One parcel carrier recently reported domestic operating profit increased 31%, while another reported net income up 33%. Shippers need to be able to manage the impact that these improved carrier margins are having on their transportation expense.

If you are not concerned about the increased margins your parcel carriers are reporting, (on a lower revenue base) you should be. The impact of having just two primary parcel carriers is starting to be felt by shippers. This is especially the case now that the market place wars with their predatory parcel pricing have subsided. Barring a recession, we believe the trend of increased carrier margins will continue unless parcel shippers recognize this as a call to action. 

The carriers say that they are focused on selling “value”. That is fine if the provided value added services are services that a shipper needs. Selling value can also be interpreted as code for increased pricing which is typically the real story. More often than not these values do not translate to true benefits to shippers, only higher costs. 

Here is an example: 
On August 15th UPS announced it has significantly expanded the number of locations in the United States that can receive delivery of UPS Next Day Air® Early A.M.® packages. UPS has recently added or improved coverage on approximately 1,300 ZIP codes, which place UPS ahead of all its competitors in offering guaranteed early morning delivery services. There may be some shippers that will recognize this as a value added service. However, most shippers must recognize the premium cost for this type of service. They also need to ensure this type of service is not abused and truly adds value that their customers will recognize and appreciate. Too often premium services are used only to have the package meander thru a client’s internal delivery process mitigating the value of this premium service.
Let’s take a look at some of the “margin improvement” programs that carriers have put into play. A great deal of the country is now covered by DAS or Extended Area Surcharges. It is difficult not to incur these charges if you are a nationwide shipper. What is even more glaring is how the cost of this accessorial charge continues to increase each year.

The changes by both parcel carriers to their DIM factors are another example of a margin improvement program. A call to a large carton distributor revealed the following. If their most popular sized boxes are packed to with the weight they were designed for the carton would be subject to DIM weight charges. 

General rate increases are starting to have more of an impact on shippers, especially large shippers, than they have in the past. Carriers are not rolling over on these incremental charges when challenged by their key clients as they have in the past. 

You also have to take into consideration the fact that shipping characteristics are changing. Companies are reducing the quantity of product kept on hand resulting in lower shipment weights and more frequent deliveries that travel shorter distances. As a result more shipments classified as “net minimum charge.” These are shipments to which discounts are not applied. 

If you want to avoid these and other margin increase programs, call Joyce Rose at Data2Logistics at 239 425 8081 or email her at and tell her you want to learn more about how Data2Logistics can help you improve your margins rather than see your parcel carriers’ margins grow.