Transcript of BriefingsDirect podcast on peak season shipping efficiencies and UPS retail solutions with Alibris and QVC.
Listen to the podcast here. Sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions and you're listening to BriefingsDirect.
Today, a sponsored podcast discussion about the peak holiday season for retail shopping -- online and via television -- and the impact that this large bump in the road has logistically and technically for some major retailers.
We’re going to discuss how Alibris, an online media and bookseller, as well as QVC, a global multimedia shopping network, handles this peak demand issue. The peak is culminating for such shippers as UPS this week, right around Dec. 19, 2007.
We’re going to talk about how the end-user in this era of higher expectations is now accustomed to making a phone call or going online to tap in a few keystrokes, and then -- like Santa himself -- having a package show up within a day or two. It's instant gratification, if you will, from the logistics point-of-view.
Helping us understand how this modern miracle can be accomplished at such high scale and with such a huge amount of additional capacity required during the November and December shopping period, we’re joined by two guests. We’re going to be talking with Mark Nason, vice president of operations at Alibris, and also Andy Quay, vice president of outbound transportation at QVC. I want to welcome you both to the show.
Mark Nason: Thank you, Dana.
Gardner: Tell us a little bit about what’s different now for Alibris, given the peak season demands, over just a few years ago. Have the expectations of the end-user really evolved, and how do you maintain that sort of instant gratification despite the level of complexity required?
Nason: What we strive for is a consistent customer experience. Through the online order process, shoppers have come to expect a routine that is reliable, accurate, timely, and customer-centric. For us to do that internally it means that we prepare for this season throughout the year. The same challenges that we have are just intensified during this holiday time-period.
Gardner: For those who might not be familiar, tell us a little about Alibris. You sell books, used books, out-of-print books, rare media and other media -- and not just directly, but through an online network of independent booksellers and retailers. Tell us more about how that works.
Nason: Alibris has books you thought you would never find. These are books, music, movies, things in the secondary market with much more variety, and that aren’t necessarily found in your local new bookseller or local media store.
We aggregate -- through the use of technology -- the selection of thousands of sellers worldwide. That allows sellers to list things and standardize what they have in their store through the use of a central catalogue, and allows customers to find what they're looking for when it comes to a book or title on some subject that isn’t readily available through their local new books store or media seller.
Gardner: Now, this is a very substantial undertaking. We're talking about something on the order of 70 million books from a network of some 10,000 booksellers in 65 or more countries. Is that right?
Nason: Roughly, that’s correct. Going in and out of the network at any given time, we've got thousands of sellers with literally millions of book and other media titles. These need to be updated, not only when they are sold or added, but also when they are priced. Prices are constantly changing. It’s a very dynamic market.
Gardner: What is the difference in terms of the volume that you manage from your slowest time of the year compared to this peak holiday period, from mid-November through December?
Nason: It’s roughly 100 percent.
Gardner: Wow!
Nason: In this industry there are actually two peak time periods. We experience this during the back-to-school season that occurs both in January and the latter-half of August and into September.
Gardner: So at the end of the calendar year you deal with the holidays, but also for those college students who are entering into their second semester?
Nason: Exactly. Our peak season associated with the holidays in December extends well into January and even the first week of February.
Gardner: Given this network and the scale and volume and the number of different players, how do you manage a consistent response to your customers, even with a 100 percent increase at the peak season?
Nason: Well, you hit on the term we use a lot -- and that is "managing" the complexity of the arrangement. We have to be sure there is bandwidth available. It’s not just staffing and workstations per se. The technology behind it has to handle the workload on the website, and through to our service partners, which we call our B2B partners. Their volume increases as well.
So all the file sizes, if you will, during the transfer processes are larger, and there is just more for everybody to do. That bandwidth has to be available, and it has to be fully functional at the smaller size, in order for it to function in its larger form.
Gardner: I assume this isn’t something you can do entirely on your own, that you depend on partners, some of those B2B folks you mentioned. Tell us a little bit about some of the major ones, and how they help you ramp up.
Nason: In the area of fulfillment, we rely heavily on our third-party logistics partners, which include carriers. At our distribution centers, typically we lease space, equipment, and the labor required to keep up with the volume.
Then with our B2B partners -- those are the folks that buy from us on a wholesale or distribution basis -- we work out with them ahead of time what their volume estimates might be and what their demands on us would be. Then we work on scheduling when those files might come through, so we can be proactive in fulfilling those orders.
Gardner: When it comes to the actual delivery of the package, tell us how that works and how you manage that complexity and/or scale.
Nason: Well, we have a benefit in that we are in locations that have scalable capacity available from the carriers. That includes lift capacity at the airport, trucking capacity for the highway, and, of course, railheads. These are all issues we are sensitive to, when it comes to informing our carriers and other suppliers that we rely on, by giving them estimates of what we expect our volume to be. It gives them the lead time they need to have capacity there for us.
Gardner: I suppose communication is essential. Is there a higher level of integration handoff between your systems and their systems? Is this entering a more automated level?
Nason: It is, year-round. For peak season it doesn’t necessarily change in that form. The process remains. However, we may have multiple pick-ups scheduled throughout the day from our primary carriers, and/or we arrange special holiday calendar scheduling with those carriers for pick-up, perhaps on a Saturday, or twice on Mondays. If they are sensitive to weather or traffic delays, for example, we know the terminals they need to go through.
Gardner: How about returns? Is that something that you work with these carriers on as well? Or is that something you handle separately?
Nason: Returns are a fundamental part of our business. In fact, we do our best to give the customer the confidence of knowing that by purchasing in the secondary market, the transaction is indemnified, and returns are a definite part of our business on a day-to-day basis.
Gardner: What can we expect in the future? Obviously this volume continues, the expectations rise, and people are doing more types of things online. I suppose college students have been brought up with this, rather than it being something they have learned. It’s something that has always been there.
Do you see any prospects in the future for a higher level of technology need or collaboration need, how can we scale even further?
Nason: Constantly, the improvements in technology challenge the process, and managing the complexity is what you weigh against streamlining even further what we have available -- in particular, optimizing inter-modal transport. For example, with fuel costs skyrocketing, and the cost of everyone's time going up, through the use of technology we look for opportunities on back-haul lanes, or in getting partial loads filled before they move, without sacrificing the service interval.
These are the kinds of things that technology allows when it's managed properly. Of course, another layer of technology has to be considered from the complexity standpoint before you can be successful with it.
Gardner: Is there anything in the future you would like to see from such carriers as UPS, as they try to become your top partners on all of this?
Nason: Integration is the key, and by that I mean the features of service that they provide. It’s not simply transportation, it’s the trackability, it’s scaling; both on the volume side, but also in allowing us to give the customer information about the order, when it will be there, or any exceptions. They're an extension of Alibris in terms of what the customer sees for the end-to-end transaction.
Gardner: Fine, thanks. Now we’re going to talk with Andy Quay, the vice president of outbound transportation at QVC.
QVC has been having a very busy holiday peak season this year. And QVC, of course, has had an illustrious long-term play in pioneering, both retail through television and cable, as well as online.
Welcome Andy, and tell us a little bit about QVC and your story. How long you have been there?
Andy Quay: Well, I am celebrating my 21st anniversary this December. So I can say I have been through every peak season.
Although peak season 20 some years ago was nothing compared to what we are dealing with now. This has been an evolutionary process as our business has grown and become accepted by consumers across the country. More recently we’ve been able to develop with our website as well, which really augments our live television shows.
Gardner: Give us a sense of the numbers here. After 21 years this is quite a different ball game than when you started. What sort of volumes and what sort of records, if any, are we dealing with this year?
Quay: Well, I can tell you that in our first year in business, in December, 1986 -- and I still have the actual report, believe it or not -- we shipped 14,600 some-odd packages. We are currently shipping probably 350,000 to 450,000 packages a day at this point.
We've come a long way. We actually set a record this year by taking more than 870,000 orders in a 24-hour period on Nov. 11. This led to our typical busy season through the Thanksgiving holiday to the December Christmas season. We'll be shipping right up to Friday, Dec. 21 for delivery on Christmas.
Gardner: At QVC you sell a tremendous diversity of goods. Many of them you procure and deal with the supply chain yourselves, therefore cutting costs and offering quicker turnaround processing.
Tell us a little about the technology that goes into that, and perhaps also a little bit about what the expectations are now. Since people are used to clicking a button on their keyboard or making a quick phone call and then ... wow, a day or two later, the package arrives. Their expectations are pretty high.
Quay: That’s an excellent point. We’ve been seeing customer expectations get higher every year. More people are becoming familiar with this form of ordering, whether through the web or over the telephone.
I’ll also touch on the technology very briefly. We use an automated ordering system with voice response units that enable my wife, for example, to place an order in about 35 seconds. So that enables us to handle high volumes of orders. Using that technology has allowed us to take some 870,000 orders in a day.
The planning for this allows the supply chain to be very quick. We are like television broadcasts. We literally are scripting the show 24-hours in advance. So we can be very opportunistic. If we have a hot product, we can get it on the air very quickly and not have to worry about necessarily supplying 300 brick-and-mortar stores. Our turnaround time can be blindingly quick, depending upon how fast we can get the inventory into one of our distribution centers.
We currently have five distribution centers, and they are all along the East Coast of the U.S., and they are predominantly commodity driven. For example, we have specific commodities such as jewelry in one facility, and we have apparel and accessories as categories of goods in another facility. That lends itself to a challenge when people are ordering multiple items across commodities. We end up having to ship them separately. That’s a dilemma we have been struggling with as customers do more multi-category orders.
As I mentioned, the scripting of the SKUs for the broadcast is typically 24 hours prior, with the exception of Today's Special Value (TSV) show and other specific shows. We spend a great deal of time forecasting for the phone centers and the distribution carriers to ensure that we can take the orders in volume and ship them within 48 hours.
We are constantly focused on our cycle-time and in trying to turn those orders around and get them out the door as quickly as possible. To support this effort we probably have one of the largest "zone-jumping" operations in the country.
Gardner: And what does "zone-jumping" mean?
Quay: Zone jumping allows me to contract with truckload carriers to deliver our packages into the UPS network. We go to 14 different hubs across the country, in many cases using team drivers. This enables us to speed the delivery to the customer, and we’re constantly focused on the customer.
Gardner: And this must require quite a bit of integration, or at least interoperability in communications between your systems and UPS’s systems?
Quay: Absolutely, and we carefully plan leading up to the peak season we're in now. We literally begin planning this in June for what takes place during the holidays -- right up to Christmas Day.
We work very closely with UPS and their network planners, both ground and air, to ensure cost-efficient delivery to the customer. We actually sort packages for air shipments, during critical business periods, to optimize the UPS network.
Gardner: It really sounds like a just-in-time supply chain for retail.
Quay: It's as close as you can get it. As I sometimes say, it's "just-out-of-time"! We do certainly try for a quick turnaround.
Coming back to what you said earlier, as far as the competition goes it is getting more intense. The customer expectations are getting higher and higher. And, of course, we are trying to stay ahead of the curve.
Gardner: What's the difference between your peak season now and the more regular baseline of volume of business? How much increase do you have to deal with during this period, between late-November and mid- to late-December?
Quay: Well, it ramps up considerably. We can go from a 150,000 to 200,000 orders a day, to literally over 400,000 to 500,000 orders a day.
Gardner: So double, maybe triple, the volume?
Quay: Right. The other challenge I mentioned, the commodity-basis distribution that we operate on -- along with the volatility of our orders -- this all tends to focus on a single distribution center. We spend an inordinate amount of time trying to forecast volume, both for staffing and also planning with our carriers like UPS.
We want to know what buying is going to be shipping, at what distribution center, on what day. And that only compresses even more around the holiday period. We have specific cutoff times that the distribution center operations must hit in order to meet the customers' delivery date. We work very closely on when we dispatch trucks ... all of this leading up to our holiday cutoff sequence this week.
We try to maximize ground service versus the more expensive airfreight. I think we have done a very good job at penetrating UPS’s network to maximize ground delivery, all in an effort to keep the shipping and handling cost to the customers as low as possible.
Gardner: How about the future? Is this trend of that past 21 years sustainable? How far can we go?
Quay: I believe it is sustainable. Our web business is booming, with very high growth every year. And that really augments the television broadcast. We have, honestly, a fair amount of penetration, and we can still obtain more with our audiences.
Our cable broadcast is in 90 million-plus homes that actually receive our signal, but a relatively small portion actually purchase. So that’s my point. We have a long way to go to further penetrate and earn more customers. We have to get people to try us.
Gardner: And, of course, people are now also finding goods via Web search. For example, when they go to search for a piece of apparel, or a retail item, or some kind or a gift -- they might just go to, say, Google or Yahoo! or MSN, and type something in and end up on your web site. That gives you a whole new level of potential volume.
Quay: Well, it does, and we also make the website very well known. I am looking at our television show right now and we’ve have our www.qvc.com site advertised right on it. That provides an extended search capability. People are trying to do more shopping on the web, in addition to watching the television.
Gardner: We have synergies on the distribution side; we have synergies on the acquisition, and of using information and how to engage with partners. And so the technology is really in the middle of it all. And you also expect a tremendous amount of growth still to come.
Quay: Yes, absolutely. And it’s amazing, the different functions within QVC, the synergies that we work together internally. That goes from our merchandising to where we are sourcing product.
You mentioned supply chains, and the visibility of getting into the distribution center. Our merchants and programmers watch that like a hawk so they can script new items on the air. We have pre-scripted hours that we’re definitely looking to get certain products on.
The planning for the television broadcast is something that drives the back end of the supply chain. The coordination with our distribution centers -- as far as getting the operation forecast, staffed and fulfilled through shipping to our customers -- is outstanding.
Gardner: Well, it’s very impressive, given what you’ve done and all of these different plates that you need to keep spinning in the air -- while also keeping them coordinated. I really appreciate the daunting task, and that you have been able to reach this high level of efficiency.
Quay: Oh, we are not perfect yet. We are still working very hard to improve our service. It never slows down.
Gardner: Great. Thanks very much for your input. I have learned a bit more about this whole peak season, what really goes on behind the scenes at both QVC and Alibris. It seems like quite an accomplishment what you all are able to do at both organizations.
Nason: Well, thank you, Dana. Thanks for taking the time to hear about the Alibris story.
Gardner: Sure. This is Dana Gardner, principal analyst at Interarbor Solutions. We have been talking with Mark Nason, the vice president of operations at Alibris, about managing the peak season demand, and the logistics and technology required for a seamless customer experience.
We’ve also been joined by Andy Quay, vice president of outbound transportation, at the QVC shopping network.
Thanks to our listeners for joining on this BriefingsDirect sponsored podcast. Come back and listen again next time.
Listen to the podcast here. Sponsor: UPS.
Transcript of BriefingsDirect podcast on peak season shipping efficiencies and UPS retail solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Showing posts with label UPS. Show all posts
Showing posts with label UPS. Show all posts
Wednesday, December 19, 2007
Thursday, November 01, 2007
UPS to Debut New Customs Clearance and International Returns Solutions for Small Businesses
Edited transcript of BriefingsDirect[TM] podcast with Laurel Delaney of GlobeTrade.com, Stu Marcus of UPS, and Scott Aubuchon of UPS on new ways of simplifying international shipping and commerce.
Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, we present a sponsored podcast discussion about the new opportunities for small- and medium-size businesses (SMBs) to take advantage of overseas markets for their goods. The Internet has opened up many channels for sales and marketing, but there still needs to be the physical delivery of the goods.
We’re going to talk about customs clearance and some new efficiencies and digitization opportunities there. We’re also going to look at the flip side, of how returns are handled for goods and materials that are crossing borders, and how that can be managed and made more efficient.
Joining us to discuss this, we have an expert and researcher on these issues, Laurel Delaney. She is the founder and president of GlobeTrade.com. Welcome to the show, Laurel.
Laurel Delaney: Thank you for having me.
Gardner: We’re also going to discuss this with Stu Marcus. He is a director of new product development at UPS. Welcome, Stu.
Stu Marcus: Hi, Dana, thanks.
Gardner: Also joining us is Scott Aubuchon. He is also a director of new product development at UPS. Welcome, Scott.
Scott Aubuchon: Thanks, Dana. Thanks for having me.
Gardner: Let’s start with Laurel. Help us understand some of the issues facing small businesses, those seeking to expand their addressable markets and how they can start doing more business overseas.
Delaney: Actually, there are two forces at work right now for small businesses. One has to do with the issue of globalization. I think we all know the buzz that’s going on about going global that has been driven largely by Thomas Friedman with his book, "The World is Flat." He’s caused mainstream America and all small businesses to step up to the plate and consider the world as your market. The second force is technology, and technology is making it easier now to go global.
Gardner: So we have the opportunity, yet we still have the physical barriers. Let’s take another look at this through the lens of some other trends. There is the North America Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA), and the World Trade Organization (WTO) measures.
Have borders become more open or less open -- because we’re also talking about the post 9/11 era?
Delaney: NAFTA, CAFTA, and the WTO have absolutely enabled small businesses to go global far more easily. They've removed barriers, eliminated tariffs, and have softened the rules a bit for doing business internationally.
Gardner: Has the consolidation of currencies in Europe and also the value of the dollar in relation to other currencies made the desire for SMBs to look across their borders more financially interesting?
Delaney: It depends on who you are. What I mean by that is, if you're a Wal-Mart shopper, many of the products are made in China. The Yuan [China’s currency] is tied to our dollar, so there is very little effect on the price of goods. But if you are a worker at a Boeing plant, for example, a weaker dollar really means that foreigners can buy more of what you make.
If you’re an American tourist and you're vacationing in Paris, your dollar buys fewer Euros right now. So you’d probably end up spending $7 for a cup of coffee, or even $50 for a taxi ride.
