Oct. 2 2006 03:21 PM

The glamour of the Academy Awards... and JCPenney? On the surface it seemed an odd couple; but have you visited JCPenney's online store recently? It's glamorous; its Hollywood; its showtime. And its sure to drive more new online business.


Gaining a customer is hard enough in our competitive, worldwide economy. You can wow them with glitz, make them an offer they cant refuse; but can you keep them as a customer? That task falls, in part, to Martin Bernstein, and he takes his job very seriously. His mission, and he has chosen to accept it, is to assure online and catalog shoppers get what they ordered on time.


Bernstein was made for the role. With dual majors in business management and transportation from Northeastern in Boston and a dedicated 27-year career with JCPenney, he is quite capable of executing JCPenneys transportation plan. As Director of Carrier Relations/Postal Affairs, he develops and executes a mix of truckload, LTL, international and package shipments as well as JCPenneys direct marketing mail initiatives.


While keeping the lid on secrets in Hollywood is virtually impossible, keeping the lid on the number of shipments Bernstein and his logistics group handle is a pretty sure bet. Its in the tens of millions, is the closest I could get to having him reveal a highly competitive secret. Direct to consumer [online and catalog shopping] is almost a $3 billion business for JCPenney, is all he was willing to add. And while JCPenney has convenient pickup locations across the country, the shift in · consumers habits to home or office delivery is becoming entrenched. And that is where our story starts.


As more and more consumers are venturing online to shop and others remain comfortable with their touch-and-feel catalogs, the number of catalog/Internet parcels destined to residential neighborhoods continues to escalate. But with this new brand of customer comes a new brand of loyalty you have to keep your promises to keep your customers. And for Bernstein that means making sure we are moving our goods through the supply chain within our needed cycle times and at a reasonable cost that supports their various marketing programs.


Giving customers a choice in delivery times is commonplace for online retailers. Achieving those delivery times consistently is Bernsteins challenge. JCPenney is well positioned with its regional distribution centers to reach customers quickly, in theory. But it is JCPenneys transportation partners that must carry out the task according to the cycle times established by Bernsteins plan. Accountability is critical to these partnerships and crucial to keeping a happy customer.


Always looking to balance cost and cycle-time issues, Bernstein says, About four years ago, we started testing with the Postal Service knowing there was a cost-service trade off. But it was done consciously. With attractive residential rates and the development of Parcel Select, the U.S. Postal Service, along with consolidators, had become a viable option.


Enter stage right, the U.S. Postal Service; enter stage left, the consolidators. All admit that when they first began working together, the Postal Service and consolidators had to build more quality, accountability and dependability into their systems to meet the cycle times demanded by JCPenney. Even though Parcel Select is a ground service moving shipments via a consolidator into the Postal Services destination delivery units (DDUs), to JCPenney, its shipments were time-sensitive from the customers perspective and therefore, its perspective. Even though money could be saved, sacrificing service was not something on which Bernstein would compromise.


Bernsteins conservative, deliberate approach is paying off. As [the consolidator and the Postal Service] improved, we were able to give them more volume, and the service we are getting now is meeting the standards that we set out, he notes. As a result, the Postal Service now is a significant player for JCPenney. Four years ago, they handled nothing for us, notes Bernstein. They went from zero to handling eight to nine million packages a year for us. Thats remarkable growth.


But it wasnt smooth casting from the very start. The Postal Service and consolidators had to make many improvements to meet the requirements of JCPenneys cycle times. The Postal Service put a focus on improving service. It was from the top down, from Pat Donahoe, who is now the [Postal Service] COO and Deputy Postmaster General. They focused on making sure whatever was entered into the DDU would be delivered the same day or the next day. They have put a lot of effort into it, and we have seen the results.


At the same time, the consolidators have gotten a lot better over the last few years, adds Bernstein. Its been a team effort. The consolidators have been trying to grow the business, but Penneys requires a high level of on-time service and consistency of delivery. Four years ago, we were not getting that, and now we are.


Parcel Select may not be the fastest home delivery service, but Bernstein recognizes, [Parcel Select] is a slower service, but we know that, and as long as we are getting a consistent service and we are meeting what we promised the customer, thats the key. But how is he assured that the promises are being kept? Bernstein is just as demanding in accountability as he is in assuring customer satisfaction.


JCPenney pulls reports from the Postal Service and the consolidators systems and runs that data through proprietary reporting software. We have a standard format for following up with the Postal Service and the consolidators; so if there is a problem, things dont fester, we find out rather quickly, explains Bernstein.


Last year, JCPenney added another consolidator to the mix, FedEx SmartPost. By giving consolidators the delivery requirements, each consolidator can ascertain where it can meet those times based on the strengths of their facilities.


If handed the Oscar, what would Bernstein say in an acceptance speech? Parcel Select has been a good experience for JCPenney due to the efforts of the Postal Service and the consolidators who have focused on consistent delivery service that has been critical to the success of the program. Meeting the requirements of the owners of the packages, which is JCPenney, ultimately gets it to the customer on time. And that is what we are all trying to do. The consumer is who we are trying to please, and if they are happy, thats good for us, its good for the Postal Service, and it drives more business. Late packages mean lost sales, and we cant afford that, closes Director Bernstein.


Sidebar 1:

For Best Supporting Actor...


As shippers like JCPenney recognized the value in Parcel Select rates, the U.S. Postal Service had to step up and provide the kind of delivery consistency that major retailers required in moving products to their customers. Sue Farris, the Postal Service National Account Manager, who now manages the total portfolio for JCPenney nationwide (since February), as well as Dell and Wal-Mart, explains the process, "When Martin [Bernstein, Director of Carrier Relations/Postal Affairs for JCPenney] was first looking at using the Postal Service, the National Account Manager at the time, Kathy Cather, brought in every parcel consolidator for Martin to meet with so that he could determine their niches and values." Once Bernstein made his decision, he set out to work with the Postal Service to assure it could meet the delivery standards set forth by JCPenney.


