Parcel shipping is not a friendly business. For carriers, it’s a zero-sum game: if one company gets to move that package, another does not. For shippers, it can feel like you’re constantly being misled and manipulated. And to some extent, that’s true.
It’s an industry with little transparency. Carriers negotiate contracts with every client, so shipping-based companies often don’t know if their rates are comparable to those of their competitors. There are no ironclad rates that cannot be negotiated when it’s time for a new contract.
This lack of transparency allows myths and misconceptions to thrive. Carriers are comfortable with these myths, because they keep shippers from critically evaluating their shipping spend. But shippers who understand them—and make decisions based on their shipment data, not assumptions—can significantly better their bottom line.
Myth #1: FedEx and UPS Have No Competition
FedEx and UPS claim they have a duopoly over the shipping industry. They follow one another’s leads in pricing, service offerings and surcharges as if no other parcel delivery competitors exist. While it’s true that FedEx and UPS are the two most valuable brands in shipping, they don’t rule the industry.
In the U.S., many companies rely on regional carriers for at least some of their shipping needs. These companies have deep reach in the states and metro areas they serve, and because they move most parcels by ground, they can undercut FedEx and UPS on rates. When shippers implement multi-carrier strategies, they often take some business away from FedEx and UPS and contract with regional parcel carriers instead.
Second, the U.S. Postal Service continues to earn better and better ratings from U.S. shippers. Flat-rate Priority Mail boxes have been a boon for USPS, and the agency offers free Saturday delivery, which FedEx and UPS have only implemented in some markets. Small shippers can now rely almost totally on USPS, helping offset its decades-long reputation for high prices and poor service.
Internationally, FedEx and UPS are far from ruling the shipping market. DHL remains a leader in the European market (and is again making a play for the U.S.). In Asia, Japan Railways and Hong Kong’s public transit agency dominate.
And all these well-established firms — FedEx and UPS as well as USPS, DHL and regional carriers — will soon face a significant threat from Amazon, which is slowly building its own shipping arm and taking on more and more of its own deliveries.
Finally, FedEx and UPS face continual competition from each other. Typically, this works against shippers, because when one company implements a certain fee, the other follows. But shippers who are in touch with their shipment data can spot fee changes that will eat into their bottom line, and shift their business from one parcel delivery service carrier to the other — or use it as a negotiating tactic — if necessary.
Myth #2: FedEx and UPS Always Deliver on Time
The truth is, every day, 3 to 5 percent of packages arrive late. FedEx and UPS together ship more than 25 million packages per day which means that every day, between 750,000 and 1.25 million of their packages arrive late.
Most carriers, including FedEx and UPS, promise refunds for late deliveries. But claiming those refunds can be a tedious, time-consuming process, and the bigger the company, the more impersonal it tends to be.
Both of the Big Two have advanced internal tracking technology and know delivery times up to the minute. Yet they communicate these to shippers in lengthy, convoluted invoices. It’s up to the shippers to read these documents line by line, note the late deliveries, submit claims, and follow up to make sure the refunds arrive.
All carriers are subject to the same severe weather conditions and traffic jams, and there’s little evidence to suggest the Big Two carriers perform significantly better than their smaller competitors. When packages inevitably arrive late, what matters most is customer service.
Myth #3: FedEx and UPS Announce all Discounts They Offer
No two carrier contracts are identical, because no two shippers’ accounts are identical. Some aspects of a shipper’s business — a lot of single-package residential deliveries, for example — are more challenging for carriers to fulfill. They pass those costs and more back to shippers.
FedEx and UPS publicize some price reductions that they offer to all their clients — bulk discounts, for example. Every shipper can ask for others in negotiations. But carriers often argue against improving shippers’ rates by claiming that their relationship with their client is valuable in itself. That means the shippers with the longest relationships with their carriers are typically the ones paying far more than they should be.
Even if you have been with your carrier for years, remember that no shipping contract is sacred. Shippers can renegotiate at any time. If a certain accessorial charges impact your company’s flagship product and significantly eats into profits, target it in your next negotiation.
If your carrier refuses to reconsider, revisit Myth #1: inquire to see if competing carriers are better suited to your business, including regional carriers and USPS.
To get the best deal for your company, rely on Reveel’s reporting and analytics tools. These reports can lift the veil on shipping costs, revealing inefficiencies and agreements that no longer make sense for your company. Our invoice auditing services can ensure that your carrier pays you every refund you’re owed.
Finally, our expert consultants can help you prepare to renegotiate your contract, reducing your shipping spend by as much as 20 percent.
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