A weak dollar can be good for the U.S. economy, though, because it makes American exports cheaper and therefore helps close the trade deficit.
Gardner: Let’s open this up to Stu and Scott. UPS recognizes a growing international opportunity here, and has created some services to help companies better deliver and return goods. What is it that prompted you to pursue this potential growth?
Aubuchon: As Laurel said, we've really seen the world become flat. International shipping is at an all-time high. The Internet is making it easier for SMBs to trade internationally. Many of the free-trade agreements have helped, as well. But there’s still a lot of complexity involved in shipping across borders, and that’s something that we at UPS are very interested in helping our customers deal with and overcome.
Gardner: What are the problems or hurdles that are preventing SMBs from looking to do business -- increasingly more business -- overseas?
Aubuchon: One common problem for everyone that ships internationally is just the documentation that’s required and associated with international shipping. For example, when you ship a package domestically, you simply put on an address label and off it goes.
For anything that’s not a document or a letter moving internationally, a commercial invoice is required to go with that shipment, in order to define what is contained in the shipment. So, for example, if you were shipping a cotton shirt, you’d need to document what type of shirt it is, where it was made, and what the fabric is. That process can be fairly complex and somewhat daunting, especially to folks who don’t do a lot of international shipping.
Gardner: How has this process changed in recent years, since 9/11, since the war on terror in the United States, and its active homeland security activities? Has it become easier, harder, or more complex? What’s been the change in the last five or six years?
Aubuchon: I am not sure I would say it’s become harder, but there’s definitely been a shift in emphasis. As we talked about, there have been a lot of free-trade agreements put in place, but the focus on international shipping has moved away from duty and tax to more of a security picture.
Back in the United States, the U.S. Customs Bureau used to be part of the Treasury Department. It’s now called U.S. Customs and Border Protection, and it’s part of the homeland security function.
So even though there’s freer trade, the documentation required for trade security purposes is still very important, and may be more important than ever. This is why at UPS we think helping customers with that documentation and the complexities of international shipping is a very important step for us to take.
Delaney: I want to add to that. U.S. Customs and Border Protection are scary words to a small business owner. The whole idea of simplifying the process is important, so that small businesses can go after this in a fearless fashion.
Gardner: All right. Let’s move into some of the solutions. If I am a SMB, and I have some robust growth, I recognize that the currencies are working in my favor, and I recognize that the Internet is giving me the opportunity to market -- to gather orders and process them across borders very easily at low cost -- how do I take the next step? What are some new solutions for customs clearance?
Aubuchon: One thing UPS is doing to help change the face of global shipping is to be first to market with a solution called UPS Paperless Invoice. This enables our customers to provide us with electronic data defining what’s in the international shipment -- that would be the commercial invoice data -- and provide that seamlessly and electronically, so that we can transmit it and use it for clearance on the other end. This eliminates the need for the customer to print and manually apply three copies of that document to each shipment.
Gardner: Explain in a little bit more detail how that works. Is this completely paperless, or is it streamlined? Walk us through the process, please.
Aubuchon: From the customer's perspective it really is completely paperless. They can take the data regarding the commodities they're shipping and either apply it within, or connected to, their shipping system. Then, when they prepare the shipment, they simply designate the commodities that are in the shipment, transmit that information with the shipment upload, and we will use that information at the destination to clear the shipment.
The customer doesn’t need to print and apply any paper at all in that process. This helps by saving them time, money, and paper.
Delaney: Let me jump in again. I just love the way that that sounds. For small businesses, I always like to cut to the chase about where can this be found. Where do they go right way so that they can instantaneously access this information? [See more on this solution at http://www.ups.com/simplify.]
Aubuchon: That’s a great question, Laurel. The answer is that in January our customers will be able to utilize UPS Paperless Invoice throughout our shipping system. If they happen to use our WorldShip shipping system, or do it over the Internet at our Internet Shipping site, they simply need to get set up as a paperless shipper.
This means they have to contact us and have one of our sales folks collect from them the initial information, which is an image of their signature and their invoice letterhead. From that point forward, they would simply apply that data to the shipment.
When they click "Ship," the data will go with that shipment information to UPS and be used for clearance at the destination port.
Gardner: I suppose another concern for businesses is not just getting it done at all, but being successful in global trade. What if they need to scale up their shipping rapidly? What if the volume increases rapidly? Are these services also something that can help them manage and automate batches or bulk deliveries? And how do you take this into a larger, automated volume play?
Aubuchon: That’s another great point. Certainly for SMBs, UPS Paperless Invoice will streamline their processes; reduce some of the complexity, and lend some consistency to the documentation required for international shipments. For those businesses that grow, or for larger enterprises, this is extremely valuable, in that it streamlines what today is really an exception process that needs to be done for each shipment -- printing and applying these paper invoices.
With Paperless Invoice, they can make their international shipment processing really seamless, and become the same as their domestic processing, which can eliminate the need for additional space and resources for that activity.
So, this is definitely something that will help someone to scale up or help someone already large to be much more efficient in their global shipment processing.
Delaney: So that means that we can move people off eBay.com in single shipments and get them over to this, right?
Aubuchon: Potentially, yes.
Gardner: Are there other software systems that you integrate or interface with? I suppose there are several invoicing and bookkeeping systems that are popular.
Aubuchon: Yes, and we do. In fact, our WorldShip shipping system allows customers to integrate through a number of different means to other databases or systems that they may use to produce this information. They can either enter it directly into the shipping system or they can link through technology and pull that information in. So, yes, it’s definitely an option for customers to use existing systems and data and to easily provide this information to UPS.
Gardner: You mentioned that this would come online in January 2008. You also mentioned being first to market. How does this compare to what's available through alternate shipping channels?
Aubuchon: If you look at the industry, whether it’s other small-package carriers that we compete with, freight forwarders, or freight companies, you’ll find that the process is really the same. They have to document the shipment by commodity and apply paper copies of that invoice to the shipment.
We’ll be the first ones in the market that will eliminate the need to take that step, and we'll use this information to seamlessly clear goods at any destination.
It’s only because UPS has a global reach and has the global technology infrastructure in place, that we can do this, starting from the touch point with the customer and their shipping system all the way through to our interaction with customs brokerages at the destination. So, we'll be the first to do this and we believe that will be a significant enhancement for our customers.
Gardner: Great. In addition to the customs clearance problem, there are also things like duties, taxes, and tariffs, which do vary from geography-to-geography and nation-to-nation. Is there anything that you’ll bring to the table to help expedite that, or is that still something that businesses need to address on their own?
Aubuchon: Those definitely are issues, as well. One of the keys to dealing with duties, taxes, and a proper treatment of shipments is, in fact, the documentation. So getting that commercial invoice data correct, and consistently applied to each shipment, will be a big help with that. UPS also does have other tools available at www.ups.com that can help customers with issues like determining compliance considerations for shipments as well as determining estimates of duties and taxes. That's called UPS TradeAbility.
Gardner: We’ve talked a little bit about the fact that the world is flat, that there is more opportunity for international trade, and that it’s probably never been easier to expand abroad both from a technological as well as a legal and regulatory standpoint. We’ve talked about the fact that there’s still complexity and that there are issues and problems with paperwork. Then we talked a little bit more about some solutions that you bring to the table.
Do we have any sense of what this is going to actually do for businesses? Obviously, they're going to be able to grow their top line of revenues if they can sell more goods in more places. But I'm interested in how this can impact businesses from the profit dollars-and-cents perspective. Stu or Scott, have you done any pilot projects or worked with some customers and gotten a sense of how impactful this is to profitability?
Aubuchon: Well, for a couple of our largest customers we've actually put in place a Custom Paperless Invoice solution. And for those two entities it’s been a significant help in terms of efficiency in their shipping process, of being able to apply resources more efficiently to other more meaningful paths.
Also, because the data is moving electronically at the speed of light to its destination, it's not susceptible to being marred or lost in transit, as a piece of paper might. It’s also helped them to get their shipments cleared more seamlessly. We've seen that for a couple of our customers -- and we expect that the same will be the case for our customers who start using UPS Paperless Invoice in January.
Delaney: I'm predicting that the more that you can save a small business time, money, and their sanity, the better off everyone is going to be, in terms of allowing them to really go global in the fashion they desire.
Gardner: Laurel, you’ve been in the business of helping small businesses better understand their global opportunities. Have you done any surveys or had discussions? How prominent are these customs and border issues when it comes to the SMBs considering whether to expand their business overseas?
Delaney: That's a great question. I have a funny story on what just took place a couple of weeks ago, when I was giving a presentation. No one in the audience knew me. They really didn’t know my background, and somehow they saw the title of the presentation which was, "The World is Your Market: Small Businesses Gear Up For Globalization."
After the presentation, a half a dozen people came up to me and said, “I was so relieved to hear your presentation and that you didn't stand up there and just talk about customs clearance, documentation, tariffs, and taxes.”
What that said to me is that this is a huge issue. A lot of small businesses stop dead in their tracks -- don’t do anything in terms of going global -- because of the hassle related to just beginning customs regulations and paperwork.
Gardner: They don’t know how or where to get started?
Delaney: Right. They do not know where to get started. So what's being offered through UPS is a godsend. It really is.
Dana, you asked about surveys that I’ve conducted. I actually haven't recently, but I am fully aware that UPS just released a study called the UPS Business Monitor United States. One thing that fascinated me about the study was one outcome that indicated that only one-third of U.S. mid-market firms conduct cross-border trade.
Think about that. Think about what a small number of businesses that is and how many more businesses are missing the opportunity to tap into more than six billion potential customers around the world. In the U.S., they're touching on maybe 300 million people, but when they go outside of their borders, they can tap into a larger percentage of the world’s population.
If you look at the latest world Internet statistics, you’ll see that more than one billion people are now online. So, just being online, having a Web site or a blog -- or this podcast -- gives you the capability to reach more than a billion people instantaneously. The potential is just enormous.
Gardner: Right, there are lots of upsides. Now, we have a great potential for growth in new business from the seller’s perspective. I would think that the customs folks would also be interested in this, because it's going to create more traffic across the borders, more opportunity for them to monetize and create services. Have you had much discussion with the customs people? How do they view this opportunity?
Aubuchon: We certainly interact with customs all over the globe every day, as we move shipments and serve as the customs broker. With the new UPS Paperless Invoice offering, we’ve definitely been in ongoing conversations to try to help customs officials understand what our goals are in helping our customers, and ultimately in helping them to get better information more quickly, and help them to more quickly clear goods.
In general, it has been very positively received. This is really the way, as we talked about earlier, that the world is going -- in that information is becoming digitized and moving much more quickly. So we feel like we’re really on the leading edge of using technology to help customs clearance processes become quicker and more accurate.
Gardner: The more commerce there is, the better it is for most of the parties involved, right?
Aubuchon: Absolutely. It's really a win-win situation both for the exporter and the importer when international trade occurs.
How to Return Goods Across Borders
Gardner: Let's move onto another problem set in this overall activity. It's great that I can move goods in one direction, but what if I need to move them back? What if there's a situation where a customer didn’t like the color, or perhaps the order wasn’t what they expected, or they would like to return and upgrade or get a replacement?
How do we deal with returns? We hear that for some 70 percent of international returns, there is no standard operating procedure. They’re just done on an ad hoc, exception-by-exception basis.
Let's go first to Laurel. How important is this return capability to the overall comfort level for these smaller businesses?
Delaney: Indicating to your customer that you’re ensuring some type of a guarantee is vital to the overall transaction. When small businesses sell to their customers, they want to ensure satisfaction – absolutely, positively. So, to answer your question, it’s very important to have this return process in place.
Gardner: Maybe Stu or Scott could explain what's involved. What has been the case up until now with returns when they need to happen across borders and come back through customs?
Marcus: I'll handle that. Laurel is absolutely right, and the research that we have done with our customers indicates that the most important reason customers want to have an efficient return process is for their own customer service. Exporting goods and shipping items globally is only one part of building your business. Offering customer service when things are wrong or customers need to replace items is really key to building customer loyalty and gaining additional business.
Customers know that, in the past, having items returned internationally was really a time-consuming and burdensome process. You have receivers who need to return items internationally, and they may not be familiar with shipping internationally. The shipper who sent it out really has a knowledge base in doing global commerce. Now, the receiver has these items and no way to efficiently get them back.
In the past, what shippers had to do was fill out a manual waybill and send it via mail or local post. It would take a couple of days or a week to get to the receivers. At times, they would just leave it up to the receiver to return these items on their own. That’s really not a very efficient process.
Customers have told us, especially small business owners, that because of this inconsistent process either they were afraid to do business internationally, or, when they did, there were times when they had to abandon their goods, because they just could not get the goods back to their own customers in a timely manner.
Gardner: The receiver wouldn’t even know where to get started if they wanted to return, right?
Marcus: That’s absolutely right. Receivers may not ship regularly or maybe had never shipped before. They're just receiving goods, and then they’re stuck with these items that need to be returned.
Delaney: What I love about this for small businesses is that it now gives them an extra little edge with their customers. It's a new promise that they can make to their customer, and that will set them apart and help them be even more competitive in the global marketplace.
Gardner: I know when I do returns, that it actually gives the seller another opportunity to engage me, perhaps on some up-sell or some additional value proposition.
Delaney: Absolutely.
Marcus: With UPS Returns, which we are expanding to 98 countries, UPS is going to be the first carrier to offer this type of solution to shippers. Now shippers can use the same UPS technology with which they export goods to prepare the return label and get it to their receiver to initiate the return process.
Gardner: This is going to begin in January 2008. What’s going to be different for the sender, and what’s going to be different or better for the receiver in terms of managing this international returns process?
Marcus: In January, UPS Returns will enable shippers to prepare a return label and also the commercial invoice, which can then be sent to the receiver in a couple of different ways.
First, they can produce it while they’re exporting a package, so they can just put a return label and an invoice in the package. Then the receiver, if they do need to return something, will have the label and the commercial invoice ready to go.
Another way is through e-mail. A shipper can now prepare a label and a commercial invoice and have it e-mailed directly to the receiver. Where in the past you would only be able to fill out a manual label and put in the mail, now the receiver can get it immediately, and then use the label and the invoice to initiate the return process.
In certain countries, we can have a UPS driver bring the label and commercial invoice directly to the doorstep of a receiver who needs to return something. All these options could be initiated through the normal UPS technology platform -- UPS WorldShip, CampusShip, or Internet Shipping.
Gardner: These are available through the Web, right?
Marcus: Yes, CampusShip and Internet Shipping are two Web-based platforms we have. UPS also has an XML tool, which is a shipping API, which can be integrated into a shipper’s internal process or their Web site in order to initiate this process.
Gardner: For those folks who are not software developers, this means they can use your Application Programming Interface (API) as a tool kit to integrate your software and processes with theirs?
Marcus: That’s right. To a receiver, it’s seamless. You just go right to the shipper’s Web site, and you can initiate the return.
Gardner: How does that strike you, Laurel, as a new opportunity to manage this returns process?
Delaney: It sounds fabulous. Some of this I already knew, and I’m being educated at the same time. What I’m always thinking is, where do I go and how do I take action? That’s the bottom line on this.
We've covered what the first step is for small businesses -- where they go online to start using this capability. Or, if they don’t want to access it online, whom they can call to get further information. [Learn more about the solutions described in this discussion at http://www.ups.com/simplify.]
Marcus: Laurel, this is one of the first times where SMBs will have access to this scope of global returns capability. In the past, the carriers were able to put together customized solutions, but that was mainly for larger customers. With UPS Returns this is the first time we will have a general service offering. There is no customer setup needed. The customer needs only to use our normal UPS Shipping Solutions or use Internet Shipping, and the capability will be right there.
Gardner: I believe there are a lot of direct and indirect cost savings involved with this aspect of the process. That is to say, the cost of a lost sale or a dissatisfied customer might be an indirect loss of future business.
If you can streamline the process, automate it, and scale it, I would think that the savings are pretty significant. Have you received any feedback from some of your early customers?
Marcus: One thing customers tell us is that they notice an improvement in customer service. The cost of setting up the returns process is negligible, and the transportation cost is in line with our normal transportation cost for exports. But none of that was a factor in our research. Building relationships and setting up a business to bring customers back for return purchases was really the most important factor of UPS Returns.
Gardner: So the logistical costs are low, if those long-term benefits include a recurring, happy customer. That really is the story here.
Marcus: That’s absolutely right.
Gardner: Does that ring true with your experiences, Laurel?
Delaney: The obvious benefits are greater efficiency and time and cost savings. I see additional growth now for SMB enterprises due to the ease of use on the paperwork side of transactions.
But two other things will occur as a result of this UPS Customs Clearance and International Returns benefits. This is an unusual way to look at it, but SMBs will be able to devote more time to innovation.
In other words, just by thinking creatively about going global, they can go global. That’s critical to remaining competitive, and it will allow them to spend more time on the strategic versus the tactical side of globalization.
Gardner: And then, therefore, focus on the marketing and not worry about the paperwork and all of the processes and the transaction.
I know you can’t tell us about products and services that haven’t been announced, but this strikes me as really not the end game. Perhaps it's just the first few steps into some more additional global trade value-added services and shipping expediency benefits.
Can you paint a picture for us about what might be happening in the next several years in terms of international trade in multiple directions?
Aubuchon: At UPS, we’re constantly talking to our customers and trying to identify the issues they face with shipping, and specifically international shipping. We’re continually in a conversation, trying to identify those pain points and to design solutions. UPS Paperless Invoice and UPS International Returns are two examples that will be coming out in January.
But as we move forward, rest assured that we will continue to evaluate other opportunities and deliver solutions for our customers to address other issues.
Gardner: For the small business that might have some ideas about what they need to achieve efficiency, can they send those ideas to you, COD?
