Supply Chain Now Radio Episode 242
The Transportation Trends Series
Presented in Partnership with Spend Management Experts
Learn More: www.SpendMgmt.com
“It is really the large retailers that are driving all the volume into the networks, but everyone is being penalized. I question the how fair it is to the people that are just shipping their normal volumes. They’re not really bogging down the networks; they’re just shipping what they ship.”
– John Haber, CEO of Spend Management Experts
2019 was by no means a simple or easy year for supply chain managers or logistics providers. From the impact of tariffs to Amazon’s role in the shifting home delivery landscape, there wasn’t a dull moment.
In this conversation, Supply Chain Now Radio Host Scott Luton welcomes back John Haber, CEO of Spend Management Experts, for part 3 of the Transportation Trends series. In part 1 of the series, John talked about FedEx’s rates for 2020, and in part 2 he did the same for UPS. In this episode, John will describe the broader trends he saw in 2019 and look forward to what we can all expect in 2020.
John wraps up this 3-part series by:
- Comparing and contrasting the different carriers’ peak seasons and changing delivery surcharges
- Discussing how the lack of competition between carriers in the US provides an incentive for each logistics provider to avoid waging a ‘pricing war’
- Describing the ways in which shippers should alter their logistics and small parcel analysis in order to optimize contracts and keep costs down
[00:00:06] 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 afternoon. Scott Luton here with you live on Supply Chain Now Radio. Welcome back to the show Today Show. We’re continuing our Transportation Trend series where we’ve been diving into a wide variety of trends, challenges, issues all facing the backbone of the Indian supply chain industry, that of transportation. Today, we’re concluding a three part mini series on a really a critical development, the shipping pricing changes that FedEx and U.P.S. are rolling out. But more importantly, we’re gonna be talking about some of the things that are shaping the industry in 2019, some the biggest stories and how they’re going to continue shaping industry and impact the industry in 2020 and beyond. Now, this three part mini series, episode one, we focused on FedEx. Episode 2, we focused on U.P.S.. And today, again, we’re gonna compare and contrast those rate schedule changes as well as get global insights from our resident expert here. And we’re really proud to be conducting the series with Spend Management Experts. We couldn’t have a better subject matter expert to walk us through all the complexities of these changes. Also the complexities of the modern global. In the end, Supply chain. Some more on our special guest in just a minute. Quick programing note. Like all of our series and Supply Chain Now Radio, you can find our replays on a variety of channels Apple podcasts, SoundCloud, YouTube, Spotify, you name it. Wherever you get your podcast from. We’d love to have you subscribe. Don’t miss a. And let’s think our sponsors allow us to bring best practices and innovative ideas to you, our audience.
[00:02:03] The Effective syndicate Vector Global Logistics. ProPurchaser.com. Epic’s Atlanta Manymore. You can check out each of our sponsors on the show notes of this episode. OK, so welcome in our special guests here today. Once again, John Haber founder and CEO of Spend Management Experts. He brings more than 25 years of Supply chain experience to the table, helping some of the world’s leading brands drive greater efficiencies through their supply chain operations. John, good afternoon. How you doing? Good afternoon. I’m doing well. Thanks for having me back. You bet. We’ve gotten a ton of feedback off the first two episodes here. I think there is a lot of curiosity. It’s part good bit of pain. And as folks are also looking to prepare for 2020. And for that matter, just get through peak season. We’ve had a lot of feedback on the first two shows. So glad to have you back. And we’re we’re we’re going to kind of not only highlight some of the similarities and differences between the FedEx and U.P.S. rates, but but I’m excited about, you know, picking your brain on some of the big impactful stories. There’s a lot going on these days. And the supply chain. That’s right. But but never more exciting to be in the End to end Supply chain industry. So as we dove in here before to talk shop, you know, we still get a lot of questions around exactly what SMB does. So so tell us about what your firm does and then we’re gonna talk about your role.
[00:03:24] Yeah. For the last decade, over the last decade. Spend Management Experts has been helping large shippers build a competitive edge in the supply chain in the areas of transportation, distribution and fulfillment.
[00:03:39] We are a resource consulting resource that helps companies optimize costs and service levels within those three key areas of the supply chain. And we work with companies across all different industries and verticals retail, manufacturing, health care via it doesn’t really matter what industry you’re in. It just matters how much you’re spending in those areas or overspending in those key areas.
[00:04:08] Now, as CEO of SMB, where you spend your time, I try to spend most of my time involved with the strategic things, developing the strategy for the company, developing the strategy for the projects. I also do a lot of time selling. I try to leave the tactical work to the rest of the team and spend my time really focused on the strategic stuff.
