It's official: FedEx cuts one day from ground transit times

FedEx customers received e-mail confirmation today regarding the improvements the carrier has made to their ground network and transit times; particularly in the eastern United States. The e-mail showed a color-coded graphic representation of a US map, similar to the one users can generate from the FedEx website to indicate the  estimated number of transit days for the carrier's Ground service.

We heard about the improvements weeks ago, but details in the form of destination actual zip codes where the improvements were made were hard to come by. Ground service maps were updated at the FedEx website and are now available.

Marked improvements were noted over most of the network. From the Washington, DC area (where PA & Associates is headquartered), FedEx dropped a day of transit time to key markets such as portions of KY, TN, MS (previously a 3-day transit time). FedEx now reaches nearly the entire state of GA, with the exception of the Savannah region, within two days. Alabama, which previously had an almost equal coverage of half of the state at two days and half at three days, now is almost entirely two days.

But the big story is FL. Previous to August, any ground shipment destined anywhere in the state would have taken three days. Now every delivery zip code in the state is a two day delivery.

ND, MT and portions of WY also dropped a day, moving from a five day deliver to four days, as did a portion of NM.

FedEx made steady improvements over the years in getting to CA more quickly. In this iteration, CA transit times did not change. The next day ground destinations also remained unchanged. The improvements are readily visible in the maps below. Dark pink indicates next day ground from the Baltimore/Washington area, turquoise shows two-day, orange three-day, green four-day and fuchsia indicates five-day delivery.

FedEx Ground Delivery Map as of July, 2010

FedEx Ground Delivery Map as of August, 2010

While shaving a day from transit times might not seem like a big deal to the infrequent user of parcel services or even to the consumer, consider this scenario:

E-commerce operations are under considerable pressure to offer promotions for free shipping. Nobody is in business to lose money and e-tailers are no exception. There was a time when the profit earned on shipping was three times (or more) greater than the profit in the product being shipped. Consumer evaluation of the cost of shipping in addition to the product price has narrowed the margin available on shipping. This has led to the common practice of allowing online shoppers to "upgrade" their shipping method to receive products more quickly. Typically, this is positioned on the e-commerce site as an upgrade to express or "air" shipping (at UPS, the branded services are Next Day Air, Next Day Air Saver, 2nd Day Air and Three Day Select. FedEx uses Priority Overnight, Standard Overnight, Two Day and Express Saver).

A good e-tailer with a basic Transportation Management System can manage this upgrade to put them back into the glory days of profit-center shipping. An upgrade to Two Day Air, for example, might mean an increase in the charges to their customer of $15 or more.

I just tried this at Goldman Brothers website. I put a pair of Under Armour shorts and polo shirt into my cart and proceeded to the check out. My cart total qualified me for free shipping ($59 or more). Goldman Brothers is located in NY, so that would actually get to me in one day by Ground service. However, you would never tell the consumer that! According to their website, I saved $7.61; their rate to move my new apparel to me via Ground service.

Let's say I really wanted those items here by the weekend because I had tickets to the Baltimore Orioles and it was going to be hot this weekend (tickets are easy to come by for an O's game these days). So I'd better upgrade my shipping to the two-day option for $17.19.  A TMS could compare the destination to the ground delivery commitment schedule and determine that Ground service would suffice to meet my delivery demand. However, I just paid for 2nd Day Air. Who cares? I got my package when I expected it and the e-tailer just pocketed the difference. Everyone's happy, right? In fairness to Goldman Brothers, they state they use UPS to ship to consumers. Although they still benefit from this scenario, the improvements which are the subject of this post have to do with two-day delivery points on FedEx. Still, FedEx just created an opportunity for some of the more savvy shippers to line their pockets and no one will be the wiser.

What's next at FedEx? We're hearing rumblings that something big is coming this Fall regarding LTL services.

Kindle for your Chaos Contest

Kinaxis, providers of on-demand supply chain analytics, released a contest recently called Kindle for your Chaos! through their online community and blog called Kinaxis Supply Chain Experts Community.

Congratulations to our own Clorisee Canada [web bio | Facebook | LinkedIn] for her submission and story which one her a brand new Kindle.  Great job, Clorisee! Here is the story that she submitted:

In a previous job, I met with customers who were considering switching their business from one shipping carrier to another.  My role was to evaluate the customers supply chain process and help sales win the business by presenting technology solutions that would help improve the process.  The challenges that I faced were many, but gaining the customers trust by being honest with them about capabilities was a great way to help win business. 

