Many business leaders mistakenly think FedEx and UPS provide similar parcel delivery. Their fee schedules may look alike, but when it comes to a specific company’s shipping needs, they can vary significantly.
Choosing the right carrier starts with a company knowing what it ships, where it goes and when demand is greatest. Then, consider the following shipping service options to find which one might be a better fit for you.
Criteria Your Company Should Consider
Tracking shipments in real time is the best way to get a robust dataset about exactly what your business ships. Understanding these metrics allows executives to make sense of the differences between carriers’ rates and offerings.
For instance, if the bulk of sales ship ground, FedEx’s slightly lower ground rates may make a bigger difference than anticipated.
Here are the metrics companies should track to thoroughly understand their shipping spend:
- Package weight. Many shipping costs are organized by weight tiers, so understanding weight distribution is essential.
- Shipment geography. Distance affects shipping costs, of course. But on top of that, FedEx and UPS each have their own system of hubs and their own delivery routes, so the amount of time they require to ship the same package may be quite different.
- Oversized packages. Companies who often ship heavy or large parcels get hit with all kinds of surcharges.
- Expedited shipping. When customer bases demand same-day delivery or next-day shipping, carriers add surcharges.
- Delivery markets. If international shipping is part of your business plan, it’s essential to choose a shipping carrier that serves the markets you need.
- Residential versus commercial deliveries. FedEx and UPS both have price floors for both types of delivery service. Knowing how much of each service you need can help you understand the impact of those price floors.
- Weekend delivery service. FedEx offers Saturday residential delivery without a weekend surcharge; UPS offers that service only in urban areas. How frequently do your shipments arrive on Saturdays?
- Value of goods, for delivery insurance. Companies that frequently ship high-end items need to consider carriers’ insurance offerings. Knowing how big a policy you need can help you evaluate insurance products.
- How frequently does your carrier make mistakes, such as not following through with on-time delivery and how well do they respond to them?
With those numbers in mind, consider each provider’s parcel service policies.
FedEx Pricing and Services
Right off the bat, FedEx’s published rates are lower than UPS’s in domestic Express and Ground services. Their ground minimum charge, $7.25, is lower than UPS’s $7.32.
They also ship residential packages from Tuesday to Saturday, instead of the traditional work week, which means buyers can be home to collect their purchases (UPS’s Saturday delivery is only standard in urban areas, covering about half of customers).
Some surcharges are lower with FedEx, too. Their air and ground fuel surcharges both undercut UPS.
UPS Pricing and Services
UPS also has some advantages over its primary competitor. UPS 3-Day Air can be more than 25% cheaper than FedEx’s service equivalent, Express Saver.
Their accessorial charges are also more attractive across the board— after DAS fees are tacked on, UPS’ Ground Residential packages can be significantly cheaper than FedEx’s. UPS also treats Puerto Rico as a domestic destination.
Beyond that, the money shippers pay UPS for large package surcharges and residential surcharges is included in UPS’s calculation of the shipper’s total spend — which means they can reach higher revenue tiers and greater discounts, sooner. (FedEx counts some transportation charges toward revenue tiers, but not accessorial charges.) Also, while both companies offer rebate programs, UPS’s is much better developed.
Key Differences Between FedEx and UPS
If the bulk of your company’s shipping is straightforward domestic ground and you see few demands for express service, signing with FedEx for their lower published rates may be advantageous. However, if your company ships high volumes and could be well served by revenue tier discounts, you should consider running calculations to see if UPS’s pricing model is better suited to you.
In some cases, one specific policy can make a difference in your shipping spend. For example, UPS considers Puerto Rico a domestic destination, while FedEx does not. If Puerto Rico is even a fraction of your market, it’s worth considering those potential savings.
Finally, though most companies have to work with UPS or FedEx at least some of the time, it may make sense to consider alternative parcel shipping options too.
For example, the U.S. Postal Service is the U.S.’s cheapest carrier on average, and it doesn’t tack on many of the surcharges that corporate carriers do. DHL or regional carriers may also have specific advantages that save your company money — just know your company’s data and then apply their pricing models to see what benefits might be out there.
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