Saving time and money is the pinnacle of Supply Chain Management (SCM). It is the very goal of this profession and the prevailing paradigm of this case study. Through innovation and excellence, regional parcel delivery companies have developed win-win solutions to strengthen the Supply Chain and deliver advantages to companies that distribute parcels business to business and business to consumer. This case study will focus on OnTrac, the fifth largest parcel delivery company in North America, and the largest regional parcel delivery company in the United States. Originating from consumer demands for overnight delivery at less-than-ground service costs, and the OnTrac mission to be the leader in regional overnight delivery, the company has exceeded customer expectations, provided unsurpassed service, quality, flexibility and innovation to the Supply Chain.
Throughout its 22 year history, OnTrac has provided shippers an alternative to the high cost of the National Carriers, by offering a service that not only operates faster and more affordably, but also with the flexibility to provide shippers more options. The global one-stop solution to shipping has become outdated, and as shippers look for ways to save money, they have found solutions in regional carriers. By integrating multicarrier shipping software, and including regional carriers into their shipping mix, shippers are able to diversify their shipping portfolio, streamline their efforts and save time in transit.
Synchronizing Supply and Demand
It all started with shippers. When free shipping was not enough to be competitive in the ever-changing eCommerce world, the largest eCommerce companies, medical and dental supply distributors began searching for new ways to surpass their competition. They found solutions in regional parcel carriers. Not only would the implementation of a regional parcel carrier provide shippers with an alternative to the high cost of national carriers, but it would also save them time in transit and give their customers a reason to keep coming back. The strength and innovation of the regional parcel carrier lies in its ability to operate with a 100 percent customer solution focused business plan.
OnTrac understands that Business to Business customers want to keep very little inventory on hand. Both B2B and Business to Consumer customers want overnight delivery, and every customer demands the lowest possible price. Everything OnTrac does, as a company, is to meet the needs of its customers —to fill the niches that are left open by the national carriers, and to do it in a way that is cost effective and helps shippers exceed their customer’s expectations. The regional hub-and-spoke model OnTrac operates with keeps all its business on the Ground, therefore strategically aligning its facilities and transport lanes throughout the 8 Western United States. This enables OnTrac to provide a one-day Time in Transit (TNT) advantage to major markets where the United Parcel Service and FedEx Ground are only capable of offering customers two or three day ground service.
Additionally, the mega-regions OnTrac caters to create the perfect storm of central location, business friendly laws, great workforce, access to major ports and major interstate highways while all converged to attract major distribution. The company focuses its resources in these regions and is able to provide the very best advantages at the very best price. Reno-Sparks, Nevada is one of those mega-regions where OnTrac’s innovation has synchronized supply and demand by:
- Being the Just in Time (JIT) solution customers want, exceeding the TNT of the industry standard.
- Guaranteed overnight Ground delivery to seven states from Reno-Sparks, Nevada.
- Delivering the best service for less, leveraging a unique business plan, and yielding the lowest cost to serve.
OnTrac customers seek advantages in the markets the company specializes in. They want the latest possible pickup times, the best possible TNT, the most responsive customer service, real time tracking, and flexible IT integration. They want a partner who cares and can make a difference in their business. For these reasons OnTrac is committed to Customer-Centric Logistics, which matches or exceeds the industry standard from each market. This can be seen most dramatically through comparing TNT with the national carriers.
From Reno-Sparks, Nevada, OnTrac customizes plans for each customer to maximize what is most important for them while also boosting profits. For most customers it is TNT. OnTrac provides overnight Ground service to the seven states of California, Nevada, Arizona, Utah, Washington, Oregon, and Idaho from Reno. UPS and FedEx Ground are limited by their national network, capable of providing overnight service by Ground to only two states: CA, NV. This is where the innovation that is a regional carrier comes into play. The demand for overnight delivery exists just the same whether the customer is located in in any of the eight Western states in the OnTrac service area or anywhere in the United States. OnTrac’s network supplies a solution to those companies committed to providing the best service to their customers from their Western regional distribution centers.
By leveraging a unique business model, OnTrac is able to provide the best service at the lowest cost-to-serve. Even with massive discounts from the National Carriers, large global customers believe the OnTrac prices and services are best. One reason seems to be simple economics of a lack of competition in the industry. This result is the duopoly of UPS and FedEx and the ability they have to keep prices high. The other reason is OnTrac’s creative business approach, focusing on specialization, production, and value.
One simple example illustrating this is the Service Provider settlement. Typically, drivers in the industry are paid per hour. The incentive to provide better service and be more productive is not aligned with how they are paid. The prosperity of OnTrac’s Service Providers is directly linked to the success of customers and the company. Better service and the more productivity provided, results in more success for all OnTrac partners.
Furthermore, OnTrac’s dedication to regional overnight delivery requires fewer intermediary sort facilities. In contrast, National Carriers incur intermediary sorting costs and equipment, which are must haves to support their networks. This ultimately results in an overall lower cost to serve.
For more information on this topic, check back next month for Part 2 of OnTrac and the Supply Chain.