Aubuchon: Oh, absolutely. The voice of our customers is very important to us, and anything they want to share with us, we’re more than happy to listen to and take into consideration and see what we can do to help them.
Gardner: Very good. I want to thank our group. We’ve had an interesting discussion, understanding some of the hurdles -- and now some of the new efficiencies -- that are being brought to cross-border commerce for SMBs.
Helping us to understand this opportunity and newfound efficiency, we have been joined by Laurel Delaney, the founder and president of GlobeTrade.com. Thanks, Laurel.
Delaney: Thank you.
Gardner: Also joining us has been Stu Marcus, director of new product development at UPS, as well as Scott Aubuchon, also a director of new product development at UPS. Thank you, gentlemen.
Marcus: Thanks, Dana.
Aubuchon: Thank you, Dana.
Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions, and you have been listening to a sponsored BriefingsDirect podcast. Thanks for joining.
Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Transcript of BriefingsDirect podcast on international shipping efficiencies and UPS solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, we present a sponsored podcast discussion about the new opportunities for small- and medium-size businesses (SMBs) to take advantage of overseas markets for their goods. The Internet has opened up many channels for sales and marketing, but there still needs to be the physical delivery of the goods.
We’re going to talk about customs clearance and some new efficiencies and digitization opportunities there. We’re also going to look at the flip side, of how returns are handled for goods and materials that are crossing borders, and how that can be managed and made more efficient.
Joining us to discuss this, we have an expert and researcher on these issues, Laurel Delaney. She is the founder and president of GlobeTrade.com. Welcome to the show, Laurel.
Laurel Delaney: Thank you for having me.
Gardner: We’re also going to discuss this with Stu Marcus. He is a director of new product development at UPS. Welcome, Stu.
Stu Marcus: Hi, Dana, thanks.
Gardner: Also joining us is Scott Aubuchon. He is also a director of new product development at UPS. Welcome, Scott.
Scott Aubuchon: Thanks, Dana. Thanks for having me.
Gardner: Let’s start with Laurel. Help us understand some of the issues facing small businesses, those seeking to expand their addressable markets and how they can start doing more business overseas.
Delaney: Actually, there are two forces at work right now for small businesses. One has to do with the issue of globalization. I think we all know the buzz that’s going on about going global that has been driven largely by Thomas Friedman with his book, "The World is Flat." He’s caused mainstream America and all small businesses to step up to the plate and consider the world as your market. The second force is technology, and technology is making it easier now to go global.
Gardner: So we have the opportunity, yet we still have the physical barriers. Let’s take another look at this through the lens of some other trends. There is the North America Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA), and the World Trade Organization (WTO) measures.
Have borders become more open or less open -- because we’re also talking about the post 9/11 era?
Delaney: NAFTA, CAFTA, and the WTO have absolutely enabled small businesses to go global far more easily. They've removed barriers, eliminated tariffs, and have softened the rules a bit for doing business internationally.
Gardner: Has the consolidation of currencies in Europe and also the value of the dollar in relation to other currencies made the desire for SMBs to look across their borders more financially interesting?
Delaney: It depends on who you are. What I mean by that is, if you're a Wal-Mart shopper, many of the products are made in China. The Yuan [China’s currency] is tied to our dollar, so there is very little effect on the price of goods. But if you are a worker at a Boeing plant, for example, a weaker dollar really means that foreigners can buy more of what you make.
If you’re an American tourist and you're vacationing in Paris, your dollar buys fewer Euros right now. So you’d probably end up spending $7 for a cup of coffee, or even $50 for a taxi ride.
A weak dollar can be good for the U.S. economy, though, because it makes American exports cheaper and therefore helps close the trade deficit.
Gardner: Let’s open this up to Stu and Scott. UPS recognizes a growing international opportunity here, and has created some services to help companies better deliver and return goods. What is it that prompted you to pursue this potential growth?
Aubuchon: As Laurel said, we've really seen the world become flat. International shipping is at an all-time high. The Internet is making it easier for SMBs to trade internationally. Many of the free-trade agreements have helped, as well. But there’s still a lot of complexity involved in shipping across borders, and that’s something that we at UPS are very interested in helping our customers deal with and overcome.
Gardner: What are the problems or hurdles that are preventing SMBs from looking to do business -- increasingly more business -- overseas?
Aubuchon: One common problem for everyone that ships internationally is just the documentation that’s required and associated with international shipping. For example, when you ship a package domestically, you simply put on an address label and off it goes.
For anything that’s not a document or a letter moving internationally, a commercial invoice is required to go with that shipment, in order to define what is contained in the shipment. So, for example, if you were shipping a cotton shirt, you’d need to document what type of shirt it is, where it was made, and what the fabric is. That process can be fairly complex and somewhat daunting, especially to folks who don’t do a lot of international shipping.
Gardner: How has this process changed in recent years, since 9/11, since the war on terror in the United States, and its active homeland security activities? Has it become easier, harder, or more complex? What’s been the change in the last five or six years?
Aubuchon: I am not sure I would say it’s become harder, but there’s definitely been a shift in emphasis. As we talked about, there have been a lot of free-trade agreements put in place, but the focus on international shipping has moved away from duty and tax to more of a security picture.
Back in the United States, the U.S. Customs Bureau used to be part of the Treasury Department. It’s now called U.S. Customs and Border Protection, and it’s part of the homeland security function.
So even though there’s freer trade, the documentation required for trade security purposes is still very important, and may be more important than ever. This is why at UPS we think helping customers with that documentation and the complexities of international shipping is a very important step for us to take.
Delaney: I want to add to that. U.S. Customs and Border Protection are scary words to a small business owner. The whole idea of simplifying the process is important, so that small businesses can go after this in a fearless fashion.
Gardner: All right. Let’s move into some of the solutions. If I am a SMB, and I have some robust growth, I recognize that the currencies are working in my favor, and I recognize that the Internet is giving me the opportunity to market -- to gather orders and process them across borders very easily at low cost -- how do I take the next step? What are some new solutions for customs clearance?
Aubuchon: One thing UPS is doing to help change the face of global shipping is to be first to market with a solution called UPS Paperless Invoice. This enables our customers to provide us with electronic data defining what’s in the international shipment -- that would be the commercial invoice data -- and provide that seamlessly and electronically, so that we can transmit it and use it for clearance on the other end. This eliminates the need for the customer to print and manually apply three copies of that document to each shipment.
Gardner: Explain in a little bit more detail how that works. Is this completely paperless, or is it streamlined? Walk us through the process, please.
Aubuchon: From the customer's perspective it really is completely paperless. They can take the data regarding the commodities they're shipping and either apply it within, or connected to, their shipping system. Then, when they prepare the shipment, they simply designate the commodities that are in the shipment, transmit that information with the shipment upload, and we will use that information at the destination to clear the shipment.
The customer doesn’t need to print and apply any paper at all in that process. This helps by saving them time, money, and paper.
Delaney: Let me jump in again. I just love the way that that sounds. For small businesses, I always like to cut to the chase about where can this be found. Where do they go right way so that they can instantaneously access this information? [See more on this solution at http://www.ups.com/simplify.]
Aubuchon: That’s a great question, Laurel. The answer is that in January our customers will be able to utilize UPS Paperless Invoice throughout our shipping system. If they happen to use our WorldShip shipping system, or do it over the Internet at our Internet Shipping site, they simply need to get set up as a paperless shipper.
This means they have to contact us and have one of our sales folks collect from them the initial information, which is an image of their signature and their invoice letterhead. From that point forward, they would simply apply that data to the shipment.
When they click "Ship," the data will go with that shipment information to UPS and be used for clearance at the destination port.
Gardner: I suppose another concern for businesses is not just getting it done at all, but being successful in global trade. What if they need to scale up their shipping rapidly? What if the volume increases rapidly? Are these services also something that can help them manage and automate batches or bulk deliveries? And how do you take this into a larger, automated volume play?
Aubuchon: That’s another great point. Certainly for SMBs, UPS Paperless Invoice will streamline their processes; reduce some of the complexity, and lend some consistency to the documentation required for international shipments. For those businesses that grow, or for larger enterprises, this is extremely valuable, in that it streamlines what today is really an exception process that needs to be done for each shipment -- printing and applying these paper invoices.
With Paperless Invoice, they can make their international shipment processing really seamless, and become the same as their domestic processing, which can eliminate the need for additional space and resources for that activity.
So, this is definitely something that will help someone to scale up or help someone already large to be much more efficient in their global shipment processing.
Delaney: So that means that we can move people off eBay.com in single shipments and get them over to this, right?
Aubuchon: Potentially, yes.
Gardner: Are there other software systems that you integrate or interface with? I suppose there are several invoicing and bookkeeping systems that are popular.
Aubuchon: Yes, and we do. In fact, our WorldShip shipping system allows customers to integrate through a number of different means to other databases or systems that they may use to produce this information. They can either enter it directly into the shipping system or they can link through technology and pull that information in. So, yes, it’s definitely an option for customers to use existing systems and data and to easily provide this information to UPS.
Gardner: You mentioned that this would come online in January 2008. You also mentioned being first to market. How does this compare to what's available through alternate shipping channels?
Aubuchon: If you look at the industry, whether it’s other small-package carriers that we compete with, freight forwarders, or freight companies, you’ll find that the process is really the same. They have to document the shipment by commodity and apply paper copies of that invoice to the shipment.
We’ll be the first ones in the market that will eliminate the need to take that step, and we'll use this information to seamlessly clear goods at any destination.
It’s only because UPS has a global reach and has the global technology infrastructure in place, that we can do this, starting from the touch point with the customer and their shipping system all the way through to our interaction with customs brokerages at the destination. So, we'll be the first to do this and we believe that will be a significant enhancement for our customers.
Gardner: Great. In addition to the customs clearance problem, there are also things like duties, taxes, and tariffs, which do vary from geography-to-geography and nation-to-nation. Is there anything that you’ll bring to the table to help expedite that, or is that still something that businesses need to address on their own?
Aubuchon: Those definitely are issues, as well. One of the keys to dealing with duties, taxes, and a proper treatment of shipments is, in fact, the documentation. So getting that commercial invoice data correct, and consistently applied to each shipment, will be a big help with that. UPS also does have other tools available at www.ups.com that can help customers with issues like determining compliance considerations for shipments as well as determining estimates of duties and taxes. That's called UPS TradeAbility.
Gardner: We’ve talked a little bit about the fact that the world is flat, that there is more opportunity for international trade, and that it’s probably never been easier to expand abroad both from a technological as well as a legal and regulatory standpoint. We’ve talked about the fact that there’s still complexity and that there are issues and problems with paperwork. Then we talked a little bit more about some solutions that you bring to the table.
Do we have any sense of what this is going to actually do for businesses? Obviously, they're going to be able to grow their top line of revenues if they can sell more goods in more places. But I'm interested in how this can impact businesses from the profit dollars-and-cents perspective. Stu or Scott, have you done any pilot projects or worked with some customers and gotten a sense of how impactful this is to profitability?
Aubuchon: Well, for a couple of our largest customers we've actually put in place a Custom Paperless Invoice solution. And for those two entities it’s been a significant help in terms of efficiency in their shipping process, of being able to apply resources more efficiently to other more meaningful paths.
Also, because the data is moving electronically at the speed of light to its destination, it's not susceptible to being marred or lost in transit, as a piece of paper might. It’s also helped them to get their shipments cleared more seamlessly. We've seen that for a couple of our customers -- and we expect that the same will be the case for our customers who start using UPS Paperless Invoice in January.
Delaney: I'm predicting that the more that you can save a small business time, money, and their sanity, the better off everyone is going to be, in terms of allowing them to really go global in the fashion they desire.
Gardner: Laurel, you’ve been in the business of helping small businesses better understand their global opportunities. Have you done any surveys or had discussions? How prominent are these customs and border issues when it comes to the SMBs considering whether to expand their business overseas?
Delaney: That's a great question. I have a funny story on what just took place a couple of weeks ago, when I was giving a presentation. No one in the audience knew me. They really didn’t know my background, and somehow they saw the title of the presentation which was, "The World is Your Market: Small Businesses Gear Up For Globalization."
After the presentation, a half a dozen people came up to me and said, “I was so relieved to hear your presentation and that you didn't stand up there and just talk about customs clearance, documentation, tariffs, and taxes.”
What that said to me is that this is a huge issue. A lot of small businesses stop dead in their tracks -- don’t do anything in terms of going global -- because of the hassle related to just beginning customs regulations and paperwork.
Gardner: They don’t know how or where to get started?
Delaney: Right. They do not know where to get started. So what's being offered through UPS is a godsend. It really is.
Dana, you asked about surveys that I’ve conducted. I actually haven't recently, but I am fully aware that UPS just released a study called the UPS Business Monitor United States. One thing that fascinated me about the study was one outcome that indicated that only one-third of U.S. mid-market firms conduct cross-border trade.
Think about that. Think about what a small number of businesses that is and how many more businesses are missing the opportunity to tap into more than six billion potential customers around the world. In the U.S., they're touching on maybe 300 million people, but when they go outside of their borders, they can tap into a larger percentage of the world’s population.
If you look at the latest world Internet statistics, you’ll see that more than one billion people are now online. So, just being online, having a Web site or a blog -- or this podcast -- gives you the capability to reach more than a billion people instantaneously. The potential is just enormous.
Gardner: Right, there are lots of upsides. Now, we have a great potential for growth in new business from the seller’s perspective. I would think that the customs folks would also be interested in this, because it's going to create more traffic across the borders, more opportunity for them to monetize and create services. Have you had much discussion with the customs people? How do they view this opportunity?
Aubuchon: We certainly interact with customs all over the globe every day, as we move shipments and serve as the customs broker. With the new UPS Paperless Invoice offering, we’ve definitely been in ongoing conversations to try to help customs officials understand what our goals are in helping our customers, and ultimately in helping them to get better information more quickly, and help them to more quickly clear goods.
In general, it has been very positively received. This is really the way, as we talked about earlier, that the world is going -- in that information is becoming digitized and moving much more quickly. So we feel like we’re really on the leading edge of using technology to help customs clearance processes become quicker and more accurate.
Gardner: The more commerce there is, the better it is for most of the parties involved, right?
Aubuchon: Absolutely. It's really a win-win situation both for the exporter and the importer when international trade occurs.
How to Return Goods Across Borders
Gardner: Let's move onto another problem set in this overall activity. It's great that I can move goods in one direction, but what if I need to move them back? What if there's a situation where a customer didn’t like the color, or perhaps the order wasn’t what they expected, or they would like to return and upgrade or get a replacement?
How do we deal with returns? We hear that for some 70 percent of international returns, there is no standard operating procedure. They’re just done on an ad hoc, exception-by-exception basis.
Let's go first to Laurel. How important is this return capability to the overall comfort level for these smaller businesses?
Delaney: Indicating to your customer that you’re ensuring some type of a guarantee is vital to the overall transaction. When small businesses sell to their customers, they want to ensure satisfaction – absolutely, positively. So, to answer your question, it’s very important to have this return process in place.
Gardner: Maybe Stu or Scott could explain what's involved. What has been the case up until now with returns when they need to happen across borders and come back through customs?
Marcus: I'll handle that. Laurel is absolutely right, and the research that we have done with our customers indicates that the most important reason customers want to have an efficient return process is for their own customer service. Exporting goods and shipping items globally is only one part of building your business. Offering customer service when things are wrong or customers need to replace items is really key to building customer loyalty and gaining additional business.
Customers know that, in the past, having items returned internationally was really a time-consuming and burdensome process. You have receivers who need to return items internationally, and they may not be familiar with shipping internationally. The shipper who sent it out really has a knowledge base in doing global commerce. Now, the receiver has these items and no way to efficiently get them back.
In the past, what shippers had to do was fill out a manual waybill and send it via mail or local post. It would take a couple of days or a week to get to the receivers. At times, they would just leave it up to the receiver to return these items on their own. That’s really not a very efficient process.
Customers have told us, especially small business owners, that because of this inconsistent process either they were afraid to do business internationally, or, when they did, there were times when they had to abandon their goods, because they just could not get the goods back to their own customers in a timely manner.
Gardner: The receiver wouldn’t even know where to get started if they wanted to return, right?
Marcus: That’s absolutely right. Receivers may not ship regularly or maybe had never shipped before. They're just receiving goods, and then they’re stuck with these items that need to be returned.
Delaney: What I love about this for small businesses is that it now gives them an extra little edge with their customers. It's a new promise that they can make to their customer, and that will set them apart and help them be even more competitive in the global marketplace.
Gardner: I know when I do returns, that it actually gives the seller another opportunity to engage me, perhaps on some up-sell or some additional value proposition.
Delaney: Absolutely.
Marcus: With UPS Returns, which we are expanding to 98 countries, UPS is going to be the first carrier to offer this type of solution to shippers. Now shippers can use the same UPS technology with which they export goods to prepare the return label and get it to their receiver to initiate the return process.
Gardner: This is going to begin in January 2008. What’s going to be different for the sender, and what’s going to be different or better for the receiver in terms of managing this international returns process?
Marcus: In January, UPS Returns will enable shippers to prepare a return label and also the commercial invoice, which can then be sent to the receiver in a couple of different ways.
First, they can produce it while they’re exporting a package, so they can just put a return label and an invoice in the package. Then the receiver, if they do need to return something, will have the label and the commercial invoice ready to go.
Another way is through e-mail. A shipper can now prepare a label and a commercial invoice and have it e-mailed directly to the receiver. Where in the past you would only be able to fill out a manual label and put in the mail, now the receiver can get it immediately, and then use the label and the invoice to initiate the return process.
In certain countries, we can have a UPS driver bring the label and commercial invoice directly to the doorstep of a receiver who needs to return something. All these options could be initiated through the normal UPS technology platform -- UPS WorldShip, CampusShip, or Internet Shipping.
