Transportation Impact LLC Thu, 01 Jun 2017 16:07:45 +0000 en-US hourly 1 Transportation Impact LLC 32 32 UPS Rate Increase Could Generate $1 Billion in 2017 Tue, 02 May 2017 18:04:36 +0000 Continue Reading]]> UPS executives must have been all smiles as they announced hefty first-quarter revenue growth to investors via conference call last Thursday. The world’s largest shipping company generated 6.2% revenue growth and delivered a 3.9 percent increase in Q1 EPS when compared with the same period the year prior.

While this news is good for shareholders – to whom UPS paid $774 million in dividends in the first quarter, up 6.4 percent per share over the prior year – it’s the 2017 UPS rate increase that appears to be paying dividends for the company.

Revenue per piece in the U.S. domestic segment increased across all products, up 2.4 percent in total, according to a release posted to the UPS website, as “the company benefitted from previously implemented base rate pricing actions.”

What that means in layman’s terms is that UPS is raking in an average of 2.4 percent more revenue – $9.57 in 2017 vs. $9.35 in 2016 for U.S. domestic packages – with every package that moves through its network.

And base rate pricing actions? Give we increased our prices a couple shots of cologne and begin to smell the… roses.

According to operating data included in the earnings report, UPS generated $9.5 billion in U.S. domestic package revenue in the first quarter. If you were thinking that 2.4 percent wasn’t too bad, $233 million might sting a little. That’s about how much of the company’s $451 million Q1 growth in the segment can be attributed to the price increase implemented at the beginning of 2017.

Even without a peak in Q4, that puts nearly a billion-dollar price tag on the 2017 UPS rate increase.

Download TI’s comprehensive, 8-page 2017 FedEx vs UPS Rate Increase Report

All in all, the 6.2% overall rise in revenue equates to an additional $897 million so far this year and more than a quarter of it came directly out of shippers’ pockets via higher UPS rates.

In the name of capitalism, that might all sound OK were it not for the alarming rate at which retailers are closing their doors. Swaths of media reports put that number in the thousands, with some legacy retailers among the hardest hit.

And while plenty of the blame can be attributed to those companies’ failure to keep up with the times, the costs of keeping up with consumer demand often are most apparent at the loading dock. As the world waits for e-commerce to hit its peak, the two major global carriers continue to find innovative ways to charge customers more for services that, evidenced by holiday struggles in recent years, haven’t really changed much during that time.

In the end, the customer is left to figure out how to become more efficient while padding the pockets of their most necessary vendor with what little remains of their own margins. The scarcity of fast, reliable delivery options is forcing companies into a corner; either pay the carrier more each year or cease to exist in short order.

Seventy-five percent of supply chain executives that responded to a survey conducted by Transportation Impact this month said they were too busy to open a negotiation with their carrier. Meanwhile, high shipping costs continue to result in company’s overpaying their carriers by as much as 30 to 40 percent in some instances.

There is some good news. Companies that are making it a priority to revisit their FedEx and UPS rates do benefit from deeper discounts than have been available before. Now more than ever, smart shippers understand that need to compare shipping rates and leverage volume and spend levels for discounted shipping.


Transportation Impact is the industry leader in small package negotiation. Our team is comprised of former executive-level carrier pricing personnel and has more than 300 years of combined pricing experience. While other companies rely solely on data to determine what a company’s shipping rates should be, our pricing experts go a step farther. After Transportation Impact conducts a thorough analysis of a company’s carrier invoice data, our pricing team reviews and adjusts the results based on proven pricing experience. That’s why we are the only company in the industry that will guarantee its savings projections, in writing, to the tenth of one percent.

Click here to receive an instant download with more information, or call one of our friendly, in-house experts today to schedule a web demo, at (252) 764-2885. Or, if you have 96 seconds to spare, check out the short video below:

3 Big Misconceptions About Small Package Negotiation Thu, 27 Apr 2017 15:00:16 +0000 Continue Reading]]> Small package is big business.

Love it or hate it, everyone understands the necessity of effective small package contract negotiation strategy in today’s hypercompetitive economy. Less clear, however, are the ingredients necessary to concoct a winning strategy.

Shipping costs can be the driving force behind a start-up’s meteoric rise, or the last straw before legacy retailers are forced to shutter their windows and doors.

The Internet can be a wonderful place, but retail stores closing in 2017 now number in the thousands, according to scores of media reports like this one from Business Insider, and it’s almost solely due to the continual prevalence of online commerce.

E-commerce has ushered in an unprecedented wave of competition during the last decade leaving companies with fewer ways to trim operating costs to gain an edge. The universal truth in business, across all industries, is that merchandise has got to get where it’s going; whether that’s to the store it’s sold in, or to the front door of the customer who bought it.

That means that companies must evolve to pay less, lest they potentially meet the fate of Payless.

For several reasons, though, companies often hesitate to assert control when they compare shipping prices and ultimately fall victim to baseless misconceptions that erode what little margin remains.

Sometimes the reluctance is rooted in misunderstanding your ‘rights’ as a customer. Shippers that take a stand against rising shipping costs – rather than simply accept the rates their carrier gives them – end up with the best shipping rates.

It’s that simple.

As the market for cheaper small package shipping costs continues grows more complex, it will get harder and harder for shippers to navigate discussions with their carrier representatives and arrive at a market appropriate small package bid alone. In many ways, the shipping companies (primarily FedEx and UPS) hold all the cards and it can be tough even for seasoned small package executives to get the best shipping rates for their company.

The ugly reality is that when most small package execs go it alone, they inhibit their company’s ability to pull costs in line with the rest of the market. It costs companies millions, collectively, each year.

Here are the three most common reasons why decision-makers say they can’t negotiate a better small package agreement than the one they have:

small package agreement expirationI can’t lower my shipping costs because my small package agreement hasn’t expired yet.

They key word here is agreement. An agreement, not a contract, is exactly what you have with your small package carrier. Understanding the difference between a contract and an agreement is paramount when you compare shipping costs to see if you have the best shipping rates. Most carrier agreements lack essential verbiage needed to form a legally binding contract.

Instant White Paper Download: How to Save Money Even After You Sign

It’s surprising how few executives realize that their agreement can be revisited at any time. Most small package agreements contain language allowing either party to terminate the agreement.