[00:04:36] Yep, outstanding. And so you’re you’re interacting regular with customers and I’m sure you get peppered with all kinds of questions because they want to know exactly what’s between you two years.
[00:04:46] Right. I get peppered by a lot of customers. A lot of journalists buy a lot of employees. Yes. They’re constantly on the go.
[00:04:58] All right. So let’s talk about. Before we dove into these rate scheduled changes, which will be the kind of red meat of today’s episode, I really want to pose a broader question to you and get your thoughts around what you’ve thought had been the most impactful stories or developments in Supply chain in twenty nineteen here as we’re in the year, especially those that will have a big impact on 2020 and beyond. So I thought we’d identify maybe three biggest stories. So in your view, what’s what’s one of the, you know, the top big developments in Supply chain in 2019?
[00:05:34] Well, there sure have been a lot of developments in 2019.
[00:05:38] If I was going to keep it to the top three, I think I would start off with the global trade environment, where the tariffs are wreaking havoc on Logistics providers, shippers.
[00:05:53] It’s really wreaking havoc on all of us because you’ve got companies that are trying to move out of China to other areas of Asia. You’ve got these tariffs that have been implemented that are really hurting a lot of American companies on the import side. That is eventually passed down to customers in the form of higher prices. So you’ve got tariffs, you’ve got Brexit, you have a U.S. Congress that has gotten almost nothing accomplished in twenty nineteen because they’re just everybody’s focused on impeachment. And so the overall global economy is causing a lot of problems. And on the supply chain, especially from the tariff standpoint, that’s really I think been the single largest, most impactful area and it’s continuing into 2020. I mean, even today there’s talk about maybe things are getting better with China. But there are threats with France. Now, Argentina and Brazil are being targeted on aluminum and it’s just creating a lot of havoc on the supply chain. So that’s probably number one.
[00:07:00] So, you know, we were we were reporting earlier on some of the good news from a tariff standpoint, it seems like China has been extending an olive branch of sorts and we’ll see if it makes things better relate to the tariffs. I think soybeans and pork aren’t that looks like they took them off the table in terms of additional tariff increases. And then a couple weeks ago, maybe not as much related tariffs, but but it’s all related. They opened up Chinese markets to U.S. poultry again. So I’m hoping and our team is hoping that some of these these good faith gestures might help us get some some remedy.
[00:07:39] Really, we really hope that they that they do lead to some remedy. We understand. I can certainly understand. We want a level playing field, you know, and it has not been a level playing field. But in the process, to get to a level playing field, there is a lot of harm being done along the way. And it’s hurting a lot of people and putting some people some people out of business.
[00:08:03] Mm hmm. Yeah, I saw a poll in The Wall Street Journal not too long ago where the hundreds of business leaders are pulling over half were considering pulling out of China, pulling your operations out of China to get around some of these challenges. So certainly if you’re in Supply chain, it’s making life more difficult.
[00:08:23] It is. It’s really highlighting the need to have alternatives and a good risk management strategy. A lot of companies have been caught with their pants down.
[00:08:33] So global trade environment is your number one story. What would you say is number two?
[00:08:40] I think Amazon is probably worthy of being talked about. Here is number two. Amazon Logistics. More specifically, you Amazon’s got its hands in so many things. But from a Logistics standpoint, Amazon now has 20 over twenty thousand of their own trailers. They have an estimated 7000 tractors and their branding those Amazon Logistics. Now they have 51 aircraft with six more in order and plans to have 70 by 2020.
[00:09:20] Just for reference, U.P.S., who’s been a behemoth in the Logistics world. They’ve got about 260 aircraft and so that’s 70 sounds small. But when you think about how long it was on, it’s really been in Logistics business. That’s a lot of planes.
[00:09:39] And so Amazon Logistics from just the build out of it, literally their logistics network. Right. You’ve also got a very interesting development where Amazon and FedEx have parted way. Right. And FedEx is no longer moving. Amazon. Packages, and that was about a billion dollars in annual revenue for FedEx.
[00:10:09] What do you know? Going back to your point a second ago. It is it is absolutely remarkable how in in such short order how Amazon has built out its capacity and its capabilities from a supply chain infrastructure transportation standpoint.
[00:10:23] It’s absolute remarkable. Deep. Do you see? You know, you mentioned that the when it comes out air fleet, I think you said 264 planes roughly for FedEx or u._p._s for u._p._s. Yeah. What do you see the next few years, this level of investment to continue where the Amazon fleet start to rival these other massive. Well, you know, been there, done that organizations. I do. Absolutely.
[00:10:52] All right. If you if you think about it, the 20000 trailers that they have. That makes them the second largest private fleet in the U.S., only behind Wal-Mart.
[00:11:05] All right. So global trade environment, a lot of bad news there, but might get might get better. Amazon Logistics, which is just you know, everyone is studying what Amazon is doing. It’s really remarkable the scale they’re doing it.
