Ups and Downs at the US Postal Service

We don’t think it will come as a surprise to anyone that the US Postal Service has again reported huge financial losses.  But there is some good news as well as some obvious bad news behind those numbers; and some interesting information to boot.

First the good news:

·         The USPS delivered 589 million more packages in FY 2017 than they did in the previous fiscal year

·         Those additional packages represented an 11.4% growth rate, not a bad growth rate for any business,  But remember the USPS is not just any business

·         And finally, the current FY loss of $2.7 Billion is down from the previous year’s loss of 5.6 billion.  And, that is a significant improvement

Now for the bad news:

·         The USPS delivered 5 billion fewer pieces of mail in FY 2017 than they delivered in the previous fiscal year.  This was a 3.6% decrease from the previous year.

·         The reason this is so critical is because according to Postmaster Megan Brennan, letter and mail shipping accounts for 70% of its yearly revenue

·         USPS also defaulted on more than $6.9 billion in payments to pre-fund future pension and health benefits for postal workers

So when you analyze the good news and stir in the bad news, you come away more confused than ever and here’s why.

Letter and mail shipping has been and will continue to be on a consistent decline.  So if that revenue source currently represents 70% of the annual USPS revenues, it would behoove them to find another revenue source that will make up for the continuing losses.  They need a positive cash flow solution to replace the declining letter and mail shipping metric and they need to find it and implement really quick. 

But wait, don’t they already have a thriving revenue source in delivering packages?  You bet they do.  Now they need to implement a full-court press to improve their bottom line revenue for delivering packages so that revenue source becomes 70% or perhaps 80% of their annual revenue.

Can it be done? Only time will tell.

Global Supply Chain Management Consulting - Boxes and Globe

The Checklist Every Shipper Needs (Part 3)

Today we continue to highlight and expand upon the key elements of the “Checklist for Transportation Spend Management” created by Transwide and Supply Chain Media.  In today’s post we highlight checklist items three, four and five.

Checklist Item #3 – “Carrier Bid and Selection is an Automated Process and Rates are Automatically Updated.” 

This point is an interesting and extremely important one because in many company’s bid processes, the final carrier selection is based solely on the lowest cost respondent.  That single selection criteria process is not always the best choice, and in fact often times is the worst choice for the shipper.  In any carrier bid process, the key element is making sure that all carriers who are invited to bid are in fact “all created equal.”  If not, then selecting the least cost carrier may, and often does backfire because the lowest bidder may provide the lowest level of service.

To work with a bid process that is automated and where the carrier rates are updated automatically, is a very powerful tool for any shipper to utilize.  Automating processes in conjunction with the carriers’ processes only strengthens the working relationship between both parties, creating true and hopefully long lasting relationships.

Checklist Item #4 – “Almost all of our Carriers are Meeting their Service Level and Routing Compliance Requirements, as a Percentage of the Shipments They Handle.”

The key words in the above checklist point is “almost” and “as a percentage of the shipments they handle.”  First and foremost, we all understand that no transportation service provider will provide 100% on-time, damage free deliveries, 100% of the time.  Having said that, every company must establish their own metrics for what they feel is a reasonable “fail rate”, because that is exactly what it is, a failure of the carrier to meet its service obligations as outlined by the shipper.  If a carrier continually falls below that failure rate, the shipper must have a defined plan to replace that carrier immediately and perhaps even more important, is the need to get that change order message out to its suppliers, customers and other company employees involved in the process without any interruption in service.

Checklist Item #5 – “We Collaborate and Synchronize data with Carriers, Suppliers and Trading Partners, and we Only Need to Concern Ourselves with Invoice Exception handling.”

Collaboration is such a critical part of any business relationship, especially between shippers and carriers.  But we are continually amazed at how often these relationships are thought of as vendor/customer relationships and not business partnerships.  This is a fatal mistake and is usually made by the shippers who feel that they own the freight and they pay the bills so they are the ones that are in control…NOT!

