Although in-house delivery is common, particularly among single library systems with multiple branches, the more popular method is to contract out to a commercial carrier. As noted in chapter 1, in a 2008 survey slightly more than half of the respondents reported using commercial services as their delivery source, and another 7 percent used a combination of commercial services and in-house delivery. Add to that the 4 percent who reported using a national shipper like UPS or FedEx, and it is clear that outsourcing delivery to commercial carriers is a common activity for many delivery systems.
According to the Messenger Courier Association of the Americas, there are at least seven thousand courier companies nationwide, ranging from the small “two guys with bikes” messenger services to large, multistate corporations with huge fleets and multimillion dollar budgets. There are significant differences between mom-and-pop messenger services and those larger companies. The messenger services are often located in a single metropolitan area and deliver legal and other documents in a matter of hours. The regional firms, which may cover one state or a dozen, specialize in delivering film, financial records, legal documents, medical supplies, and flowers, to name just a few items.
The complexity of the carrier landscape makes it difficult for courier managers to find the best partner, and, unfortunately, many rural and small communities have no delivery companies. If a delivery business is available in a rural community, as with many small businesses there is a high probability that it will fail over time. Given the difficulty of transferring from one delivery service to another, most libraries would do well to avoid the smaller delivery services. For the purposes of this chapter, we focus on the larger regional carriers that may operate within a significant part of a state, an entire state, or across several state lines.
Why outsource delivery? is the main question a manager needs to consider. There are significant advantages to running your own courier, primarily the ability to customize your routes and schedules to meet the needs of usually a specific set of libraries. When it is your truck and your drivers, the control remains with the delivery manager. Further, the carrier industry is volatile; delivery companies can go in and out of business at alarming rates.
Outsourcing is attractive to library managers for several reasons. First, economy of scale can save money. If a courier service is already going to every town with a bank and a pharmacy, than adding a stop at a library divides the same cost three ways rather than two. This works particularly well for systems that deliver across a wide geographic region; outsourcing saves on the price per mile driven and on the wear and tear on vehicles. Another reason is that many courier managers do not want to payroll drivers or maintain fleets. There may not be the physical space available, or the ability to repair and service vehicles, or the expertise in-house to know how best to manage such systems. It is not uncommon for those who manage their own fleet to be on the road themselves when a driver is missing from work, and this sacrifice is not desired by many delivery system managers. Further, the library courier manager who outsources does not have to deal with driver payroll or training, liability, or insurance issues.
Perhaps one of the least recognized and yet most important reasons has to do with the difference in knowledge and culture. Employees who drive or repair trucks are very different from employees who work in reference or cataloging. Many library managers have neither experience in the logistics industry nor knowledge about supply chain management. For these managers, devising a route, choosing which trucks to buy, and hiring good drivers and mechanics may seem far too unrelated to a librarian’s core job. For many managers, knowing that someone with expertise in these areas is overseeing this part of the delivery operation—namely, their contracted courier company—is a great relief.
Libraries know very little about the carrier industry. In fact, it sometimes seems that librarians and delivery business people speak different languages. Terms like break bulk, demurrage, reefer units, and zone skip are not part of a librarian’s typical working vocabulary. Given the interdependent relationship between libraries and their contract carriers, the more the two groups know about each other, the better.
This section includes answers to questions library courier managers want to know about the carrier industry. Three people who know the carrier industry agreed to answer ten questions, sharing their insights about the field: Becky Atcheson (formerly national sales manager, RR Donnelley Logistics) has spent twenty years in the courier industry working on a regional and national basis in operations, human resources, as well as sales and marketing. Becky also has ten years of experience in proposing, implementing, and servicing library transportation systems. Ken Bartholomew has more than twenty-five years of leadership experience in executive sales and operations and start-up businesses. Ken is currently president of American Courier, a multistate courier, warehousing, and freight forwarding company. David Millikin held numerous positions at a global industrial packaging company for six years, working in transportation, sales administration, strategic sourcing, and business process improvement areas of the company. For the past year and a half he has been developing new services at OCLC as its product manager for library logistics.
1. How would you describe the current state of the carrier industry overall? Is it growing, steady-state, shrinking?
David: The transportation industry is changing in numerous ways, but costs in the industry are rising as a percentage of gross domestic product (GDP). Total logistics as a percentage of GDP was about 9.9 percent in 2006, according to the Council of Supply Chain Management Professionals, and transportation costs increased by about 9.4 percent in 2006.1
Ken: The answer depends on the type of courier service in which your company specializes. Many courier companies were started to support scheduled route work. Route work means deliveries made on specific times and dates to predefined stops in sequence. A route that goes from library A at 9:00 a.m. to library B at 9:15 is an example. In recent years, route work for both film development and banking records has decreased as their businesses have changed in response to electronic imaging and digital print. As a result, revenues have declined. Other industries supported by courier service have flourished—pharmaceutical, diagnostic, and auto parts to name a few. As with any business, it is important to recognize trends, adjust, and identify new opportunities in other industries that require or will benefit from courier service.