Markets and costs change fast in the logistics industry – this means your “great” rates can quickly become above market. That is why it’s important to understand those carrier agreements are not permanent. Optimizing your shipping costs means keeping your rates and contracts current with where the market is today.

The truth is, you can negotiate anytime. The average company does so every 13 months; not surprising when you consider that both carriers increase their list rates every 12.

small package third partyMy small package carrier says I can’t use a third party to help me compare shipping costs.

Make no mistake, you aren’t the only one negotiating here. Small package carriers are expert negotiators out of necessity. The profits they deliver shareholders depend on winning business at the highest possible margin. You can be sure that behind your smiling sales rep there is a team of pricing engineers and analysts who understand your small package spend better than you do.

Instant White Paper Download: Even Michael Jordan Had An Agent

Of course, both major small package carriers have accountants and lawyers that understand their taxes and legal issues better than they probably do, too. That’s why they hire outside help. The difference is that a carrier knows shippers (for now) only have two viable options. If a carrier threatens to move you to published rates or refuses to negotiate more favorable shipping costs if you decide to hire an expert, then you may want to ask yourself how strong your partnership really is.

You can’t negotiate the best shipping rates when the chips are stacked against you. The right third party understands how to be fair to both sides and still make money. They will maintain carrier profitability while protecting your best interests.

small package dataI can’t share my small package data with someone who can tell me if I have the best shipping rates.

This is another strong-arm tactic used by the carriers. A legal expert will tell you that you own your small package data. Carriers know that shipping data is vital to obtaining the best shipping rates, but they can hang their hats on the fact that most companies don’t have the tools or experience to leverage their data effectively. That is, of course, unless you hire someone who has the right resources.

Instant White Paper Download: What Can You Do with Your Data?

Preparation is the key to negotiating small package agreements, and the prep work can’t begin without gathering data about your business. If you need it, don’t be shy about insisting that your carriers provide complete reporting on your shipping patterns and volumes. Remember, that data belongs to you. Don’t make assumptions.

You would be hard pressed to find anyone, from either carrier, that is purposely out to hurt your business. FedEx and UPS are two of the most revered businesses in the world and for good reason. They are great companies and have great people working for them.

But they have jobs to do and interests to protect just like you do. When it comes to obtaining the best shipping rates for your company, it boils down to resources, information, and intelligence. And most of you reading this will have less of all three relative to your carriers’ understanding of how your small package shipping costs compare to what’s available on the market.

In the end, however, you know your business better than anyone. Don’t close the door on teaming up with a partner to help you compare your business to others in a way that will help you thrive.

It’s hard enough keeping the doors open as it is.


Transportation Impact is the industry leader in small package negotiation. Our team is comprised of former executive-level carrier pricing personnel and has more than 300 years of combined pricing experience. While other companies rely solely on data to determine what a company’s shipping rates should be, our pricing experts go a step farther. After Transportation Impact conducts a thorough analysis of a company’s carrier invoice data, our pricing team reviews and adjusts the results based on proven pricing experience. That’s why we are the only company in the industry that will guarantee its savings projections, in writing, to the tenth of one percent.

Click here to receive an instant download with more information, or call one of our friendly, in-house experts today to schedule a web demo, at (252) 764-2885. Or, if you have 96 seconds to spare, check out the short video below:

6 Keys to Negotiating Great Shipping Rates Tue, 28 Mar 2017 19:30:10 +0000 Continue Reading]]> Preparation plays a key role in how well a company can negotiate the shipping rates contained within its small parcel rate agreements. Everyone knows there is a wide range of discounts small parcel carriers are willing to offer their customers, but the secret to securing the lowest shipping rates lies within the details of knowing what information is both available and relevant to the negotiation.

Here are six ideas to help you negotiate the best possible discounts for your next small package agreement:

1. Get your data together

The more specific information and data you can provide about your shipping history the better. When you generalize key details like shipping patterns, volumes, or accessorials, it forces the carriers to do the same with their pricing. And when carriers paint with broad brush strokes, it often results in an agreement with blurry lines surrounding service-level discounts. While the gross discounts may look good on paper, the agreements usually contain a vast gray area of fine print and minimum charges that diminish the net financial impact to your bottom line.

2. Present it professionally

A well-prepared RFP shows you are serious about negotiating better shipping rates and shows the carriers you know how to thoroughly evaluate their pricing proposals. A lot of engineering manpower resides behind the shipping rates within small parcel rate agreement, and that can make it difficult for even seasoned supply chain professionals to compare rates the agreement’s value to the shipper. Since you are outmanned, it’s important to present a cohesive request to the carriers so they know that you are prepared and that you mean business.

3. Let carriers compete for your business

It’s no secret that FedEx and UPS are great companies from a service standpoint, so it can be a mistake to assume you cannot use both for all types of service levels. Even if your organization has no intention of shifting some or all its volume to the non-incumbent carrier, it’s important to keep that close to the vest. Each carrier’s value proposition is tried and true. While each carrier can support claims to be stronger than the other in various areas, the big picture is one of relative parity – and for a service that widely boils down to only two options, it would be unwise to show your hand and forego what little leverage you have to reduce your shipping rates.

4. Think about the future

It goes without saying that you need to thoroughly understand your company’s current shipping trends and behaviors. While these characteristics are important, it’s also vital to have a firm grip on where you see the business in the mid to long term. If you expect business to improve, you obviously will want to benefit from that through further discounted shipping rates down the road. If you expect it to decline, then you need to be honest with yourself and with your carrier. Otherwise, you will get the carpet pulled out from under your tier-based discounts as your volume declines.

5. Find a partner

Even though you may have the first four points well under control, negotiations of any kind tend to be somewhat shrewd. If there ever were an exercise for which experience mattered, without a doubt, it’s the negotiation of better shipping discounts. While 80 percent (or more) of the process is relatively straightforward, it’s the remaining portion that can make or break the ultimate value of the new rate agreement. Keep an open mind while performing due diligence during the preparation process. Third-party negotiators aren’t for everyone, nor are they all the same. Costs and experience vary widely, but if you find the right partner, you will end up with right carrier agreement for your organization.

6. Maintain your diligence

The work is not done once the contract is signed. If you are not already, look into working with a parcel audit company to make sure the carrier is living up to their end of the contract. Most third-party providers offer an audit solution but keep in mind that you should not be required to pay for both solutions. A good third-party negotiator will continue to validate its performance throughout the term of the small parcel carrier agreement. An audit is a valuable add-on but is meant to provide the customer with added business intelligence and cost recovery due to carrier errors, not to catch things that were missed during the negotiation.