Gardner: These are available through the Web, right?
Marcus: Yes, CampusShip and Internet Shipping are two Web-based platforms we have. UPS also has an XML tool, which is a shipping API, which can be integrated into a shipper’s internal process or their Web site in order to initiate this process.
Gardner: For those folks who are not software developers, this means they can use your Application Programming Interface (API) as a tool kit to integrate your software and processes with theirs?
Marcus: That’s right. To a receiver, it’s seamless. You just go right to the shipper’s Web site, and you can initiate the return.
Gardner: How does that strike you, Laurel, as a new opportunity to manage this returns process?
Delaney: It sounds fabulous. Some of this I already knew, and I’m being educated at the same time. What I’m always thinking is, where do I go and how do I take action? That’s the bottom line on this.
We've covered what the first step is for small businesses -- where they go online to start using this capability. Or, if they don’t want to access it online, whom they can call to get further information. [Learn more about the solutions described in this discussion at http://www.ups.com/simplify.]
Marcus: Laurel, this is one of the first times where SMBs will have access to this scope of global returns capability. In the past, the carriers were able to put together customized solutions, but that was mainly for larger customers. With UPS Returns this is the first time we will have a general service offering. There is no customer setup needed. The customer needs only to use our normal UPS Shipping Solutions or use Internet Shipping, and the capability will be right there.
Gardner: I believe there are a lot of direct and indirect cost savings involved with this aspect of the process. That is to say, the cost of a lost sale or a dissatisfied customer might be an indirect loss of future business.
If you can streamline the process, automate it, and scale it, I would think that the savings are pretty significant. Have you received any feedback from some of your early customers?
Marcus: One thing customers tell us is that they notice an improvement in customer service. The cost of setting up the returns process is negligible, and the transportation cost is in line with our normal transportation cost for exports. But none of that was a factor in our research. Building relationships and setting up a business to bring customers back for return purchases was really the most important factor of UPS Returns.
Gardner: So the logistical costs are low, if those long-term benefits include a recurring, happy customer. That really is the story here.
Marcus: That’s absolutely right.
Gardner: Does that ring true with your experiences, Laurel?
Delaney: The obvious benefits are greater efficiency and time and cost savings. I see additional growth now for SMB enterprises due to the ease of use on the paperwork side of transactions.
But two other things will occur as a result of this UPS Customs Clearance and International Returns benefits. This is an unusual way to look at it, but SMBs will be able to devote more time to innovation.
In other words, just by thinking creatively about going global, they can go global. That’s critical to remaining competitive, and it will allow them to spend more time on the strategic versus the tactical side of globalization.
Gardner: And then, therefore, focus on the marketing and not worry about the paperwork and all of the processes and the transaction.
I know you can’t tell us about products and services that haven’t been announced, but this strikes me as really not the end game. Perhaps it's just the first few steps into some more additional global trade value-added services and shipping expediency benefits.
Can you paint a picture for us about what might be happening in the next several years in terms of international trade in multiple directions?
Aubuchon: At UPS, we’re constantly talking to our customers and trying to identify the issues they face with shipping, and specifically international shipping. We’re continually in a conversation, trying to identify those pain points and to design solutions. UPS Paperless Invoice and UPS International Returns are two examples that will be coming out in January.
But as we move forward, rest assured that we will continue to evaluate other opportunities and deliver solutions for our customers to address other issues.
Gardner: For the small business that might have some ideas about what they need to achieve efficiency, can they send those ideas to you, COD?
Aubuchon: Oh, absolutely. The voice of our customers is very important to us, and anything they want to share with us, we’re more than happy to listen to and take into consideration and see what we can do to help them.
Gardner: Very good. I want to thank our group. We’ve had an interesting discussion, understanding some of the hurdles -- and now some of the new efficiencies -- that are being brought to cross-border commerce for SMBs.
Helping us to understand this opportunity and newfound efficiency, we have been joined by Laurel Delaney, the founder and president of GlobeTrade.com. Thanks, Laurel.
Delaney: Thank you.
Gardner: Also joining us has been Stu Marcus, director of new product development at UPS, as well as Scott Aubuchon, also a director of new product development at UPS. Thank you, gentlemen.
Marcus: Thanks, Dana.
Aubuchon: Thank you, Dana.
Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions, and you have been listening to a sponsored BriefingsDirect podcast. Thanks for joining.
Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Transcript of BriefingsDirect podcast on international shipping efficiencies and UPS solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Thursday, June 21, 2007
Transcript of BriefingsDirect Podcast on UPS's Wireless Tracking Solutions for Small Businesses
Edited transcript of BriefingsDirect[tm/sm] podcast with Dana Gardner, recorded April 27, 2007.
Listen to the podcast here. Podcast sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a sponsored BriefingsDirect podcast. Today, a discussion about wireless tracking, about how a myriad of devices can be used almost anywhere to track packages and delivery -- be it for retail, ecommerce, or business to business.
We are going to be discussing this with an executive from UPS, as well as someone who uses wireless tracking regularly and is finding it has a positive impact on his business. I’d like to welcome to the show Jeff Reid, the Director of Customer Technology Marketing at UPS in Atlanta, Georgia. Welcome to the show, Jeff.
Jeff Reid: Thank you, Dana.
Gardner: We’re also talking with Robert Wolfe, the co-founder of Moosejaw in Madison Heights, Michigan. Welcome, Robert.
Robert Wolfe: Thank you.
Gardner: We want to find out more about the use of wireless tracking, why it’s important with today’s younger generation -- a more mobile technology-oriented generation -- and the benefits it brings from both a business and technological point-of-view. Let’s go first to Jeff. Tell us how long UPS has been offering this wireless tracking capability, and why did you take the plunge into it?
Reid: UPS has actually been in the wireless business since the early 1990s. We developed our first customer-facing technology in 1999 when we introduced wireless tracking. Today we’re up to four wireless services, including tracking. We also offer the ability to get time and transit information about a package that you’re about to ship. We can also rate a package through our wireless technologies.
Then finally if you need a spot to drop-off the package, you can do that with our drop-off locator.
Interestingly enough, wireless capabilities were introduced internally at UPS in the early 1990s, when we were one of first companies to actually cobble together more than 200 cellular phone providers so that we could provide cellular phone capabilities to our package-delivery vehicles. Our drivers could transmit the information about the delivery that they had just made through their hand-held computers.
So we’ve been in the wireless business for quite a while.
Gardner: Interesting. And now we can use a lot more devices than cell phones. When did you make a leap from a cell phone to the digital side of more of these devices?
Reid: Our wireless services began leveraging most digital devices beginning in 2001. In fact, any device that has short message service (SMS) capabilities or uses Wireless Application Protocol (WAP) capabilities can leverage our tracking services.
Gardner: And these same services are accessible through the World Wide Web as well?
Reid: That’s correct.
Gardner: What kind of information do you find that people are using this for mostly? Is it the same kind of information that you expected when you first got into it?
Reid: Our customers have become more mobile as their businesses have grown, and their lives converge with their day-to-day work activities. So we find a lot of customers are using our mobile capabilities to extend their flexibility and productivity outside of work.
Small businesses and individual users are the primary users of our wireless capabilities. So it is meeting our expectations of who would use the wireless capabilities. Yet it’s amazing how wireless services and our tracking information has made it even onto the golf course nowadays, where people are using it in all facets of their life -- to check on that birthday gift to all the way down to managing their global supply chain.
Gardner: I don’t know how it happened, but I think people just have less time these days than in the past. How about email? People seem to find an easy segue from using email for alerts, and then moving to SMS. Do you find that there is a mix being used?
Reid: Well, fortunately at UPS, we have a whole suite of visibility solutions. Primarily, the solution that customers use with email is our Quantum View[sm] capabilities. That’s where you can actually get proactive alerts about your shipment anywhere within the supply chain.
Customers also use email alerts so that when they do ship a package, they can go ahead and send emails to their customers letting them know that the package is on its way. They use Quantum View for that, as well. So between email and wireless, we certainly have a vast array of different services to provide proactive information in our customers’ supply chain.
Gardner: Is there something different about today’s workforce? I suppose more folks are digitally connected, regardless of where they are. We have the road warriors, but even high school kids -- many of who have their own cell phones -- are connected. Are you finding that companies are trying to reach these end-users, or is it more company-to-company? Tell us a little bit about the type of traffic or type of usage you’re finding.
Reid: The majority of the usage for wireless tracking comes from individuals in small businesses. But UPS had the forethought to think about who would be our future customer with wireless capabilities. And as you will learn from Moosejaw in a moment, a lot of the Generation X and Millennium Generation -- those born after 1982 -- have grown up with a cell phone and with the expectation of mobility as being part of your life.
In fact, I have a nephew who was using UPS wireless service just recently. He had a pair of "shades," as he calls them that were being delivered to his home but he was at his grandmother’s house. Yet he was using wireless tracking to figure when he could go home to get his new sunglasses.
That’s an example of where expectations have changed, there is no inhibition to using wireless capabilities with this younger generation. If you look at the U.S. penetration of cell phones, it's above 75 percent. That’s unfathomable considering that cell phones really just caught on in their early 1990s. So lots of different customers are using our capabilities, but mostly it’s focused on individuals and small business uses today.
Gardner: Right, so using wireless tracking certainly makes a great deal of sense for end-users. They can specifically get information on deliveries they’re expecting, and I suppose it is really important to get your shades on time. But what about the supply chain where time isn’t just convenience, time is actually money.
Companies are using this to compress their delivery times, therefore their product lifecycle times, and are therefore seeing cost savings.
Reid: And certainly at UPS we spent a lot of time thinking about customer supply chains and how we can improve capabilities around goods, funds, and information. We look at our wireless capabilities and its efficiency as the name of the game when it comes to mobile professionals, and such examples as service technicians.
Some of our customers have large-scale service engagements where they have delivery vans out making calls. They require that a part be at a house before they can actually fix an item that they are going to service. So these large companies leverage our wireless capabilities to track a package within the van, so that they can determine whether or not that call will be effective -- if the part has arrived or not. That’s an example of where efficiency throughout the supply chain is being introduced, and wireless tracking is certainly a large component of that efficiency equation.
Gardner: I suppose that that same value can be taken to a factory floor, or an agricultural environment -- out to the farm fields and away from any centralized location. You don’t need to be tethered to a desk and a personal computer.
Reid: That’s correct. Anywhere that your feet take you, wireless capabilities are available.
Gardner: Great, let’s go check out the real-world uses of this. Robert, tell us about Moosejaw, what is its mission, and what do you do there?
Wolfe: I describe us providing high-end outdoor equipment and apparel. Basically if you’re going skiing or backpacking, we’ll have what you want -- and it’s the best stuff. And we have sort of by accident ended up skewing to a very young demographic.
I started the company when I was 21, and had absolutely no clue what I was doing. So when customers would come in the store we were playing Nintendo or whiffle ball, and we asked them to join us. And that ended up turning into our marketing theory. So we really try to connect with the customer on a level that’s not just about the product. So last Saturday, in one of our stores, we had break-dancers for absolutely no reason whatsoever.
So far it seems to be working. We definitely have more high school and college students, not only as our customers but also as our staff. And that’s really how we ended up being so proactive about wireless technology. Because when I look around and see everyone at Moosejaw, they don’t even talk to the people three seats away from them -- they text them. And half of them don’t even use their computers anymore; they just use their mobile phones and personal digital assistants (PDAs).
When we began seeing that internally, we knew that we have to be first-to-market with all of that kind of wireless technology -- and UPS has helped a ton, and not only with traditional tracking. I call it "traditional" even though it’s still pretty new. UPS began helping us all the way to getting tracking numbers tested, which we just started very recently. And it’s already been hugely successful. And when I say, "hugely successful," we have had a lot of people sign up -- but more importantly, the people who have signed up have loved it. It is definitely the college students, and it sort of filled over from in the high schools.
Gardner: Explain to us about the testing. What does that all amount to?
Wolfe: So, instead of having to wait to get to your PC -- an extra half hour to find out where your order is -- it will go right to your phone. The sunglasses example was a pretty good one. Who wants to have to wait an extra hour to find out where their package is going to be?
It sounds funny. You really don’t need to find out where your stuff is at that very movement, but it’s just that the whole idea of being able to use your phone for everything -- our customers expect it. If we are not texting information to them, then we are yesterday’s news. We have to be able to embrace that kind of technology.
Gardner: The expectations now are much higher. Immediacy is really important. I suppose for high-end camping and mountaineering equipment, if you are going on a big trip that you have been planning, you might have just forgotten some last-minute thing, so you are going to order it up. And maybe you’ll intercept it halfway to your destination. And you will be able to know right along the way if that’s going to work for you. Is that a typical scenario for you?
Wolfe: You know, it certainly works in that scenario. But for us it’s really not so much about the practical use of the application as it is about being cool.
Gardner: It’s a lifestyle thing.
Wolfe: That’s exactly right. If it so happens that we sell products that our demographic loves -- and it wouldn’t really matter if that product were coffee mugs -- the fact that we are sending tracking information through a mobile phone is what’s important. Our customers are more likely to tell their friends that they just got their tracking number to their phone telling them when their new sunglasses are coming.
Gardner: Interesting. Tell us how about how you started getting involved with UPS in order to be so cool and be so appealing as a lifestyle to your users?
Wolfe: What happened with us is we started off -- and I am not exaggerating -- that when I would take an order from the Internet it would literally be me calling the phone company and saying, “Okay, I am going to be in our Grosse Point shop today, so point the 800-number to this phone. And I bring my laptop with me, and I bring the Visa machine with me. And then when I went home, I would call the phone company and say, “Okay, I am home now, you can point the 800-number back to my house.” When someone called Moosejaw at 2:00 in the morning, that was me in bed answering the phone, taking an order.
As we grew, we needed to be able to tie orders to tracking numbers. We used to literally have to go copy and paste them into our customers order history, so they could see it. And UPS more than any other company -- and UPS is a big company, so it’s still amazing to me that they can pull this off -- they really guided us through the entire system. That means tying our retail systems to their tracking system. And we talk to UPS, I would say, four times a week because they are so super proactive about helping us embrace what’s coming next.
So it actually went beyond the simply tying the systems together. They actually took us to other companies -- in other industries -- to help us set up a warehouse. It’s really amazing -- both the practical application and just the staff to make us look cool -- that UPS has been so engaged with us.
Gardner: Now, Jeff, that sounds like UPS has figured out that if you help small companies get started, and they grow, that they are going to stick with you. And that’s perhaps a very long-term relationship.
Reid: You are right. Certainly for UPS to scale services for a small company that’s working out of its garage -- all the way up to a multinational company -- it’s important for us to offer solutions that provide uniqueness and that allow our customers to develop a competitive advantage ... just as Moosejaw has done. So we are always on the table with solutions that are unique and are scalable, depending on a customer's size.
Gardner: I suppose it’s not just getting them while they are young, but being on the leading edge of what is expected, both in terms of trends and fashion -- as we have heard about with SMS. It’s quite popular. I have just started using SMS myself more and more. It is addictive, and it does make sense in a lot of ways.
For example, if you don’t need to make a full phone call, or you don’t want to go to email and have to fire-up your PC. Maybe you could explain to us a little bit more about what UPS is doing along these lines? Give us sort of tour of the waterfront now in terms of the services, and maybe even some hints of what’s to come?
Reid: Sure. When we think about global visibility, our job as a transportation and logistics provider is to make sure our customers are able to take advantage of flexibilities to manage their supply chain. Information many times is just as important as what is in the package.
So UPS has always been looking to innovate and bring new capabilities to our customers. And an example of that is our latest solution called Delivery Intercept, where our customers can use their wireless device, or go to www.ups.com, and track a package. At that point they can decide that, “Hey, my customer told me yesterday that they are not going to be at this location any longer, so I need to redirect that package." Or, "I sent the wrong thing, and I need to have it returned.”
With Delivery Intercept a customer can go to www.ups.com and reschedule that package to either be returned to them, or sent to an alternate location. That’s an example of innovation that we are first to market with, and we are always seeking to make sure that we provide productivity, capability for our customers, and increase their efficiency. The demand and interest is there for these services, as Moosejaw has indicated. So we will continue to innovate. That’s necessary.
Gardner: Being able to work that quickly in the field -- I guess you could call it exception management as an information technology term -- that requires a lot of heavy lifting on the back-end that people might not be aware of. Isn’t that right?
Reid: Yes, in order for us to engage a customer with Delivery Intercept, there is a lot of infrastructure that UPS has to have in place. And we spent many years integrating our systems so that we know where that package is at every step of the delivery process. Technology is what has allowed us to drive in that direction; so that we can take our internal technology that we have built and make it available for our customers; to develop value-added solutions for them.
Gardner: Interesting. How far can we scale on this? When I say "scale" I mean we can increase from small businesses to large businesses, but also how about in terms of geography. Is this something just in the United States and North America? What’s the global scale on this?
Reid: Well, if I have to focus only on wireless, UPS has global scale with our wireless capabilities. We have wireless capabilities in over nine Asia-Pacific countries. It’s available in 24 European countries. Of course it's here in the United States and Canada. It’s also available in five Middle East countries, and also in South Africa. So as long as you have a connection in any of those areas, UPS certainly has information that you can consume.
Gardner: Back to you, Robert, at Moosejaw. Are you guys doing international business, and if so, is this wireless tracking of interest there?
Wolfe: I haven’t checked yet, but I would be shocked if our international customers weren’t signing up for it.
Gardner: Which markets are you playing in globally?
Wolfe: Well, Canada. We ship a lot to Europe, a lot to the Far East. So I don’t have specific numbers on that, but we do pretty significant international business, it’s important to us.