Becky: Historically, many couriers began transporting paper items on an expedited or on-demand basis. Bank check processing, legal documents, and similar items were the basis for much of their route structures. With the use of technology and the Internet, these types of shipments have decreased in volume. Other industries and items have taken up volume in systems, such as pharmaceuticals, lab samples, office supplies, and retail distribution. Although the courier industry specializes in time-sensitive shipments, the size, handling, and volume of shipment have changed. As with any for-profit organization, they must change with market demand.
2. How do you see the carrier industry’s capabilities meeting the specific needs of library delivery?
Becky: I believe the regional carrier industry is best suited to meet the needs of the library delivery systems because of the flexibility it offers in the overall transportation industry. A regional carrier is a company that services one, several, or twenty states, as compared to a nationwide service like FedEx. A regional carrier has the ability to work with library systems to offer options in service (e.g., same-day, next-day, downstreaming), packaging (e.g., boxes, recycled bags), and labeling (add specific library identification numbers).
Ken: It’s a perfect fit. Courier companies are experts in time management and route efficiency. In addition, they provide same-day service and do not have the same strict shipping restrictions of the major national delivery companies. Relieving the expenses incurred and daily management of the library staff is a win-win for both organizations.
David: An academic and business-oriented focus on transportation and logistics is something libraries have not had historically. Libraries are just now realizing the enormous cost potential to be had centralizing logistics services from the thousands of individual branches to larger groups and network-level business organizations. The logistics profession has much to add to streamlining of library operations; and, at the same time, I also believe that libraries have a lot to teach logistics operations in terms of workflow automation and handling data. I see some carrier organizations as better positioned to serve the broad library industry, and some carriers that are more geared toward the local delivery environment, depending on the needs of an organization. Libraries must be careful in choosing partners that will work for the long run and are progressive and financially stable. I see innovation as the key for libraries working with carriers—carriers need to bring new technology and process design to the table if they are going to help libraries save money.
3. With continued fluctuations in fuel prices, how is the carrier industry currently accounting for these costs in its pricing to customers?
Ken: As in the library system, we fine-tune our business as much as possible to absorb cost fluctuations. However, if costs continue to increase beyond reason, we have no choice but to pass them on in the form of rate increases or fuel surcharges.
Becky: In the transportation industry, obviously fuel is a great concern as we attempt to “manage” the cost fluctuations. These cost increases have to be absorbed at some level. A fuel surcharge is imposed on all transportation-related services. When an efficient courier commingles customer shipments, the cost increase should be shared among all customers. When a customer’s service level requires more dedicated service, the customer should be responsible for the cost of vehicle fuel utilization for their service, thus a higher fuel surcharge.
David: Since the late 1990s, carriers have implemented fuel surcharge tables that allow them to adjust the prices charged based on the price of fuel. This process gives carriers needed flexibility, because they can neither predict the volatility of fuel prices nor absorb costs that are too high. Carrier company operating margins are too low to have that much flexibility. I see the fuel surcharge as the dominant, most appropriate means for carriers to work with shippers to recover the cost of fuel. Unfortunately, I don’t see a way around this model, and it has worked for about ten years now in most transportation companies. I would frankly be wary of accepting a bid from almost any carrier that does not charge a fuel surcharge. It may be possible to negotiate with a carrier to do some hedging—perhaps pay them up front for the maximum volatility expected during the contract period, and then if they don’t use the float, they can refund the money. Something like that might work as an alternative, but I seriously doubt this model would gain any acceptance in a fixed-budget, nonprofit industry.
4. Many libraries have been placed in difficult circumstances when their carriers went out of business. What threats do you see affecting the industry that could cause more carriers to go out of business? What contingency plans should libraries have?
David: There are several threats in the industry right now:
Driver shortages. This means drivers must be paid more to stay at a company; means recruiting costs are more expensive.
Fuel costs. Volatility means unpredictable expenses for a carrier and can cost carriers millions per year more than budgeted. Also means libraries and other customers have to absorb excess costs.
Insurance costs. Rising insurance costs are always a concern and eat up a sizable portion of a carrier’s revenue.
Ken: The courier industry is very fragmented with a low barrier to entry. Shopping rates and committing to the lowest offer can lead to this type of situation for the client. It is important to weigh all factors when choosing a courier. No business is guaranteed to remain healthy, but aiming for a win-win situation with your courier partnership significantly improves your chances for success. It goes without saying that it is cost efficient to avoid interruption of service and loss of time spent securing a new courier partnership. Contingency plans are best addressed during the selection process. Starting off with a credible courier should reduce the likelihood of this happening. Regardless of how thorough your initial review is, you may still find yourself in this situation. I would suggest maintaining a file on all the companies that participated in your request for proposal (RFP) process, in addition to keeping updated route logs from your current courier. Should an emergency arise where you need to replace your courier immediately, you should be able to contact a courier from your RFP list to assist you during your transition period.
Becky: A few issues that threaten the financial stability of carriers in the overall industry could be fuel, insurance premiums, and legal issues surrounding the use of subcontracted drivers versus employee drivers. As libraries assess potential carriers individually, they must perform due diligence in evaluating the financial stability of the company. A financially sound organization should not hesitate to provide a potential customer with financial statements, percentage of revenue of largest customer(s), validation of insurance coverage, and references of present customers. These items should be reviewed on a periodic basis to ensure that the financial stability of the organization has not changed since contract inception. The best contingency plan is to have a “Plan B.” Know the other carriers in your area that could perform the services needed. Another viable option is to choose a third party to manage the overall transportation system. A third-party management company oversees and takes responsibility for the carrier(s) performing the service; it has other carrier options within the same market, should the library’s carrier go out of business.
