Special Delivery: Bringing SMBs Into the Global Shipping Network

Of the Web’s many attractions, the potential to tap into a global marketplace, has perhaps been first and foremost for businesses. If you are a manufacturer, distributor or merchant, designing and launching a Web site is but one piece of putting together and solving the e-commerce puzzle, however. Before you start taking orders, you’d best be sure that you can deliver — literally.

We’ve grown accustomed to the convenience of express delivery services so quickly that we tend to take them for granted. However, if you’ve ever tried to send a parcel to an off-the-beaten-path destination, you know that what at first glance appeared simple was deceptively so, and that shipping costs can far exceed the value of what you are shipping.

If you’re going to succeed in the e-commerce marketplace, one way or another you’re going to have to acquire the specialized knowledge associated with shipping products around the country and overseas. The major parcel and package delivery services have made it easier than ever to navigate your way through the logistics and all the rules and regulations, but the ultimate responsibility for getting your product to its destination on time and in one piece rests squarely with the shipper.

You’ve Come a Long Way

Just how instrumental the emergence of modern-day package delivery and shipping services has been in the rapid rise of e-commerce, and in commercial globalization more generally, is often overlooked. Charting the growth of market pioneers and industry leaders over the past couple of decades in tandem with the growth of e-commerce provides a strong hint of their mutual symbiosis.

“As a 30-year veteran of the industry, I can remember the day when it was just UPS and the Post Office. In recent decades, the industry has come a long way,” noted Mark Taylor, chief logistics officer at RedRoller.com.

Carriers have invested billions of dollars in their software to make it easier for people to ship products internationally, he said.

“Each carrier has tools to make international shipping easier. DHL calls its ‘Trade Automation Services.’ UPS’ international tool is named ‘TradeAbility.’ FedEx has its Trade Network. You will have to register in order to access these tools, and some carriers charge a transaction fee for providing a service,” Taylor told the E-Commerce Times.

The parcel carriers have been a huge factor driving the globalization of commerce, Taylor agreed.

“First, they see this as a high priority in their own growth and success,” he continued. “We can see this from some public statements from their CEOs. Mike Eskew, chairman and chief executive officer of United Parcel Service informs us, ‘Most of our 8 million daily customers at UPS are small businesses. And guess what their number one priority is? Finding a way to insert themselves into the global economy.'”

It turns out that small businesses make up 97 percent of all exporters and nearly 40 percent of exports’ total value, statistics pointed out by FedEx CEO Fred Smith, said Taylor.

“Second, international shipping is where their bread is buttered. Donald Broughton, an analyst who follows both UPS and FedEx for A.G. Edwards & Sons in St. Louis, tells us ‘Direct international is 23 percent of revenue for FedEx, but it’s the fastest growing part of their business, and it’s almost 20 percent for UPS. FedEx is the largest air freight carrier in Asia and UPS is neck-and-neck with DHL in Europe,'” he said.

Growing in Tandem

The Web and e-commerce have fundamentally changed the way business is done around the world and convenient package delivery and shipping services have been a key factor in the growth of e-commerce and international trade.

Throughout the recent holiday sales season, retailers are typically willing to offer deeply discounted or free shipping to consumers, according to Bruce Huhmann, associate professor at New Mexico State University.

“More online consumers are comfortable with shopping online, and as they want to save a few ‘gas’ dollars and as online merchants offer shipping discounts, I predict these two factors will help push online sales past the year over year growth of 10 percent, comfortably. Online gift spending should grow again this year. Many online retailers are offering free shipping this holiday season,” Huhmann told the E-Commerce Times.

Thus, even shoppers who do not buy over the Internet, due to higher shipping costs or worries about returns or shipping delays, are increasingly using the Internet to search for gift ideas. Between online purchases and information searches, about 30 percent of New Mexico holiday sales involved the Internet last year. Thus, New Mexico retailers should continue to improve their presence on the Internet in the coming years.

“The Internet has changed the way we buy things,” Taylor said. “I did all my Christmas shopping online. Manufacturers used to send their products in trucks to distribution centers which would store them and break them into smaller shipments to stores. Today, manufacturers are shipping packages directly to the consumer.”

