Customers that ship both ground and overnight air packages will see three primary benefits from the changes taking place within FedEx � convenience, competition and cost reductions.
Customer convenience will be improved by merging sales, customer service/dispatch and invoicing. Web-page interfaces for tracking and rating will be simplified. One call will do it all. This should help lower costs for both FedEx and its customers, but the competition it creates will ultimately do the most for cost containment.
RPS trucks will be repainted and driver uniforms will bear the new FedEx Ground (purple and green) logo. The FedEx operating group will remain purple and orange. Each operating group will have a separate delivery workforce. There are inherent operational benefits to moving packages of varied priority levels in two independent logistics systems. FedEx has been successful in doing this with its heavyweight pickup and delivery system which handles freight over 150 pounds per piece. As such, it�s not too difficult to imagine two different drivers picking up ground and air packages. UPS, on the other hand, has been tremendously successful running one courier force for both services for years. So the debate goes on.
Increased competition is certainly the greatest benefit to customers. The first question RPS and FedEx sales executives heard when the purchase of RPS was announced two years ago was, �Can I get combined pricing and discounts?� Until now that was nearly an impossible task. As a result, UPS has had a strong advantage on the market by being able to leverage ground volume and provide portfolio discounts to successfully compete against the �separate entities,� FedEx and RPS.
For the last two years, RPS and FedEx sales staff have been �sisters� of the same holding company and have attempted to make �joint proposals� but, let�s be real, it is much more difficult to negotiate with two sales professionals than with one. FedEx and RPS sales professionals have been limited (at best) in their abilities to offer pricing that recognized the customer�s combined air and ground expenditures. They also did not have the ability, as UPS does, of subsidizing air with ground (or vice versa) to get all of a customer�s business. Which company would be willing to take the hit on profitability?
As soon as the reorganization is complete, one sales person will be in charge of gaining a customer�s air and ground business. FedEx executive management will be anxious for new business gains to support its decision and will support aggressive proposals. UPS will have some responding to do. If positioned properly, a customer with significant multiple service-level volume will be able to negotiate lower overall pricing.
Internal cost reductions will continue to be realized by both FedEx and UPS, as each finds new ways to manage its business. Opportunities to add attractive volume from other carriers, based on price, are available. In addition, the US market is still strong, and incremental volume is available for both carriers. UPS certainly has the ability to move on price, as shown most recently with an admirable 37% increase in quarterly net profits.
The integration of RPS into the family of FedEx services as FedEx Ground lends much needed credibility to that unit. It also adds increased competitiveness in an already intensely competitive market. FedEx Ground, with the help of massive investments and support by FedEx, is not your father�s RPS. The lines of differentiation between the two top players in the industry are becoming increasingly narrow.
These are good times for customers who want to maximize their transportation values. Information systems, carrier reliability and delivery systems to meet a wide range of customer delivery transit needs are available. If you haven�t examined your carrier agreements recently, there is no better time. Large shippers with the resources and savvy to analyze their fulfillment needs and the know-how to present their shipping profiles to the various carriers will do very well indeed.
Dale Wade is regional manager of AFMS Transportation Management Group, a Portland, OR-based consulting company that specializes in helping shippers improve their freight programs. He can be reached at 800-246-3521, via e-mail at dale.wade@afms.com or on the Web at www.afms.com.
