanta, Georgia. Supply chain. Now radio spotlights the best in all things supply chain the people, the companies, the technologies, the best practices and the critical issues of the day. Now here are your hosts.
[00:00:36] Hey, good morning Scott Luton here with you, Liveline Supply Chain Now Radio, welcome back to the show. On today’s show, we are going to be continuing a new series here at Supply Chain Now Radio, the Transportation Trend series, where we’ve been diving into a wide variety of the trends, challenges, issues facing the backbone of the End to end Supply chain industry, which is transportation. We have started this three-part series on a critical development, the shipping pricing changes that FedEx rolled out. And now in the second installment, we’re gonna be diving into the changes that U.P.S. rolled out. So the series is going to continue with our third episode after today’s conversation where we’re going to kind of do a comp comparison and contrast of all the pricing changes and get ready for 2020 for sure. We’re conducting the series with none other than spend management experts, and we couldn’t have a better subject matter expert to walk us through all the complexities of these changes. I’ve learned a ton through these conversations. So more on our special guests in just a minute. Quick programing note. Like all of our series on Supply Chain Now Radio, you can find our replays on a variety of channels Apple, podcasts, SoundCloud, YouTube, wherever you get your podcasts from. As always, love to have you subscribe so you don’t miss a thing. Really quick, let’s think our sponsors that allow us to bring these best practices and innovative ideas to you. Our audience. The Effective syndicate Vector Global Logistics. ProPurchaser dot com epix. Atlanta manymore. You can check out each of our sponsors on the show notes of this episode. Let’s bring in my fearless co-host for today’s show. Once again, Greg White Serial Supply chain tech entrepreneur, trusted advisor, kronic disruptor. Greg, good morning.
[00:02:23] Good morning. I’m glad you brought back Kronic disruptor and I know that they’re like the starting rotation we just swapped. Now. How are you doing? We’re doing fantastic. I don’t think people ask you that enough.
[00:02:33] How are you doing? Well, outstanding week. Outstanding month in November. And this series has been well received. I think we published the first episode of the series. We had hundreds of plays within the first 24 hours, I think. Now, what does that speak to who’s on the show and the best practices, but also the relevance of the top? Yeah, I no doubt who is not challenged with these pricing changes that are impacting peak season and Twenty20 in very big meaningful ways, which we’re going to dove in on in a second.
[00:03:04] Well, we talk about the impact on the carriers. But the truth is, it’s going to impact consumers as well, because as these fees go up, which they seem to always. Yes, right. We never have these conversations where the fees are going down. Yes. It’s going to it’s going to have to get passed through to the consumer. So these are things we ought to be concerned about as well as consumers.
[00:03:24] And as we doubled down on the first episode, there’s no such thing as free shipping. That’s right. So let’s bring in and welcome our special guests here once again today. John Haber founder and CEO, Spend Management Experts, a big advocate, that of all things, no free shipping. Loved that from the first episode. John brings over 25 years of Supply chain experience. And you’re working with John, you and SMG working with all kinds of companies, including some of the biggest brands to drive greater efficiencies within our supply chains, right? Absolutely. Thanks for having me back. You bet. Well, again, the first episode was a home run on the FedEx pricing changes and looking forward to diving into the U.P.S. changes here today. But before we do that, let’s see what’s going on. Forecki. Supply chain.
[00:04:12] All right. Radio these days.
[00:04:13] And so this is really interesting and I think timely considering what we’re about to talk about and the time of the year. So we’re airing live now. But I think this will release probably the first part of the week of Thanksgiving. Ryder. Very quickly. Yeah, quickly. So get this. A survey recently done by Zebra Technologies, 39 percent of consumers have ditched shopping in stores for online purchases because out of stocks in the stores. So that’s some 75 percent of millennials have left a store because without purchasing the item and instead bought it online and over 50 percent of Gen Xers. Way to go. My generation the best. Yeah, that’s right. Stand strong. You know, have left a store in, you know, brief story. One of the pivotal moment, moments in one of my last technology ventures was when my wife went into a Best Buy storm and wanted to buy TV sound system.
[00:05:16] Everything for a room theater room we were doing. And the person in the Best Buy store said, sorry, we don’t have it. And she said, no problem. Right on her phone, she went to a Ubiquiti. At the time, we had to call them a ubiquitous online retailer, Amazon, and bought it right there in front of the sales rep. And that’s happening more and more.
[00:05:38] I think you’re seeing it on the omni channel, struggles of retailers, ship from store is creating havoc on the inventory in the store. It is. And it’s causing a lot of problems.
[00:05:48] It is. And and, you know, returns are a big part of what stores are used for these days. And it’s it’s interesting, because if you go far enough back into retail, the whole issue with this is because retailers separated their store operations efforts from their online efforts, because the store operations management didn’t want to be burdened with the cost and possible impact on their bet on their bonus of this new fangled online retail.
[00:06:15] Yeah. So you look at the returns with Kohl’s where you can redeem Amazon’s packages. Kohl’s had a dismal earnings report. Yes, weak. And they’re not seeing that it’s driving additional purchases in the stores. Right. So it’s a big problem. That’s all.
[00:06:30] That is really interesting because since I think there’s no direct relationship because other retailers do see some some creative value of taking returns in their stores, but it’s their customers. If you’re taking returns for Amazon, you could be taking returns for a bicycle. And and Kohl’s doesn’t sell bicycle’s or anything related or you can be taken returns for a fish tank. And so there’s not a there’s not a, you know, relationship to what they might buy in that store. And I think that’s that is a lingering problem with them. So in the spirit of one of my favorite terms, a B.A., anything, anyone but Amazon, there’s this whole class of providers out there who are trying to create services similar to FBA marketplaces and fulfillment and fulfillment services and and last mile services and that sort of thing. Another little tidbit of news is that several, three P.l. Providers are strategizing on how to work with. And in some cases against Amazon. So, sure, quite months, months or years back, I wrote this article, Enemies with Benefits about Amazon and How You Survive in the Amazon era. And some of it is to embrace that and some of it is to work against that Amazon’s influence in the marketplace to your own benefit as well.
