Couriers take on the supply chain burden

With retailers turning to the two holy grails of business in the nineties – the Web and outsourcing – in ever greater numbers, it’s the packaged courier companies which are reaping the rewards.

Once viewed solely, but not inaccurately, as the folks who picked up a package from site A and delivered it to site B, courier companies have since branched out, and in a big way.

Today, shippers such as Federal Express Corp., United Parcel Services of America Inc. and Purolator Courier Ltd., either directly or through extended partnerships, offer their customers everything from meat-and-potatoes overnight delivery to supply chain consulting and outsourcing, and even enterprise software implementations.

“No longer are we just an outside supplier that steps up to the plate and delivers a package. We are an integral part of the supply chain, and as such the dynamics of our relationships have changed,” said Richard Swanborough, director or marketing with Purolator in Mississauga, Ont.

In fact, one of the big problems currently facing courier companies is taking on more than they can handle. “They’re stretching into areas that they’ve never been in,” said Karen Peterson, an analyst with Stamford, Conn.-based Gartner Group Inc. “They’re having challenges finding the right people to understand these (new) issues.”

Some of the changes were ushered in by the availability of tracking and ordering software, which customers could download to their desktops, and which are now appearing on the Web.

Then there’s the rise of dot-com companies, the owners of which tend to have little or no experience in shipping or logistics. Many on-line retailers have become tightly integrated with the package shippers, relying on them for warehousing, real-time inventory tracking and handling returns.

And with International Data Corp. predicting 183 million on-line shoppers by 2003, vs. 31 million last year, this will likely continue.

But traditional companies are also fuelling the transformation, Peterson said. “Many brick and mortar companies are saying these are not core competencies, that they don’t have the time or the experience to keep up with these things, and so now they’re able to leverage someone else’s experience,” she said.

FDX Corp., the parent company of Federal Express Corp., is among the most aggressive. The company is investing US$1.3 billion this year in its IT infrastructure in support of cyberlogistics.

And FDX has already created several subsidiaries to further its position, including FDX Supply Chain Services, formerly known Caliber Logistics, which offers supply chain consulting and outsourcing services to FedEx customers.

On the customer-facing side, FedEx provides users with FedEx Ship tracking software or access to the increasingly popular FedEx interNetship, available since 1997, which lets customers manage their shipping directly from the FedEx Web site.

“You can actually get the airbill as a graphic, and then print it up from within a browser. You don’t need software,” said Timothy Kibbey, manager of electronic commerce with Federal Express Canada Ltd. in Mississauga.

FedEx officials point to La Jolla, Calif.-based as its showcase customer. When the on-line flower retailer receives an order, both the company’s contract growers and FedEx receive copies. When the order is ready, it is picked up by FedEx. For, there is virtually no inventory, and the retailer can keep on top of the location of orders.

Integration is the key, and the shippers are readying themselves for the end of hand-written bills and even software in favour of the Web. Currently, 50 per cent of Purolator’s orders are automated – a figure the company would like to see hit 90 per cent by 2002, according to Swanborough.

“The demand here is huge; the customers are putting increasing pressure on us to provide them with automated solutions,” he explained.

Purolator is also well into the supply chain route; to that end, it has partnered with Burnham Corp., an Atlanta-based supply chain consulting firm with offices in Canada, to help provide services including transportation, inventory supplies and return management to its customers.

No one knows the shift in the courier business better than those on the front lines. That includes Wayne Bosch, former director of IT and now director of customer automation with UPS Canada in Mississauga, who says his job has changed drastically over the past several years.

“We’re not necessarily talking to the (customer’s) traffic manager anymore, we’re talking to the vice-president of customer service. Why would a courier company talk to a vice-president? Because we’re sharing information with the customer,” he said.

UPS is currently working on Web APIs for its customers. It also offers its customers access to supply chain consulting via its UPS Worldwide Logistics arm.

Though the prospect of cutting costs may be attractive, Gartner’s Peterson said companies looking to outsource their supply chains have to be cautious. “[There is] a huge risk in that I have no control of the companies outside my contract,” she said.

“But the reward in outsourcing to one company is that I only have one throat to choke, rather than four or five different people to manage.”