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1. The Evolution & Current Industry Trends of the Small Package Marketplace
ISM Teleconference
Monday, November 14th, 2005
2. We Are Comparing The Four Integrated Carriers
DHL (formerly Airborne)
FedEx
UPS
USPS
3. Today�s Competitive Marketplace Carriers are battling it out for market share and competition is greater than ever before
Why is this happening now?
4. Recent Industry Trend: Carriers Now Offer a Full Portfolio of Services A number of factors have converged to create the most competitive small parcel marketplace ever
In prior years, each carrier had a unique market niche, and were content to concentrate on that area: there was little or no market overlap
UPS, FedEx, DHL, and the Postal Service now offer a full suite of air, ground, and international shipping options
5. Late 1990�s: Each Carrier Had A Market Niche UPS was the ground carrier of choice
FedEx was the air carrier of choice
DHL was the strongest international carrier
USPS concentrated on mail and residential small parcel shipments
Airborne-low cost express
RPS-commercial ground shipments to metro areas
6. Factors Contributing To Increased Competition Economy
Package volume growth has been relatively flat
Not as many new packages are being shipped
Carriers need to get their additional volume from other carriers
Available Capacity
New regional hubs, larger truck networks and enhanced technology allow carriers to handle more volume
7. Factors Contributing To Increased Competition Technology
Sorting facilities
Barcoding � �smart� labels
Tracking
Shipping automation
Interactive websites
EDI billing advances
Data capture technology
8. UPS Technology
UPS CampusShip
UPS WorldShip
UPS OnLine Compatible Solutions
ConnectShip UPS Toolkit
UPS Address Validation
Quantum View
Billing format options:
Flat File Bill
EDI-generated bill
Paper bill
Package Flow Technology
9. FedEx Technology
FedEx Caf�
FedEx Ship Manager
FedEx.com - online shipping
FedEx Insight
Adhoc Reporting
Billing Options
EDI
DataLink/DirectLink
Download invoices from Fedex.com
10. Factors Contributing To Increased Competition
New Services
Faster ground networks
Residential offerings
Special freight services
FedEx Freight
UPS acquisition of Overnite Transportation
UPS stores
FedEx Kinko's
Portfolio Pricing � The single biggest factor!
Carriers offer the maximum discounts only if you give them most, if not all of your business
11. New Ground Competition UPS and FedEx have enhanced ground delivery times; ground shipments are now day-definite and guaranteed
FedEx Home Delivery now serves the entire US
The merger of Airborne & DHL creates a new, strong competitor
USPS Parcel Select: new service enhancements, new partners
12. New Air Competition On-time performance is at an all time high for all carriers
Carriers have switched most customers from flat-rate (unzoned) pricing, to zone-based pricing
Carriers are now targeting specific segments of the air market (letters, heavier and larger shipments, industry groups, etc.)
13. New International Competition While domestic volume growth is slow, international growth is in double digits
FedEx and UPS have added new overseas infrastructure and new hubs
Airborne, formerly weak in the international segment, has now become a key player thanks to the deal with DHL
14. Profile: DHL Low cost - good value
Added ground service April 2001
Strong in commercial deliveries
DHL@HOME drop ships to USPS DDU�s
Merger with Airborne has made DHL a �solid third carrier�
Drivers: one driver delivers all packages
15. UPS does it all, and does it well
Technology leader
Service levels at all time high
Single statement for ground and air
Gaining added volume from UPS Stores (over 3200)
Drivers: one driver delivers all packages
16. Profile: FedEx Big improvements in FedEx ground:
New hubs
Superior IT technology
Improved on-time performance
Grown rapidly-at expense of other carriers
FedEx Home Delivery now fully ramped up
Drivers: multiple (Express, Ground, Home Delivery)
FedEx Kinko�s partnership promotes new opportunities
17. Strong in RESIDENTIAL deliveries
Has formed relationships with all carriers
�Last mile� delivery
Six day delivery
Increase in Parcel Select DDU shipments
No annual rate increase
19. Package Characteristics #1 Driver of Incentives Commercial & Residential characteristics:
Super-Rural
Rural
Suburban
Urban
Super Urban
Metropolitan
20. Key Surcharge Areas Address corrections
Residential delivery
Oversize charges (OS1, OS2, OS3)
Dimensional charges (air)
Saturday delivery
Declared value (insurance)
Additional Handling
21. Additional Surcharges Fuel surcharges on ground shipments
Delivery area surcharge on air shipments
Excess tracking fee
Package return charges
Security surcharges
At last count, there are more than 80!
22. FedEx air & ground $2.00
FedEx Home Delivery $1.50
DHL $2.00
UPS ground $1.50
UPS air $2.00
23. UPS air � 12.5%
UPS ground � 4.5%
FedEx air � 15.5%
FedEx ground � 4.5%
DHL air �22.0%
DHL ground � 4.5%
USPS � No surcharge
24. DHL and FedEx calculate your discount then add the residential charge
UPS adds the residential charge then calculates the discount
26. Rural Surcharges
27. UPS, FedEx and DHL have essentially the same base ground rates
USPS � has It�s own pricing
28. RFQ or RFP process
Wait for contract to expire
Renew your contract per carrier�s recommendation
29. Know your pricing characteristics
You must gather and analyze detailed information about your patterns, trends and characteristics
Establish goals for negotiating
30. Data Collection Required Customer Information
Electronic manifests (1-2 months)
Invoices (same period as manifests)
Package dimensions
Carrier agreements and rate charts
Carrier management reports
List of shipping locations
Affiliate companies
31. Carrier Agreements Important Reasons to Review:
Revenue commitments
Locations included
Discounts offered
Terms and conditions
Addendum�s
Rate charts
Portfolio Services
32. Carrier Agreements Important Contract Terms
Tiers (revenue or volume based)
Rolling Averages
Cell by Cell
Net Minimums
Portfolio Pricing
Ramp-up Period
Bonus Discounts (kicker)
Flat Incentives
33. Negotiation Checklist Understand the format of the contract
Understand your business better than your carrier
Analyze the proposals against your real data
Determine what discounts you deserve (benchmark)
Know the value of your business to the carriers
Create a contract that fits your needs
Request a quick response to any changes
34. 2006 Carrier Rate Increase Expecting formal announcement in November or early December from FedEx/UPS
2006 FedEx (Express/Int�l) Rate Increase
5.5% rate increase � impact may be higher
Residential increase $0.10 to $2.10
Commercial DAS up $0.05 to $1.30
Residential DAS up $0.10 to $2.10
35. QUESTIONS?