Your approach is everything when it comes to small parcel rate negotiation. Taking the time to prepare properly will help make sure you get the rates possible for your business.


Transportation Impact is the industry leader in small package negotiation. Our team is comprised of former executive-level carrier pricing personnel and has more than 300 years of combined pricing experience. While other companies rely solely on data to determine what a company’s shipping rates should be, our pricing experts go a step farther. After Transportation Impact conducts a thorough analysis of a company’s carrier invoice data, our pricing team reviews and adjusts the results based on proven pricing experience. That’s why we are the only company in the industry that will guarantee its savings projections, in writing, to the tenth of one percent.

Click here to receive an instant download with more information, or call one of our friendly, in-house experts today to schedule a web demo, at (252) 764-2885. Or, if you have 96 seconds to spare, check out the short video below:

How to Choose the Right Parcel Audit Partner Mon, 06 Mar 2017 15:00:28 +0000 Continue Reading]]> Getting in shape is something most of us have grappled with at one point or another. Who knew that having so many solutions for such a widespread problem could yield such futile results?

“Take this pill, pop in this DVD, plug in this contraption and watch lard literally fall from around your waist directly onto the area rug!” they tell us.

“It’s easy,” they say.

Of course, we all know it doesn’t quite work that way.

So, from time to time anyway, we pony up and commit to some sort of regimen that’s going to make it happen.

“For real, this time,” we tell ourselves.

And yet between the diets, the distance running and the yoga classes, many of us invariably fall short of our goals to trim the fat, to become more lean, to run more like a well-oiled machine.

Yet there are a few who always seem to have it figured out. They jog each morning, walk the dog every evening, choose salad over steak and even drink beer. Nothing seems to faze them. Never mind how they convinced themselves to shed pounds in the first place, they, we perceive, must have the magic bullet.

Time, money, willpower, whatever it is, we wish we had more of it. Then we promptly chase that wish with a few gulps of Cabernet and get on with our lives.

Technology vs. Experience

If you think about it, the same problem plagues the parcel audit industry.

Finding a good company to conduct an ongoing small package audit of your carrier invoices has become increasingly difficult during the last several years. Not long ago, the concept was still relatively new, and the industry was somewhat fenced in around companies that pitched industry experience as vital to the equation.

Now the barriers to entry have been lowered by the new fad of “tech-first” companies that leverage their ability to discern the complexities of the invoice process through online platforms that translate aggregate data into reports, charts and dashboards.

What remains is largely a commodity-based industry. The sheer number of providers leaves many consumers with the false impression that one parcel auditor is as good as the next.

Companies with industry experience and those that lean more heavily on technical acumen each bring a lot to the table. As with most choices, though, the best decision for an organization typically boils down to somewhere in the middle.

There is one universal truth, however, that many consumers in this niche B2B space regularly overlook: that no parcel auditor can perform better, from a cost-recovery standpoint, than the market will allow. And the market is solely dictated by the carriers whose services are being audited. Simply put, even the best technology can only capture the amount of credits that there are to be captured. That amount, of course, is a finite number.

Paying Less Isn’t Always More

So where does that leave the consumer?

Well, to start, it illustrates that cost recovery has indeed become a commodity. So long as a parcel auditor has all the rules scripted correctly, no single party is likely to vary much from the others.

It is more important, though, to realize that there is far more value within the data intelligence provided by a parcel auditor than any of the hard-dollar savings your company will recover. And that’s where much of the parity within the industry ends.

A company’s ability to combine an airtight credit-recovery strategy with user-facing technology is what separates vendor from value. It’s no secret that buyers across all industries are quick to jump at low-cost solutions. Still, the you-get-what-you-pay-for adage can be dangerously hard for companies to fully understand.

That’s because the tangible value of the credits recovered by a parcel auditor are only fractional relative to the overall value of the right solution. If all things are equal, the choice is obvious between two companies that can find you $20,000 in credits in a given year. You should choose the one that takes the smallest share, which currently ranges between 25 and 50 percent — a $5,000 difference in the example above.

However, the most overlooked part of the value that a parcel audit brings an organization is the back-end support and solutions that a company provides a buyer to identify and secure harder-to-find savings. Credit recovery is nearly 100-percent automated. Therefore, if that’s all you’re getting from a parcel auditor, you’re not getting nearly enough. The eye-catching charts and reports on the dashboard? Yep, those are automated, too.

What you should be looking for isn’t a parcel auditor, but a partner.

Forming a Parcel Audit Partnership

The best parcel auditors in the industry (and there are several very good ones) will offer a mix of revenue recovery, technology and live support. Used effectively by the buyer, the right parcel audit partnership can yield significant results that are both measurable and surprisingly cost-effective. Companies that invest in effective small package audit partnerships increase productivity by outsourcing grunt work to their parcel auditor and using the data they receive on the back end to make important business decisions, like changing behavior or reallocating resources.

Rather than becoming bogged down in the minutia of day-to-day cost drivers, they trust their small parcel auditing partner to perform due diligence and notify them proactively of any issues they should be aware of. Often, this represents a perfect partnership, since the parcel auditor is paid based on performance. The customer can rest assured that the parcel auditor is doing its job and will happily pay for the results, since the costs are covered by resources that before were going unnoticed.

Furthermore, optimization opportunities can quickly become huge wins for companies that are invested in the power of the right parcel audit platform. For the same reasons companies outsource their negotiations to teams with more information and experience, companies that build a rapport with a quality parcel audit partner achieve far more financial benefit than those looking for a plug-and-play solution to recoup credits for late deliveries and billing inaccuracies.

In the end, counting on a parcel audit to get your supply chain into shape comes with similar pitfalls to setting the bar at “beach bod.” A gym membership is a logical place to start, but the card they give you to hang on your key chain isn’t fooling anyone into thinking you know what time spin class starts.

And even though you might have to pay a little extra to for a membership that includes a personal trainer, you will be much happier with the results.


Transportation Impact offers industry-leading parcel audit technology. We own our Supply Chain Intelligence Platform; we don’t blind label our parcel audit service through a third party like most other companies. Not only does our parcel audit engine sweep your weekly small package carrier invoices to ensure a maximum return on credits due back to your company, our developers, analysts and customer service representatives are fully dedicated to making constant improvements to our already robust web-based platform.