I remember going to Michigan to meet with a company that shipped lots of international packages.  They had 3 systems setup and 35 people to do a 2 person process. You see, their systems were all setup to do a small piece of the shipping process due to limitations in their systems.  So the staff walked from one system to another to complete the shipping process on one shipment.  When I first walked into the warehouse and they showed me their shipping process I looked around the room to see if I was on “Candid Camera” because in this century with all of the technology available no one should have a very manual process for creating a carrier shipping label and documents needed for international shipping.  Once I determined I was not on candid camera I asked a lot of questions and proposed a GREAT solution to pull all of their manual processes together to make it easy and more efficient to ship.   

I am sure by now you are wondering how I knew my solution was a great one. Well here is what happened next.  The Carrier I worked for did not win this business because of pricing.  The Carrier that won the business did not present a solution to help streamline the shipping process but their rates came back so low which allowed the customer to still save money.  Once the customer announced the carrier that was chosen they called me to ask if I could present my proposed solution to the winning carrier because they could not explain it and the winning carrier could not think of anything.  This was wrong on so many levels.  I of course turned them down for so many reasons but this validated that my solution was really good. 

Without going into a lot of details enhanced automation of information would have solved their issue but getting to that required out of the box thinking because this customer had network connectivity limitations. Orders were sent to the warehouse via email because the warehouse was down the road from the customer service office and the internal systems were not connected via a network.  To make all of this happen the carrier needed to build a bridge using a server with a make shift network connection so that communication could happen from system to system. Once this internal fake network was setup we could solve their other issues and eliminate a lot of their manual processing that they did. 

No More "Unlimited Weight" UPS Letters - a 44% Increase in Your Shipping Costs

For years, UPS has made sure that shippers comparing their express envelope shipping with FedEx, or even premium US Postal Service offerings, know that a shipper can stuff as much paper as they would like into the UPS letter and legal-sized envelopes without any restriction on weight and still obtain the "letter" rate. In contrast, the FedEx terms place a limit on letter and legal envelopes at eight ounces and everything more than eight ounces is billed at the actual weight.

For shippers or organizations like PA & Associates, which help shippers with their spend management strategies, special consideration needed to be given when negotiating and comparing UPS envelope shipments to FedEx envelope shipments to ensure that shippers considering a move from UPS to FedEx did not realize an increase in shipping expenses in this area.

However, UPS changed this policy for 2010. As noted in the UPS Tariff/Terms And Conditions of Service for Package Shipments in the United States, UPS will now charge by scale weight (rounded up to nearest pound) for letter and legal envelopes weighing more than eight ounces (see page 23, section 35.3). Interesting to note that the Terms and Conditions document is buried four clicks into the UPS.com website.

It isn't surprising that UPS changed its policy for this segment of shipments given their intensive focus on package yield which began in 2009 (more about this fundamental, strategic change in managing profit margins which has already begun to affect end-user pricing and discounts in a future blog post). What some may find surprising is how UPS has (or has not) conveyed this change to their users.

At PA & Associates, we have been monitoring our client data for changes to UPS charges for letters. We have noted that the earliest instance of UPS changing the way they charge for letters weighing more than eight ounces was for the week ending January 23, 2010.

Yet, phone calls and e-mails to a number of UPS account executives to inquire about this issue were met with the same initial response, which went something like this, "No; UPS allows customers unlimited weight for envelope shipments". When we supplied the UPS contact with the reference to the Terms and Conditions document and section stating this change, the response was varied from the honest "I didn't know about this" to the embarrassed "I'll have to check on this and get back to you".

To date, none of our clients which we have inquired with about this change have been made aware of it by someone from UPS. For some of you more cynical users of UPS (or FedEx, for that matter), you may not find this surprising. After all, both companies have issued annual increases and raised surcharge amounts and have been less than helpful in providing the information the average shipper needs to fully understand the impact of increases to their bottom line.

What is the impact to an average UPS shipper?

For illustration purposes, let's create an average week of shipping for a user of UPS services to determine the impact to the shipper's bottom line.

