Until the mid-90s, small-package delivery was a relatively minor logistical issue for the typical manufacturer and retailer. But thanks to the explosive growth of home-based shopping, in particular the e-commerce arena, companies have dramatically bumped up their outbound small-package shipments. As a result, small package delivery and the choice of small package carriers has become a key strategic tool. This is because the rate and consistency at which these carriers deliver and the amount they charge could make or break a company's success.
With that in mind, here's some advice on both the strengths and weaknesses of package-handling alternatives.
Immediate/Same-Day Delivery
Web shoppers may never have products magically appear on their doorsteps within seconds of placing an order. However, same-day home delivery services such as Kozmo.com, Sameday.com, Urban Fetch It, CD&L and Velocity Express come close. Some of these companies are so fast, they offer delivery in under an hour. These services enable companies to satisfy customers who want it now, which can be a real plus if you have customers who are short on patience.
However, to take advantage of same-day delivery, companies must have their full inventory located in or near almost every market throughout the country. This explains why many national retailers-turned-e-tailers such as Barnes & Noble, Staples and Office Depot, which have a vast supply of local inventory at their stores, take advantage of this alternative and why it's probably not realistic for small cataloguers or dot-coms that have a limited amount of inventory. Similar to next-day delivery, same-day delivery can be one of the more expensive delivery options.
Overnight/Next-Day Delivery
Thankfully, even the most last-minute of home-based shoppers are usually content with next-day delivery a concept made famous by letter and package carriers such as Airborne Express, Mery Worldwide, FedEx and DHL. · In recent years, household names such as UPS and the US Postal Service have launched their own overnight service offerings. These carriers use a combination of air and ground services to quickly move packages large distances. Since aircraft, aircraft fuel and pilots tend to be more costly than trucks, truck fuel and truck drivers, it should come as no surprise this option is more expensive than ground delivery. Like same-day delivery, next-day delivery enables companies to satisfy customers who can't or don't want to wait for their purchases. Unlike same-day, though, it doesn't require companies to have their inventory deployed throughout the country. In fact, there are many companies using the FedEx-perfected hub-and-spoke model that can provide next-day delivery to virtually any location in the US, even if all their products are shipped from one location.
Another thing that works in next-day delivery's favor is most consumers are aware that overnight delivery costs more and so they are willing to pay the premium to receive their product faster. However, companies should not be misled into thinking they can always provide next-day shipping just because they have next-day carriers in the area. Even the fastest of these carriers have "drop-dead" or cut-off times in which products have to be at their collection hubs, and if companies can't get an order to the hubs by that time, they're out of luck.
Next-day delivery is a popular option for many companies and their customers. However, it is especially viable for those who sell or manufacture high-value items. It typically costs less than same-day delivery but more than multi-day delivery.
Multi-Day Delivery
The final and least expensive option is multi-day delivery, frequently synonymous with the term ground delivery. Depending on the ground carrier and which service level companies choose, multi-day delivery can mean anywhere from two to seven days.
Some of the most well-known multi-day carriers include the USPS and UPS. However, many other companies have entered the ground delivery marketplace in recent years, including FedEx, which established its own ground home delivery service in early 2000. Also included in the multi-day delivery category are package handling companies providing parcel consolidation services.
Ground delivery enables cost-conscious companies and consumers to avoid having their product savings or profit margin eaten up by high shipping costs. It's especially economical when dealing with high-weight or large items that take up a lot of cubic space.
Ground carriers are becoming much more proficient at collecting proof-of-delivery information, like the overnight carriers have done for years. On the down side, ground deliveries take longer to reach customers, and depending on the ground carrier companies use, they can't always guarantee a precise, down-to-the-minute delivery time. However, when properly educated about how much they're saving and when the delivery window is quoted accurately, many customers don't mind the wait.
Which Alternative Is Best?
As you most likely have gathered, there is probably no single package delivery alternative that is always exactly right for every company. It all depends on a company's industry, income, inventory situation and particular set of customer service initiatives. In many cases, companies may elect to use a combination of package handling alternatives, especially if they allow their customers to choose faster alternatives in return for shipping premiums. The important thing to remember is companies must be realistic with expectations. For example, it may be nice to deliver packages same-day or next-day but if it undermines a company's ability to run a profitable business or affects a customer's purchasing decision, then it's not necessarily worth the extra cost. By the same token, the cost savings achieved by going ground isn't necessarily a savings in industries where speed is everything and a significant delay could mean a lost customer.
Most importantly, companies must work closely with their customers to manage expectations. No matter what delivery option a company chooses, it's simply smart business to keep customers informed about the mode of delivery selected, the delivery timeline and any package-tracking alternatives.
Todd Carter is senior vice president of Customer Solutions at GATX Logistics Inc., a North and Latin American provider of contract logistics services. GATX Logistics recently created GATX eLogistics, an end-to-end provider of e-commerce fulfillment services. For more information, you can visit www.gatxlogistics.com.
