DDU delivery. You've heard about it. It has been advertised as both a strategic advantage and a means to cost savings. You probably have more questions than answers: What is it? Who benefits from DDU delivery? Will DDU delivery save me money? Will my packages arrive faster? Can my customers track their packages? And what do I need to know to get involved?
DDU Delivery Defined
The destination delivery unit, or DDU, is the final stop in the U.S. Postal Service network that a package takes prior to delivery. Often referred to as the Last Mile, packages arriving at a DDU are sorted to carrier routes and sent out for delivery. This process typically takes one day or less from arrival at the DDU to consignee delivery. This process is efficient because the U.S. Postal Service leverages its vast coverage in doing what no one else can provide low-cost, daily residential delivery, six days per week.
The U.S. Postal Service created a work-sharing discount that provides reduced postage for shippers able to bypass portions of its network. Known as Parcel Select, the service is the U.S. Postal Service's version of destination entry rates. Translation: Packages induced closer to the consignee are delivered faster and less expensively. The concept is clear, but the challenge is execution.
Who Benefits from DDU Delivery?
By offering destination entry rates, work-sharing discounts and partnerships with consolidators and expeditors, the Parcel Select service is well-positioned to meet the needs of larger destination or drop shippers. At the same time, Parcel Select offers benefits for any medium to large and specialized shippers that have traditionally utilized UPS, FedEx or other types of regional distribution. Parcel Select offers many options:
APX has developed a service offering providing both regional and national DDU delivery solutions. Having made DDU deliveries on a national scale for over three years, APX is uniquely positioned to share its experience to develop custom shipping solutions that maximize the benefits of DDU delivery.
How Does DDU Delivery Save Money?
For any consolidator or large shipper already drop shipping to U.S. Postal Service BMCs, it is a question of scale. Nationwide, there are 21 BMCs and over 35,000 DDUs. For a drop ship transportation solution, the insertion level is based on the frequency and cost effectiveness of delivery into the U.S. Postal Service. Shipments brought to DDUs are processed in fewer stops in the U.S. Postal Service's system, resulting in faster, more cost-efficient delivery.
To shippers looking to utilize the U.S. Postal Service's drop ship entry and subsequent discounts, they must first negotiate the cost associated with destination sortation and transportation. Large national consolidators find greatest leverage with both high parcel volume and additional business segments requiring similar delivery such as printed material. In order to make DDU delivery for some of these packages, they must use regional transportation providers or expeditors with a lower-cost delivery method.
APX provides daily DDU delivery services for a variety of customers with zone ship or drop ship distribution needs. APX utilizes its own delivery fleet for DDU delivery nationwide and does not use local cartage, delivery or courier companies. APX gains low-cost leverage through high-volume levels and existing B2B delivery operations.
APX's DDU delivery customer, Nordstrom.com, converted the majority of its parcel delivery volume from Priority Mail to Parcel Select, relying on APX to sort and deliver its packages to DDUs. "Nordstrom.com made the switch in April 2001 from Priority Mail to Parcel Select and DDU delivery," says Bill Monk of Nordstrom.com. "To date, over 93% of our ground shipments are being delivered via DDU delivery and Parcel Select Service. The savings continue to amaze us. Overall, we have had much more success with our DDU delivered packages than with our BMC delivered packages."
What about DDU Tracking Technology?
Today's shippers expect their packages to be delivered timely, safely, inexpensively and with accessible information along the way. As the U.S. Postal Service strives to gain parcel delivery market share from the larger looming parcel delivery companies, its ability and, more importantly, the ability of its partners to provide detailed information with seamless interface is critical.
Shippers or consolidators bringing packages directly to BMCs rely on internal scan events and tracking information from the U.S. Postal Service. Those that utilize third-party delivery or regional DDU delivery companies are limited by the technological capa-bilities of these companies and those of additional cartage and courier companies used to supplement coverage. When multiple companies are handling the package prior to DDU or BMC delivery, there is a possibility for breakdown in the information chain.
To meet the shippers' expectations and those of the shippers' customers, the consolidator or expeditor must provide closed-loop tracking information, coordinate data transmissions of varying formats and provide a seamless interface for all package-related information. APX has made an extensive investment to integrate the many different technologies into one seamless information system for its shippers.
"APX's technological offerings are hands down the best that we have experienced," notes Monk. "It has provided raw data, management reports and package information all available through one Web site. The Web site allows you to track packages with the Postal Service's Delivery Confirmation barcode or a shipper's reference number. APX has also made it simple to download routing guides. This has allowed Nordstrom.com to keep up with both new DDU offerings and routing changes as they are made to ensure we are getting the best service for our customers."
Success Factors
Each BMC supports a few thousand DDUs within a 200- to 300-mile radius, not all of which are deliverable. Remote location, physical constraints and delivery method all are factors creating increased cost and inhibiting fully saturated delivery.
The decision to utilize a DDU delivery solution lies in a combination of DDU delivery saturation, pricing and service. DDU saturation (the percentage of packages induced at the DDU level) represents savings both in transit time and cost related to the U.S. Postal Service's discounts. There is also an additional cost associated with the residual or non-DDU packages. Whether these packages are delivered to a BMC by a consolidator or separated for UPS or FedEx delivery by the shipper, there is an incremental handling cost.
APX leverages its core competent sortation and delivery capabilities to design flexible distribution programs while working closely with the U.S. Postal Service's requirements to provide a seamless interface. To meet shipper expectations, APX offers flexibility including:
Consolidated entry points APX is able to combine multiple regions into one destination drop point and receive next day DDU delivery to a wider radius. For example, packages to
Daily DDU delivery APX delivers to the DDU daily and with its own delivery fleet. Packages are not consolidated to reach a targeted delivery volume level.
Three- or five-digit ZIP Code sort acceptance APX supplies current ZIP and routing tables, giving customers the choice to perform an initial three-digit (BMC based) or five-digit (DDU based) sort.
Use of existing shipper labels or APX generated labels
Same day BMC delivery Any package not delivered to a DDU will be separated and delivered the same day as arrival to the appropriate BMC with additional processing to enhance service (ZIP sortation, separation of non-machinable packages, etc.).
Another important advantage that APX leverages to the benefit of its customers is volume. Few shippers have the ability to create 21 full trailer loads with daily, regional drop ship capability. To do so requires scale in package volume and distribution center capacity.
The Bottom Line
A well-designed DDU delivery solution can bring significant cost savings to your bottom line. But it's important that you understand the important success factors and choose the right delivery solution provider for your business. Remember, it is a game of scale for those vying for your packages more packages mean greater and lower-cost DDU delivery saturation.
The alternative to working with a consolidator or DDU delivery solution provider is to go it alone. This involves working with a multitude of regional delivery companies, local cartage agents, couriers and others. But you may very well lose the advantage of scale.
Ask yourself, "Does my DDU carrier have enough packages to make a cost-effective DDU delivery, or are my packages being given to someone else to deliver?" If the latter is true, then at least two different groups will handle your packages before arrival at the DDU. Additional handling could mean watered-down accountability, increased opportunity for loss and the likelihood for delays.
With the upcoming rate case and postage increase, the savings potential for DDU-inducted packages will only increase. Understand your package life cycle from distribution center to consignee. There are plenty of opportunities to minimize cost and maximize service.
Kevin Collins is vice president of Business Development at APX. He can be reached by e-mail at kcollins@shipapx.com. For more information, please visit www.shipapx.com.