5. How do we know if the vendor is giving us a fair price to our RFPs? What should we look for?
David: A fair price is most easily confirmed when multiple bids are received from multiple carriers and multiple types of carriers. This ensures that the library has several points of reference to consider when deciding if it is getting a fair price.
Ken: Proceed in this order: call the better business bureau; check several references supplied by courier; visit courier offices in person; speak with a variety of courier staff at each level; and, finally, review and compare prices on the RFP. The RFP should reflect a savings to your own courier operation efforts—in addition to meeting your overall courier needs.
Becky: Understand the costs that are used to determine the final rates presented. Internal costs of transportation management could potentially include wages and benefits, payroll taxes and processing, vehicle costs and maintenance, fuel, vacation and sick time, property/casualty/liability insurance, workers’ compensation, supervision/management, facility allocation and other overhead costs (e.g., utilities), and hiring and contracting costs.
6. Many carriers use subcontracts and independent drivers. What should libraries look for or specify in RFPs and contracts regarding second-party agents? Also, what personnel checks should we require?
Becky: Subcontracting is fairly standard in the transportation industry. You should not expect any different service level should a company use independent contractors rather than employee drivers. Background checks with regard to criminal history, driving record, and similar verifications should also remain the same whether the company is subcontracting or using employee drivers. Many carriers use third parties to manage their independent contractors. Determine whether the carrier is using a third party to manage its drivers.
Ken: Initially, in your RFP, you should ask for respondents to list all subcontractors they will use and to insert language that all future use of subcontractors must be approved by the contracting entity. There should also be language that all subcontractors must maintain the same insurance coverage listed in the contract and that the carrier’s use of a subcontractor does not release it from any responsibilities listed in the contract. Most reputable carriers run thorough background checks on their employees and independent contractors, which include motor vehicle records, credit checks, criminal checks, and social security number verification. Drug screening is also becoming common in the industry.
David: Libraries should just have a strategy—to either accept or not accept subcontractors. If the courier company uses independent drivers, the library should make sure the courier company has a solid process to prequalify such drivers and penalties for bad performance by nonconforming drivers in the contract. Libraries can and should specify anything they feel is important to them, such as driver cleanliness and vehicle cleanliness, when putting together an RFP or contract.
7. In general, librarians do not understand the logistics business? How can we learn more?
Becky: Several organizations offer information regarding the courier industry, including the Express Carriers Association, Messenger Courier Association of the Americas, National Transportation and Logistics Association, and Council of Logistics Management. Many of these organizations have publications.
David: Get involved in professional associations, such as the Council of Supply Chain Management Professionals, Logistics Institute, International Warehouse Logistics Association, Institute of Supply Management, and Warehousing Education and Research Council. Also, it would help to hire graduates with transportation and logistics, operations management, supply chain management, or business process management degrees, or professionals with this background. We need more of these types in the industry to start infusing the broader knowledge into the industry. Get training at one of the many institutions (the most recognized programs historically have been the University of Pennsylvania, Ohio State University, Michigan State University, the University of Wisconsin) that offer basic transportation, logistics, and supply chain management courses.
8. Some carriers also deliver blood and flowers—a bad mix with books and DVDs. How do we ensure that our materials are protected?
Ken: All clients a courier does business with should package their shipments to ensure they meet their respective safety measures. Some items must meet strict guidelines imposed by their respective industries or the government. Others must meet stringent shipping procedures or risk product loss—a very costly expense to the client. Professional, well-respected courier companies do not accept deliveries if there is a possibility of contamination. If you have done your research regarding your prospective courier, you will receive premium service.
Becky: All shipments that are transported by a carrier should be packaged properly to ensure the integrity of the shipment until receipt to the end users. It is the shipper’s (e.g., library’s) responsibility to package shipments properly. In the case of labs items, there are strict requirements from government agencies regarding primary and secondary packaging. If, upon arrival for pickup, the shipments are not packaged properly, the carrier can refuse transport. Accidents do happen, but this should be the exception rather than the rule. When an accident does occur, the importance of insurance coverage comes into review.
9. How difficult is it to track packages or bins? What kind of costs would that add to systems that are moving five, ten, even fifteen million books a year?
Ken: Tracking packages ranges from manual application to technology-driven methods. With manual tracking, keeping up with the required documentation can be time consuming and challenging. Scanning deliveries indeed adds costs, but it greatly improves overall communication and tracking of items. The additional costs associated with technology are relative to the overall services and features provided, so they vary. A credible courier should be willing to review a detailed cost-benefit scenario with you.
Becky: With technology today, there is not a difficulty in tracking a package or bin as long as the labeling has some unique identifier or bar code. With library items, the difficulty comes with requests to track individual items within a package or bin. From a carrier standpoint, unless it has been contracted to package individual library items, it should not know the contents of the package. It is up to the library’s technology system to track individual items that have been shipped from point of pickup to delivery endpoint. The additional cost for tracking or tracing depends on the technology required, from simple bar code scanning to real-time proof of delivery or signature capture. A good gauge for additional cost would be fifty cents per delivery endpoint for an “average” stop.
