Sept. 21 2014 07:22 PM

The recent announcement from FedEx and then UPS about charging dimensional weight for ground shipments is becoming a game changer in the parcel industry. It is interesting that both these announcements were about a month apart. This is still a residual effect of DHL leaving the domestic market in the US. The USPS is taking an offensive charge at FedEx and UPS with its recent Priority Mail rate reduction announcement, which is scheduled for September. There is a need in the US parcel business to start to drive to “un-bundle” the single carrier strategy. The major carriers have touted this approach to seek more business from existing clients and drive down their total cost. Here are three approaches to optimize your parcel spend:

1. Multi-Carrier Shipping Platforms: In order to begin a multi-carrier strategy, you will need to move off the carrier-supplied platforms and deploy a multiple carrier platform. This will instantly create a “bargaining” position with your primary carrier. If they know you have the ability to move your business in a flip of a button, they will be more willing to negotiate with you. There are many different systems in the market. Here are a few of them: iABOL, Pro Ship, ADSI, Logicor, Kewill, Varsity and Pitney Bowes. 
2. Carrier Contracts: Simply put, you need a contract with each carrier. This can be done in a number of ways. You can go directly to each carrier and sign a contract. You will be expected to make a revenue commitment to each carrier; do your homework with this approach. You can also look at using a 3PL’s agreement or resellers (for smaller shippers), which is usually non-contractual. The USPS should be looked at for all lightweight shipments (1-10 lbs). The USPS is truly the new “challenger” competitor. 
3. 3PN: I am a strong proponent of using third party negotiators. They are experts in analyzing contracts, data and identifying negotiation opportunities. There are many ways of reducing your parcel costs, and they will find them for you. There is also a new software on the market that allows the shippers to obtain the “tools” similar to the 3PNs; check out www.parcelview.com as an alternative solution. Please keep in mind that you do not get the expertise of the 3PN when you take this approach.

The peak season is right around the corner and most shippers are preparing for another successful holiday season. Please keep in mind that the parcel industry will experience the largest price increase in the history of shipping in the US with the new dimensional weight rule for ground services. FedEx and UPS have built highly effective distribution networks in the US but it’s time to take control of how you spend your parcel dollars. A multi-carrier approach maintains a competitive spirit for all carriers and allows the shipper to optimize their parcel spend.

Michael J. Ryan is the Executive Vice President at Pro Star Logistics and has over 25 years’ experience in the parcel industry. He can be reached at 708.224.1498 or michael.ryan@prostar.com
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