[00:07:49] But, John, I think you had some recent conversations with well, there’s some organizations. Yes.
[00:07:57] Week just yesterday, I was at the huge new facility in McDonough, Georgia, with the come to gold project verte. And it’s an end to end Marcus Marketplace fulfillment all the way to last mile delivery using blockchain, fantastic up and coming company. And they’re they’re here to compete with Amazon. That’s great.
[00:08:20] There have been other providers who’ve done that in the past. They have eBay, eBay Enterprises, which became radio. And now as Belgian post tried that, they were never able to kind of hit the profit model and, you know, and stemm cash flow to be able to do it. But we’re talking about about one hundred and forty two billion dollars worth of Logistics costs that these these companies incur and and provide services around. So it and there’s no sign of slowdown of growth in that area. So I think that’s a good that’s a good sign for consumers, for Amazon to have competitors. Yeah.
[00:08:54] And speaking of blockchain, John, there continues to be more more practical use cases out there. I think a lot of folks within the global End to end Supply chain community here, blockchain all of a sudden click. Right. Right. However, just like we’ve been reporting on the show between Hewlett Packard and DHL, they’ve been using blockchain to better streamline, went off orders. News came out in the last week or two about, well, how Wal-Mart Canada is using blockchain in new ways. It’s delivering a real practical return. We’re gonna see more more of this in the months ahead. Right. Sure.
[00:09:27] I think people are confused by blockchain. A lot of people don’t really understand what it means and what it is. Yeah. Blockchain is here to stay. And if you look at the large organizations, IBM is developing really solid blockchain proprietary methods and methodology to drive and change the power of the inalterably record.
[00:09:49] Right. I mean, if you think about this, the power of being able to track things and not have it, if you think about it as simply as possible. Being able to track what happened and not have any alteration occur to that gives a credible accountability in supply chain. So there are really in any step-by-step process in truth. So there are a lot of uses for that. Absolutely. And really valuable.
[00:10:12] I mean, one of the Amazon’s biggest problems is counterfeit goods sold on Amazon and blockchain. Help solve that problem, right?
[00:10:20] Yeah, that’s right. Well, and the sourcing also, I mean, they’ve had some trouble with not not just counterfeit, but some whatever we want, undesireable paint, lead paint and things like that. Some undesirable. Opponents of some of their products as well. Yeah, where where the materials are being sourced. Right. Right. All right. So one final tidbit, and I think this will help us kind of roll into our discussion today. So FedEx announced just yesterday, I think, that they expect to move about 33 million packages through their global network on Cyber Monday. So think about that from a scale standpoint, you know, credible. They’re predicting that overall predictions are that e-com sales will be up around 5 percent or so. I think it will be higher based on first news we heard today. People are. Having reason to continue to abandon the in-store experience and and, you know, I think that’s an incredible amount of volume. And and FedEx and U.P.S. are taking full advantage of that volume. They are so well. So let’s let’s switch gears a little bit.
[00:11:35] So let’s get to know you a little bit better before before we talk about those issues around shipping. So I’ve been watching this series called Poldark and I think of you as the Ross Poldark of parcel shipping.
[00:11:49] That’s a new one for me. You were once once part of the as usual, I hear a lot that Poldark is a do. He’s a stud. I like that. Yeah. Yeah.
[00:11:57] He was he was a member of the establishment and now is helping us common folk navigate the establishment. And I think that’s similar to what you do, right? You saw it. LG Yeah. You sort of help people understand the environment that they’re operating in and how they can, you know, how they can make their way through it in a cost effective fashion so we can talk about some of those costs. But tell us a little bit about you and you know where you came from. I can’t believe there’s anybody watching here that doesn’t know who John Haber is. So you don’t have to go back to your childhood. But, you know, just tell us a little bit about what shaped your kind of vision and worldview.
[00:12:32] In my previous life, I spent about a decade corporate finance and corporate strategy at u._p._s.
[00:12:41] And I was for about half that time, I managed a group that was monitoring the profitability of U.P.S., whose largest customers. And what I saw during those years was that U.P.S. was making too much money on the largest customers, really, because there’s a lack of competition in the U.S. domestic, small market, small parcel marketplace. And so it’s similar to Poldark U.P.S. that would say I went to the dark side and now I’m helping large shippers create a competitive advantage in the supply chain by optimizing their transportation, distribution and fulfillment. And it’s critical, especially if you look at retail. The supply chain can either be it’s either a make or break and it could be it’s almost survival of the fittest. If you look at all the bankruptcies in retail and the demands of free shipping. Right. It’s just it’s an imperative that you have an optimize supply chain and that’s what we help deliver to our customers. It’s been management. So form spend management in 2011, spent five years before that at MPI, which is a boutique consulting firm here in Atlanta that helps companies manage costs and I.T. and telecom. So we’ve been helping shippers optimize their costs in the supply chain for almost the last 13 years while saving America money for 13 years to have that be that be on your Web tagline.
[00:14:22] Yeah, that’s right. Well, so tell us a little bit about that. Look, it’s just it’s almost December. Martin Bryant. It’s almost December. So when you look at look back at 2019, what stands out to you or what’s surprised or concerned or enthused you over the last?
[00:14:40] Yeah, 2019 has been a crazy year. There has been so much going on from the tariffs, which have had a huge impact on shipping and imports and exports and on retail capacity in the truckload market has changed drastically. You’ve got FedEx, which has and Amazon have parted ways. That’s a billion dollar revenue loss for FedEx. FedEx also announced that they’re pulling a lot of volume back on the SmartPost product and they’re going to deliver it with their own vehicles. So that’s going to impact the USPS.