Click here to receive an instant download with more information, or call one of our friendly in-house experts to schedule a web demo today at (252) 764-2885. Or, if you have 86 seconds to spare, check out this short video:


Understanding Your Options: What you should know about the three types of 3PL providers Thu, 19 May 2016 09:00:15 +0000 Continue Reading]]> Choosing the right third-party logistics (3PL) provider is a big decision for a company. More and more, companies are looking for single-source providers capable of managing a larger chunk of their overall supply chain. In the past, many vendors specialized in one particular area — small package, technology, packaging supplies, freight, etc. — and the varied sources made things inherently complex. That has long been counter intuitive for shippers whose No. 1 objective was to simplify.

As is the case with the trucking industry itself — there are more than 1,100 less-than-truckload and truckload carriers — 3PLs are all over the place, and it can be tough to decide which one best suits your needs.

One of the first questions you should ask a prospective 3PL provider is a simple one: Whom do they represent? Essentially there are three types of 3PL provider, and all play an important role within the industry. Deciding which one is right for your company will boil down to your specific needs. Those should be pretty apparent. As for the types of 3PL suitors, below is a breakdown to help you better understand which type is right for you:


In the simplest form, freight brokers are most concerned with matching cost and service needs to individual shipments. In other words, brokers are transaction-minded. When a shipper uses a broker, it’s a lot like investing in the stock market; sometimes you win and sometimes you lose. Brokerages can be great options for transactional shipments when the “stock market” is doing well. The downside is volatility and the fact that, because brokerages are commanding volume from different places to fill truckloads, they are basically middlemen. The brokerage itself owns the rates, not the customer, since the brokerage is responsible for the total volume. Sometimes shipments are a lot cheaper, and sometimes they are a lot more expensive. In many ways, technology has forced brokerages to either expand their service offerings or abandon the business altogether. Those that are still in the game, however, understand the strengths and weaknesses of their preferred providers and can match a shipper’s individual freight with a carrier that will make ends meet. Frequently used by companies with relatively light freight volume, brokerages can provide benefit, but freight moving with any regularity likely will require a 3PL with a broader portfolio.

Carrier Agents

Carrier agents obtain pricing from a network of carriers and resell their rates to shippers. Think of them like taxi drivers that get a cut of the cover any time someone requests to be taken to the “best bar in town.” Companies looking to move freight will contact their 3PL with the bill of lading, and the 3PL will match the freight, density and destination with the carrier within its network that can best meet the needs of the customer. The customer will never see the bottom line price that the carrier will charge for the freight, since the 3PL will obviously need to profit on the transaction as well. Therefore, it can be difficult for the customer to know where the markup is. Depending on volumes, the customer probably would negotiate better rates on its own, but not everyone has the resources. The downside of the carrier agent model is that only certain carriers will work with companies that fall within that model due to potential conflicts of interest. If only certain bars are paying cab drivers a cut of the money they bring in at the door, it will obviously facilitate bias and limit the number of carriers a company ultimately has to choose from.

Shipper’s Agents

Shipper’s agents determine which carriers best suit a company’s needs and negotiate rates with all of those carriers and thus build a customer its own network. This type of 3PL likely has its own version of a transportation management system (TMS) or is at least capable of loading a customer’s custom rates into the TMS they already use. This type of provider empowers its customers to analyze price and service for each shipment at manifest and to quickly notify a carrier and produce a bill of lading. While brokerages and carrier agents also provide similar visibility through TMS, a shipper can be more certain that their costs are market appropriate, since a shipper’s agent 3PL likely gets compensated based on measured savings; therefore, the better rates they negotiate for you, the larger their share. The customized rates combined with the level of visibility provided by the TMS can really make the freight shipping process more streamlined and cost-effective. The downside with some shipper’s agents is that they withhold the rights to the rates they negotiate for customers. Good 3PLs, though, will negotiate the rates in their customers’ names. These true partnerships will not only provide access to all carriers to ensure that a company can match its needs against the open market, but empower the company to free itself from a partnership down the road without incurring financial hardship.

The 3PL that’s right for a company can depend heavily on volume and overall spend. Shippers with relatively low freight volume can benefit from brokerages or carrier agents and may be too small to qualify for the services provided by a shipper’s agent. If you’re looking for outside help to manage your freight, however, knowing and understanding what types of help are out there are important first steps in making the correct decision. Shipper’s agents are a perfect fit for shippers with a sophisticated supply chain.

Same Shipments. Same Day. Mon, 09 May 2016 11:00:37 +0000 Continue Reading]]> In an intriguing move, UPS announced on February 24 that it has put cash behind a same-day-delivery startup called Deliv, which Fortune speculates could someday become a UPS competitor.

A UPS spokesperson said that the company sees same-day delivery as a growing segment and contends that its investment would be “a better use of resources … than to test ideas internally.”

The move certainly isn’t unprecedented. In fact, it’s somewhat common for the carrier, according to Forbes, who says this strategy is used often with UPS’s venture capital fund, called the Strategic Enterprise Fund.

Regardless how the relationship unfolds, the move shines an unavoidable spotlight on the same-day sector, which seems to be gaining traction despite the fact that UPS doesn’t “see the economics for same-day delivery for retail packages as currently fulfilled by Deliv.”

It’s no secret that UPS, FedEx and Amazon, along with just about every other package carrier, are pulling out all the stops in their respective attempts to keep up with increasing e-commerce demand. That area of the market has been consistently difficult to efficiently capitalize on for UPS and FedEx, especially during the holidays. And as competition across virtually all industries increases, the race to the bottom line often boils down to which companies can put their products in customers’ hands the fastest, even if not necessarily at the lowest cost.

Internet Impulse

To fully understand the same-day scenario, it’s necessary first to understand the difference between the impulse consumer’s willingness to pay a premium for faster service and the more cost-conscious one’s desire to still receive an order quickly, but for a lower price.

E-commerce has substantially lowered barriers to entry, allowing entrepreneurs to thrive collectively in the face of conglomerates. While one small business that sells t-shirts online could never compete with companies like Walmart or Target a decade ago, the sheer volume of those individual small businesses now provides strength in numbers, allowing sustainability mainly by enabling precise, targeted focus. These specialty markets have experienced enough growth through e-commerce that many of the individual businesses are able to leverage just enough discounts from their primary small package carriers to siphon customers away from bigger retailers with clever marketing strategies, comparable products and quick turnaround times.