[00:11:18] What would be your third story? I think the third story’s got to be what’s going on in the U.S. domestic truckload market right now. Celadon today filed for bankruptcy.
[00:11:33] That is the single largest full truckload bankruptcy in U.S. history. You’ve got over 3000 drivers that are going to be without jobs or without jobs that are kind of stranded around the country right now. You’ve got another 13 hundred administrative employees in Indiana that are out of job right now before the holidays. Just in the first half of twenty nineteen alone, they’re almost 650 trucking companies that went out of business. And so you’re seeing just hemorrhaging within the full truckload market, drivers getting laid off. Even the truck engine manufacturers, Cummings, which is the largest U.S. based truck engine manufacturer, they announced two thousand layoffs at the end of November. So it’s not just the Logistics providers, it’s the companies that manufacturer the assets for the Logistics providers that are feeling the pain just as much as the providers.
[00:12:37] So there are probably no shortage of reasons that doing when you see, as you mentioned, over 600 trucking companies go out of business the first half of twenty nineteen. No shortage of reasons. But do any. What are the main themes? What are some of the main recalls is there you think? What?
[00:12:56] What we’re seeing is there’s a lot of new rules and regulations. A lot of it having to do with technology that needs to be implemented. And a lot of these trucking companies don’t have technology. They don’t have the margins or the funding to be able to develop it or buy it. So I think that rules and regulations in fact, I even saw President Trump talking about it yesterday during an interview. So I think that that’s driving a lot of it. I think that the overall economic environment from the tariffs and things like that. I think that is trickling down into, you know, the volume levels and there’s excess capacity. Right now, there’s more assets than are needed. And so people you know, it’s a very different environment than it was in twenty eighteen. I know. And towards the end of 2017 and 2018, there was a lack of capacity. You couldn’t find drivers, you couldn’t find enough drivers to drive trucks. And what we’re seeing is different here and twenty nineteen. Well put. So one last point before move on to some some good news.
[00:14:07] Good news folks can use. Put that there’s bankruptcies in perspective. Twenty nineteen versus twenty eighteen. What, what do we see. Twenty nine. Twenty eighteen in terms of companies going out of business versus what we’re seeing now. Three times the number of companies going out of business in twenty nineteen versus twenty eighteen three X.. OK, well I appreciate you sharing. Those are we could dedicate easily a series each of those three topics but very interesting go through.
[00:14:38] And now we’re to shift gears and we’re going to talk more about these rate schedule changes and any good news is to our listeners before we dove in. This is going to be some practical observations and insights to just what we talked about in the front and mitigate these pricing increases and also help mitigate from just that the complexities that exist in the twenty, nineteen and twenty twenty global supply chain environment. So for starters, John, let’s talk about these, the peak season shipping in surcharges, what are they and why are they needed?
[00:15:09] Yeah, the peak season surcharges were started being rolled out a few years ago. And this year, both U.P.S. and FedEx have implemented what called peak season surcharges for three categories, additional handling, a large packet surcharge and an overmatch charge.
[00:15:32] All three of those charges are designed to address large, bulky items that are increasingly moving through the small parcel networks. They don’t really want this volume in their network. And so, for instance, on an over max package, that’s a package that is billed at over 150 pounds. The surcharge for U.P.S. is $250 a package. The surcharge for FedEx is four hundred thirty five dollars per package. Wow. Just as the peak season surcharge now there’s already a surcharge that’s in place. Right now it costs $850 just in the regular surcharge. Add another 250 to that.
[00:16:17] And that’s eleven hundred dollars before you include the freight or the fuel cost. So you’re looking at about fifteen hundred dollars to ship that package through the network. And so e-commerce is really driving the need for these peak season surcharges.
[00:16:34] The problem is, is that it’s really the retailers that are driving all this volume into the networks, but everyone is being penalized. You and I are subject to a peak season surcharge if I ship something that fits that category from a U.P.S. store or a FedEx office.
[00:16:51] But but to your point a minute ago, these this is this is unattractive cargo and freight for these providers and they’re going to tackle it. They want to ensure that they’re making money. Is that. Is that fair?
[00:17:04] It is fair. It’s it’s certainly fair to the large volume shippers, where I question the how fair it is is to the people that are just shipping their normal volumes. So they’re not really bogging down the networks. They’re just shipping what they ship. And they’re having to pay these peak season surcharges where it would seem to be a little bit more fair if they identified, you know, a handful, the customers, which, you know, it’s pretty easy to do. I mean, you know, the biggest shippers of the world are it’s Amazon, it’s gonna be Wal-Mart and to be Target.