On any given week, our shipper sends 100 letters (in addition to their regular UPS packages). This would not be an uncommon or high amount for someone in the financial services industry (e.g.; mortgage or title business). The shipper is well-aware of the UPS policy to allow for unlimited weight in the envelope and, frequently, sends more than eight ounces of paper per envelope. In fact, this had been a point of consideration in choosing UPS over FedEx for the type of shipping they do.

Of the 100 letters per week, let's say that 25% are contracts or checks and the remainder are loan packages or escrow closing information...stuff that would weigh anywhere between 2 and 7 pounds (we have some creative shippers that, somehow, get upwards of 12 pounds into envelope products!). For pricing purposes, let's divide the 75% of eight-ounce plus shipments evenly over 1 to 7 pounds (about 10 pieces for each weight per week). And, for ease of calculation, let's say that each of these pieces are destined for a Zone 5 recipient.

The results

Prior to the change in pricing, our hapless title shipper was spending $1,717.50 per week to send 100 letters to Zone 5 (this would just be the base rate shipping charge -- at the list rate for 2010-- not including any applicable surcharges or accessorial charges).

After the change in pricing, the same packages now cost $3,887.50; an increase of $2,160 per week or a whopping 44% increase. Over a period of 52 weeks, that's an additional $112,320 in shipping costs that our shipper probably didn't account for in their last re-work of the 2010 budget.

And the sad truth is that the average shipper who does not employ spend management strategies in this critical spend area probably has no idea that costs have gone up. Those that do monitor costs closely might see that something is out of whack, but have no idea what it is or where to find the changes.

What can you do?

The obvious (and biased) answer is that you should contact PA & Associates for assistance in managing your costs. We can assist most shippers, regardless of annual spend, with either a formal spend management project or even just free strategies if you don't qualify for one of our projects. In fact, I'll provide my number here and you can reach me directly: 866-200-SAVE (7283) x 201.

However, there are areas to consider when reviewing your agreements. If you are considering a move to FedEx and ship a critical number of envelopes in your shipping profile, make FedEx aware of this (provide relevant data with service type, weight and zonal breakdown) and request that they make a provision for you in your agreement for unlimited weight envelope shipping. A word of caution, however; the new focus by FedEx and UPS on package yield and a change in honoring discount requests is beginning to take hold in the mass market. Your chances of obtaining such a provision may be slipping away day by day.

If you are a UPS shipper, you can make a similar request of UPS. While FedEx has a formal program to bring parity in this area between their pricing and the way UPS used to honor the unlimited weight envelope, UPS does not. This makes it easier for a FedEx shipper to make such an appeal, while a UPS shipper will be reviewed on a case-by-case basis. So far, UPS has honored our requests to allow a shipper to ease into this change by offering some limited weight, limited time (or both) provisions that do not bring an abrupt change to shipping costs. Note, however, that we're experts at this.  Your results may vary.

I've yet to find any of our clients or a shipper in the general population that actually reads the Terms and Conditions when they are published every year. I once had a bout of insomnia and took a read of the T&C document; worked just as good as an Ambien!

FedEx Express Not Out of the Woods Yet

Martha Coakley, the MA Attorney General and candidate for the Senate seat vacated by the late Ted Kennedy, paid a visit yesterday to a UPS facility in Watertown, MA to meet with Teamsters Local 25 and to sign on to support the Express Carrier Employee Protection Act.

UPS and the Teamsters claim that FedEx has operated at an unfair advantage since its inception by being allowed to classify employees of the Express business unit as railroad and airline employees. UPS employees are organized under the Teamsters.

Coakley's support comes after last month's ruling that the IRS would drop all pending investigations into FedEx Ground operations. The Ground business unit was under investigation for the same employee misclassification which would have lead to the IRS' involvement in auditing previous years of FedEx revenue.

Also present was Sean O'Brien, president of Teamsters Local 25. "This loophole has allowed FedEx to operate on an unfair playing field," O'Brien said. "Most workers at FedEx in the Boston area don't have anything to do with aircraft operations, yet they are trapped under the jurisdiction of the Railway Labor Act. These sorters, drivers, truck mechanics and package delivery drivers deserve the opportunity to join a union to improve their working conditions and benefits."


The Express Carrier Employee Protection Act is cleverly attached to the FAA reauthorization bill which will be heard and discussed by the Senate in the coming months. Some government action is expected.

Teamsters Gain Support From Coakley for FedEx Express Carrier Legislation -- BOSTON, Jan. 15 /PRNewswire-USNewswire/ --

Retail Pricing at Pack and Ship Stores - Is There a Better Way?