One thing those companies likely could not afford, however, would be the steep prices associated with same-day services from major carriers like UPS, FedEx or Amazon. Even though these costs probably would be passed on to customers, lagging volumes still would result in higher base costs. This would price many smaller businesses out of at least some business, depending on just how specialized their specific target markets are.

Davids vs. Goliaths

Further complicating the way ahead for smaller shippers is the leverage larger companies have with omni-channel distribution. The ability to fulfill orders from neighborhood brick and mortar stores, combined with larger discounts for shipping services, leaves large retailers, for instance, more than capable of competing directly with smaller companies selling the same products.

All is not lost for the small business, however. There are several very important facets of the supply chain for which the Davids of the world still have the upper hand; mainly cost to serve and customer service. While a larger competitor may be able to fill orders from any or all of its stores, there is, of course, great and complex cost associated with the resources required to do so. Staff, assets and technology have tangible, hard-dollar costs, while implementation, strategy and execution have soft-dollar costs that many companies still struggle to manage efficiently.

Undoubtedly, a large part of big box retailers’ plans is to afford online customers the same ability to make an impulse purchase as in-store shoppers. Store displays and in-store layouts and promotions are things we’re all familiar with. How many times have you seen a child throwing a tantrum in the checkout line? There’s a reason the candy isn’t stocked next to the area rugs.

Grownups are impulse buyers, too, especially those of us who are still young enough to sometimes wonder whether we’ve grown up or not. The modern consumer wants the best of both worlds – the convenience of shopping online and the access to instant gratification.

And while it’s not quite instantaneous yet, same-day delivery is a move in the right direction.

What Buying a Car Will Teach You About Small Package Negotiation Tue, 03 May 2016 14:05:10 +0000 Continue Reading]]> Buying a new car is one of most exciting and one of the most miserable experiences all rolled into one. On one hand, there is that shiny, new set of wheels you’ve wanted for a while now – maybe even your entire life. On the other, there’s the price tag; the mere sight of which invokes that inevitable thought: I can’t believe I’m about do this.

So you do what everyone does. You negotiate. Every conceivable point of leverage is applied full tilt in an effort to drive off the lot feeling high on that new car smell undeterred by an emptiness in the pit of your stomach (and wallet).

The sales rep starts at the sticker price, you start somewhere short of it, and together you embark on a battle between “This is as low as we can go” and “This is the most I’m willing to pay.” Fueled by stubbornness and stale coffee you hold your ground as the rep pawns himself between you and the number cruncher fighting to protect the dealership’s bottom line.

Minutes turn into hours and you gaze out the showroom window wondering whether that beige sedan with the dirty windshield is really so bad after all.

You might not know it, but the similarities between haggling over the price of a new car and bargaining for better shipping rates are striking. Take the following into consideration during your next carrier negotiation:

The Sales Pitch
The best car for the money vs. The best discounts in the market for a company of your size

Let’s face it, it’s about the margins. Whether you’re buying the car or negotiating a carrier contract, finance is looking at the bottom line. How much money will we make?

Don’t take offense; that’s why people are in business. Don’t take no for an answer, either. What most buyers don’t know (or don’t realize) is that in both situations the sales rep doesn’t actually know where the bottom line is. He or she is simply at the mercy of the pricing department. In either scenario that department manages its information very skillfully.

While that may seem hard to fathom, think about it: How badly would the company’s margins deteriorate over time if the balance of power was spread haphazardly throughout the sales team?

Sure, some would be diligent in their attentiveness to the bottom line, but salespeople are salespeople. They get paid to sell, and many of them are going to justify a sale above all else, including the company’s profit. Car dealerships and carriers alike are very aware of this, and take measures to limit how low the company can actually go. That’s why the car salesperson makes so many trips back and forth with the message “This is lowest price we can offer.” Like it or not, your carrier rep is trained to do the exact same thing.

They can go lower. And if you play your cards correctly, they will go lower.

The Value Proposition
The service plan vs. The warehouse design

How many times have you ever bought a car and not been lectured on the value of the service plan? It comes in many forms. Extended warranties, free maintenance, you name it. This essentially costs the dealership nothing, and more often than not the value doesn’t come anywhere close to offsetting the hard-dollar savings you will forgo in exchange for it.

The carriers push value adds in much the same way. Take warehouse design, for instance. You may have heard something along these lines before: We can’t discount the services any more than we already have, but what we can do is help you eliminate inefficiencies which will save you even more money.

Says who? What tangible benefit will your company receive from something like a warehouse design? Maybe you will save money that way, but the carrier will benefit, too; probably by lowering its cost to service your account. The point is that, as is the case with the service plan, the cost to your carrier is not equivalent to the hard-dollar savings you’re looking for on the front end. Furthermore, the carrier has the ability to do both for you. If you weren’t talking discounts and needed the same help on a certain supply chain initiative, your carrier likely would be all ears. They might not be as eager to jump on it (What do they really stand to gain?). But if they are honest about their commitment to partnership, the two of you will find ways to make ends meet.

Stay focused on the price, and let your carrier know that cost is your number one concern. The dog and pony show is secondary.

The Electric Bill
After we pay the light bill… vs. After we pay the light bill…

We all have bills to pay. If you tell your boss that you need a raise because there isn’t a whole lot left after you pay the light bill, you’re not going to get very far. Everyone has an operating ratio. People who own car dealerships own 70-foot sport-fishing yachts. People who own UPS and FedEx own hundreds of airplanes and tens of thousands of vehicles. All of them can pay the light bill, believe me.

It’s a legitimate point, to be sure. Everyone has to look out for the bottom line and no one is in business to lose money. However, pricing engineers have factored every penny into the equation and have a very clear picture of how low they can go. If you’re requesting discounts so steep that the company on the other end of the negotiation can’t pay the bills, then the answer will be no, plain and simple. If they start nickel-and-diming, it may be an indication that you’re getting close to the breaking point. Don’t forget that the other side is fighting for ground just like you.

