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Parcel Forum 2011

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Parcel issues 2011

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Parcel Forum 2011

  1. 1. TF 108 MEGA SESSIONEverything You Wanted to Know but Were Afraid to Ask Rob Martinez Gerard Hempstead President & CEO President Shipware, LLC Hempstead Consulting www.shipware.com www.hempsteadconsulting.com
  2. 2. Topics for Discussion• Ground Rules• NDA• What’s discussed in this room, stays in this room• No media press
  3. 3. Suggested Topics• Implications & Predictions of USPS Financial Crisis• 2012 Rate Increase• Pricing Benchmarks• 3rd Party Negotiators – Update on AFMS lawsuit• State of the Parcel Industry• Carrier Pricing Predictions• Impact of Regional players• Best Ways to Reduce Costs in 2012
  4. 4. USPS: Financial Status, Predictions & Implications
  5. 5. 2012 General Rate Increase
  6. 6. General Rate Increase History Year Ground Air Intl Fuel 2004 1.90% 2.90% 2.90% Introduced DAS 2005 2.90% 2.90% 2.90% 2006 3.90% 5.50% 5.50% 2% Fuel Reduction 2007 4.90% 6.90% 6.90% 2% Reduction 2008 4.90% 6.90% 6.90% 2% Reduction 2009 5.90% 6.90% 6.90% 2% Reduction 2010 4.90% 5.90% 5.50% 2% Reduction 2011 4.90% 5.90% 5.50% 2% Reduction; DIM Changes 2012 ? 5.90% ? 2% Reduction TOTAL 34.20% 43.80% 43.00%5 YEAR AVERAGE 5.10% 6.30% 6.34%
  7. 7. Ground Minimum Shipment Charge$6.00 Up 48% since 2005! $5.17$5.00 $4.84 $4.57 $4.20 $4.00$4.00 $3.80$3.00 2006 2007 2008 2009 2010 2011
  8. 8. Minimum Charge > Announced 8.81% 9.00% 8.00% 6.82% 7.00% 5.26% 5.91% 6.00% 5.00% Aver 5.00% 2012 ??? 6.36% $5.42 = 4.9% 4.00% $5.48 = 5.9% 3.00% $5.53 = 6.9% 2.00% 1.00% 0.00% 2007 2008 2009 2010 2011Announced Increase 4.90% 4.90% 4.90% 4.90% 4.90%
  9. 9. Strategies to Reduce Parcel Costs
  10. 10. Steps taken past 12 months to reduce parcel costs? (Check all that apply) 48%50%45%40% 34%35%30% 26% 27%25%20% 12% 13%15% 9%10% 4% 5% 0%
  11. 11. Minimum Charge Strategies• Negotiate Minimum Shipment Charge – Percent off – Dollar off• Quarterly rebate contribute savings to minimum charge*• Explore per ounce rating (USPS, SmartPost, etc.)
  12. 12. Strategies for GRI• Fix incentives to previous year’s tariffs• Cap increases – Maximum – % below general – Include minimum charges as % or $• Rebate
  13. 13. DIM Strategies• Do nothing; contract already above the standard 194• Negotiate the new factor to something greater than 166 or “grandfather” the 2010 dim factor• Redesign corrugated packaging and packing configurations• Switch carriers (pending UPS GRI announcement) 1
  14. 14. Solutions for Res & DAS• Negotiate concessions• Identify charges in advance• Download DAS ZIP table• RDI• Sourcing alternatives• Ask for commercial address• Rebate
  15. 15. Accessorial Charges Solutions• Understand impact• Negotiate concessions – All accessorial charges are negotiable! – Percent or $ off – Range from 0-100%• Software solutions (mitigate and/or charge back) – Residential surcharge – Address Correction• Scan based billing• USPS options
  16. 16. Third Party Negotiators
  17. 17. Outside consulting firm to negotiate your carrier contract w/in last 12 months 3% 12% Yes No We tried, carriers opt out 85%
  18. 18. Feelings on carrier policy on 3PNs 35%35% 30% 29%30%25%20%15% 6%10%5%0% Not aware Not concerned, dont Up to carriers Who are they to tell use them me what to do?
  19. 19. Primary motivation for UPS & FedEx 3PN policy? (Check all that apply)70% 63%60%50%40% 29%30% 24% 13%20%10%0% Rate confidentiality Money/margin Avoid adversarial Don’t know relations
  20. 20. Do you think UPS and FedEx colluded to boycott third parties? 48%50% 41%45%40%35%30%25%20% 11%15%10%5%0% Yes No Don’t know
  21. 21. Pricing Benchmarks
  22. 22. Accessorials negotiated at least a 25% incentive: (Check all that apply)35% 31%30% 26% 25%25% 22% 22%20% 15% 15% 16%15% 12% 10% 9%10% 6% 5%5%0%
  23. 23. If you could change your UPS or FedEx PricingAgreement, what would it be? (Check all that apply) 69%70%60% 55%50%40% 31%30%20% 15% 13% 12%10% 5%0% Better Better terms Fewer No rolling >Term >Payment Other discounts surcharges averages or terms Eds
  24. 24. Correlation of Monthly Parcel Volume and Overnight Incentives Received60.0%50.0%40.0% < 10,000 10,000-24,99930.0% 25,000-49,999 50,000-99,99920.0% > 100,00010.0% 0.0% <40% 41-50% 51-60% 61-70% >71%
  25. 25. Upper Tier Incentives by Service TypeService Incentive Percent of ShippersNext Day Air/Priority Overnight 61% or Greater 19%Two Day Air 51% or Greater 21%Ground (1 to 10 Lbs) 41% or Greater 18%Ground (11 to 30 Lbs) 46% or Greater 12%Ground (31 to 50 Lbs) 51% or Greater 10%Ground (51 to 150 Lbs) 51% or Greater 7%
  26. 26. Thank You For Attending OTHER PRESENTATIONS THIS WEEK Monday, Oct 24, 9:00 am - 4:00 pm WS 100 PRECONFERENCE - Inside Parcel Rate Negotiations Tuesday, Oct 25, 10:00 am – 10:45 am PL 502 SURVEY RESULTS - Pricing Benchmarks, Trends and Cost- saving Strategies Wednesday, Oct 26, 9:00 am – 9:45 am Rob Martinez, MQC, CMDSS TM 206 Low-Cost Delivery Options for Residential Shippers President & CEO Wednesday, Oct 26, 2:45 pm – 3:30 pm Office 858.538.3359TF 108 MEGA SESSION - Everything You Wanted to Know but Were www.shipware.com Afraid to Ask rob@shipware.com

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