The old adage “it takes two to Tango” is still true today. Yes, the carrier needs the shipper’s freight but equally as important is the fact that the shipper needs the carrier to get its goods delivered.  Sounds simple enough and it is, but putting the proper tone on these relationships at the outset is critical for long term business success FOR BOTH PARTIES!

The issue of invoice accuracy is another critical aspect of any carrier/shipper relationship.  If the rates and charges are agreed to by both parties, the rates and charges would be loaded into the freight carriers billing system and therefore each and every invoice it issues SHOULD be 100% accurate.  That’s in a perfect world which none of us live in.  Again, metrics are critical here as well.  What percentage of invoice inaccuracies is acceptable?  What happens if the carrier exceeds that percentage?  There is a cost associated with the shipper’s need to audit and properly pay all of the carriers invoices in a timely fashion.  So the more invoicing errors there are, the more cost the shipper bears.  That is another recipe for failure that is often overlooked in the bidding process.

One final point that both shippers and carriers should always strive for.  If the carrier and shipper agree to the rates and there is a total collaborative process in place between the shipper and the carrier, the shipper could “Pre-Rate” every shipment it makes based on the agreed upon rates and charges.  That would allow the shipper to send payment to the carrier without ever having to receive an invoice from the carrier – How’s that for a collaborative and synchronized business operations process.

 

  

Breaking: USPS New Pricing for 2018

All information property of the United States Postal Service and reprinted here as a courtesy to our readers. For more information please visit www.usps.com

DMM Advisory

Classification — keeping you informed about classification and mailing standards of the United States Postal Service

USPS™ Announces New Prices for 2018

The Postal Service™ filed notice with the Postal Regulatory Commission (PRC) today of price changes to take effect Jan. 21, 2018. The new prices, if approved, include a one-cent increase in the price of a First-Class Mail® Forever® stamp from 49 cents to 50 cents. Postcard stamps and metered letters would also have a one-cent increase.

The proposed prices would raise Mailing Services product prices approximately 1.9 percent, and most Shipping Services products will average a 3.9 percent price increase. While Mailing Services price increases are limited based on the Consumer Price Index (CPI), Shipping Services prices are adjusted strategically, according to market conditions and the need to maintain affordable services for customers.

The proposed Mailing Services price changes include:

Product Current Proposed
Letters (1 oz.) 49 cents 50 cents
Letters additional ounces 21 cents 21 cents
Letters (metered) 46 cents 47 cents
Outbound International Letters (1 oz.) $1.15 $1.15
Domestic Postcards 34 cents 35 cents

 

The proposed domestic Priority Mail Flat Rate® retail price changes are:

 

 Product Current Proposed
Small Flat Rate Box $7.15 $7.20
Medium Flat Rate Box $13.60 $13.65
Large Flat Rate Box $18.85 $18.90
APO/FPO Large Flat Rate Box $17.35 $17.40
Regular Flat Rate Envelope $6.65 $6.70
Legal Flat Rate Envelope $6.95 $7.00
Padded Flat Rate Envelope $7.20 $7.25

 

The PRC will review the prices before they are scheduled to take effect on Jan. 21, 2018. The complete Postal Service price filings with the new prices for all products can be found on the PRC site under the Daily Listings section athttps://www.prc.gov/dockets/daily. For the Mailing Services filing, see Oct. 6, 2017, Docket No. R2018-1. For the Shipping Services filing, see Oct. 6, 2017, Docket No. CP2018-8.

 

The Domestic Mail Manual (DMM®) and DMM Advisories are available on Postal Explorer®(pe.usps.com)

Business People Sitting in an Office Building Chatting

Is Blockchain The New Supply Chain?

Blockchain!  The new hip and technical term everyone is hearing more about; what is it exactly and how will it affect your Supply Chain in the very near future?

Throughout modern history, the majority of anything involving the sale/transfer of goods and services between two or more parties was recorded on some form of a physical ledger. With the development of the computer and the internet over the last several decades, technology has proven that the use of a physical ledger is no longer efficient and can be highly risky for business.

Technology dictates how we buy and sell and keeping records of that has become increasingly more complex and leaves too much room for inaccurate data and in some cases, even fraud.

