Anticipation, Contingency: Guidelines from Parcel Carriers

March 1, 2003
The numbers are impressive, mostly because the numbers are you. Small parcel shipments are on a steady incline. United Parcel Service, in business now

The numbers are impressive, mostly because the numbers are you. Small parcel shipments are on a steady incline. United Parcel Service, in business now for more than 90 years, delivers 11 million packages every day; 325 million between Thanksgiving and Christmas. The U.S. Postal Service, on a peak day, delivers more than seven million packages. FedEx, on a peak day during the holiday season delivers 6.5 million packages.

And many of these packages are streaming from your distribution centers. If the package does not get to your customer, the carrier doesn’t get the blame, you do. Just because it’s out the door does not mean you can forget about it. Knowing how your carrier handles the package is important. It’s so important that many packaging consultants say the first thing a packaging engineer should do in designing a new package is know the environment the package will move through.

What the September 11, 2001, terrorist attacks taught material handling managers in the small parcel business is that the defining characteristic of Just-In-Time (JIT) -- shrinking the time period between order and delivery -- may in fact have to be reconsidered. When cross-border transportation slowed or stopped in mid-September, reactions varied, but one thing was certain: a better way to maintain the flow of goods had to be found.

Consumer packaging managers are not strangers to terrorist attacks. In 1982 the Johnson & Johnson Company established the precedent for handling terrorists when its Tylenol product was laced with cyanide and seven people died. Since then, billions of dollars have been spent on tamper-proof packaging for consumers.

While some companies wondered what to do next after September 11, contingency reactions ranged from switching to domestic suppliers to temporary stockpiling, says Paul Evanko, vice president, St. Onge Company, a global consulting and engineering firm, specializing in logistics strategies. Ironically, the model for what to do (or what should have been done) was already available, says Evanko.

“Israel serves as a model for the problems of terrorism,” he says. “Israeli importers experience an additional day in lead time due to elaborate security procedures in place.” Its security procedures have been honed over many years of experience.

Evanko adds that in the short term, some companies may have to increase critical inventories, but most will adjust to a single-day increase in lead time.

While the U.S. government has been swift to respond to the question of airport security, providing some $2 billion for high-tech explosive-detection baggage scanners and particle blasters that knock particles off clothing, allowing them to be analyzed for explosives or biological substances, such has not been the case for small parcel handlers.

The irony is that much of the federally funded technology going into operation at our nation’s airports could easily be adapted to parcel handing, say Evanko.

Today, for many of the large players in the small parcel business, it’s a kind of wait-and-see game. Companies are waiting on the final decisions of the Federal Aviation Administration (FAA) before investing in more inspection equipment, says David Ruckriegel, an accounts manager with FKI Logistex. He works with all the major small parcel carriers except FedEx.

“UPS, for example,” says Ruckriegel, “already has heavy security in place inside the building at its half-dozen entry points for parcels coming from overseas. Since September 11, it has really tightened security outside the building, on the ramps and jetways.”

A point Ruckriegel and others make is that the general economy was already deteriorating prior to September 11, so measuring the impact of the terrorist attack is difficult, and has even become a convenient excuse for some people. He adds that in the past, it was not uncommon for his company to be bidding on 30 or 40 material handling projects every year, spread among all the parcel carriers. For 2001, that number was cut by about half, indicating to Ruckriegel and others a general downturn in the economy.

Ruckriegel says one reason carriers are playing a waiting game is because investing in X-ray machines or similar equipment is a costly venture with little opportunity to yield profits.

“Carriers want to know what the FAA will mandate for inside the building,” says Ruckriegel, “because the investment will be sizable, and they want to make the right decision.”

Contingency or prevention?

While there seems to be no sense of urgency among parcel carriers, there are probably contingency plans in the works they are unwilling (and rightly so) to share with the public. The importance of contingency planning has been emphasized, especially among companies dealing with time-sensitive products or manufacturing schedules.

“It makes sense,” says supply chain management expert Bill Villalon, “that importers and retailers of apparel, auto parts and other time-sensitive shipments need to be more focused than ever on ensuring time-definite delivery in today’s volatile, indefinite world.”

Villalon, president of the Americas region of APL Logistics, adds that contingency plans should include the ability to rapidly shift sourcing locations, routes or modes of transportation. He notes that making these kinds of shifts adds more complexity to the supply chain.

Maintaining secure supply chains in global businesses such as small parcel handling is a formidable task. Working with supply chain partners in collective and common actions such as detection and prevention is a beginning.