[00:15:21] So we SmartPost is that’s where they’re using that’s last mile delivery by the post office.
[00:15:27] And U.P.S. has Sheer Post FedEx says SmartPost DHL. E-commerce is also uses last mile delivery by the post office. But what we see is that the three Amazon, U.P.S. and FedEx are pulling volume back from the post office into their own networks. It’s going to have a huge impact on the post office. In the post office is really struggling. If you like there or. Yeah. So it’s it’s it’s going to be harmful for the post office. I’m not sure how you fix the post office with the pension problems they have.
[00:16:05] It seems like we’ve been talking about that for decade.
[00:16:07] Yeah. What you got to wonder, what is what’s going to be the straw or a ton of bricks that’s going to finally brighten? Cain was back there. It just did the losses keep mounting, the challenges keep mounting, and all the while that the market and that landscape for for how they’re making deliveries, that’s constantly changing and transforming as well.
[00:16:27] So it’s got a double whammy. Gotta give. It’s not going to give. I can tell you it’s not going to give. It’s a semi governmental entity and they are beholding to the unions. Those two things will will force them to bleed money out of us, consumers and taxpayers till the end of time. It’s not going to change.
[00:16:44] Well, it it will strike up in a series that deepened.
[00:16:47] Oh, yeah. That’s such a downer. Let’s keep we’ll keep driving for now with John Haber with. Yeah. Asami. So. So Scott loves to ask this question because he reads I’m not much of a reader myself. Or do you read. I read nonstop.
[00:17:03] I am not reading and not really reading books. I’m reading the news every single day because in the world of Logistics, things change the blink of an eye.
[00:17:14] I do. What’s here? So give us an idea. What’s your most favorite read? Or maybe the biggest revelation you’ve seen in something you’ve read recently?
[00:17:25] I would say my most favorite recent read was the article in The New York Times last Sunday on FedEx. And they’re them not paying any taxes last year. And as a result of the article, Fred Smith, the founder of FedEx, has challenged the the author of the article to a public debate.
[00:17:50] Wow. Really? And which, you know, I tend to think that the factual information in the article is correct, but I really want to see this debate. And I think that The New York Times is pretty wimpy, because if you’re going to write an article and you think it’s accurate, why not get up and defend it? So I think that what I see, you know, is there’s a lot of media that is spreading half truths. I’m not saying that articles have truths. Right. But it’s hard. If you’re going to stand up on that and be behind your article, then get up and debate Fred Smith. I think that would be seen to TV. Yeah. Let’s see. I would rather see those debates and some of the others will have it.
[00:18:33] But that I mean, kudos to Fred Smith, because I’m sure anytime an organization that big leadership’s got to be real careful when they wade into, you know, different conversations. But for someone to draw a line in the sand and challenge, you know, and stand up for the organization, that could. We need more of that.
[00:18:51] I think it’s about time. Yeah. I mean, really? Because, look, the way that news happens today is the first one to say it is your authoritative and accurate. Right. So I think you need. If you can’t be that and you can’t always, then you’ve got to actively and openly and broadly challenge that. And that’s going to be a really interesting thing. I didn’t know about that. That’s really cool.
[00:19:12] Yeah. Yeah. You should check it out. That’s why I like asking the questions. So aside from New York Times, where else do you get news? An industry insider?
[00:19:20] I get a ton of content from LinkedIn and Twitter. And because it’s it’s one those two places, I can go and get so much information and get it very fast. I get it condensed. And so I spend a lot of time on LinkedIn. Scroll through, scroll through it. See you guys on there. See all your great material. Kathy Roberson, who’s one of the best head research analysts to putting out great content. But the CSC MP newsletters are also good. But LinkedIn is really my source, my go to source on a daily basis to understand what’s happening in the in the moment you start.
[00:20:03] Do you follow any particular hashtags or do you just I mean, LinkedIn does such a good job based on what your career is and that sort of thing.
[00:20:10] You have to follow any particular hashtags or anything to get what you want or following a lot of the trade public trade publications on Transportation Journal, Commerce and Van Logistics. Yeah, Parcell magazine where I’ve got a column following all those follow obviously Supply Chain Now Radio.
[00:20:32] Thanks for that plug. That’s outstanding.
[00:20:37] So and you know, one last comment, because we’re gonna dove into these u._p._s pricing changes. You know, Twitter gets a bad rap in many. You know, it’s like saying podcasts, right. Some folks are to have kind of preconceived notions. But, gosh, a wealth of data and information on Twitter and how you can find it right then and the timeliness of it that that’s as a news source. Twitter is highly underrated.
[00:20:57] I’ve always thought, well, you can it is now because you can filter it such that you can cut out all the noise. And, you know, there is an answer and you can see what you want to see. That’s right. Right. So, yeah, you don’t have to. You don’t have to hear shouting contest right now.
[00:21:11] Well, today we are really looking forward to. Diving in and getting your expertise on these U.P.S. pricing changes, which is going to reverberate out throughout the marketplace. Impact peak season or continue to impact peak season at an extended peak season, but also 2020. So they were just released with just the last day or two. Let’s get your initial thoughts on the pricing changes, the big key takeaways here.
[00:21:38] The big key takeaways are that it’s another at least 5 percent rate increase. And it doesn’t sound like that’s a big deal because shippers are conditioned to expect a 5 percent rate increase every year. If you look at the consumer price index over the last 10 years, that’s only going up maybe 2 percent. And so U.P.S. and FedEx are raising rates 5 percent every year. That’s more than double the price increases that competitive industries are experiencing. So that’s kind of just, you know, people were snoring at the at the 5 percent increase. The reality is the increase for a lot of shippers is way more than 5 percent due to some policy changes. They’ve got some a new additional fees that they’re rolling out. But the policy changes are going to be incredibly impactful to shippers, especially people that are shipping heavy goods.