If the price you pay eats into the margin, they will make up for it somewhere else.
These and other similarities are found in just about all good negotiations. It’s easy for decision makers to worry about rubbing their carrier the wrong way, considering the vital role that the national carriers play in helping businesses get their products into their customers’ hands quickly and reliably. The fact that there are essentially only two players in the small package market means that leverage is harder to come by. Unlike the car dealer, the carriers have the upper hand since they know your options are limited.

Regardless, no company wants to lose business. It’s important to remember that so long as the business is profitable, it still makes good sense. If you do your homework and can resist the pressures to focus on anything other than the bottom line first (the bells and whistles may be important, but first make sure they are affordable), then you will arrive at a solution that makes everyone happy. You will save money and your carrier will make money.

Then both of you can buy a car!

Supply Chain Efficiency Helps UPS 2015 Q2 Profit Surge Fri, 31 Jul 2015 08:31:20 +0000 Continue Reading]]> Efficiency was the underlying theme in UPS’s July 28 shareholder announcement, during which the world’s largest shipping company said that second quarter 2015 diluted earnings per share were $1.35, a 12% increase over adjusted results for the same period in 2014.

All segments improved profitability and expanded margins, according to UPS, much to the delight of shareholders, evidenced by the 7 percent jump in the share price as of noon Wednesday.

“Pricing initiatives continue to drive base rates higher,” according to a news release posted to the UPS website. Also contained in that release was UPS’s selected financial data from its Form 10-K and other filings with the Securities and Exchange Commission, which highlighted several suggestive factors that could attribute to the carrier’s strong performance.

For the quarter, operating expenses dropped 10 percent, while operating profit soared 162 percent. Net income rose 171 percent and UPS reported 8.7 percent net income as a percentage of revenue, up 172 percent from a year prior.

These numbers point to the fact that UPS’s efforts to become more efficient are working, and working very well. The numbers contained within the report point to revenue decline in premium air services and increases in deferred air and ground services, two segments that saw the steeper price increases when the 2015 general rate increase was announced last year, substantiated by steep volume growth in domestic deferred air services.

The evidence seems to point to the fact that UPS’s efforts to more heavily increase prices of services they know their customers will use most are lining their pockets. And as both major global carriers begin to hone in on the holiday season – which has pestered them both in each of the last two years – the true cost of carrier profitability still appears to fall down to their customers.

With changes promised to oversize package surcharges and the advent of peak season surcharges for certain shippers, both carriers are poised to prevent, or at least limit, the recurrence of issues that have led to each carrier’s disappointing fourth quarters in each of the last two years.

Contrarily, however, FedEx and UPS customers will face an increasingly tough road ahead as they struggle to remain competitive in the face of increasing costs for necessary services.

UPS is considering assessing peak season surcharges on a customer-by-customer basis. Customers that experience 10- to 20-percent surges in volume are targets, as are other customers UPS deems are disruptive to their supply chain. Oversize package surcharges are also in play for companies that ship large products that slow down the carrier’s operation. These charges could be implemented only during peak season or permanently in certain, yet-to-be-determined instances.

Of course, no shippers will be immune to the general rate increases that are announced annually, usually in late-October or early-November. With seemingly so many other moving parts in play this year, the effects of those hikes could feel more compounded than usual, especially for customers subject to the pricing changes outlined above.

With so much at stake, it is no wonder that efficiency and optimization have taken the business world by storm. Companies everywhere are looking for the upper hand, and the good ones are finding answers right under their noses, by effectively utilizing their own data to understand their respective businesses in granular detail. While it obviously is a great time to be a UPS or FedEx shareholder, the same can be said for being an analyst. There is no shortage of solutions clamoring to be found; no shortage of work, in other words. The challenge, though, is a company’s ability to combine analytical skill with market knowledge sufficient enough to build a strong foundation for lower costs through statistical analysis. While many have one or the other, possessing an in-house expert (much less an entire team of them) capable of marrying data and market pricing knowledge is a luxury typically afforded only to larger companies, and you would be surprised how many of those do not possess the knowledge they think they do.

A study of 500 high-volume parcel shippers with net annual parcel spends between $200,000 and $30 million found that about 85 percent are missing significant savings opportunities by failing to better optimize the discounts contained within their carrier agreements, regardless of size.

Fortunately, shippers without these resources do have options.

First, savvy companies can leverage their carrier relationships to make ends meet. UPS, in particular, has begun telling customers that the carrier will not make them go it alone when the pricing changes shake out. By leveraging a carrier relationship, high-volume shippers can request that their carrier help shoulder the load. With an army of analysts and engineers (most or all of whom specialize in this sort of thing), the carrier should have all the necessary data to make as good a prediction as any with regard to how a specific company should prepare for the road ahead. Depending on the nature of that relationship, however, that advice could come with a price tag. Even if the carrier is willing to provide insight at no cost to the customer, there is still an unsettling element of letting the fox guard the hen house, in a manner of speaking. Shippers should understand that FedEx and UPS have their own margins to protect, and that their sales reps are only empowered with a limited amount of knowledge. (UPS arguably is more profitable than ever, after all.) Simply put, it would be good practice to vet any advice they provide to prevent unforeseen issues down the road.

Second, options for third-party input abound, many of which are capable of providing the insights needed to make sound business decisions on a quick turnaround, as dictated by an ever changing market. With large customer sets from which to extract data for comparison to your account, a properly vetted third party is uniquely qualified to perform powerful data analysis from a customer perspective. Good ones can determine whether your rates are competitive and provide a wealth of actionable intelligence across many different departments. Great ones will even highlight optimization opportunities you are currently ignoring, or unaware of, many of which could greatly improve the overall health and efficiency of your supply chain. While those services, too, will come at a cost, the decision then boils down to the net benefit to your organization. The latter, should result in more net costs savings and efficiency enhancements that benefit you, the customer.

Of course, which road is best for your company is a case-by-case scenario. The only universal truth is that changes are coming that could have significant impacts to the bottom lines of companies that are ill prepared.

The carriers are pacing the field in terms of efficiency, showing us all how profitable that can be. If you are investor, the numbers suggest that you should take notice. If you are a shipper, likewise, you should take action.

USPS leveraging lightweights to contend with heavyweights Thu, 10 Jul 2014 13:15:39 +0000 Continue Reading]]> It is early July, and the future is unclear.

The opposition is firmly entrenched on either side and possesses resources so far outnumbering their own that winning is improbable and even survival is uncertain.