Evanko says prevention consists of erecting barriers to would-be terrorists such as certification of supply chain processes or process compliance.

“Documentation of processes and procedures,” explains Evanko, “coupled with rigid training leading to certification, will become essential to assure customers of supply chain integrity.”

He adds that we’ll have to incorporate effective oversight and build in triggers that alert management and security when specific people have not met compliance standards.

Theft of a company’s brand is as disturbing and dishonest as theft of an actual parcel. Devaluation of a brand erodes consumer confidence -- to say nothing of a company’s profits.

Recently, several news organizations reported that trademark pirates based in Pakistan have been filling orders from Afghanistan to produce T-shirts bearing counterfeit Nike logos. Lucrative counterfeit markets such as music, software, even baby formula, have been traced back to terrorist organizations throughout the world.

Westvaco Brand Security ( has a process that uses a diverse portfolio of partners in various technologies to help clients find secure designs, security inks, holograms and security substrates, along with secure tracking and tracing applications.

Although it sounds like science fiction or a story from a spy novel, Westvaco works with things like reactive invisible inks or friction-activated inks to covertly mark products and cartons. Special fibers coated with these materials can be incorporated into carton board or substrates as well as package labels.

When it comes to tracking and tracing containers, a serialized invisible (or visible) bar code marked by special technology can be detected, authenticated and read simultaneously. Data collected is encrypted and transferred via cell phone or the Internet to a central database enabling instant verification. This database can be located at a secure facility or on a secure Web site.

Heightened Security

Lambda Technologies, a microwave systems manufacturer that developed variable frequency microwave (VFM) technology to rapidly cure polymeric adhesives and encapsulants in electronics assemblies, has now adapted its patented technology to help “cure” the threat of anthrax contamination in the mail system. Testing has shown the VFM technology’s ability to effectively neutralize pathogens such as anthrax spores contained within mail packages.

In preliminary tests conducted by the company along with researchers at the University of North Carolina Pathology Department, the company’s system proved effective in killing test spores inside envelopes within minutes of exposure to the microwaves generated by the system.

“Our VFM technology has the potential to quickly and safely neutralize pathogens in mail, without the complications and safety issues inherent with other technologies,” explains Dick Garard, CEO. “Initial testing confirms that our technology can be readily adapted to process large volumes of mail efficiently. Our next step is to initiate a more comprehensive test program with a government test laboratory for further evaluation and certification.”

Unlike conventional fixed-frequency microwave ovens for home and commercial use, Lambda Technologies’ VFM technology uses a sophisticated electronic amplifier to sweep the center frequency to the optimum frequency for coupling to the bacteria/spore. VFM controls the microwave frequency around that central frequency thousands of times per second. This produces a uniform heat that can be precisely controlled to avoid damage to the object being heated, and enables VFM systems to safely handle metal parts (such as staples and paper clips) without arcing and sparking. A more detailed description of VFM technology can be found at

Changing times

Will the entire face of small parcel handling change? Probably not. Many of the suggestions for making the supply chain more secure are already in play, or make good business sense, so they should be in play. For example, straight runs of trucks from the original pickup location to final destination make sense, but are hard to do when sortation is required. It’s happening with suppliers to industries such as automotive. For the UPS and FedEx companies of the world -- it’ll never happen.

However, secure truck stops, aerial surveillance and increased use of ground positioning systems (GPS) are distinct possibilities. We are also likely to see an increased use of tamper-evident tape or other carton sealing systems in the future.

In a down economy or when critical supply lines can’t be disrupted, companies need to know their supply chain won't be interrupted by the failure of a key supplier. But how can you predict where the weak link in the chain might be? In December, Open Ratings released its Supplier Stability Indicator, a predictive tool that "turns on" when suppliers reach a threshold of potential insolvency. SSI is based on Open Ratings Buyer Insight tools and computer-learning technology that evaluates opinion data, transaction data, and third-party financial data information from Dun & Bradstreet. Fed into rule-based software, the model predicts when a supplier becomes one of the riskiest five percent of businesses, in financial terms, over the following 15 to 90 days. The company claims its repository of information covers 15 million suppliers in North America. The company says predictive supplier management can aid in selecting suppliers, as well as monitoring their performance.

Managers in the small parcel shipping business can learn their lessons from consumer packaging managers and from what counterparts in the rest of the world have lived with for many years. What will be interesting is whether a mad rush for security, and its associated costs, will be possible given the current state of the economy.

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