[00:17:40] And in some of these big retailers that are clogging up the networks. I think maybe it would make more sense to target them than just a standard tariff wide rollout.
[00:17:52] So before we dove into some of the similarities between the rate and announce, it’s between FedEx and U.P.S.. Anything else related to the peak season surcharges and shipping rates that we should touch on?
[00:18:06] Well, I think that it’s important to understand that the peak season surcharges this year for U.P.S. went into effect October 1st.
[00:18:14] They’re in place from October 1st to January 4th last year that it starts on November 18th. So the duration of time, not only did the costs go up drastically and on the price side, the amount of time that these surcharges are applied, it’s it’s an entire quarter. It’s the entire fourth quarter. Now, FedEx did not roll out their surcharges until October 24th for the most part. And so there’s less time. But the the costs on the FedEx, the cost per package is higher. So people really need to pay attention to when these things go into place and understand what they’re applied to, because you’re looking at, you know, very significant charges per package.
[00:18:57] And really, the full of what I’m hearing is really the full scope, the full picture, not just the charge here, but the why behind it as well as the full. So like you said, the whole fourth quarter is peak these days, according to some.
[00:19:10] Yeah, well, I understand the rules of what they apply to as well. So you got to understand how to avoid these charges.
[00:19:20] All right. So now let’s shift gears and let’s talk about some of the similarities between the FedEx and the you pay U.P.S. rate announcements here, mainly for 2020. What are some of those similarities?
[00:19:33] Well, this is one of my favorite things to talk about is the similarities that just seem to happen between the U.P.S. and the FedEx rate increases. I think we’re going on a decade now of them announcing the same average increase. You know, it’s the 4.9 percent or 5.9 percent, but it’s been the same for almost the last decade. And the. Both have implemented a very new. Policy on additional handling whereby any package over fifty one pound fifty pounds is gonna be hit with a $24. A digital handling surcharge. FedEx announced that change in September. U.P.S. followed suit in November and matched it. If you look at the surcharges, a lot of them are exactly the same. The delivery area surcharges are the same between the carriers address. Corrections are the same between the carriers. A lot of the surcharges, it’s the exact same costs between no matter who you’re shipping with. So they’re keeping asking each other very closely. They are very effective. What I would call price signaling. Mm hmm.
[00:20:44] So so to the layperson that mean that may not know what you mean there. Explain a little bit more.
[00:20:51] They are both very smart. There’s not enough competition in the U.S. marketplace and they’re very good at understanding that they don’t need to get a pricing war with each other.
[00:21:09] And that allows them to implement very aggressive increases annually. If you look at a lot of the surcharge costs, for instance, some of those rural delivery costs on the delivery or surcharge side of things, they’re going up almost 30 percent this year over last year. And so what happens is one of them announces the rate increase and it becomes public information and then the other announces their rate increase at a different later time.
[00:21:40] But they’ve had a chance to look at exactly what their competition is doing. And somehow it it comes out to be the same. And a lot of cases.
[00:21:52] And so in twenty nineteen, if I’m not mistaken, FedEx came out first and published their rate schedule first and the u._p._s came roughly what, a month and some change letter. Is that right. Yeah, over a month later. Okay. All right. So moving from similarities, let’s talk about some of the differences between to your touch on a couple. But what else did you find on the differences?
[00:22:14] Yeah, the difference is if you look at there, they’re just their general public tariff. If the ground rates in their next day are rates in the second are rates the those the tariffs by weight zone, the pricing is generally different. The ground is usually fairly similar, but the costs within each of those cells is different. And so those are different. There are some differences on the surcharge side. Their fuel surcharge tables are different. Their costs for the residential surcharge are different. So there’s a handful of surcharges where the cost is different and fuel and then just the overall tariff is going to be different.
[00:22:57] Ok. So with these differences, I mean, my Masket dumb question here, do you see more when these price changes come out? Do you see a lot of movement between the FedEx u._p._s? Or do you see more movement? And then we’re gonna talk about alternative alternatives later on in the interview. Do you see more movement to third party alternatives? Or do you see more movement between the two major players?
[00:23:21] You see both. You see people analyzing how it’s going to impact them and then looking at potentially moving from a U.P.S. to a FedEx or vise versa. If you’re a largish, a large enough shipper, then you’re looking at some alternatives and maybe looking at the USPS.
[00:23:42] You may be looking at regional carriers, you may be looking at last mile providers like a DHL commerce or a Pitney Bowes. So but most of those on the regional carrier side, you’ve got to have mass. You’ve got to have a lot of volume in order to make that solution work. So generally, it’s it’s for them. For most of us, it’s either u._p._s. FedEx or the post office.
[00:24:08] Gretchen OK, so John, what do you think? What what is your biggest surprise from the FedEx and U.P.S. rate schedule announcements?
