The playing field is becoming slightly more level.
For years the small parcel market in the United States was defined by UPS and FedEx. It seemed the only mystery was which company could come up with the more clever ad.
The small parcel market will experience one of the biggest shifts in the history of the industry with the right sizing of DHL in the United States. The companys commitment to the U.S. market in 2003 sent a much-needed message to UPS and FedEx: Dont rest on your laurels.
And for awhile, the strategy worked. But a recent reorganization plan promises to hurt DHLs competitiveness in the domestic arena. Although DHL will continue to be a player in the international (outbound/inbound) USA market and enjoy a dominant market position outside of the United States, the duopoly of FedEx and UPS will gain strength and jeopardize U.S. shippers efforts to keep costs down.
But for shippers, its not a fait accompli.
Shippers are under extreme pressure to find cost savings. Fortunately, several options exist in the United States that shippers can take advantage of to reduce their growing parcel costs.
§ U.S. Postal Service (USPS) offers very competitive solutions for shipments under 5 lbs. The USPS has re-invented itself, focusing on competitive delivery times, package tracking, pickup service, free Saturday delivery, and automated shipping processes. The USPS has an opportunity to carve out a piece of business that plays to its strengths.
§ Purolator USA offers a great value proposition for high-volume shippers to Canada. However, Purolator also offers domestic services in the United States.
§ TNT Express maintains the No. 1 position in Europe and offers a viable international outbound/inbound solution in the United States. TNT Express flexibility meets its customers needs at a competitive price point.
§ Eastern Connection, Spee-Dee, California Overnight, and other regional small parcel carriers compete in the Zone 2 ground service, offering a good alternative to FedEx and UPS on a regional level.
§ Demand management solutions, including shipping software programs, give shippers the freedom to compare small parcel carriers and LTL carriers (for multipiece shipments). One such solution is Redroller.com, a new Web-based provider that recently launched in the United States. With a new tool that provides complete visibility to shipping options, Redroller.com allows shippers to make better-informed, well-rounded decisions.
The U.S. small parcel market is at a critical juncture, as cost, demand, and the economy are combining to form the perfect storm. Against this backdrop, shippers must be aware of and factor in their decision making the following elements that have an impact in the U.S. market:
§ Skyrocketing fuel rates
§ Economic recession
§ Major carrier retraction (DHL)
§ Mode changes (air to ground)
§ Changes to network infrastructures
§ Election year
§ Advancements in technology
Keep in mind that many of these elements are beyond the control of shippers. Despite this, each shipper has a responsibility to thoroughly review their specific shipping programs and investigate ways to reduce costs.
In all likelihood January 2009 will go in the record books as the point when the small parcel industry experiences the single largest price increase in its history. Carriers, struggling to reduce their costs against increasingly shrinking volumes, will look at the upcoming hike as reason to improve their own financial results. This, combined with DHLs U.S. restructuring, portends well for UPS and FedEx.
Although it seems that they have little ammunition with which to battle high costs and the FedEx-UPS duopoly, shippers actually can take several steps to mitigate the current small parcel environment:
§ Review USPS services, particularly for shipments under 5 lbs.
§ Research regional carriers, TNT Express, and Purolator USA.
§ Renegotiate the current contract (use a consultant)
§ Deploy a demand management tool
§ Communicate openly with current carriers
Its clear that the small parcel industry is at a crossroads as it struggles to provide good service for the right price. Competition is at an all-time high. So the good news is that there are viable options beyond the standard Big Two.
But shippers cant afford to be passive when it comes to selecting a parcel carrier. During these volatile economic times, its incumbent on shippers to do their homework to get the best rate, best service, and best return on this very important investment.
Michael J. Ryan is the Vice President Business Development of Parcel Solutions at GENCO Supply Chain Solutions, which specializes in reducing clients shipping costs, anywhere from 5 percent to 20 percent. Mr. Ryan has been in the parcel industry for 25 years and can be reached at (708) 224-1498 or firstname.lastname@example.org.