Does Parcel Still Mean Profits?

Implications:   UPS and FedEx, the two dominant players in the U.S. parcel business, are facing sharply higher fuel costs, as well as increases in labor. All this comes at a time when shippers are "downgrading" from more costly same- and next-day services to cheaper, deferred services.  While the two giants have announced hefty rate increases along with hikes in their fuel surchargers, shippers are countering with another weapon: the U.S. Postal Service recently began a program of offering volume discounts for the first time.   Shippers have other strategies in hand for countering the annual rate increases of FedEx and UPS. How effective these strategies are will largely determine profitability at the two parcel giants.

Analysis:    Parcel shippers, who have been hit with average rate increases of at least 5 percent (counting accessorials and fuel surcharges) the past several years, are fighting back.
  This detailed, well-written article describes some of the strategies small parcel shippers are using to counter the hefty rate increases issued by UPS and FedEx every year,.
  Those increases (absent of fuel surcharges), average between 3.8 percent and 5.2 percent, depending on the length of haul (or "zone"). In addition, there is the new "dimensional weight" pricing scheme, which basically charges more for larger (even lighter) packages. Then there are accessorial charges for everything from Saturday delivery to inside delivery.
  This article gives shippers 10 detailed tools and techniques to save money on parcel shipments. This cannot be good news for UPS and FedEx, which repeatedly have warned this year of reduced guidance and lowered profit forecasts.
  In addition, there's another huge player in the parcel business. The U.S. Postal Service, for the first time ever, has begun a program offering volume discounts to its best customers. This is a direct shot across the bow of both UPS and FedEx.
  This article is highly technical, but worth reading. It describes a number of techniques to shave money off parcel shippers' freight bills. I'm sure UPS and FedEx would like to strangle the author, Jeff Haushaulter of Chicago Consulting, but it's a well-researched article that shows some of the pitfalls facing the parcel industry.