The fundamental advantages of ground delivery for shippers have been well-documented for many years. Today, due to continued economic uncertainty, changes in the supply chain, and an increased demand for business-to-consumer (B2C) service, ground delivery is gaining traction in the marketplace.
Overall, ground delivery — a deferred service as opposed to priority overnight (usually by 10:30 a.m.) — has been growing steadily over the last decade as air revenue continues to slip.
What Are the Factors Behind this Trend?
Cost Savings. While the economy is still soft, cost containment remains the mantra at most corporations. The idea that is has to be there overnight may still apply at times, but the prevailing mindset today is “let’s go cheaper, even if it’s slower.” Shippers save substantially with ground service while carriers cut back on more expensive air transport, associated with rising fuel costs, and enjoy greater profits.
B2C Growth. While the volume of ground service continues to increase for business to business, the increase is even more dramatic in B2C shipping. This is tied to an explosive growth in e-commerce, with Amazon.com as a prime example, and this is enabled through an industry shift regarding the supply chain: More regional distribution centers are now located closer to shippers, and they use ground transport to make residential deliveries.
Increased Efficiency. Compared to air transport, ground service is more reliable. Fewer exchange points result in less margin for error, better damage control, and fewer claims.
But Which Ground Service Best Meets Your Needs?
UPS and FedEx. Among the industry giants, UPS does the most ground volume. Federal Express arrived later in the ground game, launching FedEx Ground (originally RPS) in 2000. Today, air volume continues to decline for both of the national giants, and domestic ground service is now FedEx’s only source of growth. Typically, ground service deliveries for both UPS and FedEx range from next day to five days.
U.S. Postal Service. In 1913, Parcel Post was introduced as a cost-effective service of the USPS. Today, as the Internet has dramatically reduced the Postal Service’s mail volume, and USPS revenue continues to decline, the Postal Service still does a good job of “going the last mile” at the lowest price point. Yet its services are limited, with the “sweet spot” being light-weight shipments (under five pounds). Given these dynamics, USPS is looking for “workshare” arrangements, including consolidators to sort the mail and regional couriers to deliver it to the local post office. In this sense, many regional carriers view USPS as more of a partner than a competitor.
Regionals. Regional carriers have always relied on ground transport for not only deferred service but also priority and next-day. Today, while they may not yet have the national reach of the giants, they offer distinct advantages:
• Faster. As regionals expand their footprint, they can provide guaranteed, next-day service in Zones Two, Three, and Four.
• Less expensive. Deliveries cost 10% to 20% less than the giants.
• More flexible. Easier to negotiate customized plans.
Of course, a trademark of the regionals is personalized service. And now, with advanced technology, regional quality is on par with and sometimes superior to that of the nationals.
Looking ahead, we expect the regionals to increase their market share of the ground business as more shippers become aware of this alternative. We also expect the regionals to further expand their national footprint. In fact, we have seen the start of a network of “Super Regionals," and this may become another force to reckon with in the future.
Of course, the regionals will never replace the nationals in the ground war. But in the battle of David vs. Goliath, the Davids are now on more solid ground.
Ted Kauffman is the chairman of Eastern Connection, the largest regional small-package overnight carrier on the East Coast, covering over 5,000 ZIP Codes in the Northeast. The company, which has 17 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Second-Day, Logistics & Warehousing, Trucking, and Expedited Mail. For more information, visit www.easternconnection.com
Overall, ground delivery — a deferred service as opposed to priority overnight (usually by 10:30 a.m.) — has been growing steadily over the last decade as air revenue continues to slip.
What Are the Factors Behind this Trend?
Cost Savings. While the economy is still soft, cost containment remains the mantra at most corporations. The idea that is has to be there overnight may still apply at times, but the prevailing mindset today is “let’s go cheaper, even if it’s slower.” Shippers save substantially with ground service while carriers cut back on more expensive air transport, associated with rising fuel costs, and enjoy greater profits.
B2C Growth. While the volume of ground service continues to increase for business to business, the increase is even more dramatic in B2C shipping. This is tied to an explosive growth in e-commerce, with Amazon.com as a prime example, and this is enabled through an industry shift regarding the supply chain: More regional distribution centers are now located closer to shippers, and they use ground transport to make residential deliveries.
Increased Efficiency. Compared to air transport, ground service is more reliable. Fewer exchange points result in less margin for error, better damage control, and fewer claims.
But Which Ground Service Best Meets Your Needs?
UPS and FedEx. Among the industry giants, UPS does the most ground volume. Federal Express arrived later in the ground game, launching FedEx Ground (originally RPS) in 2000. Today, air volume continues to decline for both of the national giants, and domestic ground service is now FedEx’s only source of growth. Typically, ground service deliveries for both UPS and FedEx range from next day to five days.
U.S. Postal Service. In 1913, Parcel Post was introduced as a cost-effective service of the USPS. Today, as the Internet has dramatically reduced the Postal Service’s mail volume, and USPS revenue continues to decline, the Postal Service still does a good job of “going the last mile” at the lowest price point. Yet its services are limited, with the “sweet spot” being light-weight shipments (under five pounds). Given these dynamics, USPS is looking for “workshare” arrangements, including consolidators to sort the mail and regional couriers to deliver it to the local post office. In this sense, many regional carriers view USPS as more of a partner than a competitor.
Regionals. Regional carriers have always relied on ground transport for not only deferred service but also priority and next-day. Today, while they may not yet have the national reach of the giants, they offer distinct advantages:
• Faster. As regionals expand their footprint, they can provide guaranteed, next-day service in Zones Two, Three, and Four.
• Less expensive. Deliveries cost 10% to 20% less than the giants.
• More flexible. Easier to negotiate customized plans.
Of course, a trademark of the regionals is personalized service. And now, with advanced technology, regional quality is on par with and sometimes superior to that of the nationals.
Looking ahead, we expect the regionals to increase their market share of the ground business as more shippers become aware of this alternative. We also expect the regionals to further expand their national footprint. In fact, we have seen the start of a network of “Super Regionals," and this may become another force to reckon with in the future.
Of course, the regionals will never replace the nationals in the ground war. But in the battle of David vs. Goliath, the Davids are now on more solid ground.
Ted Kauffman is the chairman of Eastern Connection, the largest regional small-package overnight carrier on the East Coast, covering over 5,000 ZIP Codes in the Northeast. The company, which has 17 facilities, is open 7 days a week and 365 days a year. Services include Next-Day Ground, Priority Overnight, Same-Day, Second-Day, Logistics & Warehousing, Trucking, and Expedited Mail. For more information, visit www.easternconnection.com