[00:22:36] Right. Which is happening more and more these days. I mean, people buying all kinds of things online. Right.
[00:22:42] And so speaking of the heavy goods, I believe one of the biggest changes there is lowering the ceiling of a when those extra fees kick in. Tell us more about that.
[00:22:52] Yeah. Both U.P.S. and FedEx have announced a policy change for additional handling of packages, for packages of of certain weight. Prior to 2020 rates at 70 pounds, there is a surcharge that is applied to a package in addition to the freight charge. And it’s called additional handling weight. And it’s a four dollar charge per package that is being lowered to 50 pounds in 2020. We just finished doing a cost estimate for one of our big retail clients and it’s going to add two million dollars in additional cost in 2020. So when you think they’re only taking a 5 percent rate increase and they’re not taking a 5 percent rate increase because we’ve helped them to negotiate a 3 percent fixed rate increase. Right. These policy changes are ways to circumvent the rate contract language and push through much larger rate increases. Shippers don’t understand how much is this is going to impact them.
[00:24:01] Sluggy. Twenty four dollars and sound like much in and of itself. But when you start to your point, when you start mapping it out across enterprise and certainly over multiple shipments and high volume shipments, they can add up, as you’re saying to me, in dollars and more in a heartbeat.
[00:24:15] Well, I mean, if you’re talking about something like a fish tank, which is big and bulky, heavy, I mean, there’s not that much margin. I mean, this the thing that concerns me is how are retailers going to absorb this? Because their margins are relatively tight as it is. And the truth is, they’re not going to absorb it. They’re going to have to pass it through.
[00:24:35] They’re going to they’re going to have to. But it’s very difficult because every 16 seconds for shipping.
[00:24:40] Right. Right. But I mean, they may reflected another way in the price of the product and when they may absorb a portion of it. But we’re going to continue continue to see pricing edge upwards because of these kind of costs. Absolutely. So how does it how does a retailer combat that? I mean, you say that the the contract terms allow FedEx to do that. Is there a way around around that or do you have to wait till the next contract negotiation and try to know, figure out you should never wait till the next contract, till your contract expires.
[00:25:13] You need to be proactive in managing your costs on a daily basis because the carriers are changing. The rate increases no longer just happen in January. More at the end of December. Right. We’re tracking rate increases. They’re occurring on a weekly basis. And so you’ve got to pay attention to the fine print and you’ve got to get back up to the negotiation table immediately. Right now, we’re running forecasts for all of our clients, showing them what the cost impact is. And we’re going back in and challenging the carriers and renegotiating. And if we need to switch to swap out, you know, to a different provider because of these cost increases, then all options, we’re going to do it.
[00:25:55] All right. So it’s a big early lesson. Learned, learned there. Don’t wait. Read the invoices, follow, dove into the details and be proactive. You always have options. So before we talk more about the three new surcharges, which is a little bit more to be expected, any other? Sites or response to the policies, the impactful policies in general?
[00:26:21] Yeah. The responses are obviously you’ve got to really understand. We just did a presentation, a partial forum, a big trade show on 20 on surcharges and surcharges are becoming a much larger portion of your overall cost structure. So we went through how to how to understand how the surcharges are formulated, understand the cost, understand how to forecast them. One of the other big changes that’s coming out with both U.P.S. and FedEx, that’s a policy change, is that they are increasing the number of zip codes that deliver every surcharge applies. They’re increasing that by almost 5 percent. So if you look at how much the cost increases are for delivery surcharges, they’re tremendous on the extended rural deliveries.
[00:27:14] This is really this is really interesting because I’m I’m thinking back to our discussion around the FedEx rate changes. That’s almost like U.P.S. is mirroring those changes that FedEx has made.
[00:27:24] They had a fair estimate. FedEx announced the policy change from 70 to 50 pounds. U.P.S. followed suit. Exactly. Our specialty is delivery area surcharges. What is it in the bigger sense? What how is it u._p._s? What market share? They look into acquirer. What are they looking to do with these delivery area surcharges?
[00:27:46] Well, what is happening is that you see a lot more rural deliveries and each every zip code in the US is classified by u._p._s.
[00:27:59] Fedex is either an extended delivery surcharge, which is going to be the more rural areas, a regular delivery surcharge. We may be in a regular delivery surcharge right now, even though we’re in Atlanta, Georgia, or there’s no delivery or surcharge that applies. But what’s happening is that in the more rural areas, people are not driving 20 miles to a Wal-Mart. They’re ordering it online and they’re getting free shipping and it being delivered to their home. So there’s a big increase on the deliveries to these more rural areas. Huge price increases on that surcharge. U.P.S. is going up over 18 percent on that surcharge.
[00:28:47] In particular, it is that how is that going to factor in to the ratio of business that falls between U.P.S. and USPS? How do you see that breaking?
[00:28:58] Well, what you see is that Amazon, who’s delivering a lot of packages, they’re cherry picking volume in the dense urban areas and then they’re trying to push the lower density deliveries to the post office, to U.P.S., to FedEx. And those are much less profitable deliveries. So those cost increases are really due to what Amazon’s doing there in the facts and in the fact that the the rural deliveries are increasing so much because anything I think they’re pushing some of that lesser volume to their prime carriers because those are contract carriers.
[00:29:39] Absolutely. Cute little gray vans. And they are very good looking fans, by the way. But you see driving around, those are not owned by Amazon. Now, for the most part, they are owned by contract carriers like the people who deliver for FedEx, DHL, ISP, like the independent service provider. Yeah. All right.
[00:29:56] Let’s change gears a little bit to talk more about three specific new surcharges, the processing fee, I think, related to imports. Airport imports, exports, customs, the prohibited item fee and the rebate fee rebuild fee. Talk more about those.
