Parcel Forum 2011
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This document summarizes an upcoming conference session titled "TF 108 MEGA SESSION - Everything You Wanted to Know but Were Afraid to Ask". The session will feature presentations and discussions on topics related to the parcel shipping industry, including predictions about the USPS's financial crisis and 2012 rate increase, pricing benchmarks, strategies for reducing costs, and discussions with presidents of two consulting companies. Attendees will have the opportunity to ask questions about various carrier contracts, pricing agreements, and industry trends in a confidential setting.
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Parcel Forum 2011
- 1. TF 108 MEGA SESSION Everything 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. Topics for Discussion • Ground Rules • NDA • What’s discussed in this room, stays in this room • No media press
- 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. USPS: Financial Status, Predictions & Implications
- 5. 2012 General Rate Increase
- 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. 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. 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 2011 Announced Increase 4.90% 4.90% 4.90% 4.90% 4.90%
- 9. Strategies to Reduce Parcel Costs
- 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. 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. Strategies for GRI • Fix incentives to previous year’s tariffs • Cap increases – Maximum – % below general – Include minimum charges as % or $ • Rebate
- 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. Solutions for Res & DAS • Negotiate concessions • Identify charges in advance • Download DAS ZIP table • RDI • Sourcing alternatives • Ask for commercial address • Rebate
- 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
- 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. Feelings on carrier policy on 3PNs 35% 35% 30% 29% 30% 25% 20% 15% 6% 10% 5% 0% Not aware Not concerned, don't Up to carriers Who are they to tell use them me what to do?
- 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. 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
- 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. If you could change your UPS or FedEx Pricing Agreement, 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. Correlation of Monthly Parcel Volume and Overnight Incentives Received 60.0% 50.0% 40.0% < 10,000 10,000-24,999 30.0% 25,000-49,999 50,000-99,999 20.0% > 100,000 10.0% 0.0% <40% 41-50% 51-60% 61-70% >71%
- 25. Upper Tier Incentives by Service Type Service Incentive Percent of Shippers Next 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. 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 858.538.3359 TF 108 MEGA SESSION - Everything You Wanted to Know but Were www.shipware.com Afraid to Ask rob@shipware.com
Editor's Notes
- TF 108 MEGA SESSION Everything You Wanted to Know but Were Afraid to Ask As a parcel shipper, you hear things... New carrier services, acquisition rumors, policy changes. What's true and what's spin? A PARCEL Forum exclusive, here's your chance to ask former carrier executives and two of the top parcel consultants in the US ANY question on your mind. Questions such as: What's the truth about FedEx and UPS policies about working with third-party consultants? What's the single best way to reduce costs in today's environment? Will any third player, whether the U.S. Postal Service or regional carriers, make a play to gain significant market share from the Big Two? How can you gain leverage in your carrier negotiations? What's the best deal you can get from a third-party consultant? And many more! There are no sacred cows in this session. Everything is on the table. Because of the sensitivity of this session, attendees will be asked to sign non-disclosure agreements.Implications & Predictions of USPS Financial CrisisNo Saturday delivery1/20/12 rate increasesFuel surcharge? 2012 Parcel PricingAnnouncements?2011 reviewCovidian case study 3rd Party NegotiatorsUpdate on AFMS lawsuitPolicies in reviewReasons for policyLegal implications of disclosing confidential informationEffectiveness of policyEffects of policy for shippersEffects of policy for 3PNsEffects of policy for carriersHow to select a 3PN and Negotiating with the Negotiators State of the Parcel IndustryAcquisitionsCarrier Pricing PredictionsElimination of 3 cubic foot gimmeIncentives no longer to apply to fuelImpact of Regional players Best Ways to Reduce Costs in 2012
- Also in 2006, moved increase from February to January. Reason given, to better align to our customer’s budgeting. Result, $85M for the month!
- Started in 2005 at $3.62. Since, net rates are up $1.22 which is a 26.2% increase.
- Identify how currently impacting your costsWork with carriers to reduce back-end charges, or capture on the front-endAll surcharges are negotiable; some can be waived!Utilize prepaid shipping productsSoftware/information solutionsRDI software to identify residential addressesAddress cleansing s/w to avoid address correctionReal-time APIs with discounted rates/fuelDownload DAS ZIPsExplore UPS Scan-based billingEnhances reconciliation & allocation Avoids bill for shipments manifested but not shipped; lost packagesMinimize audit expenseUPS Shippers – Implement scan based invoices (Scan Based Billing is a new billing model that aligns the billing of a shipment with operational activities. Under the Scan Based Billing model, the billing process begins when we capture a physical scan. Final billing will occur after delivery or in the absence of a delivery scan billing occurs based on a previous physical scan.)Shipments billed based on physical scans. Avoids a bill for:Shipments manifested but not shippedLost packagesMost post manifest charges will appear on the same bill as the original transportation chargesEnhances reconciliation and cost allocation processes by having most transportation and post manifest charges on the same billImproves cash flow by allowing shippers to bill their customers the total transportation charges more timelyCan reduce the need for extensive auditing
- Both FedEx and UPS on the same day (4/23/10) announced to Field Sales very similar policies that they won't work with third-party consultants. It's now the subject of an ongoing Department of Justice Antitrust investigation. Do you think UPS and FedEx colluded to boycott third parties?