10. What are the accepted industry compensation standards for lost or damaged materials?
Ken: We strive never to lose or damage materials. The methods used to ship packages can reduce the opportunity for damage. Closed-lid totes are recommended to minimize damage. Situations do, however, arise from time to time that may lead to such an occurrence. Periodic spikes may occur for one reason or the other, but damaged or lost items should be less than 0.025 percent on average. It is important to have a system in place to establish measurements for condition of items shipped, thus ensuring the condition of each package prior to receipt from the courier.
Becky: The industry standard is $100 per shipment for lost or damaged items. Additional insurance coverage can be made available for extra cost and negotiated at the time of contractual agreement.
By the time this is in print, circumstances related to the carrier industry may have changed. The courier manager must be proactive in finding out what is happening in the field. The Moving Mountains symposiums typically include panels of vendor representatives as well as exhibit tables. Libraries should also consider attending carrier conferences, as listed elsewhere in this chapter.
Once a consortium or library system decides to outsource its delivery service, how does the manager proceed? Self-education is first. A book like this is a great start, but only a start. At a minimum, the manager should contact others involved in delivery to ask questions and learn from their mistakes. There are several ways to find courier managers. A physical delivery electronic discussion group with more than one hundred members can be found on the Moving Mountains website. ALA’s Association of Specialized and Cooperative Library Agencies has created a database of consortia: Library Networks, Cooperatives and Consortia. One of the database’s searchable fields calls up those consortia that run courier services and includes contact information. By far the best option is to include funds in the start-up budget that allow the manager to visit other regions or states that have an operating courier service and learn firsthand what others are doing with their delivery services.
Selecting a vendor is covered in chapter 6. But before you can choose a vendor, you have to find one. This discovery process can be difficult. Searches of better business bureaus and the like often turn up numerous mom-and-pop delivery services that are not appropriate for large-scale library delivery. Managers need to be looking for businesses with millions of dollars in operation costs, not hundreds of thousands.
The Moving Mountain website maintains a list of vendors who have expressed interest in library delivery.2 But this list is far from comprehensive. Again, checking with consortia in your region is a good way to find reliable vendors. After that, going to the carrier association meetings discussed earlier is the manager’s best tactic. The Express Carriers Association has a member directory that gives information on regional carriers. The Messenger Courier Association of the Americas also has a “find a courier” feature. Another newcomer, Courierboard.com, recently launched a site to help find carriers, and it has by far the best interface. Make sure you check as many sources as possible, since they do not necessarily include the same listings.
The manager must develop a plan detailing the requirements to start up an outsourced courier service. One of the most important elements of a business plan is the budget. Obviously the largest budget item will be the contract with the vendor; information on contracting is found in chapter 6. The following paragraphs discuss items to consider in developing a budget.
The budget must include a salary for a courier manager or assistant. Few if any courier services leave problem resolution and troubleshooting up to the vendor alone. Most outsourced library courier services have a point person who serves as an intermediary between the vendor and participating libraries. Having one person who tracks problem logs, resolves billing questions, and gets to know the delivery company staff is a good way to keep the service on track. Salaries related to managing and maintaining vendor or library relationships are likely to be the second highest cost after the vendor’s delivery charges.
Most vendor contracts charge the vendor the cost of providing shipping containers, whether they are bags, bins, totes, or some other container. Shipping containers can be an area of controversy with vendors, especially in delivery services that are growing and constantly need more containers, or where there is a pattern of libraries borrowing the containers for other than delivery purposes. If the shipping containers are not part of either the vendor contract or the participating libraries’ obligation, they must be part of the courier service’s budget. In 2009, bins were selling for between $12 and $20; shipping bags were less. As services grow, shipping containers can become a significant cost factor.
Although it may seem unnecessary to create marketing materials for a library delivery service, there are good reasons to dedicate part of the budget to marketing. If the manager does not “tell the story” of the courier, someone else will, and that story may not be favorably told. A good way to influence attitudes about a service is to use established sales techniques. One popular marketing item is the van-shaped refrigerator magnet that includes the service’s contact phone number and website. Other useful promotional materials include colorful posters that depict the courier service in action and toy vans for the children of the client’s employees. The list is endless, and for a small capital investment such items can have a big payoff politically.
Some library delivery systems choose to reimburse for lost materials, knowing full well that the materials will likely be discovered at either the borrowing or lending library. A small pool of money to pay for lost materials can resolve small complaints before they become big problems. It is wise to have clear policies on how the reimbursements are made to eliminate confusion.
Courier management system software is another wise investment. A well-designed management system can assist with participant information, billing records, communication, and trouble log maintenance. At this time there is only one commercial system available, Library2Library from the Quipu Group. Quipu will do a fair amount of customization, which can be very helpful for a courier manager. When preparing a budget, the manager needs to consider both purchasing and ongoing maintenance costs of an information management system. If a system chooses to develop a home-grown system, costs will include technical experts and software development.
Each courier service has unique circumstances that affect its budget. For instance, some services use the USPS or UPS for some deliveries to small libraries. Costs associated with materials, labor, and postage have to be considered. There can also be costs associated with maintaining a courier advisory committee. These costs involve travel or group phone services. Overall, tracking expenses, managing the budget, planning for new expenses, and the like are all important parts of the courier manager’s job.
