Cost Control In A Tough Economy Controlling UPS & FedEx Costs April 16, 2009

1. Cost Control In A Tough EconomyControlling UPS & FedEx CostsApril 16, 2009

2. Today’s Pressure on Transportation and LogisticsSurvey of 200 Top Logistics Executives • Increasing Freight Rates and Accessorial Fees • Increased Awareness of the Cost of Transportation in the Supply Chain • Increased Customer Demand for Accurate Delivery and Cost Information

3. Today’s Challenge onParcel ShippersWith Constantly Rising Costs, How Do You • Reduce Transportation Costs • Exceed Customer Expectations

4. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations • Once a discount or incentive is negotiated and published in my Contract, the incentives apply for all of the shipments I tender to the Carrier under the terms of my Contract?True____ False_____

5. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations False! • The incentives may not apply because you did not meet a particular revenue band • Rolling average calculation may prohibit you from meeting your minimum shipping volume commitment • Certain Shipping, Receiving, and Third Party locations may not be covered in the Contract

6. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations • As a long term customer of my Parcel Carrier I am assured of lower rates than a new customer with similar shipping characteristics? True_______ False_______

7. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations False! • Very often new customers are priced more aggressively than existing customers • Not all service types may be included in revenue goals • Shippers should constantly review shipping activity against current Contract

8. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations • Once I sign a Contract with my Parcel Carrier, the rates cannot be increased without my approval? True____ False_____

9. Quick Quiz on Parcel Carrier Pricing and Contract Negotiations False! • Each year, usually in January, the major Parcel Carriers increase their rates. • Shipper’s contracted rates are subject to these increases • Carriers are free to revise pricing with 30 days notice

10. Focus on Savings • Invoice Audit • Elimination of Shipping Errors • Contract Negotiations

11. Parcel Carrier Invoice AuditsTypes of Errors on Parcel Carrier Invoices • Duplicate Billings • Rate Overcharges • Surcharge Errors • Manifest Errors • Dimensional Weight Billing Errors • Guaranteed Service Failure Refunds

12. Parcel Carrier Invoice Audits – Actual ResultsAir to Ground Cost Comparison 6 Pounds – Queens, NY to Manhattan Next Day Air Charge $16.36 Ground Charge 5.10 Savings $11.26 Savings Percentage 31%

13. Parcel Carrier Invoice Audits – Actual Results4-Week Period Findings 7 Invalid Address Corrections $ 160.20 1429 Service Failures 13,740.13 3 Manifested – Not Shipped 124.03 2 Incorrect Residential Fee 5.07 $14,029.43

14. Elimination of Shipping Errors • Most Preventable Shipping Errors Cause the Highest Percentage of Carrier Accessorial Fees. • UPS and FedEx Contracts Contain Over 90 Different Accessorial Charges. • Accessorial Fees Account for 30-35% of Total Package Cost.

15. Elimination of Shipping Errors-- Address Corrections • Software Is Available to Correct, Standardize, Validate and Properly Format. • Address Correction Fees – UPS • $7.00 for Ground • $10.00 for Express • Address Correction Fees – FedEx • $8.00 for Ground • $10.00 for Express

16. Elimination of Shipping Errors-- Residential • 91% of the 140 Million Delivery Points Are Residential. • UPS and FedEx Add Surcharges for Residential Deliveries. • Prepay and Charge Orders Might Not Contain Correct Charges.

17. Elimination of Shipping Errors-- Dimensional RatingProblem Shipping Scenario 21 Pound Box 48 (L) x 24 (H) x 24 (W) From Dallas, TX to Burlington, NC Not Dimensionally Rated $10.72 Correctly Dimensionally Rated $98.83

18. Contract NegotiationsThe Key to Success • Know Your Shipping and Receiving Characteristics • Know How Your Characteristics Rank in Your Parcel Carrier’s Profit Scale • Know Your Carrier’s Profit Margin

19. Contract NegotiationsHow Rates Are Structured • Hundreds of Factors Determine Carrier Costs • Carriers Look to Minimize Costs and Maximize Profits • You Must Have the Ability To Do the Same Due Diligence

