Parcel Shipping & Distribution has been conducting the Annual Best Practice Survey for the past six years. This year, we are pleased that Morgan Stanley, a global financial services firm and a market leader in securities, investment management and credit services, co-conducted the survey with us. While Morgan Stanley analyzes the data and uses survey results to help advise investors on market conditions in the parcel industry, we analyze the data to set benchmarks for the industry that allow you to gauge your operation. In Part 1 of the survey, we delve into the delivery side of operations, revealing carrier discounts, whos using who, how you rate the carriers, trends in return deliveries and a host of other information. Then in December, we will unveil Part 2 of the survey results, which analyze trends in warehousing, packaging, equipment purchasing and production benchmarks.
Over the history of the survey, the parcel industry has continued to grow in volumes shipped. But the onset of a weakened economy has slowed products being shipped. Of our survey respondents, 69% will be either decreasing volumes sent by carriers (11%) or will keep volumes the same (58%). Of those who are decreasing volumes to carriers, the average decrease in volume is 27%, while those who are increasing volumes will do so by only 19%. Only about 1% were decreasing or increasing volumes to carriers because they were moving almost all of their volumes to other carriers.
Most shippers seem to be satisfied with the performance of the carriers they use. This is the first year we have asked you to rate carrier performance, and overall, no carrier scored lower than 5.1 on a scale from 1 to 10. Of the few survey respondents who wrote in comments, the most negative comments were about FedExs customer service, which could be why FedEx Express was one of two carriers that is expected to realize the biggest decline in volume by our survey respondents. On the other hand, Airbornes ground service is expected to see the least lost volume, and DHL will experience the least amount of change, either increased or decreased volume.
International shipments are not expected to change much either. While more FedEx users (28%) expect to increase volumes, · another 12% expect to decrease volumes. So FedEx is both a winner and a loser in the competitive international market. Those shippers who expect to increase their volumes shipped range from a low of 8.2% (USPS as the carrier) to a high of 19.4% (UPS). Those shippers who expect to decrease will do so by a range of 10% (USPS as carrier) to 32.9% (FedEx as carrier).
Regardless of the state of the industry, shippers are continuing to negotiate deeper discounts with the carriers. Shippers were able to shave another percentile off of both express (1 and 2 day service) and ground discounts (31% in 02 and 32% in 03; 24% in 02 and 25% in 03, respectively).
The time of year you negotiate rates seems to have an impact on your negotiating power. For UPS negotiations, try January just before the traditional rate increase in February. Those who negotiate in January average 13% more in express and 27% more in ground discounts than those who negotiate later in the spring (after the rate hike), who realize 10% less in express and 11% less in ground discounts. Those negotiating FedEx ground rates also do better in January (36% more in ground discounts) than those who negotiate in spring (7% less in ground discounts). However, regardless of January or spring, FedEx is providing better express discounts (24% more in express discounts in January and 16% more in spring), although the discount isnt as deep in the spring. More shippers negotiate rates in January and spring than any other time of year.
Of course, time of year isnt the ace up your sleeve when negotiating contracts. Many factors come into play such as volume, delivery destination, pick-up location, carrier with whom you are negotiating, express/ground percentage and a host of other factors. But knowing what other companies are doing helps you negotiate better rates. Those of you who benchmark other organizations average 32% in express discounts and 28% in ground discounts compared to those who dont negotiate (30% in express and 22% in ground discounts). If you changed carriers, you were more likely to get deeper discounts for express (36% off) than if you did not change carriers (31% off), but it had no effect this year on ground discounts. More of the survey respondents stated that UPS Ground has been more willing to negotiate and more willing to accept smaller shipments recently than FedEx Ground. But UPS Ground, more so than FedEx Ground, has been more likely to raise its rates more than in previous years.
UPS remains the leader in delivering ground shipments, with 64% of the respondents using its services (up 2% from 02), followed by USPS with 16% (up 3%), then FedEx with 13% (down 5%) and various others at 7% (no change from 02). UPS also leads in the express arena with 50% of shippers utilizing its 1- and 2-day service (down 2% from 02), followed by FedEx with 34% (down 4%), then USPS with 10% and others with 6%. For return delivery, UPS is also the carrier of choice with 60% of respondents choosing its services, followed by the USPS with 18%, FedEx at 14% and others at 8%. If the buyer pays the return cost, USPS eats into both UPS (taking 1% of its share) and FedEx (taking 6% of its share of the market).
Make sure to watch for the next issue of Parcel Shipping & Distribution with Part 2 of the survey results. And thanks to all of our readers who took the time to fill out and return the survey. Your time and effort is greatly appreciated by your peers.