[00:24:19] It’s got to be the change in the additional handling policy where the the additional handling fee on wait. Right now it applies to packages over 70 pounds. In 2020, it’s going to apply to packages over 50 pounds and it’s a $24 per package charge and a sampling of where our customers volume. How much volume do our customers have? Between 50 and 70 pounds. We’re seeing it’s about 10 percent of shipments. So we have a very large shippers. If you look at a shipper that’s got a million. Packages a year that the shipping and we have lots of them do that 10 percent.
[00:25:04] That’s a hundred thousand packages at $24 a pop. That’s 2.4 million dollars in cost. Now, most shippers that large are going to have a discount or should have a discount. So but if you have a 50 percent discount, which is pretty aggressive, it’s still one point two million in cost.
[00:25:25] If it’s a smaller shipper, say, their ship and 100000 thousand packages a year, that’s 10000 packages at 20 for a pop. That’s a quarter of a million dollars in cost. So that charge in particular was really, really is catching people by surprise. There also have been some surprises and some of the management change that kind of came out at the same time as the rate increase. For instance, Jim Barber, who was U.P.S. as chief operating officer, announced his retirement effective here very shortly. Most people had him pegged to be the CEO of of of u._p._s Ryland’s. So that caught a lot of us by surprise. I certainly didn’t expect that news to be coming out around the same time as the u._p._s rate increase. And then another announcement that FedEx made and what we’re seeing was we’re seeing it from Amazon, we’re seeing it from u._p._s. We’re seeing FedEx. They’re pulling volume back in-house and not given it to the post office. FedEx has announced that by the end of 2020, they will be giving very little volume to the post office to deliver the SmartPost product. That’s going to pull a lot of business from the post office who’s already having enough troubles of their own without losing this volume.
[00:26:54] So going back to a second ago, you’re told that some senior leadership at U.P.S. let one last episode you’re on with us. We talked about Fred Smith challenging a journalist to a debate as that happened.
[00:27:06] Hide, D.C. journalist is that will not accept the inveigh invite to the debate that was over FedEx paying no corporate taxes.
[00:27:15] I really want that debate to happen, Scott.
[00:27:18] Yes, we were hoping it hit Pay-Per-View, but no, no, look, maybe Don King can get involved and make it happen. He could promote it. That’s right. All right. So moving from some of the biggest surprises. Let’s talk about so that folks maybe aren’t surprised. Can shippers expect more rate increases in 2020?
[00:27:37] And where do you see it happening to any examples you think we can bank on being increased?
[00:27:43] You absolutely will see additional rate increase announcement announcements in 2020. I’m sure you’re going to see changes to the fuel surcharge tables. That happens every year. You’re going to have twenty, twenty peak season surcharges. We don’t know what they’re what they are, what they’re going to be. We think they’ll be focused again around the larger, bulkier items, these alternative delivery locations where, you know, the carriers are delivering packages to lockers, bodegas and things like that. And I think you’ll see some new fees come up around that. You know, if you look back over the last two years, there’s only a couple months. Within those two years, that’s some sort of price change or policy change was not made by U.P.S. or FedEx. So expect it to continue. They both have said it will continue, that they’re going to align their cost structure whenever they need to. And so they’re they’re warning people that were we’re constantly looking at our cost structure. And if we need to make tweaks and raise prices, we will.
[00:28:51] Yeah. You mentioned lockers earlier. You may have seen the commercial like I did. Know we’re watching all the football games. Home Depot throwing out those New Yorkers in the lobby at their stores. Do you see that as a sign of of you know, we talked about, I think, one of our first locker experiences as we picked up a package in Austin, Texas, because we kind of want to bypass the hotel front desk and and not take on the risk of it maybe in law. So we hit we hit lock, had a great experience, very convenient, very easy. Home Depot rolls us out. We to see a lot more of these lockers across the big retailers.
[00:29:25] You think you are absolutely going to see them across the big retailers? They’re secure, they’re convenient.
[00:29:34] And they also the retailers are hoping they’re going to increase foot traffic and increase sales in the stores as people come in there to pick up their packages from the lockers.
[00:29:47] So how does the you mentioned the USPS, United States Postal Service a couple times. Let’s talk about how the rate increases for FedEx and U.P.S.. How do they stack up against those of the USPS?
