UPS Does It As Well

As I predicted in my last Blog, UPS today has announced they are following FedEx Ground/Home Delivery and will start charging weight based on the larger of actual or dimensional weight. According to UPS, this change will affect the cost of about 2/3 of their packages. This will substantially improve margins for both UPS and FedEx and send shippers scrambling to reduce package sizes and/or find other shipping options.

My sources inside USPS say that they have no plans to change their size and weight factors. If so, that will give shippers the opportunity to switch to Priority Mail, Standard Mail, and Parcel Select and save money. USPS will have the opportunity to pick up a lot of new business from the other carriers and improve their bottom line. Hopefully they will take advantage and improve their financial situation.

UPS and FedEx will probably exempt their larger customers for a short transition period. The hardest hit will be small shippers who could see their costs rise by 25-50%, depending on what they currently ship. The world for them will be very different.

I’m putting together the numbers for switching to USPS from UPS and FedEx in 2015. I’ll be back soon to share some opportunities.

The Commercial Carrier Alternatives – UPS® and FedEx®

Since 1970 the USPS has operated as semi-independent Federal agency charged with operating as a non-profit organization.  While the USPS is “semi independent”, it can hardly be called a private enterprise entity.  The Federal Government mandates services, locations, and have successfully slowed or eliminated plans to make the operation more efficient.  They can do this because they have infused taxpayer money into the system to make up for huge losses in recent years.  In my opinion, it is a wonder that the USPS has as good a package delivery system as they do.

With that in mind, let’s discuss the true commercial alternatives – UPS® and FedEx® (FX).  For this discussion, I will detail the carriers’ residential ground delivery services.

The two carriers are very similar and have almost identical rates, rules and fees so I will discuss their attributes and pricing together.

Basics:

•  Consistent, dependable service to all US addresses other than PO, APO, and FPO Boxes
• Guaranteed transit times – you can request a refund for late shipments *
• 24 hour toll free numbers (with live, trained agents) for delivery, damage, pricing, and other assistance
• Automatic, free loss and damage insurance for the value of the shipment (up to $100)
• Free online tracking and tracing on every shipment
• Systems flexible enough to have minimal slowdowns even during peak periods
• It can be less expensive when you create labels and ship online using websites or free software
• Offer package intercept, redirect, return capabilities if needed

Total pricing is similar to Priority Mail, but can actually beat all USPS service pricing on selected  weight and distance shipments to the 48 States.  Both UPS and FX have a ground service to Alaska and Hawaii, but it is not competitive to the Standard Mail and Mail Select USPS package options on those routes.

Pricing:

•  Standard ground pricing – weight and zone based
• Surcharge for residential shipments – currently $2.80
• Surcharge for extra fuel cost – currently 6.5%
• Surcharge for rural delivery – currently $2.75 or $3.50 depending on how rural
• Ships at actual weight under three cubic feet. — dim weight above that
• Surcharges for packages with a longest length 60” to 108” or 130”+  – length + girth **

With all the surcharges, it is amazing that these two could ever beat USPS on price.  USPS does not have of these type of surcharges.  I’ll show you how it all works in the next couple of posts.

Next up – Pro and Cons – USPS versus UPS, and FedEx

*  The guarantees have exceptions for weather, disasters, and civil unrest, etc

**  “Girth” is the total inches around the smallest two dimensions of a box. Example:  If a box is 28” x 16” x 14” the total length + girth is 28+16+16+14+14=88.