20. Contract NegotiationsDon’t Go It Alone • Sales Reps Know Exactly How Their Incentive Offerings Affect Their Revenues and Bonuses • Negotiations Are Quite Calculated – Nothing Is Left to Chance

21. Contract NegotiationsNot All Carriers Are Created E qual • Operating Ratios Differ Greatly From Carrier to Carrier • Labor Costs • Equipment Costs • Marketing Costs • Sales Force Compensation

22. Contract NegotiationsGet the Upper HandThe Critical Data You Need • Weekly Gross Revenue • Weekly Net Revenue • Average Net Revenue Per Piece • Average Weight and Distribution • Zonal Average and Distribution • Air to Ground Ratio

23. Contract NegotiationsThe Facts • Many Shippers Pay More For Less • Survey Finds 82% of On-Line Buyers Consider Shipping Costs Paramount to Their Buying Decision

24. Contract Negotiations12 Steps to Lower Freight Costs Step 1: Consolidation • Single Largest Opportunity for Freight Savings • Multiple Orders in Same Box • Banding Boxes Together • Hundred-Weight and Multi-Weight Programs Save 40%

25. Contract Negotiations12 Steps to Lower Freight Costs Step 2: Shop Your Dates • What Day Does Your Customer Want Delivery? • Shop For Least Cost Service to Meet Delivery Date • 80% of Shippers Overpay By Not Comparing Service Levels

26. Contract Negotiations12 Steps to Lower Freight Costs Step 3: Compare Multiple Carriers • The Post Office May Be an Option • Regional Parcel Carriers May Yield Savings • Who is Best for International Shipments?

27. Contract Negotiations12 Steps to Lower Freight Costs Step 4: Negotiate For Better Rates • You Get What You Negotiate • Always Consider the Competition • Hire a Parcel Consultant to Lead the Way

28. Contract Negotiations12 Steps to Lower Freight Costs Step 5: Understand the Carriers Service Language • Priority, Overnight Express, Express Saver • Which One Is Right For You • Survey – 31% of Budgets Spent on Next Day Shipments • Compare to Ground Services

29. Contract Negotiations12 Steps to Lower Freight Costs Step 6: Make Freight a Profit Center • Add Shipping and Handling Charges • Flat Dollar Amount or Percentage • Charge Standard Rate – Keep Discount • Always Reduce Your Costs to Enhance Profit

30. Contract Negotiations12 Steps to Lower Freight Costs Step 7: Never Pay for Shipping and Handling • Don’t Purchase on a Delivered Basis • Suppliers Should Use Your Account Number • Establish Concise Routing Instructions • Average Routing Guide Savings – 25%

31. Contract Negotiations12 Steps to Lower Freight Costs Step 8: Watch the Accessorials • Accessorials Can Destroy Your Budget • Address Corrections • Correct Dimensional Weight Factors • Residential vs. Commercial

32. Contract Negotiations12 Steps to Lower Freight Costs Step 9: Audit Your Carrier Invoice • Invoice Errors Could Equal 7% of Total Spend • Money-Back Guarantees Should Be Credited • Are You Being Charged Late Fees?

33. Contract Negotiations12 Steps to Lower Freight Costs Step 10: Ship Accurately to Save Money • Cost to Re-Work Orders – Wrong Goods • Return Freight Costs • Associated Handling Charges • Dissatisfied Customer!

34. Contract Negotiations12 Steps to Lower Freight Costs Step 11: Third Party Shipping Systems = ROI • Service Shopping Across Carriers • Rate Shopping Across Carriers • Custom Designed to Meet Your Needs • Tracking and Management Reporting Is Centralized

35. Contract Negotiations12 Steps to Lower Freight Costs Step 12: Get Creative • Reduce Dimensional Weight Costs by Redesigning Packaging • Are You Insuring Your Packages Through Carrier? • Is Association Pricing Available? • How About a Rebate to Impress Your Boss?

36. QUESTIONS ???????????????