[00:30:01] Surprisingly, the USPS announced increase for twenty nineteen was much lower than we were anticipating. Last year they had huge cost increases which actually don’t just impact the USPS, they impact U.P.S. FedEx because they’re handing off UPS was doing the last mile delivery for both of them and so that caused their services to increase significantly. The post office is losing so much money, we were expecting to see that they were going to have large increases and they’re they’re they’re minimal. And so far in Twenty Twenty. Twenty Twenty. How ever similar to price changes that we’re expecting in 2020 with U.P.S. of FedEx, we expect mid year the post office to go to look at a rate increase, especially with some of the recent decision that had been made with the u.s.-eu, which impacts international pricing. u.p, you know that it’s a it’s a it’s a it’s a it’s a global partial union of sorts. Exactly. Exactly. The kind of monitors the pricing that goes on with Post’s office across the world. Really? Yeah. OK. So there’s some changes there. You also have the Postal Rate Commission, which just this in the last couple days has put forward a proposal to change the way that they can increase prices. Historically, it’s been tied to inflation. Now they want flexibility to make price tweaks based on how much volume is being made in those rural delivery locations that nobody wants to literally those packages and gives it to the post office because the post office is going to the mailbox every day, as well as a piece of it that is tied to their mandated pension obligation. What’s interesting is about the pension obligation is that that money that’s generated from any price increase there gets set aside and it goes right into the bank. It would go right of the bank accounts of the retirees.
[00:32:18] Mm hmm. All right. So before we start talking alternatives that we’ve kind of touched on already, anything else when it comes to FedEx, U.P.S. and the USPS? Any other observations you have with these pricing changes or for that matter, any other any other the dynamics between the three?
[00:32:36] You know, I think that the dynamics are really, as I mentioned, what’s going to happen with the post office.
[00:32:45] As U.P.S. and FedEx and Amazon pull their their volume from the post office, you’re already seeing a huge decrease in just the amount of priority mail, first class mail that goes through the post office. How long are they going to continue to sustain the financial losses that they’re sustaining and be a viable entity? I mean, I think that’s the most pressing issue that people are looking at.
[00:33:14] Yeah, I completely agree. It’s really interesting to kind of see how consumer a consumer behaviors that we talked about a lot on these shows, how they are when it comes to the post office. You know, for decades, for generations, you know, consumers would would anything you go up to the post office and ship it. And then with the proliferation of whether it’s a U.P.S. store and so many other other alternatives for timeliness, for pricing, for peace of mind, that is going to get there for whatever you have for a variety of reasons. This track, even from a consumer side, you or you’re talking about, you know, FedEx and U.P.S. pulling traffic. But just from your average, you know, one off consumer, how these behaviors are changing dramatically. So we’ll see. I see it reflected in the mail I get in the mail. I do get every day from from the postal service and how we’ve got to be seps that that’s take a lot of marketing and advertising that that doesn’t resonate. But anyway, so let’s talk about the alternatives to the FedEx, the U.P.S. and the USPS. You touched on the regional carriers early earlier. Talk more about that.
[00:34:26] Yeah, the regional carriers are great solutions for large shippers. You’ve got the ontrack on the West Coast. You’ve got lazers ship on the East Coast and the southeast. You’ve got Lone Star overnight. That is a good regional carrier in the Southwest generally. They can get it to the customer faster. And a lot of cases than the parcel carriers cheaper in many cases. But the problem is they’re the regional carriers and they’re not. Nation wide limitations, so there’s limitations on where you could use them. They would say trouble, professionalism, standpoint. You know, the U.P.S. drivers and the feds. You know, a lot of case of the FedEx drivers. You know, I know who my U.P.S. drivers are. I know who my FedEx drivers are. I don’t know who I am with laser ship shows at my house. And they do they do a lot with, you know, how much shopping my wife is doing online. I don’t know. I don’t know who the driver is going to be. You know, it’s it’s a different it’s a different person every time. It’s it’s hard to even tell. You know, I’d definitely pull in the driveway. You know who who is who’s in my driveway, right?
[00:35:44] Right. Yeah. Have early thought as much about that. The standardization that is part of as you describe that the culture and then the delivery. That even that that home delivery that U.P.S. and FedEx has and how that changes when it moves the regional carriers. What advantages would you say from regional carriers is pricing?
[00:36:06] Pricing is usually more attractive. They’re doing it at a lower cost. They’ve got less infrastructure in most cases. These are not union employees. You know, with U.P.S., anybody, almost everyone that’s delivered your package. It is a union employee. They’re a Teamster. They’re making high salaries. So their cost structures are much lower and their capital expenditures are much lower. And they can price things differently than you do. You’re going to see from U.P.S. or FedEx. Price is one of the great advantages and also time in transit. And a lot of cases they’re getting it delivered to you faster. Hmm. Okay. So moving from regional carriers to some other alternatives, what else comes along? And you’ve got a lot of crowdsourced delivery now, you know, where it’s almost like the Uber ization of package delivery and that, you know, what we’re seeing is, you know, a lot people you buy stuff and it’s delivered the same day and that’s usually being done by crowdsourced solutions. So you’ve got a lot of retailers that are offering same day delivery. They’re using crowd source solutions. That takes it to another level, even below, you know, the professionalism of a regional carrier. You know, the regional carriers, you know, it’s leadership. You know, it’s on Trident on track. You go on and on to their websites. You know, most people know they are on the crowdsource side. You really don’t know who they are. You don’t know who’s delivering the package. And so that’s an option that’s really being increased. Amazon is is is becoming an option to deliver packages for third parties now. So they’re going after the same market in some cases that U.P.S. and FedEx and the post office live in. So there you will see them continue to increase as an alternative. So those are really the top alternatives these days.