We asked organizations that contract for library delivery services about the status and characteristics of their customer-vendor relationships (or business relationships) as part of the survey described in chapter 2. The survey posed questions to identify the characteristics of good customer-vendor relationships and the methodologies to create them. Responses from forty-three organizations in twenty-one states that reported using a transportation company for delivery services were analyzed. Ten respondents were also interviewed by telephone in a survey follow-up. Ten delivery companies that provide services to library organizations were contacted for further information after the follow-up telephone calls with respondents. Two of these companies responded to our brief questionnaire.
None of these organizations are libraries themselves. Rather, they are consortia, state library agencies, or hosts of shared integrated library systems. We refer to them here as organizations or as respondents. They all contract with a courier for delivery services on behalf of participating libraries. Many couriers also provide contracting organizations with sorting services, such as sorting items at a warehouse for delivery the next day or onboard sorting by drivers. The couriers make most of their stops at libraries, and many comments and suggestions described here refer to libraries. We also cite responses from transportation companies as well as reporting our firsthand knowledge.
The first question we asked was how satisfied the respondent organization was with its customer-vendor relationship. Survey results indicated that 93 percent of respondents were satisfied (49 percent) or very satisfied (44 percent) and 7 percent were unsatisfied.
In this section we examine some of the elements of a business relationship, for example, communication, expectations, flexibility, empathy, trust, and contractual aspects. Many satisfied respondents repeated certain themes in describing their couriers. These positive courier characteristics (listed below) correspond to factors (in parentheses) that lead to the successful implementation of a business relationship:
Positive characteristics in the area of trust were mentioned less frequently. Only two respondents referred to honesty as a positive factor in their business relationship. Several very satisfied respondents referred positively to a contract. For example, one respondent said, “There are clear, delineated expectations in the contract for both vendor and client. There are measurable outcomes to gauge [whether] standards are being met.”
Respondents at all satisfaction levels reported problems with delivery services and with the customer-vendor relationship. The concerns raised most often were about missed stops at a particular library on the scheduled day, off-schedule stops, poor communication about schedule changes, cost, and driver turnover. Respondents also mentioned overloads, where drivers were unable to pick up all the materials at all stops because of insufficient vehicle capacity. These issues may also be categorized into business relationship elements. Missed stops and off-schedule stops often fit into the category of expectations. However, some respondents expressed the need for drivers to understand (or have empathy with) the reasons libraries prefer on-time stops, such as to allow them to schedule part-time or volunteer staff to process materials and avoid having unprocessed materials taking up space in a busy and crowed library. Overloads and driver turnover could be symptoms of financial pressure under which a delivery company cannot afford to provide sufficient vehicle capacity for the workload or afford to increase drivers’ payments to reflect fuel cost increases.
Some respondents explained that their contracts do not allow for cost increases when volume or fuel prices rise, possibly fitting into the category of expectations not being accurate at the time of the contract. Recent increases in fuel costs were difficult to predict even two years ago, and systems that implement patron-placed holds for all users or for large groups of new users are very likely to see a significant increase in the volume of deliveries.
Dissatisfaction or a lack of understanding about the cost of delivery services was not uncommon among respondents. It would benefit organizations to learn more about delivery and sorting costs and to have a clear understanding of the current volume and likely changes to volume of items for delivery.
Communications was a common positive theme in the comments among organizations with a successful relationship. Satisfied and very satisfied respondents cited “regular” meetings and contact with couriers as a feature of their business relationship. Meeting frequency ranged from monthly to annually. One very satisfied organization reported, “I now have quarterly meetings with our vendor. He and I sit down together to make sure everything is on track and to address any issues that either of us sees on the horizon.” A single point of contact or a clear hierarchy for different communications for the contracting organization was described as a positive aspect of communications. All follow-up interviewees preferred that the organization, not the transportation company, provide information to libraries.
We received responses from two transportation companies that provided their own perspective on issues surrounding the customer-vendor relationship. We asked how organizations can best contribute to a successful venture. One recommendation was for regularly scheduled meetings. When asked if they had any suggestions to help other organizations that provide courier service to libraries, one respondent responded, “Have one person on the customer side and one person on the vendor side who are responsible for handling all complaints for all libraries. These two people should have a good working relationship.”
Drivers’ communications and relationships with libraries are an essential part of delivery services. A positive, professional relationship can enhance services. Respondents described communications between libraries and drivers in both positive and negative terms. The organization’s courier manager must exercise professional judgment and ask participating libraries to do the same in order to maintain professional relationships with drivers. Drivers are often independent contractors who are not actually employed by the courier or the organization. Participating libraries should be informed about proper channels for communications to ensure consistency of service.
We asked organizations about factors caused by participating libraries that “soured” the customer-vendor relationship. Some responses indicated that inappropriate library communications with drivers could lead to problems, for example, complaints made directly to the driver or arrangements made directly with the driver for services. Such arrangements can compound problems until they reach a critical point, without the knowledge of the courier manager at the organization or the transportation company management. On the other hand, one respondent felt that the ability to communicate directly with drivers was beneficial.