Then, with its back against the wall, the underdog, desperate to seize an opportunity, sees its chance.

It had to start somewhere.

No, this is not the American Revolution. It is the United States Postal Service. And on July 1, it fired a shot that, while not heard around the world, certainly piqued the interest around shipping circles everywhere.

Under increasing pressure to perform in the face of imposing competition from the world’s two largest parcel shipping companies, the future for the USPS has at times seemed bleak. But the timing of the announced dimensional weight pricing changes by FedEx and UPS could not have provided a better platform for the proposed USPS cost cuts absorb the spotlight.

Now, for the first time in years, shifting volume to the Post Office could again be a viable option.

That is because its brass decided to buck the trend of rising prices and make a play for market share when it slashed prices in key areas of its Commercial Plus Price Sheet. While the rate structure still must receive approval from the Postal Regulatory Commission, the proposed prices demand that shippers take the USPS seriously, lest spend nearly 50 percent more on certain packages.

USPS Commercial Plus pricing charges commercial and residential packages equally, while FedEx and UPS each tack on a $2.90 surcharge for the latter. Commercial Plus requires a minimum volume threshold of 50,000 packages per year, and any shippers that wish to divert volume could reap heavy benefits if the pricing model is approved and thus goes into effect on September 7.

The most significant and consistent price changes occur with shallow-zone (2 through 4) USPS shipments that weigh up to 15 pounds; specifically residential shipments. USPS Commercial Plus rates for packages in this range would be cheaper than FedEx and UPS published rates by an average of 27 percent for commercial shipments and about 45 percent for residential ones.

The announcement is part of a move not only to become a stronger player in the lightweight parcel market, but also to shift its current customers toward a more efficient supply chain. Proposed retail rates would actually increase an average of 1.7 percent over where they stand now. However, the USPS is leaving customers a perfectly sensible option to help mitigate these increases via its Commercial Base pricing model, which contains proposed cuts that can be attained simply by using Click-N-Ship, PC Postage products, permit imprints, or digital mailing systems (meters) that generate an IBI (Information Based Indicia) and submit data electronically, according to a release on the USPS website.

Still the buzz is almost solely about the Postal Service’s push to attract short-zone shipments on the premise of lower rates. As such, when comparing to FedEx and UPS rates, it is important to factor commercial and residential ground discounts to determine what the true impact of diverting volume to the USPS would be.

A current FedEx or UPS customer that qualifies for USPS Commercial Plus pricing and receives an average discount on its FedEx and/or UPS ground volume likely would achieve more substantial savings on residential shipments as opposed to commercial ones, since USPS residential shipments are not subjected to residential surcharges.

Another factor that could skew the numbers in a positive way for the customer is fuel surcharge. FedEx and UPS charge a percentage-based fee for fuel, depending on the market, whereas the USPS has no such add-on for commercial and/or residential ground shipments.

All things considered, the proposed Postal Service rates do indeed have strong potential to significantly help cost-conscious companies save money. While it is important to weigh the pros and cons relative to your own company’s business rules and best practices and to analyze your own unique data to determine the true net savings potential, there is little doubt that the latest move by the USPS is bold.

Whether it proves to be revolutionary? Well, that remains to be seen.

Dimensional Doomsday? UPS CEO hints dimensional pricing change could be announced within a month Mon, 02 Jun 2014 14:38:58 +0000 Continue Reading]]> In what was described as a “fireside chat” between Bernstein analysts and UPS CEO Scott Davis during an investor-relations meeting on Wednesday, Davis called the approach “sensible” when asked whether the global shipping leader would follow in the footsteps of its largest competitor and apply dimensional weight pricing to all ground shipments.

Davis went on to say that UPS is investigating all options with regard to the decision in an effort to determine the best approach.

According to the Bernstein findings, sent to investors after the meeting, investors should expect an official decision within a month. The report says that UPS concedes that “there will be some box adjusting on the customer front.”

Bernstein’s note to investors said UPS believes that “overall, it will be a win-win for both customers and UPS, since customers will reduce shipping costs and UPS will gain capacity.”

The potential for adverse customer selection, should UPS not follow, is also part of the decision process, according to the report.

On May 2, FedEx turned the shipping industry on its head by announcing it would apply dimensional weight pricing to all ground shipments, effective January 1, 2015. Each carrier implemented dimensional pricing models, which derive a “billable” weight for packages based on cubic-inch measurements divided by a published rate factor of 166, to compensate for capacity issues presented by large, lightweight packages. To date, any ground package smaller than three cubic feet (5,184 cubic inches) will be charged based on the actual weight of the shipment. Packages that measure above that threshold will be billed based on the greater of the dimensional and actual weights.

In 2015, however, that will change for FedEx customers, likely resulting in significant cost increases for businesses that ship lightweight items – like pillows, lamp shades or shoes – in larger boxes. FedEx stands to gain about $350 million in additional revenue following the move, and Kevin Sterling, a BB&T Capital Markets analyst, said he projects the shift will boost FedEx’s annual operating income by $180 million, according to a May 8 report by The Detroit News.

Because UPS possesses a larger ground network than FedEx, those numbers could be even more mouth-watering for UPS and its investors.

Naturally, how UPS will react is the burning question being asked by decision makers eager to brace for the potential impact in the New Year and beyond. Based on the historical correlation between things like new service offerings and pricing changes among the world’s top shipping competitors, the overwhelming opinion is that an adoption of the same model by UPS is a foregone conclusion.

And while Davis stopped short of confirming that assumption, his comments have certainly fanned the flame.

Of course, it can be argued that UPS stands to gain in the long run, should it break the chain of mirroring FedEx’s price increases; even if only temporarily. If UPS could avoid the temptation, even for a year, it likely would gain market share by gobbling up companies that abandon FedEx out of fear of eroding profitability. Wholesale carrier shifts are often time-sensitive, resource-hungry initiatives that many companies prefer to avoid. Were UPS to stand pat for a period before eventually implementing the same pricing change, customers acquired during the transition period would seemingly have little incentive to go back from whence they came.

Another potential alternative would be for UPS to simply reduce its current dimensional threshold below three cubic feet.

Still, hundreds of millions of dollars in additional revenue brought in with the simple flip of a switch is likely to put dollar signs in the eyes of even the world’s largest shipping company.