One of the things that Jeff was talking about earlier, made me think of the following -- I was in a store the other day getting a new cell phone. The woman in line in front of me did not want to get texting because -- this is actually a true story, believe it or not -- she did not want her kid to have texting on the phone. I interrupted the conversation and basically told her that she was wasting her time, because the kid is going to use it anyway. And she would then have to pay some super-huge fee because she was not signed up for SMS. I told her to just get it. It’s not whether people are going to use it or not -- it’s going to happen. So, for us, we have to embrace that.
Gardner: When it comes to finding a business use for SMS text messaging, it seems a tracking number is perfect because it’s not a lot of visual real estate. It’s just a number. It’s all text. It doesn’t require a whole lot of rendering or anything, and it’s something that people can use personally and in business. I am surprised it hasn’t even been taken up as even further into the business supply chain.
Wolfe: Well, the way we talk about it internally is that we are trying to create the least amount of friction with the customer as possible. What can we do to make the shopping experience the best for the customer? If you give us your email address, you get the tracking number, but it can get lost in a spam filter. So to create the most positive experience, we get them that tracking number and in as many ways -- or the best ways -- as possible. That’s what we need to do as a business. We even are now allowing for people who opt-in to just get text messages.
And we've gone beyond just text messaging for tracking numbers. We are using our opt-in list for texting as a community-building activity. For example, last week one of the people on our marketing team went out with a new girl. They met at a coffee shop. And when he got back, he re-sent a text to our list saying something like, "I just went out with a girl, and I like her. When should I text her to see when she wants to go out again?"
So we texted that to our list, and -- I am not exaggerating -- I would say within a minute we had 40 replies, and they were hilarious. So we’re really trying to use the technology as a way to engage the customer -- not just on the product level with a coupon code -- but just to have as much fun as we possibly can.
Reid: I think that it’s important to note too that the wireless providers are doing their part by bringing down the cost of text messaging. Several years ago, every time you send a message it cost you a pretty penny. And today with bundling and the pricing schemes that they have in place it’s affordable for young users to use it, and for anyone to add this as part of your cellular plan. It’s making another channel to market for businesses like Moosejaw and UPS.
Gardner: It seems like you are able take essentially a customer service function and then extend it to create community dialogue and discussion between not only yourself and your customers, but among your customers.
Wolfe: Yeah, it’s really amazing. And you know what? I just thought when I was telling that story that the person at Moosejaw who went out with the girl, he didn’t say, “When should I call the girl next?” He said, “When should I text her?” I mean, calling wasn’t even an option. So, again, that’s just another example of the importance of wireless text technology. You are not even picking up the phone to call people anymore.
Gardner: Okay, so you are building your community, you are getting some social networking benefits. Do you see any other ways that you would like to use this in the future? Are there other aspects of either texting or these wireless-tracking procedures and benefits that you’d like to take to another level?
Wolfe: Yes, but I can't answer that question now because we use the word "experimenting," and that's really what it is for us. We’re tracking to see if things like a coupon code hit better than a text message about a date, and we’ll continue to try and figure that out. Also our website is now available via mobile phones. So, this is all very new to us.
The fact that people are getting personal digital assistants (PDAs) instead of cell phones means you can use more characters and texting makes more sense. So these are things that we’re just playing around with. The short answer is we’re not sure yet, but it is part of our weekly meeting to figure out what do we do next with texting, and what we can do next with mobile commerce. It’s definitely something that we will continue to play around with.
Gardner: Well, that certainly sounds like the buzzword for all of this -- mobile commerce. Let’s take it back to Jeff. Do you see this as a stepping-stone for UPS to get more involved with the mobile commerce?
Reid: Certainly at UPS we think about bringing new solutions and technologies to market. We want to focus on being where our customers are. So if our customers are in the wireless space, we want to make sure that UPS is right there with them. Anything that you can do at www.ups.com -- the ability to set your own workspace, for instance, we see wireless being the next step. So anytime a customer engages us through any channel, we want to make sure that we have similar capabilities across all the channels that we touch.
Gardner: All right, we’ve talked about a small company with Moosejaw -- and I don’t mean that in a bad way, being a small company -- I mean something smaller than a multinational corporation. But how do big companies get started with this? Is this something you can just go to a website for and sign–up? How does someone without a lot of experience in SMS get started?
Reid: All the information you need to get started with text messaging or wireless capabilities with UPS is available at www.ups.com. The easiest way to get there is to go to www.ups.com and use our search engine to type in "wireless services." And there you’ll see a plethora of information that describes exactly how to get started. It’s very easy ... how you do it, set it up to register your phone with us -- it's a 10-minute process -- and you are ready to go.
Gardner: All this really requires is your cell phone number, right?
Reid: That’s right.
Gardner: Very cool. Do you have any sense of how many of your users are involved with this now, or what the growth pattern is? Is this something that’s been taking-off lately -- or ramping up slowly over period of time? What’s the adoption trend like?
Reid: We’ve seen wireless services more adopted in the last two years than previously. In fact, if you just look at the wireless- or cellular-use patterns in the U.S., it’s more than grown by 50 percent this year alone. If you look at Europe, it grew 60 percent last year, and we're seeing similar patterns with our services -- that it’s growing exponentially each year.
Gardner: Very good. Well, we have been discussing the benefits of package tracking using mobile devices -- and I just want to be clear for our audience, this includes BlackBerries, PDAs and, I suppose, the new Apple iPhone when it's out. This isn’t limited to just cell phones, is that right?
Reid: That’s right, it’s any mobile device that you can connect to the Internet, including pagers, anything that you can text with you can use them to reach UPS wireless tracking.
Gardner: We have been talking about how to follow your packages, no matter where you are, without necessarily being involved with the personal computer or strapped down to your desk. We’ve heard from Moosejaw, a retailer of high-end hiking and mountaineering and camping equipment in Michigan, and its use of UPS wireless tracking.
I want to thank both of our participants. We’ve had Jeff Reid, the Director of Customer Technology Marketing at UPS. Thanks, Jeff.
Reid: Thank you.
Gardner: And Robert Wolfe, co-founder of Moosejaw. Thanks, Robert, for joining.
Wolfe: Thanks so much.
Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for joining.
Listen to the podcast here. Podcast sponsor: UPS.
Transcript of Dana Gardner’s BriefingsDirect podcast on UPS's wireless tracking capability. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Listen to the podcast here. Podcast sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a sponsored BriefingsDirect podcast. Today, a discussion about wireless tracking, about how a myriad of devices can be used almost anywhere to track packages and delivery -- be it for retail, ecommerce, or business to business.
We are going to be discussing this with an executive from UPS, as well as someone who uses wireless tracking regularly and is finding it has a positive impact on his business. I’d like to welcome to the show Jeff Reid, the Director of Customer Technology Marketing at UPS in Atlanta, Georgia. Welcome to the show, Jeff.
Jeff Reid: Thank you, Dana.
Gardner: We’re also talking with Robert Wolfe, the co-founder of Moosejaw in Madison Heights, Michigan. Welcome, Robert.
Robert Wolfe: Thank you.
Gardner: We want to find out more about the use of wireless tracking, why it’s important with today’s younger generation -- a more mobile technology-oriented generation -- and the benefits it brings from both a business and technological point-of-view. Let’s go first to Jeff. Tell us how long UPS has been offering this wireless tracking capability, and why did you take the plunge into it?
Reid: UPS has actually been in the wireless business since the early 1990s. We developed our first customer-facing technology in 1999 when we introduced wireless tracking. Today we’re up to four wireless services, including tracking. We also offer the ability to get time and transit information about a package that you’re about to ship. We can also rate a package through our wireless technologies.
Then finally if you need a spot to drop-off the package, you can do that with our drop-off locator.
Interestingly enough, wireless capabilities were introduced internally at UPS in the early 1990s, when we were one of first companies to actually cobble together more than 200 cellular phone providers so that we could provide cellular phone capabilities to our package-delivery vehicles. Our drivers could transmit the information about the delivery that they had just made through their hand-held computers.
So we’ve been in the wireless business for quite a while.
Gardner: Interesting. And now we can use a lot more devices than cell phones. When did you make a leap from a cell phone to the digital side of more of these devices?
Reid: Our wireless services began leveraging most digital devices beginning in 2001. In fact, any device that has short message service (SMS) capabilities or uses Wireless Application Protocol (WAP) capabilities can leverage our tracking services.
Gardner: And these same services are accessible through the World Wide Web as well?
Reid: That’s correct.
Gardner: What kind of information do you find that people are using this for mostly? Is it the same kind of information that you expected when you first got into it?
Reid: Our customers have become more mobile as their businesses have grown, and their lives converge with their day-to-day work activities. So we find a lot of customers are using our mobile capabilities to extend their flexibility and productivity outside of work.
Small businesses and individual users are the primary users of our wireless capabilities. So it is meeting our expectations of who would use the wireless capabilities. Yet it’s amazing how wireless services and our tracking information has made it even onto the golf course nowadays, where people are using it in all facets of their life -- to check on that birthday gift to all the way down to managing their global supply chain.
Gardner: I don’t know how it happened, but I think people just have less time these days than in the past. How about email? People seem to find an easy segue from using email for alerts, and then moving to SMS. Do you find that there is a mix being used?
Reid: Well, fortunately at UPS, we have a whole suite of visibility solutions. Primarily, the solution that customers use with email is our Quantum View[sm] capabilities. That’s where you can actually get proactive alerts about your shipment anywhere within the supply chain.
Customers also use email alerts so that when they do ship a package, they can go ahead and send emails to their customers letting them know that the package is on its way. They use Quantum View for that, as well. So between email and wireless, we certainly have a vast array of different services to provide proactive information in our customers’ supply chain.
Gardner: Is there something different about today’s workforce? I suppose more folks are digitally connected, regardless of where they are. We have the road warriors, but even high school kids -- many of who have their own cell phones -- are connected. Are you finding that companies are trying to reach these end-users, or is it more company-to-company? Tell us a little bit about the type of traffic or type of usage you’re finding.
Reid: The majority of the usage for wireless tracking comes from individuals in small businesses. But UPS had the forethought to think about who would be our future customer with wireless capabilities. And as you will learn from Moosejaw in a moment, a lot of the Generation X and Millennium Generation -- those born after 1982 -- have grown up with a cell phone and with the expectation of mobility as being part of your life.
In fact, I have a nephew who was using UPS wireless service just recently. He had a pair of "shades," as he calls them that were being delivered to his home but he was at his grandmother’s house. Yet he was using wireless tracking to figure when he could go home to get his new sunglasses.
That’s an example of where expectations have changed, there is no inhibition to using wireless capabilities with this younger generation. If you look at the U.S. penetration of cell phones, it's above 75 percent. That’s unfathomable considering that cell phones really just caught on in their early 1990s. So lots of different customers are using our capabilities, but mostly it’s focused on individuals and small business uses today.
Gardner: Right, so using wireless tracking certainly makes a great deal of sense for end-users. They can specifically get information on deliveries they’re expecting, and I suppose it is really important to get your shades on time. But what about the supply chain where time isn’t just convenience, time is actually money.
Companies are using this to compress their delivery times, therefore their product lifecycle times, and are therefore seeing cost savings.
Reid: And certainly at UPS we spent a lot of time thinking about customer supply chains and how we can improve capabilities around goods, funds, and information. We look at our wireless capabilities and its efficiency as the name of the game when it comes to mobile professionals, and such examples as service technicians.
Some of our customers have large-scale service engagements where they have delivery vans out making calls. They require that a part be at a house before they can actually fix an item that they are going to service. So these large companies leverage our wireless capabilities to track a package within the van, so that they can determine whether or not that call will be effective -- if the part has arrived or not. That’s an example of where efficiency throughout the supply chain is being introduced, and wireless tracking is certainly a large component of that efficiency equation.
Gardner: I suppose that that same value can be taken to a factory floor, or an agricultural environment -- out to the farm fields and away from any centralized location. You don’t need to be tethered to a desk and a personal computer.
Reid: That’s correct. Anywhere that your feet take you, wireless capabilities are available.
Gardner: Great, let’s go check out the real-world uses of this. Robert, tell us about Moosejaw, what is its mission, and what do you do there?
Wolfe: I describe us providing high-end outdoor equipment and apparel. Basically if you’re going skiing or backpacking, we’ll have what you want -- and it’s the best stuff. And we have sort of by accident ended up skewing to a very young demographic.
I started the company when I was 21, and had absolutely no clue what I was doing. So when customers would come in the store we were playing Nintendo or whiffle ball, and we asked them to join us. And that ended up turning into our marketing theory. So we really try to connect with the customer on a level that’s not just about the product. So last Saturday, in one of our stores, we had break-dancers for absolutely no reason whatsoever.
So far it seems to be working. We definitely have more high school and college students, not only as our customers but also as our staff. And that’s really how we ended up being so proactive about wireless technology. Because when I look around and see everyone at Moosejaw, they don’t even talk to the people three seats away from them -- they text them. And half of them don’t even use their computers anymore; they just use their mobile phones and personal digital assistants (PDAs).
When we began seeing that internally, we knew that we have to be first-to-market with all of that kind of wireless technology -- and UPS has helped a ton, and not only with traditional tracking. I call it "traditional" even though it’s still pretty new. UPS began helping us all the way to getting tracking numbers tested, which we just started very recently. And it’s already been hugely successful. And when I say, "hugely successful," we have had a lot of people sign up -- but more importantly, the people who have signed up have loved it. It is definitely the college students, and it sort of filled over from in the high schools.
Gardner: Explain to us about the testing. What does that all amount to?
Wolfe: So, instead of having to wait to get to your PC -- an extra half hour to find out where your order is -- it will go right to your phone. The sunglasses example was a pretty good one. Who wants to have to wait an extra hour to find out where their package is going to be?
It sounds funny. You really don’t need to find out where your stuff is at that very movement, but it’s just that the whole idea of being able to use your phone for everything -- our customers expect it. If we are not texting information to them, then we are yesterday’s news. We have to be able to embrace that kind of technology.
Gardner: The expectations now are much higher. Immediacy is really important. I suppose for high-end camping and mountaineering equipment, if you are going on a big trip that you have been planning, you might have just forgotten some last-minute thing, so you are going to order it up. And maybe you’ll intercept it halfway to your destination. And you will be able to know right along the way if that’s going to work for you. Is that a typical scenario for you?
Wolfe: You know, it certainly works in that scenario. But for us it’s really not so much about the practical use of the application as it is about being cool.
Gardner: It’s a lifestyle thing.
Wolfe: That’s exactly right. If it so happens that we sell products that our demographic loves -- and it wouldn’t really matter if that product were coffee mugs -- the fact that we are sending tracking information through a mobile phone is what’s important. Our customers are more likely to tell their friends that they just got their tracking number to their phone telling them when their new sunglasses are coming.
Gardner: Interesting. Tell us how about how you started getting involved with UPS in order to be so cool and be so appealing as a lifestyle to your users?
Wolfe: What happened with us is we started off -- and I am not exaggerating -- that when I would take an order from the Internet it would literally be me calling the phone company and saying, “Okay, I am going to be in our Grosse Point shop today, so point the 800-number to this phone. And I bring my laptop with me, and I bring the Visa machine with me. And then when I went home, I would call the phone company and say, “Okay, I am home now, you can point the 800-number back to my house.” When someone called Moosejaw at 2:00 in the morning, that was me in bed answering the phone, taking an order.
As we grew, we needed to be able to tie orders to tracking numbers. We used to literally have to go copy and paste them into our customers order history, so they could see it. And UPS more than any other company -- and UPS is a big company, so it’s still amazing to me that they can pull this off -- they really guided us through the entire system. That means tying our retail systems to their tracking system. And we talk to UPS, I would say, four times a week because they are so super proactive about helping us embrace what’s coming next.
So it actually went beyond the simply tying the systems together. They actually took us to other companies -- in other industries -- to help us set up a warehouse. It’s really amazing -- both the practical application and just the staff to make us look cool -- that UPS has been so engaged with us.
Gardner: Now, Jeff, that sounds like UPS has figured out that if you help small companies get started, and they grow, that they are going to stick with you. And that’s perhaps a very long-term relationship.
Reid: You are right. Certainly for UPS to scale services for a small company that’s working out of its garage -- all the way up to a multinational company -- it’s important for us to offer solutions that provide uniqueness and that allow our customers to develop a competitive advantage ... just as Moosejaw has done. So we are always on the table with solutions that are unique and are scalable, depending on a customer's size.
Gardner: I suppose it’s not just getting them while they are young, but being on the leading edge of what is expected, both in terms of trends and fashion -- as we have heard about with SMS. It’s quite popular. I have just started using SMS myself more and more. It is addictive, and it does make sense in a lot of ways.
For example, if you don’t need to make a full phone call, or you don’t want to go to email and have to fire-up your PC. Maybe you could explain to us a little bit more about what UPS is doing along these lines? Give us sort of tour of the waterfront now in terms of the services, and maybe even some hints of what’s to come?
Reid: Sure. When we think about global visibility, our job as a transportation and logistics provider is to make sure our customers are able to take advantage of flexibilities to manage their supply chain. Information many times is just as important as what is in the package.
So UPS has always been looking to innovate and bring new capabilities to our customers. And an example of that is our latest solution called Delivery Intercept, where our customers can use their wireless device, or go to www.ups.com, and track a package. At that point they can decide that, “Hey, my customer told me yesterday that they are not going to be at this location any longer, so I need to redirect that package." Or, "I sent the wrong thing, and I need to have it returned.”
With Delivery Intercept a customer can go to www.ups.com and reschedule that package to either be returned to them, or sent to an alternate location. That’s an example of innovation that we are first to market with, and we are always seeking to make sure that we provide productivity, capability for our customers, and increase their efficiency. The demand and interest is there for these services, as Moosejaw has indicated. So we will continue to innovate. That’s necessary.