Take for example, a widget manufacturer; the company’s supply chain can be vast.  Sourcing materials from multiple vendors, assembling products lines and having third party logistics providers transport product direct to customers. Without Blockchain technology, a company is forced to rely on transactional data from multiple intermediaries who own and control their data.  This is inefficient as parts of the data can be changed by various owners and therefore, visibility for the manufacturer and other parties in the supply chain is highly limited.

And here’s where Blockchain technology can be a game-changer– as every transaction or data input occurs, it would be placed into its own “Block.”  When another Block of data is created it is then linked to the previous Block.  All parties have permission to see the data Blocks and once they are created, they cannot be changed, moved or deleted unless all parties involved review and agree to the changes. This is HUGE for transparency. Who doesn’t love transparency? Especially with your own business – honesty is the best policy, I always say.

As technology continues to develop there will be more and more room for error and fraud.  Blockchain is a simple and efficient solution to provide value and security for companies, consumers and logistics providers to ensure that the data they operate off of is correct and tamper proof.

Tesla

Can Tesla’s New Semi-Truck Pave the Way for an Entire Industry?

The commercial trucking industry is integral to our daily lives.  In the United States approximately 70% of all freight is moved by commercial trucks; the figures are higher for food, agricultural and pharmaceutical products. Essentially, nearly everything you come in contact with on a daily basis has at some point, been on a commercial truck.

Interestingly enough, these goods/products are moved across the country by trucks that have gone virtually unchanged for nearly 50 years; what has changed is the technology utilized to organize and move goods more efficiently.  The core problem for the commercial trucking industry remains that freight is moved by energy/fuel that may not be available or will become too expensive in the near future.

This is where Tesla comes in.

Tesla has been breaking barriers in the automotive industry with the success of their fully electric fleet of vehicles for consumers.  Now Tesla is going to try to change the hearts and minds of the commercial trucking industry with the unveiling of their fully electric Semi-Truck come September, 2017.

Manufacturers for the commercial trucking industry today seem more worried about driver shortages than what their trucks will run on in the next 5 to 10 years.  But they need to also be concerned about fuel prices and that’s where Tesla has the answer.

As electric vehicle technologies become more common and less expensive, trucking companies will quickly see the benefit of operating those vehicles over fossil fuel.  The cost of electricity will also be managed with companies creating their own electricity through solar, wind, water, etc.  Not to mention the significant federal and state tax credits that these vehicles will allow companies to apply for.

Tesla is the ONLY Company to successfully bring to market a fully electric and non-polluting vehicle fleet and the same will be true with their new semi-truck.

The trucking industry in the US alone operates over 15 million gasoline powered vehicles and economists are predicting that this ‘cheap gas phase’ we have had for the last two years is going to be short lived.  Fuel prices are expected to increase by 75% by 2020 and the cost for charging electric vehicles will be significantly less than it is today.

One thing is for sure, significant change in the commercial trucking industry is coming.  Whether it is using other forms of alternative fuel rather than electric; the fact remains that in our lifetime gasoline and diesel will be a thing of the past because it simply is inefficient and costs too much.

WSJ

No longer your father’s supply chain!

It’s obviously no longer your father’s supply chain!  We have all been witnesses of what we consider significant changes to traditional supply chains.  The Wall Street Journal is now reporting that Kellogg Company will remove the leg of actual store deliveries from its traditional supply chain to retail grocery stores and just deliver their sought after goods directly to the grocery store warehouses.  This means the grocery chains will now have the responsibility to handle the actual store deliveries.

So what’s the impact here, well for Kellogg, they intend to close 39 distribution centers and will eliminate approximately 1000 jobs.  So for Kellogg workers this is certainly a major blow.  For the grocery chains, this means more goods moving through their distribution centers for actual store delivery; obviously at additional costs.  We also wonder if the reduced costs Kellogg will benefit from by making these changes will be passed onto their customers in terms of reduced prices for the “delivered” goods.  Somehow we don’t think that will be the case however.

Here is a link to the full article.

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