Thursday, November 12, 2009

IRS Reverses FedEx Ground Ruling

In what appears to be the latest chapter in a series of long-awaited FedEx rulings on their independent contractor woes, the IRS announced that it has dropped the last audit of FedEx. At present, FedEx does not expect any more audits on the company for this matter.

The IRS ruled in late October that it will reverse its earlier stance and previous assessment that FedEx had misclassified some of its package delivery drivers as independent contractors. The reversal squarely backs the FedEx stance that its classification of certain drivers in the network as independent contractors is appropriate. Furthermore, the ruling drops a potential $319 million assessment by the IRS. FedEx broke the news in their SEC filing.

For the past three years, it has been common for us to hear UPS warn our clients during presentations about the status of FedEx independent contractors and to watch for a huge move by the federal government to push for the classification of these drivers to employees. That would open the door for potential  labor union representation and a more level playing field when it comes to how this part of FedEx's business is managed (UPS drivers and other parts of UPS are represented by the Teamsters). Now that appears to not be the case.

What we're seeing as we complete a record number of projects in 2009 and slated for 2010 is that FedEx has made aggressive moves to gain market share among dwindling and finite package volume. Most recently, FedEx announced the introduction of their SmartPost service; a low-priced ground residential delivery service that has significant cost savings in the 1-10 lb range. The delivery of SmartPost packages is handled by both FedEx and the US Postal Service.

At the same time and within the same climate, we're seeing backward moves by UPS. Although most pricing remains competitive, UPS is tendering odd documents with their new rounds of pricing; including loosely-worded early termination agreements. For nearly two decades, UPS has been overt in their education to the shipper that their pricing documents are "Carrier Agreements" (as worded clearly on the top of every document) and not a "contract". With the advent of early termination, one would construe that there must be a term...and with the statement of penalties for early termination, it would appear that these are now contracts.

The months of January and February are always interesting in our organization, as we're fielding calls and requests from clients and prospects for assistance with the rate increases that they knew were coming, but didn't know how they would affect their bottom line. This winter will also be an interesting time to watch the continued jockeying of the two remaining global service providers in this space.

IRS Drops Last FedEx Audit
IRS Reverses FedEx Ground Ruling

Wednesday, November 4, 2009

When Rates Caps Aren't Enough in 2010

The 2010 general rate increase will impact your business in more ways than one. Don't let 2010 be another year when the carriers raise your base rates well over 5% and also increase the surcharges that will ultimately drive up your overall cost of doing business. For example, the FedEx accessible dangerous goods surcharge will increase over 9% going from $65 to $70. Another example is the FedEx Express oversize charge increasing by 9% from $45 to $50 per package. We are all experiencing one of the most challenging economic environments in recent history and the road ahead is treacherous at best. PA & Associates is poised to take your carrier negotiations to a new level with a financial model that has produced an industry leading 42% average savings for our clients. Our value stems from over 18 years of logistics and financial expertise and a team of logistics professionals that deliver quantifiable results.

PA & Associates understands your desire to elevate your ROA (return on assets) and effectively streamline your supply chain. We provide solutions and deliver financial results. Call PA & Associates today at 1-866-200-SAVE to discuss your potential for savings!

Contributors: Steve Syverson, Clorisee Canada, Scott Guldin

Tuesday, November 3, 2009

Help! My Bus With The Right People On It Is Sinking In The Blue Ocean

Sorry to mix business self-help metaphors but I cannot stand empty slogans and war cries! It is a real chafe.

For example, many companies now espouse a “spend management” platform. Like so many hackneyed terms in business, spend management is now overhyped by those companies that are trying to use it as a sword but their services prove to be a meat cleaver instead. Let’s be clear; spend management is more than just cost reduction. Spend management is a philosophy, a practice, a discipline, and ongoing best practices management. And CFOs beware; there is a lot of “sizzle” but no “steak” with many of these service providers and consultants that purport to adhere to spend management principles. Spend management should be the manner in which companies control and optimize the money they spend. So, while cost reduction is the immediate impact, spend management presumes an ongoing discipline and internal practices to control and optimize the spend environment.

Well then, Chris, how can I seek out true spend management companies you might ask? I am glad you asked. Characteristics to be mindful of when considering utilizing a vendor to provide spend management services include: proven data-driven results; the breadth of expertise within that spend area; the makeup of the project team to ensure they bring relevant acumen to the table that is of value to your company; technology solutions--technology solutions--technology solutions; a client list that speaks to your specific industry and spend criteria; white papers, and a consultative and partnering mentality that they bring to each and every project. Experience has shown that such characteristics would indicate that the vendor is capable of not only cost cutting but also implementing far-ranging spend management practices.

The number of indirect spend areas that are in the crosshairs of the vigilant CFO is growing (energy, waste management, logistics, telecom, office supply, accounts payable, printing, cost segregation, etc.), so would the real cream please rise to the top?!!