According to Farris, "I was doing the same thing with Dell at the time. Since the onset of Parcel Select, the Postal Service has developed and refined service measurement processes designed to improve scanning performance, establish new acceptance policies and retain high levels of customer satisfaction for both the user and residential customer. Ultimately, we improved our operational efficiencies at the DDUs for all parcel consolidators." And as Bernstein will attest, its working. Delivery is consistent.


When accepting the Oscar for their supporting role in JCPenneys success, Farris, on behalf of the Postal Service, would give a special thanks to Bernstein, "When looking at package delivery and Parcel Select, we rely on Martin and JCPenney to serve as the leader in the retail industry. Bernstein's work on the Mailer's Technical Advisory Committee (MTAC), on CONFIRM reports [mail tracking service], helped to identify deficiencies in the process and allow for immediate improvement. He has contributed a lot of time and energy and that has been very helpful to us. He doesnt mind taking risks, and he is good at testing things. Its great to have a customer like him because everyone looks to him to lead the way for new, innovative products. He has been instrumental in helping others."


All the work Bernstein and his logistics staff have done with the Postal Service has trickled down to help even the smallest of shippers who use consolidators. Because of JCPenneys involvement in making the Postal Services DDU deliveries dependable, everyones packages are delivered more consistently.


Sidebar 2:

Martin Bernstein sits on MTAC (Mailers Technical Advisory Committee) as well as other U.S. Postal Service committees. The work he and other industry mailers do involve service issues as well as changes in technology and how that affects the mail. Bernstein comments that the Postal Service reaches out to the industry, to work with many from the industry to affect change.


Parcel Select has been a good experience for JCPenney due to the

efforts of the Postal Service and the consolidators.

    Martin Bernstein, JCPenney


Sidebar 3:

Also Up for Best Supporting Actor...


Accepting on behalf of the consolidators for their roles in Parcel Select and achieving consistent on-time performance for JCPenney is Henry Maier, Vice President of Marketing for FedEx, which provides consolidator services to JCPenney through its FedEx SmartPost division.


FedEx SmartPost picks up, sorts, line hauls, tracks and delivers shippers packages to the Postal Services destination delivery unit (DDU), where the USPS makes final delivery to the residence. The result is reduced transit time and low-cost delivery by taking advantage of Postal discounts.


National and regional consolidators who partner with the Postal Service provide two models of service. Under the first model, packages are picked up from companies across the nation, sorted and then delivered deep into the Postal system. Under the other model, a consolidator will pick up packages that have already been presorted by the shipper, as in the case of JCPenney, and then drop them into DDUs (hence, drop-ship). Which model is best for a shipper is dependent upon the shippers ability to presort to three- and five-digit ZIP Codes.


Because Maier works with very large accounts, he explains, We are able to offer a cost-effective delivery system because we are able to consolidate packages and drop them into the deepest point in the Postal network. We are able to design programs around the customers delivery requirements including pickup, sortation and transportation.


Every package that JCPenney ships with FedEx SmartPost includes the U.S. Postal Service Delivery Confirmation, information that is used by SmartPost to provide end-to-end visibility to JCPenney. The smooth integration of information technology across the three companies has been critical to ensuring complete visibility of the product.


JCPenney is very demanding and wants to know where a customers package is at every stage in the logistics process from the time they tender the package to us to acceptance at the DDU to delivery of the package to the JCPenney customer, says Maier. Because our three companies (JCPenney, FedEx SmartPost and USPS) product tracking systems talk to each other we are able to provide the visibility and service performance reports that JCPenney needs to meet customer requirements, evaluate transportation processes and to manage call center volumes.


Through their partnership with the Postal Service, FedEx SmartPost is able to provide merchants like JCPenney with six-day-a-week delivery service Monday to Saturday to every domestic address including P.O. Boxes. With FedEx SmartPost, there are no residential area surcharges or delivery area surcharges, and because postal discounts are maximized, merchants like JCPenney find that this is an efficient, value-oriented and timely way to ship high volumes of low-weight packages to residential customers.


We have been working with JCPenney for 20 years, so we understand its business and its needs, adds Maier. We have been able to work through any label format or IT integration issue that has occurred. Martin Bernstein and his team at JCPenney are old hands at package shipping, and that makes it easier to work through issues. So who would Maier like to thank in his Best Supporting Actor acceptance speech? The team at the United States Postal Service and JCPenney, of course. Maier states: The combination of JCPenney, FedEx SmartPost and the United States Postal Service is a great one to provide value to our collective customers, says Maier.


Sidebar 4:

USPS Confirm Program Aces Its Screen-Test


JCPenney was a Beta tester for the U.S. Postal Services Confirm Service, a tracking service for mail. You have to know where your product is; you have to know where your mail is; you have to be able to react if something is not going according to plan, remarks Martin Bernstein. And the beauty of the Confirm program is that it is a passive system; nobody has to do anything. We are getting information as mail is running through [Postal Service] processing equipment, and we are getting the feedback electronically. He further explains that if some direct marketing pieces dont arrive at their destinations on time, JCPenney has the ability to react and subsequently reach the target market through alternative means.


Confirm service provides near real-time tracking information about First-Class Mail, Periodicals, Standard Mail letters and flats. Destination Confirm (for outgoing mail) as well as Origin Confirm (for incoming mail) both provide advance notice of when mailpieces will arrive.