The Logistics of Zoneskipping

-- Logistics Management, 2/1/2001

Although parcel consolidators use the U.S. Postal Service's infrastructure for delivering parcels, they must all make significant investments in parcel processing and distribution centers. At these distribution centers, they typically manage the pickup of packages from their customers; sorting by destination; transportation to the appropriate BMC, SCF, or DDU; and value-added services like labeling and warehousing.

The number of distribution centers varies among the consolidators. Parcel/Direct, for example, has four "mega sortation centers" and this year will open five smaller centers, all of which serve states east of the Rocky Mountains. The company serves the West Coast through an agreement with PaQFast Inc. (PFI), in which it is an investor. Regional Mail Express (RMX) has nine sortation centers and additional warehousing capabilities nationwide. Drop Ship Express has six distribution centers and has plans for six more. R.R. Donnelly, the largest of the consolidators, has 24 such facilities, thanks to its recent acquisition of CTC Distribution Direct, the largest parcel consolidator in the United States. Some of those facilities are likely to be closed, however, because there is some duplication.

Where the distribution centers are located depends largely on where the big consumer markets are. Other considerations include proximity to Postal Service facilities and proximity to major transportation hubs. Most consolidators have a private fleet that handles some pickups at customers' facilities and brings shipments to the distribution centers. They also regularly use for-hire transportation for pickups. Transportation from the distribution centers to the Postal Service centers generally is by truckload or LTL, but some consolidators, such as RMX and Drop Ship Express, also offer an airfreight option.

Most consolidations are delivered to SCFs because economical delivery to destination delivery units (DDUs) would require either enormous daily volumes or an army of local delivery vehicles. But even deliveries to SCFs can be expedited. RMX, for example, delivers 95 percent of its business to SCFs, but it delivers those packages in bags already sorted by DDU. As RMX president Frans Nelson explains, "It's a cross-dock for the USPS because it doesn't need to sort the packages. We don't save any more money, but we get the time."