[00:38:07] You know, one interesting thing that I’ve always I find fascinating, we are at our house. My wife uses a grocery delivery service and it and I acro member back before kids and back before arguably the Amazon era. You saw a company after company try to figure out this grocery delivery model. And it just never stuck for one reason or the next. And now it seems like Arabi and her brother are delivering groceries. They figured it out.
[00:38:36] I don’t know if they figured it out or if everybody’s trying to figure it out because they’re not making a lot of money. So these companies are losing money. So this doing the fruits of their labor is I guess if you look at the GrubHub or in Instacart, you know, Postmates, they’re still trying to figure it out. They’re still trying to figure it out.
[00:38:56] It’s a hard this last mile delivery solution is really hard. And you just the density has to be there in order for it to be profitable. And it’s just not there yet. Mm hmm.
[00:39:11] All right. So let’s get let’s get into getting some of your insights and best practices in terms of how shippers can can mitigate all of these these shipping costs in general, but then also these changes and increases. You know, where do you start to advise our listeners and some of your clients of effective mitigation strategies?
[00:39:33] Yeah, you’ve got to pay attention. People have to pay attention. Number one, and where that starts for us that we’ve been we’ve talked about this previously is that we’ve got a model that we that we utilize. It’s an optimization model. It starts with visibility. You have to have access to the information. You have to have access to data. So the. You have an idea of what is going on. Once you have that information, you have to make it transparent. You have to understand what how it impacts you, what the rules been. And you just really you need to make sense of the data and turn it into something that is actionable. From there, you need to have a strategy. Mm hmm. What? I know how it’s going to impact me. What do I do about it? So you’ve got to develop a coherent strategy and you’ve got to be constantly tweaking that strategy. And then it boils down to execution. How well could you execute the plan? How well can you execute the strategy? You’ve got to measure it on the back end to determine how successful you have been. And the supply chain is dynamic. It is not static. Changes every day. Something new happens every day. So information is power. You got to constantly be monitoring what’s going on that will impact you. And that’s that’s, you know, at a high level, you know, it’s easier said than done. But those are the four key areas that companies, organizations and individuals need to look at in order to be successful.
[00:41:22] As you walk us through that cycle, my mind immediately goes to the good old. Been there, done that or tried and true plan. Do check act. All right. That that cycler by most people for me with where in that and we’re in. And then at four stage Socko, you mentioned this estimate. Typically you’ll get involved. Is it on the front end as as we’re trying to determine what data we need and then obtaining that data so we can go from there?
[00:41:47] For us, it all starts with the data in some cases the sophistic or sophisticated organizations. They have the data readily available. Many sophisticated organizations don’t have the data available.
[00:42:01] And so we spend a lot of time on the front end of the process just trying to gather information so that we can build a story so that we understand, you know, what’s going on, how they’re managing things. And so it’s it’s it’s crazy to us. The number of organizations that we come in and look at that are spending millions or tens of billions of dollars on transportation and distribution and for Flyknit. And they don’t really even understand where they’re spending it. They don’t have good information. They don’t know what they’re spending it on.
[00:42:40] Ok, so let’s give folks an opportunity to reach out and pick your brain and compare notes and potentially work with with y’alls team. So how can our listeners reach out, learn more and connect with you and learn more about essany?
[00:42:53] Yeah. The best way to reach us is on the web. W w w dot spend emoji empty.
[00:43:02] Dot com. You could drop in a note to give us your contact information and certainly reach out to us. It will. Or give us that info and reach back out to you. You can find us on LinkedIn. Were heavily involved on Spend Management Experts. On LinkedIn. We’re very active on Twitter and other social media.
[00:43:21] So those are also very good outlets. And we’d love to help you. Mm hmm.
[00:43:27] Well, you can also, if you follow John Haber, you’ll see from interviews the keynote tradeshows. I mean, you stay you’re seen as a thought leader in this space. So folks naturally won’t just like we are, we won’t pick your brain and share it with our listeners. So that’s a very active circuit for you.