Then, of course, there are the customers…

While analysts in every industry delve into dissecting billions of aggregate numbers in an effort to determine what the overall impact would be on their companies, a Ph.D. in rocket science is not necessary to ascertain that prices certainly are not coming down.

What’s the worst that could happen if UPS makes the switch?

A 346 percent cost increase; that’s what.

Yes… Three. Hundred. Forty. Six.

A Zone 8, 1-pound shipment spaciously arranged in a 12x12x36 inch box – which represents the current dimensional weight pricing threshold for each carrier – would cost $7.71 for the remainder of 2014. Next year, however, the price for that same package would soar to $34.41.

Specifically, dimensional weight is calculated by multiplying the dimensions of a package, length by width by height, then dividing the product by 166. A package’s billable weight is the greater of the dimensional or actual weights. So, if you apply that formula to the current threshold, you’re left with a money-hungry 32-pound package. If that package only happens to contain, for example, a desk calendar, then it might be in a FedEx or UPS customer’s best interest to find a smaller box; or consider the financial benefit of encouraging their own customers to cozy up to their email calendars.

Of course, this apocalyptic example doesn’t exactly reflect the most feasible shipment, but it does make very clear the fact that shippers of large, lightweight goods had better get to brainstorming.

Below is a breakdown of similar worst-case scenarios across all zones:



According to a May 7 report by the The Wall Street Journal, analysts think more than 30% of total shipments will be affected, and many weigh less than five pounds.

So, when determining how FedEx’s pricing change, and a potential UPS change, will impact your company’s bottom line, there are several key questions you should consider as you work to determine how the change will affect your business:

What role would a potential 2015 General Rate Increase (GRI) play in the announced increase?

It is important to consider that the rates contained within each carrier’s service guide likely will be at least a few percentage points higher by the time any dimensional weight changes are tossed in. Near the end of each calendar year, typically in between late October and early December, FedEx and UPS usually announce average published rate increases for most or all of their service offerings and service charges. While price changes for air and service charges are relatively straightforward, it is standard procedure for each carrier to refer to average cost hikes related to their respective ground service-level charges, which masks the fact that the price for the most common shipments increase at a disproportionate rate to relatively uncommon shipments, which plays in favor of the carrier.

How will contractual discounts factor into the equation?

High-volume shippers typically receive service-level discounts based on volume and package characteristics, meaning they pay less than published rates in exchange for the amount of business they provide to the carriers. When performing any type of financial impact analysis, it is important to factor these in when determining the true net effect of any dimensional weight pricing changes you have coming your way. For example, if your company currently receives a 20 percent discount on 1- to 5-pound ground shipments, and 25 percent off of 6- to 10-pounds, those discounts need to be included in your analysis. If you have an 18x12x7 (1,512 cubic inches) shipment that weighs three pounds, it will get billed at 10 if and when the change goes into effect. Make sure you subtract your respective discounts from the published rates for each shipment to ensure that you arrive at a true net change, as illustrated below in a breakdown reflecting costs across all zones for the example above:


If UPS implements the same pricing changes, should I turn to regional carriers?

Upon the unveiling of the news, “regional carriers”, “USPS” and “Amazon” have shifted from mere companies to industry buzzwords. Regional carriers hang their hats on charging fewer accessorials and offering later pull times to customers, so it is only natural that shippers ask themselves whether shifting volume to these carriers would help them in the long run. And while that makes sense, it is important to look at the big picture. Hypothetically, such a seismic shift in the costs related to ground parcel networks offers regionals a window of opportunity to partner with major carriers to create network and/or service agreements with regional carriers – similar to what we saw with the introduction of FedEx SmartPost and UPS SurePost services. As grumblings over ever-increasing shipping costs grow, companies are (and should be) taking a harder look at the pros and cons of incorporating regionals into their parcel supply chains. Still, the only way for those regionals to shift the landscape, so to speak, is not to become competitors, but rather allies to FedEx and/or UPS. That would mean that, while regional carriers might provide short-term relief, the potential exists for partnerships, the likes of which FedEx and UPS have demonstrated their willingness to form, may lessen the financial impact at an undetermined point in the future.

What about Amazon?

Rumblings (and even some evidence to support the notion) abound that Amazon is hard at work, developing a logistics service to rival FedEx and UPS. Amazon’s growth, combined with UPS’s (Amazon’s primary parcel carrier) poor service performance last Christmas all but confirm that Amazon’s brass is following the changing landscape of the parcel shipping industry closely. And given the uproar generated by the dimension-based pricing models, it would seem logical that Amazon engineers are brainstorming a simpler, more shipper-friendly cost structure that would surpass necessary density-to-profitability ratios. Of course, what Amazon has in the works is of little solace to companies looking to dodge steep price increases within six months, but staying abreast to the company’s shipping-related announcements will put savvy businesses in prime position to take advantage if and when the opportunity arises.

Can a third-party parcel consultant help stop the bleeding?

Full disclosure: Brandon Staton, author and publisher of this article, is marketing and public relations manager for Transportation Impact and First Flight Solutions, third-party parcel consultants specializing in helping customers reduce parcel costs through carrier rate negotiation and parcel auditing.

A good parcel consultant can begin by helping you measure the net impact of dimensional weight increases related specifically to your business and its unique package characteristics and shipping trends. Before you can stop the bleeding, it is important to know two things: if you are even bleeding (i.e. will these cost increases actually impact your business), and if so, where is the cut; that is, which areas of your carrier agreement are driving costs up and profitability down? Third-party companies have made their mark in the industry by helping companies break aggregate, complex shipping data into discernable reports from which educated and effective decisions can be made. Often, companies assume that because the bulk of their shipments do not fall into a certain bucket (ground shipments subject to dimensional pricing in this case) that the impact will be minimal. Those assumptions can be costly. Since most parcel consultants are paid on a performance-based model, they are willing to thoroughly analyze your data at no cost, and in a fraction of the time that most companies could on their own. Therefore, the only real way to know whether hiring outside help is right for your company is to request a demonstration of their service portfolio and an explanation of their qualifications and business model.

It remains to be seen whether UPS will buck the trend of aligning its pricing models with its largest competitor, but companies that fail to prepare, as they say, are preparing to fail. Shipping is a numbers game; and the numbers point to one conclusion – a conclusion substantiated by the Bernstein findings. So while the news should come as no surprise, the net effect of the resulting cost increases could; even for companies that think they are well-prepared.