| Results of our Annual Best Practice Survey truly demonstrate that the parcel industry remains strong, even in a weakened economy. There are a few bumps in the road, but compared to our sister industry, mailing, the effects of the past year have not substantially altered how we conduct business. (For results of the mailing industry annual survey, see our sister publication, Mailing Systems Technology, or visitwww.mailingsystemsmag.com.) Each spring, readers of Parcel Shipping & Distribution are sent a questionnaire regarding their parcel operations. The results are analyzed and revealed in this issue, which covers the transportation issues of parcel shipping, and the December issue, which includes examination of all other facets of the parcel operation from warehousing to packaging to performance standards and more. I would like to thank all those who took the time to complete the survey. Without your input, we could not provide you with a benchmark for your operation. Now, on with the survey results. Who Pays Returns Affects Discounts With the rise of e-commerce, the issue of returns has been a quandary for businesses, questioning how return processes are streamlined and who pays for transportation back to the returns center. Most companies (60%) bear the cost of returns deliveries, but those who do not may actually have a higher cost of transportation as a percentage of sales. Those who let customers pay the returns delivery cost average 8% transportation cost of total sales, while those companies that pay the charge average 7%. The reason for the difference is carriers are providing slightly deeper discounts to those companies that bear the returns cost. Express discounts average 32%, and ground discounts average 25% for companies who pay for returns, while those who do not average a 31% discount for express and 24% for ground. Company Positions Affect Pricing Many factors play a role in negotiating transportation rates. This year, we analyzed the effect of the department to which the parcel shipping operation reported. Most logistics managers function within the operations department, which is the second-best negotiator of both ground transportation discounts (24%) and express (32%). Not too surprisingly, if parcel operations report to the sales department, discounts are the lowest at 16% for both express and ground. Parcel logistics managers are least likely to report to the manufacturing department, which does the best job of negotiating express discounts (33%) and the third best for ground (22%). If managers report to purchasing, discounts are 30% for express (third best) and 25% for ground (the best of all departments). Perhaps if companies were to combine negotiating talents between departments, it would be a win-win for the companies. Volume Helps and Hurts Costs On average, our respondents ship 75% of parcels B2B and 16% B2R within the US; 3% B2B and 1% B2R to Canada; 1%B2B to Mexico; and 3% B2B and 1% B2R to other international destinations. If you ship less than the average B2B domestic ground, your ground discount averages 21%, losing three percentiles from the overall average. Conversely, if you ship less than the average B2B domestic express, you are rewarded with a higher discount (two percentiles more than the average). Apparently, carriers are not anxious to build up a tremendous amount of one- and two-day domestic parcel volume and therefore are rewarding those who keep their express volumes lower than average and ground volumes higher than the overall average volume. Changing Carriers Pays The competition between carriers remains fierce. One obvious way they maneuver is to entice shippers with better pricing. Even with that enticement, only 13% of shippers changed carriers in the last year, which is up two percentiles from last year�s survey results. Of those, 53% noted better discounts or pricing as the reason for the shift. However, it is not all about money. Twenty-6% cited better service, and 15% stated negligence/bad service/damage as reasons for switching carriers. Those businesses most likely to make a switch are retailers with sales above $5 million, followed by manufacturers. Who�s Using Whom UPS remains the leader in delivering ground shipments, with 62% of the respondents using its services, followed by FedEx with 18% and the U.S. Postal Service with 13% and various others at 7%. UPS also leads in the express arena with 52% of shippers utilizing its one- and two-day services, followed by FedEx at 38%, Airborne at 8% and all others at 2%. Internet-driven parcels change the landscape a bit for choice of carrier. UPS remains the leader with a slightly lower percentage (61%), while FedEx moves up to 20% and the Postal Service dips to 9%. However, the Postal Service eats into some of FedEx�s business on Internet-driven returns, in which the Postal Service moves up to a 12% share of our reader market and FedEx comes down to 18%, while UPS climbs to 65%. The Postal Service also makes a gain when the seller is paying for returns delivery rather than the buyer paying for returns, while FedEx and UPS lose slightly, even though they maintain the bigger share of the market. More in the Next Issue Make sure to watch for Part 2 of the survey results in the December issue of Parcel Shipping & Distribution. It will contain a wealth of information on the operational side of the parcel logistics process. And don�t forget to fill out and return our Best Practice Survey when it comes to you on the back cover next spring. |
