The introduction of guaranteed ground service by UPS and RPS has caused many shippers to take a closer look at parcel carrier transit times. The growing emphasis on inventory reduction, along with more reliance on just-in-time management practices, has precipitated the need to analyze the use of higher-cost expedited transportation services versus standard ground. It�s clear companies want their products to arrive at their customers location as soon as possible, but the transit time/cost trade-off has become a little more cloudy with the advent of guaranteed ground service for commercial parcels.
 
In order for logistics management to make an educated decision in this matter, they must rely on the carrier�s published ground transit time standards. However, how reliable are these standards? Let�s take a look.
 
Scheduled vs. Standard Transit Times
It is critical for the logistician to understand the difference between standard and scheduled service. Standard service is what the carriers publish and what they are guaranteeing. Scheduled service is the real world. If you thought these two were the same, as is the common perception, you are in for a surprise.
A carrier�s scheduled service is a function of their distribution network. Three key areas in a distribution network determine scheduled service.
 
1.         The number of hubs and their geographic locations
2.         Hub sort times
3.         Linehaul runs
 
These three areas produce a very reliable schedule when tied together in an engineered and analytical method.
 
Number of Hubs and Geographic Locations
The use of a hub and spoke (commonly referred to as �hub and satellite�) network enables parcel carriers to minimize expenses and charge relatively low rates for their services. Without such a network and the inherent economies of scale, carriers would be forced to transport parcels directly from origin to destination without the benefits of parcel consolidation. Therefore, the number of hubs and where they are located dictates the transit times a carrier can offer its customers.
 
Each hub will have satellites (pick up and delivery facilities) assigned to its geographic area. This is often referred to as a �hub area.� For example, a hub area in northern California would have a hub in the Bay area and satellites from Stockton to Redding.
 
Hub Sort Times
A hub network is an interdependent system. What occurs at one hub will impact another hub close by or even across the country. Parcel carriers, unlike their LTL counterparts, operate their hubs in a series of four-hour �sort windows� throughout the day. These four-hour sort windows can be back-to-back or can be separated by an hour or so. Each hub has an AM and a PM operation. The AM operation sorts parcels originating the previous day from the hub�s satellites and consolidates them into trailers destined for other hub areas. The PM operation sorts parcels received from other hub areas and consolidates them into trailers destined for its own hub area satellites. The timing of these sorts must be engineered to meet the desired level of service.
 
Linehaul Runs
Linehaul is a term for the �over-the-road� movement of tractors and trailers one sees on interstate highways. Linehaul runs (or schedules) are engineered to arrive at hubs within the designated sort windows. The arrivals must be spread out throughout the first three hours of the sort window to allow for unloading, sorting and loading. All of the arrivals cannot occur during the last hour since the hub can only process so many parcels per hour.
 
Linehaul arrivals can be accurately planned based on distance traveled, intermediate stops and Department of Transportation rules.
 
Having explained how the network functions, let�s illustrate a three day scheduled service lane between Abilene, TX and Palm Springs, CA (Figure 1, page 35).
Parcels are picked up in Abilene and consolidated into a trailer at a satellite facility destined for a hub in Dallas. The trailer is dispatched and arrives at the Dallas hub prior to the sort. Once the hub sort begins, the Abilene parcels are sorted and consolidated into a trailer destined for a hub in Los Angeles. The trailer to Los Angeles is dispatched and sent over the road (not via rail) to the Los Angeles hub. The trailer arrives prior to the next day PM sort in Los Angeles. The parcels in the trailer are sorted and all parcels destined for Palm Springs are consolidated into another trailer. The Palm Springs trailer is dispatched after the sort and arrives at a satellite facility in Palm Springs for delivery the next day.
 
UPS vs. RPS Published Transit Times
Many times, people equate the UPS and RPS published transit times to be the same. This is not the case. Figures 2 through 11 show the published transit times for UPS and RPS from Atlanta, GA, Chicago, IL, Dallas, TX, Los Angeles, CA and York, PA. Figure 12 shows a synopsis of the notable differences in times. Why is there such a disparity? The first reason is because UPS has a much larger distribution network. UPS has over 100 hubs while RPS has approximately 25. The second reason is due to how much of a �buffer� UPS and RPS build into their published standards.
 
All of the maps in figures two through 11 show cities where UPS and RPS have hubs. If one were to analyze cities where UPS has a hub and RPS does not, the differences in transit times would be more pronounced, especially for overnight service.
 
Remember, this address published service and not the scheduled service. One can see that UPS has better published service in more areas than RPS. However, if the comparison were done on scheduled service, the difference would not be as great.
 
It is interesting to revisit our scheduled transit time example discussed earlier (Figure 1). Transit time from Abilene to Palm Springs is published as four days for both UPS and RPS. However, the scheduled transit time is three days (provided the trailers are not moved via rail and UPS tends to use more rail than RPS). So here is a good example of a service lane with some extra �buffer� added to it. This example may remind one of how the airlines schedule their on time measurement by adding a buffer of 15 to 30 minutes to the wheels-up to wheels-down time.
 
Now envision the confusion companies experience when their carrier�s published transit times are plugged into their sophisticated supply chain planning software. Is there any wonder why planned versus actual inventory still has some variance? Why do the carriers have this �buffer?� The answer: to report better on-time service performance and avoid guaranteed service refunds (remember that parcels delivered early are considered �on time�).
 
Guaranteed Service
The ground service guarantee has caused carriers to be less aggressive when setting transit time standards. The trend so far has been to be more lenient with the scheduled service being much better than the published service. Carriers do not like refunding money for parcels which are delivered late. And why should they? So their solution is to build a �cushion� into their published standards.
 
 Although it is still too early to tell, carriers assumed that the same percentage of shippers would pursue the ground guarantee as for the expedited service guarantee � typically less than 1% of late parcels. However, the ground service guarantee refunds have exceeded that level. Shippers are more apt to pursue ground service refunds since on-time ground service is typically anywhere from 1% to 4% lower than expedited service. Naturally, shipping managers are hearing more about ground service failures and are more likely to request a refund.
 
One must always perform an apples-to-apples comparison of transit times � particularly when considering changing carriers. Your customers might be accustomed to two-day service and then receive three-day service from a new carrier with no advance notice. Take the time to compare service standards when evaluating your carrier options. You may be able to save a percentage point or two in your rates but end up disappointing your customers with less timely delivery performance.
 
Lastly, now that you know carriers use both published and scheduled standards, you can better understand why there are fluctuations in actual transit days for your parcel but parcels do not show as arriving late. A movement toward time definite ground service offerings would be a step in the right direction to correct this problem. But only time will tell if the ground carriers are willing to accept that operational challenge!
 
Joe Sudar is executive vice president of SmartTran, Inc. and an expert in parcel logistics and network operations. SmartTran is a transportation consulting company offering services in carrier rate analysis, logistics planning and technology integration. SmartTran�s management team has over 40 years of experience in transportation planning. Joe can be reached by phone at 724-378-6471 or e-mail at sudar@smarttran.com.