We wondered if there was any correlation between drivers wearing delivery company identification and contracting organization satisfaction, since uniforms or identification badges are often considered symbols of professionalism. We asked ten follow-up interviewees about driver identification. Our conclusion was that there was no correlation among this group. All unsatisfied respondents reported that drivers wore a uniform or some other form of identification. Among satisfied and very satisfied respondents, three reported that identification was worn, three reported that no identification was worn, and one said, “They are supposed to.”
Setting expectations is critical to the success of a business relationship. The organization may expect all stops to be made on time, all materials to be sorted and delivered according to a schedule with a certain level of accuracy, all drivers to appear and behave according to standards, periodic reports of delivery activities, and timely, accurate billing. One respondent said that organizations should “express expectations at outset of relationship” to improve a customer-vendor relationship. From the courier side, expectations could include that participating libraries have materials ready for pickup, that they be prepared to take delivery at scheduled times, that the volume of delivery be within certain limits, that new stops be within reasonable driving distance of anticipated routes, and that the courier be paid in a timely manner.
Some problems reported by survey respondents were attributed to the inability of the organization and courier to set expectations accurately. For example, improved technology encouraged requests for materials from more libraries, resulting in a significant increase in the volume of delivery or the number of stops. This caused overloads. The delivery contract was based on a per-stop cost that did not factor in volume of materials. The courier apparently signed a contract without a provision for changes in volume and was attempting to live up to the agreement with limited resources.
Fuel price changes are another important area for setting expectations. Some respondents expressed concern about the rapid rise in fuel prices and how that might either drive prices up or service quality down. Some respondents had contracts that do not allow fuel surcharges. Nevertheless, they seemed to be waiting for the “other shoe to drop.”
One transportation company representative’s comment directly addressed flexibility: “Be open to change, understand there may be issues that arise which are beyond the vendor’s control and keep communications open.” Libraries and delivery companies alike are compelled to adjust to many variables such as the weather, traffic conditions, vehicle breakdowns, driver illness or injuries, library workloads, volume of patron requests, holidays, as well as driver turnover, hiring, and training. In follow-up interviews, some respondents expressed a tolerance for the occasional turnover and an understanding that new drivers and sorters face several challenges and need time to get over the learning curve and increase productivity and accuracy. Reports about transportation companies providing services in the face of increasing fuel costs and increasing volume demonstrate vendor flexibility.
Organizations that have experienced serious problems with delivery services can attest to the fact that problems are all relative. What one organization sees as a serious breach is a minor inconvenience to others in a tougher situation. Developing an ongoing relationship with appropriate delivery service representatives allows an organization to use the proper channels to manage problems. Regular meetings at a mutually agreeable frequency can foster constructive communications and eliminate a situation in which problems are the only topic of conversation.
Taking each other’s perspective is important to a satisfactory business relationship. A lack of understanding of your business partner’s situation can lead to unreasonable expectations and misconceptions about the seriousness of problems. An organization’s or library’s staff may think that it is simple to see things from a “library” point of view, but the carrier’s perspective must also be taken into consideration. Several respondents expressed the need for mutual understanding. One satisfied courier manager said, “We understand one another.”
One very satisfied courier manager advised, “Work closely with the delivery vendor to help them understand why the libraries act the way they do,” and added that it was useful for her to learn about the transportation business because it helps her develop creative solutions. Comments by other respondents expressed the need for libraries to understand that the delivery company is not part of the library world. Business relationships with delivery companies may create a challenge to new courier managers because they are not accustomed to dealing with this new type of contractor. Unlike traditional library vendors, staff and managers at delivery companies are not always familiar with or trained to sell to or provide services to librarians. Often they do not share librarians’ language or point of view. In addition, the level of supervision of independently contracted drivers is minimal compared to the level librarians are often accustomed to.
A transportation company representative suggested that “customers . . . be fully informed of standard operating procedures, issues, actions, corrective measures, trends, and new developments.” In other words, have empathy with your delivery vendor by doing things in the agreed manner.
Trust was not a frequently mentioned topic in the survey results. It was mentioned a few times in describing transportation company characteristics, as noted above, and it was implied in the suggestions of three respondents on how to help others develop a good business relationship:
A transportation company representative stated, “Communication and trust are the major tools to maintain a fair and equitable partnership.” Conversely, one unsatisfied respondent indicated lack of trust by expressing skepticism that the transportation company would deliver on service promises.
Survey respondents had many suggestions related to contracts. Several respondents focused on the need for a contract. Other respondents suggested that contract terms helped ensure high-quality services and advantageous pricing. We go into considerable detail on the contents and benefits of contracts in chapter 6; here we look at the process from the vendor’s point of view.
We asked representatives of delivery companies for suggestions to help library organizations understand more about contracts with transportation companies. One replied, “A contract is a partnership where both parties must benefit in order for everyone to win. If at any point in the contract an issue becomes one-sided, then the contract is not fair and equitable.”
During follow-up interviews with targeted respondents, indications arose of possible conflicts or imbalances between contract pricing and costs. When delivery experts discuss costs, it is usually the cost per mile and time on the road that are most significant in a library delivery contract. Some organizations have negotiated agreements that do not include provisions to address increasing fuel costs; others have formulas that predetermine fuel surcharges.