[00:43:45] John, it’s a very active circuit. You and I are both in those trenches. And, you know, it’s it’s exciting, exciting times for the Supply chain. Absolutely. Gates said it’s changing every day and keeps us on our toes. It does. It does. And that’s where you need good partners, right?
[00:44:03] Cause you can’t know and do everything. So. And one last thing. I know you’ll work with a wide range of companies. We talk about this a lot when it comes to reverse Logistics. And for that matter, love innovation. Some of the best worldclass companies still real realized the gap they have. And look to bring in the experts on the outside that that know that better than anyone else. And you can uncover so many opportunities, you know, in this day and age with the rate of change. You’ve got Delina on the experts that know it better than others. Right.
[00:44:35] They always say, I have a finance background. I did corporate finance for u._p._s. OK. And but I’ve got a bookkeeper. I have a couple financial planners. I got separate tax people. I have specialist specialists, insurance people. If I have a finance background, why do I need all these specialized people? Because they’re better. And each of those areas. And I don’t have enough time to manage all that stuff. And so, you know, the people that are not seeking third party help when it would benefit them. They’re being selfish and they’re not being wise. I know.
[00:45:17] I take it to the current state to check your ego at the door. If someone could do it better, then why not engage them, especially for us?
[00:45:25] Yes. Wereally paid on savings. And so if we can’t save you money, you don’t have to pay us. That’s a no brainer. Well, why wouldn’t you do that? Love it.
[00:45:34] You know, it is we’ve really enjoyed this three episode mini series as part of our Transportation Trend series at one of my favorite interviews and episodes are getting folks own that have been there, done that and in kind of, you know. And even though you might would argue, I say you can do the stuff in your sleep. And yeah, there’s so much to gain from folks that are either, you know, encountering problems, new ways or trying to move into different markets or to art or taking a new volume and ton of opportunity.
[00:46:06] So I really appreciate this series we’ve done with John Haber, CEO of Spend Management Experts. Thanks for your time. And hopefully our listeners enjoyed as much as I have. So stick around for a second. We’re gonna talk to just a couple of quick announcements, John. Some places we’re going to be not nearly as all the places John SMU you’re going to be in 2020. When I was talking about how active John is in the keynote circuit, you really you just said everywhere.
[00:46:35] I’m traveling a lot. I’ll be in Peoria, Illinois tomorrow. Really high as the 28 low 60s. So looking forward to that. Okay. Your breakout closure everywhere in Atlanta. That’s right. Well, really, I’ve enjoyed it.
[00:46:47] To our audience. First off, if you have heard something here today or a previous episode, you can’t quite, you know, Google it and find what you looking for. You can shoot us a note to our chief marketing officer, Amanda at Supply Chain Now Radio dot com. And we will try to serve as a resource for you. We’ve got a slew events from CSC, MPE Atlanta roundtable in January to the Reverse Logistics Association Conference and Expo in Vegas in February to Mode X right here in Atlanta in March 2020. You can find where we’re gonna be on our events calendar at Supply Chain Now Radio dot com. I do want to mention the Atlanta Supply chain Awards March 10th. This is a second year installment. Moto X is hosting us. We’ve got Christian Fisher, president CEO of Georgia-Pacific as our keynote, and Chan Cooper, executive director of the Atlanta Committee for Progress as our emcee and nominations are at John. Remember last year we were part of the twenty nineteen Liegghio Supply chain Awards. We probably have three or four dozen nominations already, including folks like the Clorox Company, Cisco, Flex, Port Bekker, Logistics, a lot of those folks and nominations are open. If you have a presence in the twenty nine county metro Atlanta area, even if you’re a global superpower, it might be based in Europe or based elsewhere.
[00:48:09] So once you have an operational presence here, metro Atlanta, you’re eligible. You can learn more at Atlanta Supply chain awards that come back to Moto X. Moto X is free to attend. John Haber. Members of your team will be there and you’re there every year. And it is one of the largest supply chain trade shows in all of North North America. Moto X showed outcome in Modise, x showed outcome and it’s free to attend. Yeah. What a deal. Can’t beat that. Can’t beat that at all. Not with a stick. All right. So big thanks to our guests here today on Supply Chain Now Radio John Haber, founder and CEO of Spend Management Experts John. Thanks again for your time. It’s a pleasure being here. You guys do a great job. Thanks for having me. I appreciate that. That’s always a pleasure. To our audience, be sure to check out other upcoming events, replays of our interviews, other resources at Supply chain. Now, Radio RT.com Financial NAPO podcast, SoundCloud, YouTube, Greg White. Wherever else you get your podcast from. Be sure to subscribe so you don’t miss anything on behalf the entire team here. This is Scott Luton wishing you a wonderful week hit and we’ll see you next time. Owen Supply Chain Now Radio, thanks everybody.
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
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