The US Postal Service “Could” Be a Big Player Affecting UPS / FedEx - If…..

Implications: We all know both United Parcel Service and FedEx have implemented substantial rate increases for small shipments, driving shippers to look for alternatives. I agree with my colleague Mr. Schultz’ comments on the article, but will flavor it with actual decisions being made today. Will this have an impact on UPS and FedEx? It is and could more!

Analysis: While the majority of discussion in investment and media circles surrounds the truckload and less-than-truckload segments, it is helpful to assess the impact of increased costs on small shipment shippers. It is especially important when the freight costs alone tip over buyers from purchasing the products at all.

As planners, we continue to field numerous requests from shippers regarding understanding fuel surcharges - so they can try to collect them from those purchasing their products. Where they cannot pass them on, many are trying to absorb them hoping those costs will drop in the near future while others are trying other options.

Approaches that are seeing some success are 2nd day services versus overnight, ground package transport and shipping larger lots less frequently. This results in lower transport costs per pound, but requires better flow timing planning, potentially higher inventory costs on each end, etc. This may be a positive for some ground and LTL segments, but a negative for more profitable (per pound) small-shipment segments.

Another very active approach is to look for alternatives. UPS and FedEx are viewed as “take-it-or-leave-it” types rate-wise today. Their flow is still viewed as bigger shipper to receiver / consumer focused. Their route folks may be very likable and a great sales presence, but they can’t offer solutions. They gotta go!

The quoting activity has accelerated with the likes of DHL and the United States Postal Service (USPS), with DHL having a tough time even calling back shippers to quote. USPS does seem to have the rates where they need to be and have many trying them out. Their problem today has to do with delivery (OK - it’s a notable problem). We could go into government and union discussions as it applies to flexibility - and one gets the drift.

Regardless, once one gets the system figured out, the right forms signed, etc, it works well. They do have the infrastructure to address this and IF they get their flow better understood and even streamlined, they will affect the others. They are doing it today!