The experience of survey respondents suggests that, when increases in fuel prices are not addressed, the transportation company’s reaction might be to limit the size or number of vehicles serving a particular organization. This can lead to one of the commonly listed problems—overloads. Some organizations are compelled by state procurement rules to make contracts that are fixed in this manner. Still, the rapid increase in fuel costs in 2007 and 2008 could not have been predicted, and apparently some transportation companies did not include a high enough price to cover costs and allow for a fair profit. Similarly, a contract that is based on a per-stop price with no factor for increased volume can lead to imbalanced prices and costs that force transportation companies to make decisions that reduce service quality.
It is probably fair to say that it would be useful for organizations and transportation companies to come to a mutual understanding of the risks and rewards for all parties that could result from changes during the term of a delivery agreement: inflation, fuel prices, volume of items shipped, number of stops, distance between stops, and delivery window of time and accessibility at each stop. The focus of such issues and trends in survey responses and comments was mainly on increasing fuel costs and increasing volume of library materials. Both parties should understand that, although not likely, such trends can also be reversed.
It is a challenge for some library organizations to understand transportation companies’ business models and their costs of providing services. When responses to an RFP are received, organizations might question whether a higher price equates to improved service, and one respondent said that he felt a transportation company’s bid was too low. There are not apples-to-apples comparisons of delivery costs among organizations because of variations in the volume of items shipped, number, frequency, and density of stops, and sortation needs.
We believe it is difficult for an inexperienced transportation company to estimate the costs of providing library delivery services accurately. Bids from different companies can vary significantly, even if they are responding to an RFP to provide the same service that is currently offered with the same routes. The offer to provide the identical service at a drastically reduced price may have little chance for long-term success.
Understanding the bases for costs and prices can help determine measures for improving services that enhance productivity and keep costs reasonable. Knowledge of the cost per mile and per hour for different-sized vehicles and operators may help an organization and transportation company resolve overload problems at a fair price. An understanding of the sorting rate per person may suggest that improved sorting procedures, sorting site setup, and library processing and labeling could benefit parties that use centralized sorting sites. Determining the typical profit margins for delivery companies can provide an understanding of business norms. Such an enhanced understanding could be considered a vast improvement over the situation in which an organization has little or no control over and little basis to predict future costs and prices.
Some respondents expressed a need to contract for a fixed price for a fixed term with little flexibility. Such agreements can lead to higher prices, because the delivery companies are compelled to predict the future cost basis and volume of service and inflate estimates to protect themselves. One transportation company representative said that, in a three-year agreement, he expected to make the most profit in year one because profit would decline in future years due to increased volume of items.
We looked for correlations between the organizations’ characteristics and their satisfaction with the customer-vendor relationship. The strongest indicator of satisfaction was the method of sorting. The highest level of satisfaction was found among organizations that used on-route sorting by the driver and for organizations that contracted with a large parcel transportation company that requires individual packaging or labeling for each destination. In these two categories, respondents were all very satisfied. On-route sorting was used exclusively by organizations with the smallest delivery volume (under 100,000 items per year), and the parcel transportation company was used by one organization reporting volume under 100,000 items per year and another reporting volume of about 500,000 items per year. There were also no unsatisfied respondents among organizations for which libraries did the sorting. One respondent was very satisfied and five were satisfied. Of these organizations, only one handled volume exceeding one million items per year.
It was not possible to compare delivery costs across a range of organizations accurately because of variables in the size of the service area, miles driven, volume of items shipped, and frequency of delivery. All these characteristics would affect the size and number of vehicles required as well as the staffing needs for sorting. Nevertheless, we looked at cost factors and customer satisfaction. Respondents reported the total annual cost of delivery service. figure 5.1 demonstrates that the largest number of respondents had budgets of less than $1 million and similar levels of satisfaction. The single organization with a budget over $1 million responded as very satisfied. One respondent commented that his organization’s contract is a large part of the courier’s business and that he believes the courier makes efforts to provide responsive customer service and a reasonable price to retain this business.
The survey did not allow us to calculate information to consider the detailed cost of providing delivery services against level of customer satisfaction. We did want to explore the relationship of detailed cost to satisfaction. In follow-up interviews, we determined the average cost per item delivered for ten respondents. The responses indicated that cost per item delivered is not a reliable indicator of satisfaction. The respondents with the highest cost and lowest cost per item both responded as very satisfied. All three levels of satisfaction overlapped with respect to cost per item delivered for other interviewees.
Local preferences and budgets among libraries and organizations that contract for delivery services strongly influence their decision making. For example, one very satisfied respondent had the highest per item cost because its libraries grew accustomed to a particular large parcel transportation company’s successful efforts. The libraries served by this company incur higher labor costs to package and label all outgoing materials. Other respondents accept a lower level of service because of affordability. In fact, one unsatisfied respondent described pricing as the best aspect of the customer-vendor relationship. Several respondents described a lack of understanding about what a reasonable price should be; as noted previously, one respondent put the service out for bid but was unsure that paying a higher price would ensure good service.
There is room for further study by contracting organizations on mileage costs, vehicle and operator costs, sortation, warehousing costs, and typical profit margins for transportation companies. Having access to reliable benchmarks will assist them in decision making. These organizations need to begin with a good understanding of the actual volume and traffic between libraries to use this information effectively. Some respondents were not able to describe their volume easily. Others rely on their transportation company for these figures.
