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(or transportation) charges — not accessorial charges — to contribute to revenue-based incentives (earned discounts). Puerto Rico treated as domestic with UPS: As a result, UPS shipments between the US and Puerto Rico are typically less expensive than FedEx. Rebates: UPS often provides additional discounts as a “deferred tier thresholds” — or rebates — in which UPS will write your company a quarterly check as a percentage of your overall transportation expenditures. FedEx also offers a rebate program called the Earned Discount Override Program, but it is utilized significantly less than UPS. KEY TAKEAWAYS If I were a UPS customer, I’d demand they match FedEx fuel surcharges, Ground minimum charges, non-dimensioning of SmartPost, etc. (of course, based on my usage). As an example, a UPS shipper wanting a discount to the fuel surcharge fee would want to know that they are paying a lot more in fuel surcharges than they would as a FedEx shipper. Similarly, if my UPS invoices included significant charges for third party billing, late payment fees, or peak surcharges, I’d demand that UPS waive those fees to match the pricing policies of their largest competitor. And if I shipped with FedEx, I’d demand that FedEx provide some of the pricing advantages of UPS (where most impacting), including a 166 dimensional divisor for the first cubic foot, request that accessorial charges contribute to discount tiers, target FedEx Express Saver and Puerto Rico pricing for improvement, etc. NETWORK Apart from pricing differences, there are also significant service and network differences that can be leveraged. As the largest user of USPS Parcel Select services, FedEx SmartPost enjoys deep discounts from the USPS

for packages inducted at the Destination Delivery Unit (DDU, or final mile postal facility), allowing SmartPost a competitive advantage in the marketplace. SmartPost also offers two delivery attempts (versus one for UPS SurePost). FedEx is also the largest LTL company in the US. Shippers that have both parcel and LTL needs can bundle services to enjoy deeper discounts on both services.

UPS also offers more global “access points” – neighborhood stores designed to give online shoppers convenient delivery alternatives. Finally, FedEx has invested hundreds of millions upgrading package sort centers and modernizing Ground hubs. As a result, FedEx boasts faster Ground deliveries than UPS in approximately 26% of ZIP to ZIP pairings. While UPS might not immediately be able to match some of the services or network reach of FedEx, well-informed shippers will get UPS to provide unique services or special pricing to offset any perceived service disadvantage. Of course, UPS also offers unique service and network distinctions that FedEx customers should leverage. UPS is the only carrier to offer a single, integrated network, providing operational conve-


nience. By contrast, FedEx could demand their customer segregate packages for pickup by their different operating companies like Express, Ground, Home Delivery, etc. UPS also offers more global “access points” — neighborhood stores designed to give online shoppers convenient delivery alternatives. Moreover, over 35 million consumers are now UPS MyChoice users — significantly more than the FedEx alternative (FedEx Delivery Manager) — empowering online shoppers and retailers with greater flexibility on residential delivery options. Again, the point being that while FedEx cannot simply wave a magic wand and get 35 million people to sign up for FedEx Delivery Manager, FedEx e-commerce shippers are wise to bring up some of the service differences with UPS as additional points in their FedEx contract and service negotiations. In summary, shippers that understand the pricing and network differences between the two major parcel carriers can potentially leverage those variances to improve pricing and maximize services. Wishing you great success in your carrier negotiations!

Rob Martinez, DLP is Co-Founder & CEO of Shipware LLC, the premier audit and consulting firm that helps volume parcel & LTL shippers reduce shipping costs 10-30%. Rob offers more than 27 years of experience negotiating parcel contracts — on both sides of the negotiating table — for some of the most recognizable brands in the world and is a sought-after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858.879.2020, ext 114 or Join him at 9 am on September 18 for his session titled, “Mastering Parcel Contract Negotiations” or 11 am on September 19 for his always-popular session, “Live and Interactive Parcel Benchmarking Survey” at the 2017 PARCEL Forum in Nashville.

PARCEL September/October 2017  

PARCEL September/October 2017