Gardner: Being able to work that quickly in the field -- I guess you could call it exception management as an information technology term -- that requires a lot of heavy lifting on the back-end that people might not be aware of. Isn’t that right?
Reid: Yes, in order for us to engage a customer with Delivery Intercept, there is a lot of infrastructure that UPS has to have in place. And we spent many years integrating our systems so that we know where that package is at every step of the delivery process. Technology is what has allowed us to drive in that direction; so that we can take our internal technology that we have built and make it available for our customers; to develop value-added solutions for them.
Gardner: Interesting. How far can we scale on this? When I say "scale" I mean we can increase from small businesses to large businesses, but also how about in terms of geography. Is this something just in the United States and North America? What’s the global scale on this?
Reid: Well, if I have to focus only on wireless, UPS has global scale with our wireless capabilities. We have wireless capabilities in over nine Asia-Pacific countries. It’s available in 24 European countries. Of course it's here in the United States and Canada. It’s also available in five Middle East countries, and also in South Africa. So as long as you have a connection in any of those areas, UPS certainly has information that you can consume.
Gardner: Back to you, Robert, at Moosejaw. Are you guys doing international business, and if so, is this wireless tracking of interest there?
Wolfe: I haven’t checked yet, but I would be shocked if our international customers weren’t signing up for it.
Gardner: Which markets are you playing in globally?
Wolfe: Well, Canada. We ship a lot to Europe, a lot to the Far East. So I don’t have specific numbers on that, but we do pretty significant international business, it’s important to us.
One of the things that Jeff was talking about earlier, made me think of the following -- I was in a store the other day getting a new cell phone. The woman in line in front of me did not want to get texting because -- this is actually a true story, believe it or not -- she did not want her kid to have texting on the phone. I interrupted the conversation and basically told her that she was wasting her time, because the kid is going to use it anyway. And she would then have to pay some super-huge fee because she was not signed up for SMS. I told her to just get it. It’s not whether people are going to use it or not -- it’s going to happen. So, for us, we have to embrace that.
Gardner: When it comes to finding a business use for SMS text messaging, it seems a tracking number is perfect because it’s not a lot of visual real estate. It’s just a number. It’s all text. It doesn’t require a whole lot of rendering or anything, and it’s something that people can use personally and in business. I am surprised it hasn’t even been taken up as even further into the business supply chain.
Wolfe: Well, the way we talk about it internally is that we are trying to create the least amount of friction with the customer as possible. What can we do to make the shopping experience the best for the customer? If you give us your email address, you get the tracking number, but it can get lost in a spam filter. So to create the most positive experience, we get them that tracking number and in as many ways -- or the best ways -- as possible. That’s what we need to do as a business. We even are now allowing for people who opt-in to just get text messages.
And we've gone beyond just text messaging for tracking numbers. We are using our opt-in list for texting as a community-building activity. For example, last week one of the people on our marketing team went out with a new girl. They met at a coffee shop. And when he got back, he re-sent a text to our list saying something like, "I just went out with a girl, and I like her. When should I text her to see when she wants to go out again?"
So we texted that to our list, and -- I am not exaggerating -- I would say within a minute we had 40 replies, and they were hilarious. So we’re really trying to use the technology as a way to engage the customer -- not just on the product level with a coupon code -- but just to have as much fun as we possibly can.
Reid: I think that it’s important to note too that the wireless providers are doing their part by bringing down the cost of text messaging. Several years ago, every time you send a message it cost you a pretty penny. And today with bundling and the pricing schemes that they have in place it’s affordable for young users to use it, and for anyone to add this as part of your cellular plan. It’s making another channel to market for businesses like Moosejaw and UPS.
Gardner: It seems like you are able take essentially a customer service function and then extend it to create community dialogue and discussion between not only yourself and your customers, but among your customers.
Wolfe: Yeah, it’s really amazing. And you know what? I just thought when I was telling that story that the person at Moosejaw who went out with the girl, he didn’t say, “When should I call the girl next?” He said, “When should I text her?” I mean, calling wasn’t even an option. So, again, that’s just another example of the importance of wireless text technology. You are not even picking up the phone to call people anymore.
Gardner: Okay, so you are building your community, you are getting some social networking benefits. Do you see any other ways that you would like to use this in the future? Are there other aspects of either texting or these wireless-tracking procedures and benefits that you’d like to take to another level?
Wolfe: Yes, but I can't answer that question now because we use the word "experimenting," and that's really what it is for us. We’re tracking to see if things like a coupon code hit better than a text message about a date, and we’ll continue to try and figure that out. Also our website is now available via mobile phones. So, this is all very new to us.
The fact that people are getting personal digital assistants (PDAs) instead of cell phones means you can use more characters and texting makes more sense. So these are things that we’re just playing around with. The short answer is we’re not sure yet, but it is part of our weekly meeting to figure out what do we do next with texting, and what we can do next with mobile commerce. It’s definitely something that we will continue to play around with.
Gardner: Well, that certainly sounds like the buzzword for all of this -- mobile commerce. Let’s take it back to Jeff. Do you see this as a stepping-stone for UPS to get more involved with the mobile commerce?
Reid: Certainly at UPS we think about bringing new solutions and technologies to market. We want to focus on being where our customers are. So if our customers are in the wireless space, we want to make sure that UPS is right there with them. Anything that you can do at www.ups.com -- the ability to set your own workspace, for instance, we see wireless being the next step. So anytime a customer engages us through any channel, we want to make sure that we have similar capabilities across all the channels that we touch.
Gardner: All right, we’ve talked about a small company with Moosejaw -- and I don’t mean that in a bad way, being a small company -- I mean something smaller than a multinational corporation. But how do big companies get started with this? Is this something you can just go to a website for and sign–up? How does someone without a lot of experience in SMS get started?
Reid: All the information you need to get started with text messaging or wireless capabilities with UPS is available at www.ups.com. The easiest way to get there is to go to www.ups.com and use our search engine to type in "wireless services." And there you’ll see a plethora of information that describes exactly how to get started. It’s very easy ... how you do it, set it up to register your phone with us -- it's a 10-minute process -- and you are ready to go.
Gardner: All this really requires is your cell phone number, right?
Reid: That’s right.
Gardner: Very cool. Do you have any sense of how many of your users are involved with this now, or what the growth pattern is? Is this something that’s been taking-off lately -- or ramping up slowly over period of time? What’s the adoption trend like?
Reid: We’ve seen wireless services more adopted in the last two years than previously. In fact, if you just look at the wireless- or cellular-use patterns in the U.S., it’s more than grown by 50 percent this year alone. If you look at Europe, it grew 60 percent last year, and we're seeing similar patterns with our services -- that it’s growing exponentially each year.
Gardner: Very good. Well, we have been discussing the benefits of package tracking using mobile devices -- and I just want to be clear for our audience, this includes BlackBerries, PDAs and, I suppose, the new Apple iPhone when it's out. This isn’t limited to just cell phones, is that right?
Reid: That’s right, it’s any mobile device that you can connect to the Internet, including pagers, anything that you can text with you can use them to reach UPS wireless tracking.
Gardner: We have been talking about how to follow your packages, no matter where you are, without necessarily being involved with the personal computer or strapped down to your desk. We’ve heard from Moosejaw, a retailer of high-end hiking and mountaineering and camping equipment in Michigan, and its use of UPS wireless tracking.
I want to thank both of our participants. We’ve had Jeff Reid, the Director of Customer Technology Marketing at UPS. Thanks, Jeff.
Reid: Thank you.
Gardner: And Robert Wolfe, co-founder of Moosejaw. Thanks, Robert, for joining.
Wolfe: Thanks so much.
Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for joining.
Listen to the podcast here. Podcast sponsor: UPS.
Transcript of Dana Gardner’s BriefingsDirect podcast on UPS's wireless tracking capability. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Monday, May 21, 2007
Transcript of BriefingsDirect Podcast on UPS's Solutions for Supply Chain Visibility
Edited transcript of BriefingsDirect[TM/SM] podcast with Dana Gardner, recorded April 17, 2007.
Listen to the podcast here. Sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to BriefingsDirect. Today, a sponsored podcast discussion about visibility into supply chains and distribution networks. It’s about effective information-sharing across the spectrum of transportation options and during the distribution of goods.
"Do you know where your stuff is?" is the big question and, most importantly, "Do your customers know where their stuff is?"
Helping us to sort through this important area for ecommerce and for small- and medium-sized businesses (SMBs) and their retail operations, we have an expert in the area of supply chain management. We are joined today by Jim Rice, director of the Integrated Supply Chain Management Program at MIT. Thanks for joining us, Jim.
Jim Rice: My pleasure.
Gardner: We also have Stephanie Callaway, director of customer technology marketing at UPS in Atlanta. Hello, Stephanie.
Stephanie Callaway: Hello, Dana.
Gardner: We also have users and practitioners of this emerging art. Frank Deen is the shipping manager at Rackmount Solutions in Garland, Texas. Hello, Frank.
Frank Deen: Hello, Dana.
Gardner: And lastly, joining us from Saline, Michigan is John Schaffer, president of TrueWave, the distributor and creator of the Wadia line of high-end audio products. Thanks for joining us, John.
John Schaffer: Glad to be here, Dana.
Gardner: As I mentioned, this visibility issue is a part of the information revolution and the knowledge economy, whereby at some point either folks who are end-users buying goods or folks in the distribution channel are looking for reductions in cost, efficiency improvements, and reduced time to distribution -- all of which can substantially reduce the total cost of an overall production and distribution activity.
I want to go first to Jim Rice. Jim, help us understand the state of the art here today. What are we talking about in terms of business drivers and technology drivers in this search for higher efficiency and distribution?
Rice: Thanks, Dana. Let me start by talking about the business drivers. If we were to ask companies and leaders what their concern was, they would be talking about a number of things. They'd be talking about continuity -- business continuity. We saw that destructions like Hurricane Katrina and 9/11 caused a lot of companies to start recognizing that their supply chains are genuinely at risk.
A lot of vulnerabilities were always there, but weren’t very apparent or evident. So, there's a fair amount of recognition about this vulnerability. Right now, there is some work going on in that some companies are planning to make their supply chains more resilient and trying to actively manage risks.
Similarly, companies are aware of security as an issue, although many are talking about it, but aren't taking much action. In part, that's because it’s very difficult to show a return on investment from security investments. The trick question is, "What happens when supply chain security investment is successful?" Of course, the answer is "nothing," because it prevents something from happening.
The companies are concerned with optimal supply chain design, and this takes in the aspect of outsourcing. How much outsourcing do we use? How much of that do we even think of putting offshore, trying to reduce cycle time, cost, and uncertainty in the system? That will ultimately enable them to be much more responsive to spikes and drops in demand.
Companies continue to squeeze their supply chain to lean it out, and make it more efficient and more effective. There are a lot of drivers in the industry right now that affect the price of sundry industries differently.
Gardner: We want to have this clarity in the best of times and also in the worst of times. Is this essentially a data integration and availability exercise? What are the core issues to enable folks to get the information they need about supply-chain activities?
Rice: It’s not just about data, but certainly data is a central and a critical issue.
A lot of it comes down to having relationships with customers and suppliers. They would be open and free to share the information that ultimately will help both organizations to make better decisions, reduce uncertainty in the system, and take out some of the cost and uncertainty. That makes the system potentially much more efficient.
Gardner: I suppose this has to do with levels of trust. There are interdependencies -- "You help me, and I help you" -- in terms of making the customer at the end of the process happy. How has that gone? Has there been trust? Have people recognized a quid pro quo and have they been willing to share?
Rice: Yes. I go back to that quote by Ronald Reagan: “Trust, but verify.” There’s certainly some inherent trust that exists between individual parties, and there maybe some trust that exists over the long term between organizations, but ultimately the trust is backed up by systems or processes that enable regular engagement coordination. They are backed up by contractual agreements, or at least agreements in principle, whereby one party is going to make the other party whole in the event of some disruption or some eventuality that they hadn’t planned for.
Gardner: Before we go to UPS to learn about some of the things they are doing, what should we expect in the future? Is this a mature and fully baked technology and business approach, or are there more efficiency, visibility, and innovation to come?
Rice: I think we are just on the cusp of lots of great potential. I can’t tell you whether the potential will be realized tomorrow, next year, or in five years, but I think we are getting really close. Probably as far back as 10 or 15 years ago, you had some pundits who were saying, "Oh, in the future our systems will be fully integrated and completely synchronized." It hasn’t happened yet to a large extent. There are isolated instances. Some individual companies have demonstrated the capability of being synchronized, organized, and coordinated.
Some of these capabilities are becoming more readily available for large companies, and hopefully in the near term, to small- and medium-sized enterprises. The challenges aren't simple, but I think there are some tools and processes emerging that are going to make this much more possible in the future, and therefore get us a little closer to that Nirvana of the synchronized supply chain.
Gardner: Thanks. Let’s go to Stephanie Callaway at UPS. Stephanie, you’ve heard about the need and desire for looking for data and visibility in the best of times and the worst of times. UPS sits in a very advantageous position between all these players. Tell us a little bit about what’s been going on for the last several years to try to improve on this activity?
Callaway: Okay, Dana, thanks for having me. UPS started with tracking on the Web in the early '90s and since then we have evolved our portfolio to include a broad set of visibility solutions that address the very diverse needs of our customers.
Today, we support tracking in 63 countries, and that serves the basic visibility needs of our shippers, receivers, importers, and exporters -- both residential and commercial. Our emphasis today is on more than our traditional U.S. small package business. That's available outside of the U.S., but we also provide visibility through tracking to our UPS Freight, Air, and Ocean Freight Services.
Gardner: Jim mentioned about this trust issue for verification? Have you been playing a larger role in trying to broker these relationships or get people to shake hands and agree on visibility?
Callaway: From the perspective of our relationship with our customers, we provide full visibility of shipment status from the time they tender their package to us to the time it is delivered to their customer. We have other visibility solutions, such as Quantum View, that provide proactive information, even when the package encounters trouble along the way. Whether it’s a weather delay or an incorrect address, we can provide that information proactively to our customers, so that they can provide that information to their customers and improve customer satisfaction.
Gardner: So, you are the picks and shovels, and your customers are out there mining these relationships. Tell us a little bit about small- to medium-sized businesses in particular. Is this a high-growth area for your goods and services? Where in the whole business spectrum are these things being used the most? Then, secondarily, where do you think the larger uptake is in the future?
Callaway: Customers of all sizes take advantage of our visibility portfolio. I mentioned tracking on the Web. Even with tracking, some of our customers prefer to integrate that information into their own Web sites. We have XML tools that customers of any size who have an IT organization can take advantage of to integrate information about package status into their Web sites.
We also have this suite of Quantum View solutions that can be used by customers of all sizes. Typically, smaller customers who don’t have large information technology (IT) functions or large IT budgets would take advantage of our ready-to-go solutions, like Quantum View Notify, which is an email notification. Customers can select that at the time of shipping, and proactively notify their own customers about important shipping events, such as exceptions and deliveries. That helps them save time and increase customer satisfaction by reducing the number of calls that they receive.
We also have Quantum View Manage, which is a visibility dashboard that customers of all sizes can use to see where their packages are in transit. That would be any packages they are shipping out, any that are coming into them, or any that they’ve paid for, along with some special capabilities to help importers with compliance.
Gardner: Without going too far into the weeds on application development and integration, Web services and APIs, and that sort of thing, it sounds like you’ve got a spectrum of approaches for those who aren't interested in getting into too much of the technology, perhaps using the email alerts approach. I imagine you also will allow for those who do have application developers at their disposal to bring in the visibility benefits, and mash-up your tracking, information, and data services right into their portals for self-help and for customers to track what’s going on with their retail purchases. Is that right?
Callaway: Exactly. As I was saying earlier, we believe we have to address a broad set of diverse customer needs. I mentioned the online tools for tracking, but we also have Quantum View Data, which lets data about package status information flow proactively from UPS to customers. They can integrate that however they see fit into their own internal applications, whether it’s for their own use within their customer-service department, or whether they want to proactively share that with their customers.
Gardner: I suppose as a customer or a partner, you’re elevating yourselves to an information-sharing value, not just the logistical and transportation value?
Callaway: That’s true, and our customers expect that of us.
Gardner: Okay, let’s talk to some customers. Let’s go to Frank Deen at Rackmount Solutions. First, Frank, tell us a little bit about Rackmount, the history of the company and what you do.
Deen: Dana, we started out about five years ago as strictly an Internet company. We sell racks for IT solutions, file servers, and different types of peripheral equipment that goes into IT rooms. We ship those all around the country. Our business has grown to the point where we have a warehouse here and stock quite a number of the items ourselves, but because of the magnitude of the type of things we sell, we ship from probably a dozen locations around the country, depending upon what the item is.
If the quantity someone is purchasing makes it impossible for us to ship it from here, we have to have it drop shipped. That, in itself, has been a challenge, because our shipments are going from so many different locations. We are usually selling to people who come in over the Internet or call us direct, so everything we have does get shipped out. Being able to track and know where our packages are is very, very important to us.
Gardner: So, you have been managing fast growth. People have been building out data centers and modernizing their infrastructure for their IT departments. You’ve also been dealing with complexity in terms of the number of points that you are distributing from and the number of points that you are trying to get your things to. Specifically, what sorts of visibility services have you been using to manage this high growth and complexity?
Deen: Initially, when we started doing this, because we were shipping from so many locations, even though it was being shipped on our account, we would have to contact each one of those shipping points, each warehouse, each manufacturer to get tracking numbers to send to our customers. Of course, now we are able to have that information sent directly to the customer when the product ships. They get an email with that information.
Plus, on Quantum View, we are able to pull up a report every day that shows everything that has been shipped out on our account, whether from our local warehouse or any of those other locations. We're able to have that tracking number and see the exact progress of that package -- when it was picked up, where it’s at currently, when it’s expected to be delivered, and the address that it’s expected to be delivered to. When a customer calls and asks a question about it, we are able to go to that and immediately give them an answer that provides a comfort level that we are keeping track of their merchandise that they are waiting to get.