Responses indicated that some respondents have a fluctuating perception of their customer-vendor relationship. At times they are satisfied and at other times they are not satisfied. One respondent had a totally different perspective on the customer-vendor relationship in the few weeks that passed between filling out the survey and a follow-up phone call. In this case, the change was for the better.
Changing and conflicting perceptions are not unique to the library community. It is not uncommon in other industries served by transportation companies. John Kerr, contributing editor to Logistics Management, wrote this: “Ask most shippers if they’re happy with their third-party providers of warehousing or transportation services and their standard answer is ‘yes.’ Scratch a little deeper, and the real perspectives start to emerge—perspectives quite often summed up in gripes about missed deliveries, missed opportunities, and persistent miscommunication.”3 Kerr went on to cite studies that show that such issues are not totally one-sided. Third-party providers feel that they lack all the necessary information to develop services in the best manner possible.
What do we learn from this? We learn that the customer-vendor relationship is a two-way street. All parties play a role in the success of delivery programs— the transportation company, the organization contracting for services, and the libraries on the delivery routes. If the relationship is professional and consistent, there is an improved opportunity for customer and vendor satisfaction, both of which are necessary for success. There are many elements to a successful business relationship and many challenges to implementing them successfully. However, our survey demonstrates that most of the customer-vendor relationships are successful in terms of customer satisfaction. Striving for the highest levels of satisfaction can lead to improved customer service and, in the end, library patron satisfaction.
The carrier industry is volatile—changing as film and banking disappear as business components and most companies scramble to find alternatives. As stated earlier by Ken Bartholomew, the start-up cost to launch a delivery service is low and as a result either the marketplace can have a glut of companies driving down profit margins or the industry can get overheated with mergers, with companies buying each other in cutthroat fashion.
Another problem with the industry is the role of independent drivers. Almost all companies use some mix of in-house employee drivers and independent drivers. These drivers are just that—independent. A 2007 survey by the Messenger Courier Association of the Americas found that drivers are not well paid: 38 percent were earning $7–$10 an hour and only 5 percent were earning more than $20 an hour.4 Issues with service training, insurance, and liability are constant problems for the industry. Many companies have outsourced the driver contracts to a third party as a way of minimizing the liability problems. This trend can add another layer of problems for the library service.
Further, as mentioned earlier, the price of fuel has been steadily increasing, putting additional pressures on individual companies, as has the price of insurance and liability coverage. When gas hit $4.00 a gallon, profit margins disappeared and business closures became common.
Given this potentially dire situation, what should a library do? Maintaining an in-house fleet and drivers means business will continue, but gas prices and liability insurance and other pressures felt by the carrier industry are also felt by the in-house courier manager. More than one in-house courier manager has spent the day on the road when a driver failed to show up. A manager might consider having more than one carrier service under contract, but the contracting process discussed in the next chapter invariably leads toward multiyear contracts to provide stability of delivery and gain volume discounts.
So what is left to do? Basically, there is only one thing a manager can do in advance, and that is to know which larger couriers do business in the region. Using services like the aforementioned Messenger Courier Association on a regular basis can help a manager stay informed. However, many states, particularly the more rural and western states, may not find regional or statewide competition. For instance, Idaho does not have a statewide carrier as of this writing.
The more knowledge the manager has of the carrier industry, the better. Ways of learning through library channels include attending library distribution and courier industry conferences, asking questions, developing relationships with vendor who you are not contracting with at the time, and reexamining inhouse delivery options on a regular basis. All can help you in a disaster situation. Unfortunately, there are no perfect solutions.
A third model for managing a courier system is a hybrid of the previously discussed in-house and outsourced systems. This is a reasonably common model; it tends to develop where an existing library system delivery to branch public libraries or between campus libraries expands to delivery to other libraries nearby. Missouri, as an example, runs a fleet of its own trucks to some members and contracts with a courier service for delivery to others.
There are several advantages to this model. A local library system delivery service to branches or campus libraries already has a fair knowledge of what is involved in maintaining a fleet, which can be used to negotiate with carrier companies. The in-house system may want to use a commercial carrier to do long routes to save wear and tear on the in-house fleet or to handle stops that are inefficient to provide in-house because of great distances or low volume. All of these options are worth exploring when you are developing a plan for establishing a courier service.
1. James A. Cooke, “Logistics Costs under Pressure: 7th Annual State of Logistics Report Finds That Rising Prices and Interest Rates Will Soon Push Logistics Costs above 10 Percent of GDP,” Logistics Management (July 1, 2006), www.logisticsmgmt.com/article/CA6352889.html.
2. Valerie Horton, “Moving Mountains Project: Physical Delivery of Library Materials” (2008), www.clicweb.org/movingmountains/MovingMountains CourierCompaniesSuppliers.html.
3. John Kerr, “3PL Relationships: More Than a Contract,” Logistics Management (September 1, 2007), www.logisticsmgmt.com/article/CA6477625.html.
4. Messenger Courier Association of the Americas, “MCAA 2007 Survey Results” (2008), www.mcaa.com/pdf/Survey-Results_2007.pdf.