Since the introduction of guaranteed service for ground commercial parcels, I am constantly being questioned about the logic behind carrier service standards. Its clear distribution managers throughout the country are scratching their heads at what seems to be irrational standard settings by the carriers. Why do parcels often arrive earlier than the standard number of days published by the carrier? Well, lets consider the facts.
First of all, UPS and FedEx Ground each have their own measure of how long it should take to move a parcel from point A to point B. One common misconception is both carriers have an identical standard service. That simply isnt the case. In fact, standard service differs greatly between the two carriers because both use their own discretion in establishing standards.
Secondly, it is critical to understand the difference between standard and scheduled service. If you thought these two were the same, as the carriers would like you to believe, you are in for another surprise. Standard service is what the carriers publish and are willing to guarantee. Scheduled service is the real world. Scheduled service is how they plan their operation.
Very often, a parcel delivered early, when compared to standard service, actually arrived on time according to the carriers operational plan. For example, a carrier plans their operation so they will provide delivery from point A to point B in three days, yet they promise their customers a four-day standard. We are familiar with that approach in the commercial airline industry. Did you ever wonder how a plane can take off a half-hour late and still arrive on time? They arrive on time by allowing an extra 15 minutes for take-off and landing. Well, your parcel carriers frequently build in that same slack throughout the service matrix.
Clearly, the ground commercial service guarantee causes carriers to be less aggressive when setting standards. As this trend continues, the standards remain much more lenient than scheduled service. The bottom line is, neither carrier likes reporting poor on time service performance or refunding money for parcels delivered late. And why should they? Their solution is to build a cushion into their published standards. But the inconsistencies continue to cause problems for many of their customers.
So, whats the big deal? Who cares if the carriers bend the rules a little in their favor? Well, if your company or your customer uses a just-in-time inventory system, the extra day of slack becomes a big issue when you are trying to fine tune your business model, especially considering that nearly 20% of all parcels are scheduled one day earlier than standard. This certainly causes confusion when carrier standard-transit times are plugged into high priced, sophisticated supply chain planning software. Is it any wonder companies continue to struggle with planned versus actual inventory variance?
The best way to analyze your situation is to request an outbound lane-by-lane on time service report from your carrier. Be sure to ask for the report that shows not only the on- time percentage but also the actual versus standard number of days by ZIP Code(s). With this information, you can identify the ZIP Codes that are scheduled differently than standard and adjust your planning accordingly. For example, if actual transit time for a particular ZIP Code is 31/5 days and the standard is four days, then most parcels are arriving in three days. So, plan accordingly.
Another important reason for knowing your carriers detailed actual versus standard service is to provide a comparison between carriers. There is quite a disparity between UPS and FedEx Ground standard transit times. This is because UPS has a much larger distribution network. UPS operates several hundred hubs, while FedEx Ground has only several dozen. If one were to analyze cities where UPS has a hub and FedEx Ground does not, the differences in standard transit times would be more pronounced, especially for short-haul lanes. It is safe to say that UPS has tighter standards than FedEx Ground. However, if the comparison were done on scheduled service, the difference would not be as great.