Gardner: So, using some of the UPS services, you're giving your call-center folks visibility. When they've got hopping-mad customers saying, "Where are my goods? I've got to build out this data center. I need these racks," you’ve given visibility to your call center, but do you take it to the next step? Do you have a Web site where these people can track their own goods? How does that work, when you face too much cost and too much traffic into your call center?
Deen: That really hasn’t been a problem for us. The fact that they have the information themselves, the tracking numbers, all customers can go in and do the tracking and look at it themselves. That has reduced the amount of calls that come into us, because people are able to see that.
The other issue is that with Quantum View, we are able to find out quite often if there is a problem with the outgoing package, and whether it’s been delayed for some reason. We get that information before the customer calls and complains about it. The call center will be proactive in dealing with the customer, and letting him know that we are out there serving his needs. That’s very big, because sometimes in the past, we didn’t know if there was a problem until the customer called, asking "Hey, where’s my package? It should have been here already." Being proactive helps us provide better customer service.
My feeling is that there is a lot of competition out there for what we do. There's a lot of competition for every business out there. Customer service makes the difference whether that customer is going to come back to see you or not, because there’s only so much difference in price that businesses can generally give. When we can do these things to show customer that we care about when they get their product and that we are going to be right there with them all the way through, until they’ve got it and it’s being used by them, that makes them want to come back to us.
Gardner: I want to check in with Jim Rice. Is there anything you heard from Frank Deen that illustrates some of the trends that we talked about, or perhaps some of them we didn’t? It seems that customer service and the trust element is pretty prominent.
Rice: I was biting my tongue here, because I wanted to ask Frank a bunch of questions. I think the example illustrates, in great part, dealing with uncertainty. Because Frank now has pretty good understanding where his materials are, he’s able to make commitments to his customers that will then allow them to be more sure of when they can expect to get their materials. That means they can take out a lot of uncertainty in their planning process.
The question I have -- and maybe it’s for another time -- but when someone has less uncertainty in their supply chain, does it make it possible then to take inventory out of the system, because inventory is basically there as a buffer to deal with uncertainties?
Maybe Frank has chosen to keep his inventory levels the same and ensure higher customer-service levels, or possibly he has reduced inventory based on the ability to have a much higher level of certainty. I think it’s a really good example, and I think it illustrates something that I didn’t mention -- the importance of maintaining high service for your customers to maintain those customers.
Gardner: How about it Frank? Have you been able to whittle down your inventory as a result, and is there some cost savings there for you?
Deen: Jim’s right in the fact that we have a comfort level, so when we need a product for a customer, we can have it directly drop-shipped to that customer and know that it’s going to get there. That means we don’t have to keep a large amount of each kind of item. We keep enough for when someone calls and wants one, two, or three of something, but when they need 20 of it we don’t have to be worried, because we know that we can go right to our supplier and have that drop-shipped and serve that customer’s need. We know it’s going to happen.
Gardner: I have a sneaking suspicion that customer satisfaction is important to John Schaffer, as well. John, tell us about TrueWave and the Wadia products. Then let’s get into how this ability to satisfy customers throughout the transportation phase of a purchase works.
Schaffer: Sure, Dana, you hit the nail on the head there. Customer service is everything to us, as well. One of the great things about the tools that UPS has provided for companies like ours is the ability to offer a higher level of customer service through the visibility that Frank was discussing.
TrueWave manufactures a product under the Wadia brand, basically high-end consumer electronics, and specifically what most people would think of as CD players and high-end stereo equipment. We have the enviable position of a brand that is very well received throughout the world. Our challenge with shipping and satisfying our customers has to do with not just the United States, but satisfying countries overseas, working with distributors throughout Asia and Europe, and North America as well.
Our challenges are a little bit different. What UPS has been able to provide for us has really given us advantages. Previously, we would work with freight forwarders quite often. They are pretty good at handling the customs side of things, but the visibility was very poor, and we would have significant delays in getting packages from point A to point B. What we have enjoyed in our relationship with UPS is the ability to have the packages transported across borders seamlessly, and have visibility throughout the process.
Gardner: So, you’ve been able to enter and then satisfy markets that you probably wouldn’t have been able to get to?
Schaffer: No, we could get to the markets, but we couldn’t do in a way that allowed our customers to have visibility into the process. There’s a lot of uncertainty when you are shipping internationally. When you have visibility into the process from point A to point B, it really changes the dynamic quite a bit. One of the tools that Stephanie was discussing, Quantum View Manage, allows us to see if there are problems along the way. Then we can communicate with our customers in such a way that we can set the proper expectations.
Communication is the secret to customer success, and visibility into all aspects of the supply chain has really changed the way that we’ve operated our business. I think for the better. Our customers are very satisfied with how we are able to offer them now a clear expectation of what they’ll get and when they’ll get it, thanks, in large part, to the tools that UPS has been able to develop and offer to us. As a small company, that’s really valuable.
Gardner: I suppose the whole notion of customer satisfaction also involves exception management, or even returns, if someone decides that it wasn’t exactly the right fit for them. Does this visibility and these tools help you in terms of managing, "I’d like another one right away," or "This one didn’t work out for me." This is working in reverse -- getting stuff from the customer back to you.
Schaffer: Oh, yeah. It does help us when packages have to come in for service, an upgrade, an exchange, or for whatever reason. It allows us to again control the situation and set the proper expectations for our customers.
It’s very helpful for us in planning for things. For example, if we have a product coming in for an update, now we can track the product back to us, have an understanding of when that will hit our dock, prepare the service department, make sure that our inventory of the parts that are needed to updated are available, and just really control the whole process in a better way. It’s really created a great benefit.
Similarly, with incoming components for manufacturing, sometimes we’ll have a supplier send products to us cash-on-delivery (COD). If we have visibility into the shipping process, we can have finance prepare the payment in advance, so that we are efficient in how we manage the process at the dock. That’s been really valuable.
The new Quantum View tools -- Quantum View Notify -- has allowed our customers to have a good understanding of when their product has shipped and how it's proceeding to their destination. Then, the Quantum View Manage has helped us quite bit with giving us visibility into both outgoing and incoming parts and products. It has really benefited us, and we are happy that, to have been able to partner with UPS and take advantage of such powerful tools.
Gardner: Let’s bounce that again off of Jim Rice, the expert. It sounds like when you’re receiving goods and you can plan for payments and schedules and manage your own manufacturing processes, that's another opportunity to reduce risk, improve efficiency, and cut your total cost.
Rice: What we just heard from John is another example of how getting additional visibility into the system gives the company a lot of power. It gives them the power to decide whether to increase the amount of service they are going to provide. They can provide products and materials on a shorter cycle time and possibly take cost out of the system, because there is much less uncertainty. In the pervious example, when Frank Deen was talking about being able to ship direct with the knowledge of where the materials were, this just allows the company to say, "All right, here’s where we need to put our capital."
Now, the confidence that they have, knowing that they are going to have this information that tells them where their products are, is very powerful for the company. It gives the companies lot of tools and lot of power to say, "Here is how we are going to chart our own destiny, and we are going to squeeze some efficiencies out of that. We are going to reduce the uncertainty and the cycle time." This is good news.
As I suggested in the beginning, companies are trying to reduce the uncertainty. They are looking for ways to take cost out of the system, and these are pretty good examples of that. I want to underscore that this is not easy. It’s hard work, and it takes working very closely with customer and supplier and really leveraging whatever systems and processes you have, so that you have a robust solution. It sounds like they’ve been able to create that.
Gardner: Even relatively smaller companies without a whole lot of resources?
Rice: That’s the beauty of some of the technologies. It doesn’t necessarily require a huge fixed-cost. That’s where this big advantage is now, as we see in many companies, outsourcing some of the capabilities, because of the firms who are providing outsourcing services. In this particular case, UPS has made huge investments to develop these very competent and capable systems that, for a piece price, individuals and small- and medium-sized enterprises can take advantage of.
Gardner: Let’s go back to Stephanie Callaway. Stephanie, how do companies get started with this? We heard that it requires a lot of work. How do companies get started to enjoy some of these benefits?
Callaway: On www.ups.com, if anyone is interested in more information on Quantum View, they can search for Quantum View. There's an online demo that describes the various Quantum View products and their benefits to help customers recognize their own business process pain points and identify the solution that will work best for them.
We also have a sales force, so customers who have an account executive can speak with their account executive about their specific business process pain points to be registered for something like Quantum View Manage or Quantum View Data. The things that are more sophisticated, such as the online tools that I mentioned for tracking, are available on our Website, and customers just need to login and register to access those tools.
Gardner: Jim mentioned earlier that we are perhaps just scratching the surface on what’s going to be possible. I’d like to throw this out to the entire group. If you have a wish list, if you like to see some things down the pike a little bit, what would they be? Where can we go next with this? How about one of our users John Schaffer or Frank Deen? What’s on your wish list for the next stage?
Schaffer: I think UPS has done a good job of anticipating the needs. In some cases, they have changed the way that we’ve thought about supply chain visibility and have really done a great job of leading the way there. One of the things that I think would be interesting -- and I know UPS has begun to explore this -- is in fostering relationships.
This goes back to the trust issue, but in fostering better business relationships with offshore manufacturers and suppliers, there’s a financial component that goes along with that, and UPS has set up some programs to address that. But, I think there are some additional programs that could be built to allow the issues that arise from language barriers, etc. to be broken down more. They could have financial control of the situation to go along with the control of the shipping, the movement of parts. I think that’s something that UPS has begun to explore but it’s something that we would like to see more of.
Gardner: How do you react to that Jim? Is that along your lines of what the next stages will be?
Rice: I think that the next stages are going to have lots of different pathways. What we’ve just heard from John is one example. We just don’t know what’s going to be coming, and this is one of the exciting things. We try to predict and expect these things, and we always get surprised. I think it’s through innovation in small- and medium-sized enterprise, because these are organizations that are not rich with resources, but they are very deep in innovative approaches to solutions. This is one good example, and there probably would be plenty of others.
Gardner: Are there any gee-whiz technologies still to come? We’ve heard about GPS and RFID chips. Are we going to take this a step further in terms of what the technology can provide?
Rice: I think that the gee-whiz technology that is often talked about -- and you just made a brief reference to it, Dana -- is RFID technology. In many ways, this has been oversold. It has great power in a limited number of instances and environments. Potentially, this has lots of broader application, but there is an awful lot of standardization development that needs to be done in order to make this more broadly and widely acceptable and usable.
The future is really bright, but it’s a little way off for that. The synchronized supply chain is going to come as a result of organizations working closely together using technologies like radio frequency or cobbling together a variety of different technologies. Whether it’s GPS or more sensors for security applications and containers, to software packages that allow deep analysis of rich data from RFID tags, it’s going to require a lot of hard work to pull these things together, but the potential I think is significant.
So, that’s why a lot of people continue to make investments in those areas. But I do think it’s a ways off, before the capability of those technologies to work network-wide comes to fruition.
Gardner: So, perhaps the future will have more data and more data points for us, and the ability to analyze it, but it’s the relationships and the efficiency and innovation of companies in the field that is where the biggest payoff is, at least the short term.
Rice: There’s going to be a tsunami of data that’s going to be available, and the challenge is going to be how we actually analyze all this and then do something with it. Even if you can’t do something with that data, current systems are not fully capable of responding in ways that you otherwise would like them to respond. But, by using technologies like the visibility systems we’ve been talking about today, as well as designing systems to be more resilient, it will increase the ability of supply chains and company supply chains to be more responsive. Then, when the tsunami of data does come and tells us, "Hey, here’s a forecast. We know it’s going to happen tomorrow," it will allow the company’s system to actually respond in time for tomorrow.
I remember talking with a manufacturer not long ago who sells to Wal-Mart. Their folks said, "Well, we get an 80 percent accurate forecast 10 days out from a shipping due date, but we can’t do anything with that because we need six weeks in advance to be able to respond to that." So, that's going to require some responsive systems in order to be able to utilize all that data.
Gardner: Well, great. I want to thank our panel. This has been an interesting discussion. I’ve certainly learned more about what’s possible and what’s going to be probable.
We have been talking with Jim Rice, director of the Integrated Supply Chain Management Program at MIT. Thanks Jim.
Also Stephanie Callaway, director of customer technology marketing at UPS. And Frank Deen, shipping manager of Rackmount Solutions, as well as John Schaffer, president of TrueWave/Wadia. Thanks again.
This is Dana Gardner, principal analyst at Interarbor Solutions. You have been listening to a sponsored BriefingsDirect podcast.
Listen to the podcast here. Sponsor: UPS.
Transcript of Dana Gardner’s BriefingsDirect podcast on UPS's solutions for supply chain visibility. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Listen to the podcast here. Sponsor: UPS.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to BriefingsDirect. Today, a sponsored podcast discussion about visibility into supply chains and distribution networks. It’s about effective information-sharing across the spectrum of transportation options and during the distribution of goods.
"Do you know where your stuff is?" is the big question and, most importantly, "Do your customers know where their stuff is?"
Helping us to sort through this important area for ecommerce and for small- and medium-sized businesses (SMBs) and their retail operations, we have an expert in the area of supply chain management. We are joined today by Jim Rice, director of the Integrated Supply Chain Management Program at MIT. Thanks for joining us, Jim.
Jim Rice: My pleasure.
Gardner: We also have Stephanie Callaway, director of customer technology marketing at UPS in Atlanta. Hello, Stephanie.
Stephanie Callaway: Hello, Dana.
Gardner: We also have users and practitioners of this emerging art. Frank Deen is the shipping manager at Rackmount Solutions in Garland, Texas. Hello, Frank.
Frank Deen: Hello, Dana.
Gardner: And lastly, joining us from Saline, Michigan is John Schaffer, president of TrueWave, the distributor and creator of the Wadia line of high-end audio products. Thanks for joining us, John.
John Schaffer: Glad to be here, Dana.
Gardner: As I mentioned, this visibility issue is a part of the information revolution and the knowledge economy, whereby at some point either folks who are end-users buying goods or folks in the distribution channel are looking for reductions in cost, efficiency improvements, and reduced time to distribution -- all of which can substantially reduce the total cost of an overall production and distribution activity.
I want to go first to Jim Rice. Jim, help us understand the state of the art here today. What are we talking about in terms of business drivers and technology drivers in this search for higher efficiency and distribution?
Rice: Thanks, Dana. Let me start by talking about the business drivers. If we were to ask companies and leaders what their concern was, they would be talking about a number of things. They'd be talking about continuity -- business continuity. We saw that destructions like Hurricane Katrina and 9/11 caused a lot of companies to start recognizing that their supply chains are genuinely at risk.
A lot of vulnerabilities were always there, but weren’t very apparent or evident. So, there's a fair amount of recognition about this vulnerability. Right now, there is some work going on in that some companies are planning to make their supply chains more resilient and trying to actively manage risks.
Similarly, companies are aware of security as an issue, although many are talking about it, but aren't taking much action. In part, that's because it’s very difficult to show a return on investment from security investments. The trick question is, "What happens when supply chain security investment is successful?" Of course, the answer is "nothing," because it prevents something from happening.
The companies are concerned with optimal supply chain design, and this takes in the aspect of outsourcing. How much outsourcing do we use? How much of that do we even think of putting offshore, trying to reduce cycle time, cost, and uncertainty in the system? That will ultimately enable them to be much more responsive to spikes and drops in demand.
Companies continue to squeeze their supply chain to lean it out, and make it more efficient and more effective. There are a lot of drivers in the industry right now that affect the price of sundry industries differently.
Gardner: We want to have this clarity in the best of times and also in the worst of times. Is this essentially a data integration and availability exercise? What are the core issues to enable folks to get the information they need about supply-chain activities?
Rice: It’s not just about data, but certainly data is a central and a critical issue.
A lot of it comes down to having relationships with customers and suppliers. They would be open and free to share the information that ultimately will help both organizations to make better decisions, reduce uncertainty in the system, and take out some of the cost and uncertainty. That makes the system potentially much more efficient.
Gardner: I suppose this has to do with levels of trust. There are interdependencies -- "You help me, and I help you" -- in terms of making the customer at the end of the process happy. How has that gone? Has there been trust? Have people recognized a quid pro quo and have they been willing to share?
Rice: Yes. I go back to that quote by Ronald Reagan: “Trust, but verify.” There’s certainly some inherent trust that exists between individual parties, and there maybe some trust that exists over the long term between organizations, but ultimately the trust is backed up by systems or processes that enable regular engagement coordination. They are backed up by contractual agreements, or at least agreements in principle, whereby one party is going to make the other party whole in the event of some disruption or some eventuality that they hadn’t planned for.
Gardner: Before we go to UPS to learn about some of the things they are doing, what should we expect in the future? Is this a mature and fully baked technology and business approach, or are there more efficiency, visibility, and innovation to come?
Rice: I think we are just on the cusp of lots of great potential. I can’t tell you whether the potential will be realized tomorrow, next year, or in five years, but I think we are getting really close. Probably as far back as 10 or 15 years ago, you had some pundits who were saying, "Oh, in the future our systems will be fully integrated and completely synchronized." It hasn’t happened yet to a large extent. There are isolated instances. Some individual companies have demonstrated the capability of being synchronized, organized, and coordinated.
Some of these capabilities are becoming more readily available for large companies, and hopefully in the near term, to small- and medium-sized enterprises. The challenges aren't simple, but I think there are some tools and processes emerging that are going to make this much more possible in the future, and therefore get us a little closer to that Nirvana of the synchronized supply chain.