[00:30:11] Yeah, those are like I said, don’t see those as game changers. From a cost standpoint, the prohibit the prohibited items, those prohibited items have existed. What they’ve done and what they’re going to do is they’re going to put in a $150 fine.
[00:30:29] It applies to a lot of things. One of the interesting things I saw listed was shark fins. I don’t know how much how many people were shipping shark fins around, but obviously very sensitive. You’re not supposed to be shipping marijuana through u._p._s. So that’s also on the list. Yes. And that’s when it’s shocking.
[00:30:50] Yeah, most of it’s common sense. But what they’re doing is going to make a phone call. Yeah. Big problem for you right there.
[00:30:57] But they’re imposing, you know, large fines when they catch people shipping these banned items. No currency watches that are over a certain value. I believe over five hundred dollars is not supposed to move through the u._p._s network. So it’s it’s it’s. Meant to deter people from shipping these items with these large fines associated with with these banned, banned goods, and I’m assuming they’re impatient for lack of a better word, impounding these items, confiscate them.
[00:31:29] Yep. Yeah, absolutely. And then some of the usual suspects, again, we kind of talked about the most the made the most impactful aspects. The person changes upfront and they were kind of moving through these surcharges. And then you got some these usual suspects, the address correction fees, the signature fees. Some of these things were parleys place pricing changes as well, right?
[00:31:49] Absolutely. Signature required is a big one. You’re seeing big increases on those charges. It’s you know, people are moving to more signature required because there is a lot of theft of packages. And, you know, if you if you have a signature, then you can prove that someone received the package. I was just in New York City Monday through Wednesday. I went to my cousin’s apartment building. There must have been fifty packages sitting in the lobby on a table. And I mean, so it’s just not they’re not secure. And what the signature required is, it helps it helps you on a claim that it helps close the loop. But it takes more time for the carriers. And so they’re increasing the fees associated with that. Mm hmm. Address corrections is one my favorite $17 to do an address correction. That’s probably double the cost of what will you be paying to move the package from point A to point B? It’s a huge margin area in most cases. The address is corrected before the delivery attempt is even made. So that’s a that’s a money maker.
[00:33:13] Ok, so before we move in2 suggestions from urin or how to mitigate some of these and any other changes that we’re leaving out that that you found really important to mention.
[00:33:26] Again, what what I think is really important for people to understand is that there are these price increases which have just come out and they’re announced. And you really need to understand those. They’re going to be more price increases in 2020 every month. They’re going to change the fuel surcharge indexes. You’ve got to pay attention and monitor this stuff and you’ve got to really analyze how these changes are going to impact your business. You’ve got to have good forecasting techniques in order to really understand the impact to your business, because it’s the survival of the fittest, especially in the retail world. And shipping is one of the largest costs. It could be you know, it’s it can make or break your company and you need to preempt these things.
[00:34:18] I mean, you hate to find this out after the fact. Right. I mean, you need to preempt these sometimes ridiculous feats. Right.
[00:34:29] Like, you need to be at the negotiating table now. You need to be negotiating these charges before they go into effect.
[00:34:37] Yeah. And get it into your process to stay ahead of it if it’s gonna change every month. You’ve got to have someone on top of this thing all the time.
[00:34:45] You know, there’s there are a lot of people that think, well, I have a can’t I have a pricing agreement and it’s it goes another three years. I can’t dreadlock. It’s locked, frozen.
[00:34:57] You can renegotiate these contracts anytime. So that said. So let’s back up on that. So, you know, all the conversations you’re having. Oftentimes a customer mindset is, okay, we’ve got this contract. It’s locked in place when negotiated the best terms for the next three years or five years, whatever it is, we can’t touch anything. That is not the case.
[00:35:16] That is not the case. You can open those contracts any point in time. I mean, and why shouldn’t you? If they’re going to change, if they’re going to add they’re going to be a changing issue of price increase, you should be able to challenge that date. They’re changing the game. You should be able to address it at any point in time.
[00:35:37] I hear the passion in your voice around this, right? I mean, you really don’t like this at all, do you? Well, we’re very passionate. We’re here to protect our customers. Yeah. All right.
[00:35:46] So you’ve already offered some of the some of the best practices for for mitigating this. You know, get proactive, get much stronger, your forecasting. You know, challenge the contract. Don’t wait until it expires. I want to talk more about some of the unique partnerships that you’re seeing, FedEx, U.P.S. and others to form with these retailers. But before we talk about those, anything else you would suggest to anyone listening? That’s dealing with these changes with its FedEx or u._p._s.
[00:36:19] The most important thing which we which we see a lot of people don’t really have is information, visibility and transparency, as I mentioned during our last discussion. You have to have visibility and you have to have good data in order to make informed decisions. And we work with some of the largest shippers in the world, and it’s amazing how fragmented their data is. And so you’ve got to have processes set up where you’re getting good data, where you can analyze it and you can act upon it. And that’s the key to managing this very complicated shipping scenario today.
[00:37:03] Is that a pretty manual process?
[00:37:05] I mean, are they loading stuff into spreadsheets or we see clients that are still getting paper bills. They’re not even getting the electronic data feeds. I mean, you get an invoice that maybe a thousand pages long. How can you. Paper, paper, invoices mailed.
[00:37:21] Wow. There’s no way to analyze it.
[00:37:23] Come in a box and barely safeguard it. So it’s a time box. They charge 24 bucks to deliver. All right.
[00:37:32] So it’s a great note to fear and visibility and transparency is all the rage these days in global supply chain, but for good reason. Yes, it’s tough. It’s tough to manage. Tough to leave. Tough to make smart decisions if you don’t have it. Absolutely. All right. And we’re talking millions and millions of dollars at stake. Millions and millions easily of dollars. All right. Let’s talk about some of the really neat partnerships we’re seeing play out across the retail environment. For starters, we’ll pick your brain on what FedEx and Dollar General are doing.
