Two overriding issues have piqued the interest and scrutiny of carrier transit times by shippers. The first issue is the continued emphasis on inventory reduction along with more reliance on just-in-time inventory management vis-à-vis higher-cost expedited transportation services compared with standard ground service. The second issue is the ground service guarantee.
In order for logistics management to make an educated decision in this matter, they must rely on the carrier's published transit time standards. Prior to this year, it meant comparing UPS and FedEx Ground standards. However, earlier this year, Airborne entered the ground arena.
Further complicating the decision is the difference between scheduled and standard service. So let's begin with explaining the difference between scheduled and standard service and then move on to some transit time comparisons.
Scheduled vs. Standard Transit Times
Standard service is what the carriers publish and what they are guaranteeing. Scheduled service is the real world. If you thought these two were the same, as is the common perception, you are in for a surprise.
A carrier's scheduled service is a function of its distribution network. Three key distribution network areas that determine scheduled service are:
1. The number of hubs and their geographical locations
2. Hub sort times
3. Linehaul runs
These three areas produce a very reliable schedule when tied together in an engineered and analytical method.
Number of Hubs and Geographical Locations
The use of a hub and spoke (commonly referred to as hub and satellite) network enables parcel carriers to minimize expenses and charge relatively low rates for their services. Without such a network and the inherent economies of scale, carriers would be forced to transport parcels directly from origin to destination without the benefits of parcel consolidation. Therefore, the number of hubs and where they are located dictates the transit times a carrier can offer its customers.
Each hub will have satellites (pick up and delivery facilities) assigned to its geographical area. This is often referred to as a "hub area." For example, a hub area in southern California would have a hub in the Los Angeles area and satellites from San Diego to Bakersfield.
Hub Sort Times
A hub network is an interdependent system. What occurs at one hub will impact another hub close by or even across the country. Parcel carriers, unlike their LTL counterparts, operate their hubs in a series of four-hour "sort windows" throughout the day. These four-hour sort windows can be back-to-back, or they can be separated by an hour or so. Each hub has an AM and a PM operation. The AM operation sorts parcels originating the previous day from the hub's satellites and consolidates them onto trailers destined for other hub areas. The PM operation sorts parcels received from other hub areas that day and consolidates them onto trailers destined for specific hub area satellites. The timing of these sorts must be engineered to meet the desired level of service.
Linehaul Runs
Linehaul is a term for the "over-the-road" movement of tractors and trailers that one sees on interstate highways. Linehaul runs (or schedules) are engineered to arrive at hubs within the designated sort windows. The arrivals must be spread out throughout the first three hours of the sort window to allow for unloading, sorting and loading. All of the arrivals cannot occur during the last hour since the hub can only process a limited number of parcels per hour. Linehaul arrivals can be accurately planned based on distance traveled, intermediate stops and Department of Transportation rules.
Having explained how the network functions, let's illustrate a three-day scheduled service lane between Kansas City, Missouri and Burbank, California. (Figure 1)
Parcels are picked up in Kansas City and consolidated into a trailer at a satellite facility destined for a hub in Lenexa, Kansas. The trailer is dispatched and arrives at the Lenexa hub prior to the sort. Once the hub sort begins, the Kansas City parcels are sorted and consolidated onto a trailer destined for a hub in Los Angeles. The trailer to Los Angeles is dispatched and sent over the road (not via rail) to the Los Angeles hub. The trailer arrives during the next day PM sort in Los Angeles. (Note: It could arrive earlier, but we will show the worst case scenario.) The parcels in the trailer are sorted and all parcels destined for Burbank are consolidated onto another trailer. The Burbank trailer is dispatched after the sort and arrives at a satellite facility in Burbank for delivery the next day.
Published Transit Times
Many times, people equate the published transit times to · be the same. This is not the case. Maps on the left side of this page show the published transit times for UPS, FedEx Ground and Airborne from Atlanta, Georgia, Chicago, Illinois, Dallas, Texas; and Kansas City, Missouri. Figure 2, on page 47, compares the transit times. Remember this addresses published service and not the scheduled service.
It is interesting to revisit our scheduled transit time example discussed earlier (Figure 1). Kansas City to Burbank is a published four-day transit time for UPS. FedEx publishes a three-day transit time according to its map (without a service guarantee) and a four-day standard according to its point-to-point transit time lookup. (The point-to-point lookup does not elaborate if it is guaranteed or not.) Airborne publishes a five-day standard. However, the scheduled transit time is three days (provided the trailers are not moved via rail and UPS tends to use more rail than FedEx). So here is a good example of a service lane with some extra time built into it. This example may remind one of how the airlines schedule their on-time measurements. Looking at Figure 2 we can draw the following conclusions:
Guaranteed Service
Each carrier has its own distinct process and information requirements for submitting guarantee service refunds. The common thread among all carriers is the standard times that are published and these form the basis of the guarantees. What do the published standards mean in terms of the guarantee? Let's take a look.
UPS
With UPS, what you see is what you get plain and simple. Looking at a service map provides one with all of the transit times at a glance. There are not any areas or states blocked out or denied service refunds. UPS is very consistent and has the least standard deviation from the published transit times (based on our studies).
FedEx Ground
What you see is not what you get. Service maps show one standard while the point-to-point lookup shows another. Large areas, and in some instances whole states, are blocked out from service refunds. On a positive note, FedEx Ground has improved its published transit times in the past year. However, it still has a much larger standard deviation from published transit times compared with UPS due to the large number of "early" deliveries. Producing service maps such as Kansas City's does not help (see the shaded areas). The majority of eight states are not eligible for the refund, and eleven entire states are not eligible. This is in stark contrast to what its service guide says. Either it is a mistake or it wants to discourage some folks from pursuing the guarantee.
Airborne
Again, like UPS, what you see is what you get. One can gather all they need to know from one look at a service map. Since its network is still under development, some areas have much better service than others. Based on the published time of this article, we do not have enough statistical data points to accurately measure its standard deviation.
Apples to Apples
One must always perform an apples-to-apples comparison of transit times particularly when you are considering changing carriers. Your customers might be accustomed to two-day service and then receive three-day service from a new carrier with no advance notice. Take the time to compare standards of service when evaluating your carrier options. In some cases, a service map will not provide you with enough information and you will have to do additional research. You may be able to save a percentage point or two in your rates but end up disappointing your customers with less timely delivery performance.
Joe Sudar is executive vice president of SmartTran, Inc. and an expert in parcel logistics and network operations. SmartTran is a transportation consulting company offering services in carrier rate negotiation, guarantee refund service and logistics planning. SmartTran's management team has over 60 years of experience in parcel transportation management. Joe can be reached by phone at 724-378-6471 or by e-mail at sudar@smarttran.com or write to him at SmartTran, Inc. PO Box 12104, Pittsburgh PA 15231.