Gardner: Thanks. Let’s go to Stephanie Callaway at UPS. Stephanie, you’ve heard about the need and desire for looking for data and visibility in the best of times and the worst of times. UPS sits in a very advantageous position between all these players. Tell us a little bit about what’s been going on for the last several years to try to improve on this activity?
Callaway: Okay, Dana, thanks for having me. UPS started with tracking on the Web in the early '90s and since then we have evolved our portfolio to include a broad set of visibility solutions that address the very diverse needs of our customers.
Today, we support tracking in 63 countries, and that serves the basic visibility needs of our shippers, receivers, importers, and exporters -- both residential and commercial. Our emphasis today is on more than our traditional U.S. small package business. That's available outside of the U.S., but we also provide visibility through tracking to our UPS Freight, Air, and Ocean Freight Services.
Gardner: Jim mentioned about this trust issue for verification? Have you been playing a larger role in trying to broker these relationships or get people to shake hands and agree on visibility?
Callaway: From the perspective of our relationship with our customers, we provide full visibility of shipment status from the time they tender their package to us to the time it is delivered to their customer. We have other visibility solutions, such as Quantum View, that provide proactive information, even when the package encounters trouble along the way. Whether it’s a weather delay or an incorrect address, we can provide that information proactively to our customers, so that they can provide that information to their customers and improve customer satisfaction.
Gardner: So, you are the picks and shovels, and your customers are out there mining these relationships. Tell us a little bit about small- to medium-sized businesses in particular. Is this a high-growth area for your goods and services? Where in the whole business spectrum are these things being used the most? Then, secondarily, where do you think the larger uptake is in the future?
Callaway: Customers of all sizes take advantage of our visibility portfolio. I mentioned tracking on the Web. Even with tracking, some of our customers prefer to integrate that information into their own Web sites. We have XML tools that customers of any size who have an IT organization can take advantage of to integrate information about package status into their Web sites.
We also have this suite of Quantum View solutions that can be used by customers of all sizes. Typically, smaller customers who don’t have large information technology (IT) functions or large IT budgets would take advantage of our ready-to-go solutions, like Quantum View Notify, which is an email notification. Customers can select that at the time of shipping, and proactively notify their own customers about important shipping events, such as exceptions and deliveries. That helps them save time and increase customer satisfaction by reducing the number of calls that they receive.
We also have Quantum View Manage, which is a visibility dashboard that customers of all sizes can use to see where their packages are in transit. That would be any packages they are shipping out, any that are coming into them, or any that they’ve paid for, along with some special capabilities to help importers with compliance.
Gardner: Without going too far into the weeds on application development and integration, Web services and APIs, and that sort of thing, it sounds like you’ve got a spectrum of approaches for those who aren't interested in getting into too much of the technology, perhaps using the email alerts approach. I imagine you also will allow for those who do have application developers at their disposal to bring in the visibility benefits, and mash-up your tracking, information, and data services right into their portals for self-help and for customers to track what’s going on with their retail purchases. Is that right?
Callaway: Exactly. As I was saying earlier, we believe we have to address a broad set of diverse customer needs. I mentioned the online tools for tracking, but we also have Quantum View Data, which lets data about package status information flow proactively from UPS to customers. They can integrate that however they see fit into their own internal applications, whether it’s for their own use within their customer-service department, or whether they want to proactively share that with their customers.
Gardner: I suppose as a customer or a partner, you’re elevating yourselves to an information-sharing value, not just the logistical and transportation value?
Callaway: That’s true, and our customers expect that of us.
Gardner: Okay, let’s talk to some customers. Let’s go to Frank Deen at Rackmount Solutions. First, Frank, tell us a little bit about Rackmount, the history of the company and what you do.
Deen: Dana, we started out about five years ago as strictly an Internet company. We sell racks for IT solutions, file servers, and different types of peripheral equipment that goes into IT rooms. We ship those all around the country. Our business has grown to the point where we have a warehouse here and stock quite a number of the items ourselves, but because of the magnitude of the type of things we sell, we ship from probably a dozen locations around the country, depending upon what the item is.
If the quantity someone is purchasing makes it impossible for us to ship it from here, we have to have it drop shipped. That, in itself, has been a challenge, because our shipments are going from so many different locations. We are usually selling to people who come in over the Internet or call us direct, so everything we have does get shipped out. Being able to track and know where our packages are is very, very important to us.
Gardner: So, you have been managing fast growth. People have been building out data centers and modernizing their infrastructure for their IT departments. You’ve also been dealing with complexity in terms of the number of points that you are distributing from and the number of points that you are trying to get your things to. Specifically, what sorts of visibility services have you been using to manage this high growth and complexity?
Deen: Initially, when we started doing this, because we were shipping from so many locations, even though it was being shipped on our account, we would have to contact each one of those shipping points, each warehouse, each manufacturer to get tracking numbers to send to our customers. Of course, now we are able to have that information sent directly to the customer when the product ships. They get an email with that information.
Plus, on Quantum View, we are able to pull up a report every day that shows everything that has been shipped out on our account, whether from our local warehouse or any of those other locations. We're able to have that tracking number and see the exact progress of that package -- when it was picked up, where it’s at currently, when it’s expected to be delivered, and the address that it’s expected to be delivered to. When a customer calls and asks a question about it, we are able to go to that and immediately give them an answer that provides a comfort level that we are keeping track of their merchandise that they are waiting to get.
Gardner: So, using some of the UPS services, you're giving your call-center folks visibility. When they've got hopping-mad customers saying, "Where are my goods? I've got to build out this data center. I need these racks," you’ve given visibility to your call center, but do you take it to the next step? Do you have a Web site where these people can track their own goods? How does that work, when you face too much cost and too much traffic into your call center?
Deen: That really hasn’t been a problem for us. The fact that they have the information themselves, the tracking numbers, all customers can go in and do the tracking and look at it themselves. That has reduced the amount of calls that come into us, because people are able to see that.
The other issue is that with Quantum View, we are able to find out quite often if there is a problem with the outgoing package, and whether it’s been delayed for some reason. We get that information before the customer calls and complains about it. The call center will be proactive in dealing with the customer, and letting him know that we are out there serving his needs. That’s very big, because sometimes in the past, we didn’t know if there was a problem until the customer called, asking "Hey, where’s my package? It should have been here already." Being proactive helps us provide better customer service.
My feeling is that there is a lot of competition out there for what we do. There's a lot of competition for every business out there. Customer service makes the difference whether that customer is going to come back to see you or not, because there’s only so much difference in price that businesses can generally give. When we can do these things to show customer that we care about when they get their product and that we are going to be right there with them all the way through, until they’ve got it and it’s being used by them, that makes them want to come back to us.
Gardner: I want to check in with Jim Rice. Is there anything you heard from Frank Deen that illustrates some of the trends that we talked about, or perhaps some of them we didn’t? It seems that customer service and the trust element is pretty prominent.
Rice: I was biting my tongue here, because I wanted to ask Frank a bunch of questions. I think the example illustrates, in great part, dealing with uncertainty. Because Frank now has pretty good understanding where his materials are, he’s able to make commitments to his customers that will then allow them to be more sure of when they can expect to get their materials. That means they can take out a lot of uncertainty in their planning process.
The question I have -- and maybe it’s for another time -- but when someone has less uncertainty in their supply chain, does it make it possible then to take inventory out of the system, because inventory is basically there as a buffer to deal with uncertainties?
Maybe Frank has chosen to keep his inventory levels the same and ensure higher customer-service levels, or possibly he has reduced inventory based on the ability to have a much higher level of certainty. I think it’s a really good example, and I think it illustrates something that I didn’t mention -- the importance of maintaining high service for your customers to maintain those customers.
Gardner: How about it Frank? Have you been able to whittle down your inventory as a result, and is there some cost savings there for you?
Deen: Jim’s right in the fact that we have a comfort level, so when we need a product for a customer, we can have it directly drop-shipped to that customer and know that it’s going to get there. That means we don’t have to keep a large amount of each kind of item. We keep enough for when someone calls and wants one, two, or three of something, but when they need 20 of it we don’t have to be worried, because we know that we can go right to our supplier and have that drop-shipped and serve that customer’s need. We know it’s going to happen.
Gardner: I have a sneaking suspicion that customer satisfaction is important to John Schaffer, as well. John, tell us about TrueWave and the Wadia products. Then let’s get into how this ability to satisfy customers throughout the transportation phase of a purchase works.
Schaffer: Sure, Dana, you hit the nail on the head there. Customer service is everything to us, as well. One of the great things about the tools that UPS has provided for companies like ours is the ability to offer a higher level of customer service through the visibility that Frank was discussing.
TrueWave manufactures a product under the Wadia brand, basically high-end consumer electronics, and specifically what most people would think of as CD players and high-end stereo equipment. We have the enviable position of a brand that is very well received throughout the world. Our challenge with shipping and satisfying our customers has to do with not just the United States, but satisfying countries overseas, working with distributors throughout Asia and Europe, and North America as well.
Our challenges are a little bit different. What UPS has been able to provide for us has really given us advantages. Previously, we would work with freight forwarders quite often. They are pretty good at handling the customs side of things, but the visibility was very poor, and we would have significant delays in getting packages from point A to point B. What we have enjoyed in our relationship with UPS is the ability to have the packages transported across borders seamlessly, and have visibility throughout the process.
Gardner: So, you’ve been able to enter and then satisfy markets that you probably wouldn’t have been able to get to?
Schaffer: No, we could get to the markets, but we couldn’t do in a way that allowed our customers to have visibility into the process. There’s a lot of uncertainty when you are shipping internationally. When you have visibility into the process from point A to point B, it really changes the dynamic quite a bit. One of the tools that Stephanie was discussing, Quantum View Manage, allows us to see if there are problems along the way. Then we can communicate with our customers in such a way that we can set the proper expectations.
Communication is the secret to customer success, and visibility into all aspects of the supply chain has really changed the way that we’ve operated our business. I think for the better. Our customers are very satisfied with how we are able to offer them now a clear expectation of what they’ll get and when they’ll get it, thanks, in large part, to the tools that UPS has been able to develop and offer to us. As a small company, that’s really valuable.
Gardner: I suppose the whole notion of customer satisfaction also involves exception management, or even returns, if someone decides that it wasn’t exactly the right fit for them. Does this visibility and these tools help you in terms of managing, "I’d like another one right away," or "This one didn’t work out for me." This is working in reverse -- getting stuff from the customer back to you.
Schaffer: Oh, yeah. It does help us when packages have to come in for service, an upgrade, an exchange, or for whatever reason. It allows us to again control the situation and set the proper expectations for our customers.
It’s very helpful for us in planning for things. For example, if we have a product coming in for an update, now we can track the product back to us, have an understanding of when that will hit our dock, prepare the service department, make sure that our inventory of the parts that are needed to updated are available, and just really control the whole process in a better way. It’s really created a great benefit.
Similarly, with incoming components for manufacturing, sometimes we’ll have a supplier send products to us cash-on-delivery (COD). If we have visibility into the shipping process, we can have finance prepare the payment in advance, so that we are efficient in how we manage the process at the dock. That’s been really valuable.
The new Quantum View tools -- Quantum View Notify -- has allowed our customers to have a good understanding of when their product has shipped and how it's proceeding to their destination. Then, the Quantum View Manage has helped us quite bit with giving us visibility into both outgoing and incoming parts and products. It has really benefited us, and we are happy that, to have been able to partner with UPS and take advantage of such powerful tools.
Gardner: Let’s bounce that again off of Jim Rice, the expert. It sounds like when you’re receiving goods and you can plan for payments and schedules and manage your own manufacturing processes, that's another opportunity to reduce risk, improve efficiency, and cut your total cost.
Rice: What we just heard from John is another example of how getting additional visibility into the system gives the company a lot of power. It gives them the power to decide whether to increase the amount of service they are going to provide. They can provide products and materials on a shorter cycle time and possibly take cost out of the system, because there is much less uncertainty. In the pervious example, when Frank Deen was talking about being able to ship direct with the knowledge of where the materials were, this just allows the company to say, "All right, here’s where we need to put our capital."
Now, the confidence that they have, knowing that they are going to have this information that tells them where their products are, is very powerful for the company. It gives the companies lot of tools and lot of power to say, "Here is how we are going to chart our own destiny, and we are going to squeeze some efficiencies out of that. We are going to reduce the uncertainty and the cycle time." This is good news.
As I suggested in the beginning, companies are trying to reduce the uncertainty. They are looking for ways to take cost out of the system, and these are pretty good examples of that. I want to underscore that this is not easy. It’s hard work, and it takes working very closely with customer and supplier and really leveraging whatever systems and processes you have, so that you have a robust solution. It sounds like they’ve been able to create that.
Gardner: Even relatively smaller companies without a whole lot of resources?
Rice: That’s the beauty of some of the technologies. It doesn’t necessarily require a huge fixed-cost. That’s where this big advantage is now, as we see in many companies, outsourcing some of the capabilities, because of the firms who are providing outsourcing services. In this particular case, UPS has made huge investments to develop these very competent and capable systems that, for a piece price, individuals and small- and medium-sized enterprises can take advantage of.
Gardner: Let’s go back to Stephanie Callaway. Stephanie, how do companies get started with this? We heard that it requires a lot of work. How do companies get started to enjoy some of these benefits?
Callaway: On www.ups.com, if anyone is interested in more information on Quantum View, they can search for Quantum View. There's an online demo that describes the various Quantum View products and their benefits to help customers recognize their own business process pain points and identify the solution that will work best for them.
We also have a sales force, so customers who have an account executive can speak with their account executive about their specific business process pain points to be registered for something like Quantum View Manage or Quantum View Data. The things that are more sophisticated, such as the online tools that I mentioned for tracking, are available on our Website, and customers just need to login and register to access those tools.
Gardner: Jim mentioned earlier that we are perhaps just scratching the surface on what’s going to be possible. I’d like to throw this out to the entire group. If you have a wish list, if you like to see some things down the pike a little bit, what would they be? Where can we go next with this? How about one of our users John Schaffer or Frank Deen? What’s on your wish list for the next stage?
Schaffer: I think UPS has done a good job of anticipating the needs. In some cases, they have changed the way that we’ve thought about supply chain visibility and have really done a great job of leading the way there. One of the things that I think would be interesting -- and I know UPS has begun to explore this -- is in fostering relationships.
This goes back to the trust issue, but in fostering better business relationships with offshore manufacturers and suppliers, there’s a financial component that goes along with that, and UPS has set up some programs to address that. But, I think there are some additional programs that could be built to allow the issues that arise from language barriers, etc. to be broken down more. They could have financial control of the situation to go along with the control of the shipping, the movement of parts. I think that’s something that UPS has begun to explore but it’s something that we would like to see more of.
Gardner: How do you react to that Jim? Is that along your lines of what the next stages will be?
Rice: I think that the next stages are going to have lots of different pathways. What we’ve just heard from John is one example. We just don’t know what’s going to be coming, and this is one of the exciting things. We try to predict and expect these things, and we always get surprised. I think it’s through innovation in small- and medium-sized enterprise, because these are organizations that are not rich with resources, but they are very deep in innovative approaches to solutions. This is one good example, and there probably would be plenty of others.
Gardner: Are there any gee-whiz technologies still to come? We’ve heard about GPS and RFID chips. Are we going to take this a step further in terms of what the technology can provide?
Rice: I think that the gee-whiz technology that is often talked about -- and you just made a brief reference to it, Dana -- is RFID technology. In many ways, this has been oversold. It has great power in a limited number of instances and environments. Potentially, this has lots of broader application, but there is an awful lot of standardization development that needs to be done in order to make this more broadly and widely acceptable and usable.
The future is really bright, but it’s a little way off for that. The synchronized supply chain is going to come as a result of organizations working closely together using technologies like radio frequency or cobbling together a variety of different technologies. Whether it’s GPS or more sensors for security applications and containers, to software packages that allow deep analysis of rich data from RFID tags, it’s going to require a lot of hard work to pull these things together, but the potential I think is significant.
So, that’s why a lot of people continue to make investments in those areas. But I do think it’s a ways off, before the capability of those technologies to work network-wide comes to fruition.
Gardner: So, perhaps the future will have more data and more data points for us, and the ability to analyze it, but it’s the relationships and the efficiency and innovation of companies in the field that is where the biggest payoff is, at least the short term.
Rice: There’s going to be a tsunami of data that’s going to be available, and the challenge is going to be how we actually analyze all this and then do something with it. Even if you can’t do something with that data, current systems are not fully capable of responding in ways that you otherwise would like them to respond. But, by using technologies like the visibility systems we’ve been talking about today, as well as designing systems to be more resilient, it will increase the ability of supply chains and company supply chains to be more responsive. Then, when the tsunami of data does come and tells us, "Hey, here’s a forecast. We know it’s going to happen tomorrow," it will allow the company’s system to actually respond in time for tomorrow.
I remember talking with a manufacturer not long ago who sells to Wal-Mart. Their folks said, "Well, we get an 80 percent accurate forecast 10 days out from a shipping due date, but we can’t do anything with that because we need six weeks in advance to be able to respond to that." So, that's going to require some responsive systems in order to be able to utilize all that data.
Gardner: Well, great. I want to thank our panel. This has been an interesting discussion. I’ve certainly learned more about what’s possible and what’s going to be probable.
We have been talking with Jim Rice, director of the Integrated Supply Chain Management Program at MIT. Thanks Jim.
Also Stephanie Callaway, director of customer technology marketing at UPS. And Frank Deen, shipping manager of Rackmount Solutions, as well as John Schaffer, president of TrueWave/Wadia. Thanks again.
This is Dana Gardner, principal analyst at Interarbor Solutions. You have been listening to a sponsored BriefingsDirect podcast.
Listen to the podcast here. Sponsor: UPS.
Transcript of Dana Gardner’s BriefingsDirect podcast on UPS's solutions for supply chain visibility. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
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