[00:38:02] What FedEx and Dollar General are doing it help is intended to help solve the problem of the rural deliveries. If you look at where dollar generators are located, Greene usually in the rural zip codes. And so they’re setting up a process where you can go to Dollar General. You can ship your packages with FedEx. You can pick up your packages from FedEx. That creates delivery density and pickup density for FedEx by go into a dollar general rather than to each individual address. It creates convenience for the customer to be able to, you know, have a secure location, especially if you’re not at home. So there’s it’s a more secure delivery. And for Dollar General, it’s also intended to increase foot traffic to their stores and hopefully drive an increase in sales for them.
[00:38:56] Do you think a concept that Dollar General is the New Age general store, if you think about it everywhere? Yeah, I got 17 in Walton County on one block.
[00:39:06] Let’s let’s say earlier, much earlier in the interview here, you were talking about how Coles and the Amazon relationship hasn’t played out like like it looked like it would on paper. Do you think that this relationship between FedEx and Jolt Dollar Dollar General will result in more foot traffic for these stores?
[00:39:23] Yes, I do believe that. I think it will increase foot traffic for Dollar General. I think Walgreens and FedEx also have a partnership. U.P.S. is one with with Michael’s stores. Who’s a client of ours. And I think that those will increase foot traffic for them and lead to additional purchases. You’ve also got these drone deliveries now. U.P.S. and c_v_s_ had a drone delivery, U.P.S., it’s got drones and a lot of medical centers where they’re, you know, moving stuff from one building to another building. All right. FedEx has got drone deliveries with autonomous vehicle, autonomous vehicles. But these partnerships are they’re designed to create density, both pickup and delivery, as well as increase the foot traffic to the stores. I’m not sure why the Kohl’s Amazon scenario is not working out. It’s very puzzling. There wasn’t a lot of information on that from their CEO during during the the earnings call. Wall Street wants more information. They’re saying that it’s going to be better and it’s going to improve. But so far, the results look fairly lackluster.
[00:40:43] So only drones. I haven’t seen the drone carrying the packages yet, but we are in Austin, Texas at the E.F. T Logistics CIO forum and we’re talking with Rob Cook Rob Cook with Sheer Logistics, who lives in the triangle part of North Carolina. Yeah. And he was talking about the first time he’d seen a drone carrying a package fly over his house. And it was one of those moments that, you know, you won’t forget about. Right. Yep. Have you seen the drones in action yet?
[00:41:12] I have not personally seen the drone. Action. I think that drones probably at Wake Medical Center where u._p._s. It’s one of the locations where there are those during those dry drones are active doing commercial movements where they’re actually getting paid and forget.
[00:41:26] You’re from North Carolina. You know that stuff. It’s like a triangle. Yeah, that’s right. I have not had a drone.
[00:41:31] Buzz, buzz. My buzz over me yet.
[00:41:34] But next week. Looking forward to it. Yeah. All right. So. And what going back also, Michaels Michaels is at the. What is their model? They are saying arts and crafts and craft. OK. So they don’t quite have the footprint that a Dollar General has, but still a sizeable footprint that U.P.S. is looking to to leverage.
[00:41:56] And they’re often in similar type centers, not Dollar General, but in similar type centers there. There were widely distributed.
[00:42:04] Absolutely. A lot of, you know, bed, Bath and Beyond. Right. Goals.
[00:42:09] You know, our malls build power malls. The Dollar General, I think is is much more strategic just because of where they’re located.
[00:42:19] And I think that that is I think that’s a big move for FedEx.
[00:42:24] Outstanding. Look forward to have you back on and have you speaking as these developments play out and what which ones work and which ones don’t. One last comment before we make sure our listeners know how to reach out to you, John, and your organization, SMG. Let’s talk about Amazon box experience we had in Texas first. First time, I think we both had use that right up.
[00:42:47] First time I had actually used it for return some years back, told not all money. Well, you know, they they they have kind of ebbed and flowed on this. I don’t know exactly how many years back, but there was one at a Meineke muffler store down near near our house, and then it disappeared. So they they, like Amazon is prone to do. They piloted this and then they pulled back to areas of greater density. Because in Atlanta, the predominant location is around Georgia Tech campus, not far from here. Up here. King Plow. But I had not seen it. I had not seen them in any any level of distribution until we were in Austin and it was a convenience store.
[00:43:32] So so I’m always a skeptic when it comes these things, especially when you’re traveling and you really want to make sure it works. We ordered luckily we didn’t know what equipment we needed for our our mobile show, but it was a couple things. Be nice to have. You know, you don’t want to give that the hotel front desk because you’re not sure who’s working at Sheer.
[00:43:49] Well, and then in that stack of boxes that you talk about in the lobby, it happens in hotels as well. People are watching that.
[00:43:56] Yeah. So probably a 7-Eleven. It went well. Yeah, that’s right. U.P.S. has got suckers in the 7-Elevens.
[00:44:02] John would know. Yeah, it was a 7-Eleven. It was just a block down.
[00:44:06] I was like, Gregory, and give this thing a try. We pulled down to 7-Eleven rides. We got there in Austin right down the road from the the hotel and fill up with gas, grabbed a Slurpee again and big gulp.
[00:44:18] Yes. And it was there early.
[00:44:20] It was there probably six hours before that. Not o’clock p.m. or 8, 8 p.m. Central Time deadline was so. So for us, it worked out outstandingly well because they were making the commercial deliveries before the residential delivery. Yeah, makes sense. Exempts. Well, for our listeners, if if you hadn’t tried it and if you’ve thought about Trident it, it’s worked really well for us and we’ll kind of to see if this this go round, this deployment sticks this time. Maybe you’ll see that box at your monarchy. I think.
