Critical changes at UPS, FedEx and DHL yield both good and bad news for shippers. The bad news is that rates continue to rise. 2005 tariffs for each of these carriers have risen an average of 2.9%. In December 2004, the fuel surcharge assessed for express and international products was 13%, the highest level ever. Each carrier reinstituted fuel surcharges for ground shipments, while several accessorial charges were increased.
The good news is that shippers now have more options than ever. However, the status quo may be costing you. If it�s been more than a couple of years since your organization evaluated small parcel carriers, you might be surprised at the current capabilities of UPS, FedEx and DHL. More importantly, a current review may yield opportunities to take advantage of new services, consolidate vendors and reduce your distribution costs.
With flat to negative growth in the express segment over the past few years, each of the carriers has developed new revenue streams through acquisitions and the addition of new services. Their objective is to deeply penetrate the supply chain to add value, and of course, capture more of your distribution dollars.
Take UPS for example. The traditional ground carrier now offers a greater variety of express and international services than FedEx and DHL. Its 2001 merger with Mail Boxes Etc. (renamed The UPS Store) extends shipping services to small business and consumer retail outlets with services that include mailbox, packaging and shipping, copy and document finishing.
With its 2001 acquisitions of Mail2000 and RMX (renamed UPS Mail Innovations), UPS now offers expedited mail services, which include flats, bound printed matter and media mail. To broaden its suite of heavy airfreight forwarding services, ocean services and international trade management, UPS recently acquired Menlo Worldwide. 
And to further penetrate the supply chain, UPS now offers businesses worldwide the opportunity to integrate supply chain financing and supply chain management through its UPS Capital subsidiary.
The overall strategy at UPS is evident in its �Synchronizing the World of Commerce� marketing campaign. Through expanded capabilities, the UPS strategy is to penetrate the supply chain through �the reliable movement of goods, flow of information and efficient movement of funds.� Shippers have a viable single source solution with services that now include logistics and distribution, freight (air, ocean, rail and road), international trade management, mail services, retail stores, financial services, supply chain design, customs brokerage, consulting and e-commerce solutions.
The strategy to become a one-stop-shop to integrate the supply chain is not unique to UPS. In 2003, international leader DHL acquired Airborne Express to penetrate the US express, ground and home delivery markets. DHL now offers mail and catalog fulfillment services through its acquisition of SmartMail and QuikPak in 2004. The DHL family of companies now includes freight forwarders Danzas and Air Express International, as well as retail banker PostBank.
Moreover, DHL has announced numerous partnerships to expand its services including OfficeMax, Newgistics, Click Commerce, MCA Solutions and even the U.S. Postal Service, which handles the �final mile� delivery for DHL for many ground residential packages.
FedEx, too, has completed key acquisitions including 1998�s blockbuster deal with Caliber System (RPS, Viking Freight, Caliber Logistics and Roberts Express), American Freightways in 2001 and in 2004, Kinko�s and Parcel Direct.
While some shippers are concerned that the carriers may lose focus on core delivery services by trying to be all things to all customers, the strategy is clearly working. In the most recent quarter, while FedEx Express shipping only grew at one percent, newer divisions posted double-digit gains. FedEx Freight reported a 12% increase in its LTL trucking business, boosting revenue 23% to $820 million. FedEx International Express posted its largest increase in four years, up 12% in volume, while FedEx Ground increased its volume by a healthy 16%. Second quarter revenues included $524 million from FedEx Kinko�s.
As revenue and profitability improve, so too will service. UPS, FedEx and DHL are amongst the largest companies in the world. The deep pockets of these transportation giants will enable subsidiaries to make necessary improvements to infrastructure and add assets and personnel. For example, DHL estimates it will have spent as much as $2 billion by the end of 2005 on North American operations alone, investments unlikely to have been funded by Airborne Express on its own.
What does all this mean for shippers? More options, greater convenience and better service for many shippers. And quite possibly, better pricing as an incentive for shippers to single source. Carriers are offering significant discounts through portfolio pricing and bundled solutions. If you find that you are utilizing some of these �new� services from your core express carrier, challenge your representatives for additional discounts.
Of course, many shippers find their needs are too specialized for consolidation to a single vendor or don�t want to be locked into an exclusive arrangement. Whether your organization prefers the single source or best-in-class approach, you have much to gain through an evaluation of current carrier services and options.
Rob Martinez is partner and executive vice president of Navigo Consulting Group, procurement specialists for shipping and mailing services. He is considered a foremost expert in carrier affairs. Martinez is active in various industry associations nationally and in San Diego, where he is the president of Mail Systems Management Association (MSMA) and is on the Planning Board for the Institute of Supply Management (ISM). He can be reached at 858-538-3359 or