UPS provides package delivery services to 21 of the top 25 e-tailers in the U.S. as ranked by Internet Retailer magazine, according to Donna Barrett, the company’s technology public relations manager. Tracking requests on UPS.com along average 15 million a day.

The fact that UPS has a person responsible for technology public relations is indicative of how integral technology is in the organization’s operations. Investing in the development of increasingly Web-delivered information services, moreover, has paved the way for UPS to effectively become part of the many and varied businesses it serves.

There have been more than 25,000 distinct integrations within the last 18 months of UPS Online Tools, which retailers can integrate into their Web sites, Barrett told the E-Commerce Times. These have enabled more than 748,000 individual users to access tracking, time-in-transit, rating and shipping information. Many multichannel and online retailers, in turn, offer the information service to their customers to improve service and reduce costs, such as comparing and selecting alternative delivery options, as well as tracking their shipments.

Shipping and the SMB

While the emergence of today’s technology-driven package and freight carriers has made it easier and cheaper for businesses of all shapes and sizes to ship to customers across town, nationally and internationally, it’s the bigger businesses that get the most out of them.

Some 58 percent of high-volume shippers have multi-carrier shipping systems, according to the Annual PARCEL Best Practices Survey of 250 shipping operations conducted by Morgan Stanley and Parcel magazine in 2006.

“On the other end of the spectrum, the majority of smaller shippers utilize carrier-supplied shipping systems — compared to only 10 percent of the high-volume shippers. These survey results made me wonder, what do the high-volume shippers know that perhaps the low-volume shippers don’t? Why do the larger shippers use multi-carrier shipping systems and the smaller shippers use systems that the carriers provide for them?” Taylor recounted.

“From a cost perspective, SMBs (small and mid-sized businesses) could be at a considerable disadvantage. One of the areas that established merchants have the advantage is with the rates that the carriers charge for international shipping. Big businesses generally get big discounts. The cost of shipping an international package is substantially higher than a domestic package with rates closer to the price of airline tickets. I have seen discounts in excess of 50 percent. This would put a SMB at a competitive disadvantage,” he continued.

Providing an information service that enables SMBs to close some of the competitive gap that exists between them and their larger brethren is the motivation behind comparison shipping engines such as RedRoller.com.

Established in 2004, the Red Roller Web service — currently in Beta version — enables SMBs to compare real-time shipping rates and services across multiple package carriers, including DHL, FedEx and USPS. In addition, it enables users to create a shipping order with the selected carrier, generate labels and arrange for pick-up or locate the nearest drop-off location — all for free.

“The big shippers know that comparing multiple carriers to find the best option helps cut costs and gives any business a competitive advantage. You should always use the variety of information available to pick the cheapest, the fastest, or the combination thereof, to best suit your needs for each and every package you send. The results directly affect your company’s bottom line,” Taylor advised.

Supply Chains, Energy and the Environment

For its part, UPS is now focusing on using its technological edge to dig deeper and provide value to its larger organization customers by developing solutions that provide them with “personalized visibility into their global supply chains. UPS is pioneering visibility systems in the freight industry just as it has done as the world’s largest package delivery company,” Barrett explained.

“These solutions range from those as fundamental as package tracking to sophisticated order and inventory and management solutions. Most recently, UPS has focused on providing its freight customers with the same type of easy-to-use visibility capability that its small customers enjoy,” he said.

As is increasingly the case throughout the economy, but particularly for transportation industry participants, rising fuel costs and concerns about the ongoing rise of carbon dioxide and greenhouse gas emissions are leading UPS to focus on reducing fossil fuel consumption and increasing energy efficiency. Information technology, GIS (geographic information system) in particular, is playing a big role in this effort as well.

In addition to operating the nation’s largest fleet of alternative fuel-powered vehicles in the U.S., UPS is nearly finished deploying its package flow technology, which optimizes delivery routes, thereby minimizing fuel usage and costs. In 2006, using the system cut the number of miles driven by UPS package delivery drivers by 28 million, saving 3 million gallons of fuel and reducing carbon dioxide emissions by 31,000 metric tons, Barrett noted. By year-end some 84 percent of the company’s driver workforce was expected to be using the system.