[00:44:50] I think I think in certain areas you’ll see it. They have a better idea of of what creates the level of density that makes it makes sense more us. And I don’t know if we’ll see it. Now, it’s not a Meineke, by the way, unfortunately. Darn it.
[00:45:03] Well, you certainly will see him in whole food stores. You see five stores.
[00:45:08] Yep. Though Lego stores and some of the bigger markets. Yeah.
[00:45:13] All right, Sajjan. And you as you mentioned, you just got back from the what was a Texas trade show. You’re at partial form. Partial form. And now you do a lot of keynotes. You’re out. The teams out represent and sharing your best practices and and how to nat navigate through these these global supply chain challenges that we have. But how can folks what’s the easiest way for folks to learn more about you and Spend Management Experts?
[00:45:40] The easiest way to find us is on our Web site. It’s w w w dot spend S P E and D M.G. M.T. Dot com. You can also find us on LinkedIn and Twitter at Spend Management Experts. Outstanding.
[00:45:56] And you can find John on LinkedIn.
[00:45:59] Yes. Yeah. Good stuff. Always. Yeah. Maybe he can give you a list of stuff you should be scrolling through for more information about this series. I’d be happy to. Yeah. So this is a crusade. It really isn’t essays.
[00:46:11] Yes. Great. Second episode. One more installment of this mini series here as we kicked off our Transportation Trends series. Look forward to having you back on as we do kind of a compare and contrast episode in the next few weeks, but we’re focused on getting this information on u._p._s. And these changes out really quick. I think a lot of folks can benefit from what you’ve shared here today. Absolutely.
[00:46:35] And I’m looking forward to the next episode because the cost structures for U.P.S., while the policy changes are, you know, kind of in lockstep.
[00:46:46] The there’s a lot of price differences that are that are happening now, more so than the past. And so it’s really important to understand, you know, what the costs are with U.P.S. versus FedEx. And I’m looking forward to talking about some of the differences in costs between the two carriers.
[00:47:06] Slice and dice it all up next episode. Big thanks. John Haber Spend Management Experts for joining us here today. And sit tight. We’re going to wrap up a couple of final announcements here that talk about some events where I bet you and your team can be found as well. But for starters, to our listeners, if we’ve touched on anything they or any of our past episodes and you can’t quite Google it and find which looking for Shootist Note hit up our CMO Amanda at Supply Chain Now Radio dot com and we’ll do our best to serve as a resource for you. So, Greg, we’ve got a slew of events coming up. Yeah, we’re going to enjoy our time in the studio through the end of the year, which is a blessing, right? Said I don’t have a lot more of these conversations and eliminate some of that over the road stuff. But come January that changes, right?
[00:47:50] Yep. January we put our rollerskates back on and on the 15th. Fortunately, we’re staying home here in Atlanta. Atlanta. CSC MP roundtable. The lunch event. What? Yeah, right. With NASCAR track. That’s right. And you can learn more about that at Atlanta C S C M P dot or.
[00:48:10] That’s right. January 15th. Open to the public NASCAR tracks and come in and talk about some of the regulation changes taking place in the transportation industry and how that is impacting a lot of folks business. So looking forward to that. Then in February, we’re back out in Vegas, right?
[00:48:24] Vegas, baby. Yeah. So the reverse Logistics Association conference and expo. So sit down with Tony Sheer wrote in his group, learned from a lot of speakers about what is going on in reverse Logistics with returns and circular economy and all of those things that are also a huge cost and not just from a shipping standpoint, but from a Logistics Logistics and costs operational cost standpoint for so many retailers these days. Right.
[00:48:50] Yep. John, you on that first episode we did, we touched moral and returns. And in the Rod that’s playing in this e-commerce air, we didn’t touch on as much for today, but that’s a huge factor these days, right?
[00:49:02] Sixty two percent of consumers like the option of being able to buy online and return in-store. So it’s a huge cost. A huge cost.
[00:49:12] We have some we have a retail client where 50 percent of what is bottom line is returned. How it creates all kinds of inventory problems and positioning people, you know, want free shipping on the returns, people or or using e-commerce as almost as a is a as a dressing room. Yeah, I buy five pairs of shoes from Zappos, drive on, you keep one and you ship the other four.
[00:49:41] Back up with that as a backdrop. Organizations and professionals and supply chain leaders are looking more and more for best practices to mitigate these consumer buying habits that we all have been trained on now. So the RLA does a great job of facilitating that. So February 4th to the 6th out in Vegas, you can learn more at RLA dot org and we’ll be broadcast laugh throughout that event and then Mode X 2020’s. Come back to Atlanta the week of March 9th. Right.
[00:50:10] Right. Hard to find a show around Supply chain. Strictly around Supply chain. That’s on any greater scale in this show. Thirty five thousand of your closest supply chain friends. March 9th to the 12th in Atlanta at the Georgia World Congress Center, Molex 2020. We’re gonna be broadcasting streaming live there and and meeting with a bunch of really talented folks. Look, if you like to see Supply chain in action, it’s free to anyone. That’s true. And they are building factories. They are building fulfillment facilities and reverse returns facilities right there on the show floor.
[00:50:50] They got circus train. Thirty seven car circuit train comes in Atlanta. They get all this throw out thirty five thousand people. Yeah. Free to attend. You’re gonna have great networking market and intel gathering educational educational sessions, great keynotes, mo tech show dot com in ADX choked com. And we’re there all four days the wrong. I have you on the show while we’re there. We’ll be there. It is a great show and it’s free. I mean, you can’t beat that. And we’re also big fans. I’ve got a mutex tattoo cause they’re hosting our 2020 Atlanta Supply chain Awards.
[00:51:24] All right. Which we’re excited. I don’t want to see the tattoo. I’ll take your word for way across the back.
