Overnight service continues to be one of the fastest growing sectors of the shipping industry. Years of effective advertising have convinced the shipping public that faster is better � for a price. Used wisely, it is an effective mode of transportation to have in your shipping arsenal. On the other hand, if it is used without discretion, the result will be very costly.
The two biggest carriers are FedEx and UPS. Both are very good companies with outstanding service. Their prices for overnight service are backed by guarantees, which promise reimbursement of your transportation expenses if the shipment does not arrive by the promised date and time. Pretty good, huh? Not really, since a very small percentage of shippers that have legitimate late deliveries ever file a claim.
At one time, all overnight shipments were flown from origin to destination. Not anymore! In an effort to reduce operating expenses, today it is rare for a shipment traveling 300 miles or less to ever see an airplane. These short-haul parcels travel over-the-road in the same trailers used to service ground parcels, rather than aboard a high-cost airplane. Yet, when you compare the base rates of ground to overnight service, the differences are staggering. For example, UPS Next Day Air and Ground Commercial base rates for a Zone 2, 10-pound parcel are $22.00 and $4.11, respectively. That�s quite a difference for two parcels that will travel side by side from shipping dock to consignee!
Many people think that on-time service is quite different between ground service and �air� service. The difference is actually quite small, only about two percentage points! And much less for the shorter length-of-haul shipments since ground parcels only go through a single hub (if that). And don�t forget that ground commercial parcels also are guaranteed!
Where do you begin to examine your use of overnight service? Here are a few guidelines:
� Gather statistics about your shipping characteristics, such as service type, parcel weight, zone and destination ZIP code.
� Determine who decides which service type is used, particularly for overnight service. It could be a customer who has a real need for the product or it could be the shipping clerk who is unaware of the service/cost trade-off.
� Research the coverage of overnight ground service (for example, UPS offers a ground time-in-transit map for all origin ZIP codes on its Web site, www.ups.com) and use this mode instead of overnight service. Train your staff to ask if it really needs to be there the next day by 10:30 AM. Often, next day ground service will be fine since the vast majority of parcels are delivered by noon. It�s a good idea to conduct a small pilot test to give yourself some confidence before switching over completely.
� For shipments that must be sent via the higher priced overnight service, start requesting reimbursement for late deliveries. It�s money that�s due to you!
� Lastly, monitor your overnight service utilization on a quarterly basis to ensure your plans are being properly executed.
All logistics networks have at least some need for overnight service. A well thought-out, detailed operating plan defines when, where and how often the service is needed. Ensure your operating plan is communicated to the front lines and the people responsible for processing the shipments. Remember that the goal is not to eliminate the use of overnight service, just to use it wisely.