[00:51:29] Christian Fisher, president and CEO of Georgia Pacific, is our keynote for the 2020 HSCA. And Shahn Cooper, former Lockheed executive, former West Rock executive, current executive director of the Atlanta Committee for Progress is our m.c series Supply Chains Tryhard there now. One two punch and Nomination’s registrations and sponsorships are all open for that event is hosted by Madox Atlanta Supply chain Award WSJ.com. Big thanks Asami for serving as a big supporter, which helped us get the first year awards off the ground and I think we already have probably a couple dozen companies nominated for. Yeah, well you think last night. Yeah. Yeah, it’s.
[00:52:13] I’m really glad that you guys started that. It’s it’s been missing from Atlanta. There’s so much great supply chain activity in Atlanta. And to highlight the the amazing things that these organizations are doing in the Supply chain, we’re really glad you got.
[00:52:30] Yeah, it’s about time, I think. Yeah. I think we have a lot of credibility is as a supply chain center, as a city.
[00:52:38] And by instead of Supply chain city. The Chamber of Commerce hashtag. Yes.
[00:52:43] So March 10th Lana Supply chain Awards dot com. March the week of March 9th. Modoc Show and Modoc Showcase. Yeah. Make sure you check that out. And then finally, one final event we just finalized last week or two were there. We’re partnering again with the Association for Manufacturing Excellence and their Atlanta 2020 Lean’s Summit, which can be here the week or more May 4th. If you ever checked out any A.M.E. events, I have not. Okay. Yeah, great manufacturing sic centric organization. Big player coast-to-coast here in the US. Highly focused on continuous improvement and lean leadership and they’ll have to importune 53 enter folks that are from plants across Canada. Had a team of 25 folks come from a California manufacturing site last year, get really high marks for their for their educational sessions.
[00:53:33] Right. And some of the whatever you want to call it roundtable type discussion. Yeah. For getting information out.
[00:53:38] Registrations open for that event. You can learn more at a-m e dot org. Okay, missy thing Greg.
[00:53:46] No, I mean we never miss anything.
[00:53:49] Well, I really enjoyed the comp, the perspective. You know, anytime we we we have a leader come in and join us and share really from a practical standpoint, you know, John talked about things you can do today to insulate, to try to insulate yourself from some of these things that are outside of our control. Right. You’re taking action right now. The challenge of gathering information, making things more bitnet, more visible, making sure you’ve got the information, you know, don’t wait, you know, cause there is no such thing as free shipping and there’s no such thing as as a contract you cannot challenge. Do not procrastinate. Yeah. Or else you’re going to overpay, right? Yeah, that’s right. So big. Thanks again, John Hauser doing nothing right. Big thanks to John Haber, founder and CEO of Spend Management Experts. Thanks for your call. Your firm’s partnership as we roll this information out, be our Transportation Trends series here at Supply Chain Now Radio. To our listeners, be sure to check out other upcoming events, replays of our interviews, other resources at Supply Chain Now Radio dot com.
[00:54:56] Greg, where can they find us at Supply Chain Now Radio dot com.
[00:55:01] Anywhere you get your podcasts and especially on YouTube.
[00:55:04] That’s right. On behalf of the entire team, Scott Luton here wishing you a wonderful week ahead and we will see you next time on Supply Chain Now Radio. Thanks, everybody. Thanks.
John Haber is the Founder and CEO of Spend Management Experts. With over 25 years of supply chain experience, John has helped some of the world’s leading brands drive greater efficiencies through their supply chain operations while reducing transportation, distribution and fulfillment costs. Haber began his career at UPS where he held various executive level positions in corporate finance and corporate strategy and was instrumental in developing profitability and costing models. He also managed the carrier’s National Accounts Profitability Group where he audited the pricing and profitability of UPS’ top customers. Haber’s finance background combined with decades of experience working with high volume shippers enables him to offer unique insights on strategic supply chain planning including distribution model optimization, transportation cost analysis and carrier contract optimization and compliance. An active speaker at industry events such as Parcel Forum, Haber is widely considered one of the logistics industry’s foremost thought leaders on transportation spend management. He is frequently quoted and published in national business and trade media such as the Wall Street Journal, Reuters, Bloomberg, USA Today, Fortune, Supply Chain Brain, Inbound Logistics, and Parcel magazine. In 2019, John was named one of the top 100 Supply & Demand Chain Executive Pros to Know for the eighth consecutive year. Additionally, under Haber’s leadership, Spend Management Experts was recognized by Inc. Magazine, being named to the 35th annual Inc. 5000 list as one of America’s fastest-growing private companies. Haber holds a BA in Political Science from the University of North Carolina, Chapel Hill. Learn more about Spend Management Experts here: www.SpendMgmt.com
Upcoming Events & Resources Mentioned in this Episode
Connect with John on LinkedIn: https://www.linkedin.com/in/john-haber/
Connect with Greg on LinkedIn: https://www.linkedin.com/in/gswhite/
Connect with Scott on LinkedIn: https://www.linkedin.com/in/scottwindonluton/
Supply Chain Talent Webinar on 12/4: https://tinyurl.com/rtye357
Day One Recap of the eft Logistics CIO Forum: https://youtu.be/Z4BUO03GGl0
Day Two Recap of the eft Logistics CIO Forum: https://youtu.be/wTLz3Hkso2w
SCNR to Broadcast Live at CSCMP Atlanta Roundtable Event: https://tinyurl.com/y43lywrd
Reverse Logistics Association Conference & Expo: https://rla.org/calendar/1
SCNR to Broadcast Live at MODEX 2020: https://www.modexshow.com/
SCNR to Broadcast Live at AME Atlanta 2020 Lean Summit: https://www.ame.org/ame-atlanta-2020-lean-summit
2020 Atlanta Supply Chain Awards: https://www.atlantasupplychainawards.com/
SCNR on YouTube: https://tinyurl.com/scnr-youtube
The Latest Issue of the Supply Chain Pulse: https://conta.cc/2QmHGmq
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