[note: this article is in response to the large number of new Facebook fans PA & Associates has garnered since last month; many of which are not commercial shippers, but retail consumers who will, from time to time, need to ship a package FedEx or UPS]

A few years ago, I was in a pack and ship store (the type of retail operation offers post office boxes/mail receipt, shipping supplies, ships packages FedEx/UPS, etc.) picking up some mail. At the counter was a delightful, elderly woman with one small, beautifully wrapped holiday package.

She approached the counter and the clerk asked if he could help her. She said, "Yes; I'd like to send this Christmas present to my grandson in Boise, Idaho. Can you tell me how much that would cost?". Recalling his sales training, the young man working the counter went right in for the kill, "sure -- I'm assuming since its a gift its valuable and you want to make sure it gets there, right?". Grandma replied, "yes, I would guess so". And with that, the clerk had the open door to scare the kindly old woman in the hazards of blindly handing Junior's package off to the black hole that is the US Postal Service versus sending the package through the highly-reliable and trackable service of a parcel package carrier.  The whole time, I'm eavesdropping while I pretend to sort the mail from my box.

She seemed very thankful that the clerk had taken such an interest in her and the package's well-being. After her crash course in parcel shipping, she was sold on the value of sending the package UPS. The clerk took the package from her and placed it on the scale. He called out the weight of the small box to her, "Looks like five pounds...from here to Boise would be $65". She seemed bewildered at the price, but knowing that it was important to have the extra care and handling of Brown on her side, she nodded her head. I just about had a coronary. It took everything in me not to come to her rescue, put my arm around her shoulders and escort her outside to safety -- and ship the package on her behalf at about a 90% savings.

To understand the independent pack and ship retail pricing, you need to know that FedEx and UPS provide three levels of pricing: daily rates, retail rates and discounted rates. Simply put, daily rates are undiscounted "list rates" offered to commercial shippers who have a daily UPS pickup. Retail rates are also undiscounted and provided to shippers that do not have a daily pickup with UPS -- in the past, these were also called counter rates. Retail rates are usually 13%, or so, higher than the daily rates. The remainder of the shippers have some carrier agreement in place with UPS and/or FedEx that provide some level of discount from the daily rate based on package volume and spend.

Independent pack and ship facilities -- those not part of the FedEx Office (formerly Kinko's) or UPS Store system -- usually use the retail rate and add a markup to the price. Remember that the retail rate is already 13% higher than the "list" rate published at ups.com or fedex.com. The "independents" frequently have discounts with UPS and FedEx and make a significant profit margin between the amount they charge their customers and what the carriers charge them.

Is there a better way?

For the average person needing to ship a package FedEx or UPS, here are some tips to reduce the cost:

• If you're employer has a daily pickup and relationship with FedEx or UPS, inquire with your managers or mailroom about shipping the package for you (check with your Human Resources department about company policy). Offer to reimburse your employer for the shipment. If you use one of the "user defined" fields when you create the airbill to include your name or other identifying text, it will be quite easy to find that shipment in the billing data from the carrier for reimbursement.
• Use the US Postal service -- although the tracking isn't as sophisticated as FedEx and UPS, they offer a number of options at a much, much lower rate. For example, Granny's box would have shipped for $4.95 using the Flat Rate Box (inclusive price, no surcharges, boxes and pickup are free).
• And a tip for reducing the shipping fees for items you order online; look for an option to use your own account number (if you have one). Always try to send the package to a commercial address, such as your place of employment, if given the option. Online retailers will pass on the FedEx and UPS residential delivery surcharge to you when you state your home address as your delivery address.

2009: The Year of Paralysis - How Business is Like Surfing

Now that we've turned the corner and closed the last chapter on the year 2009, I'm seeing many posts, tweets and status updates about people ready to say goodbye to the year that was. I will agree that 2009 certainly wasn't the best year for many (in the way we all usually measure success). For some businesses, though, 2009 was a critical and pivotal year for business.

For starters, most trials of any type usually produce something positive. The old adage, "what doesn't kill you will only make you stronger" tends to be true most of the time. Considering the trial by fire that 2009 was for many individuals and businesses, the tough times do serve to burn away the dead brush and make way for healthy growth to come. And, in some cases, the fire got so hot under some businesses that much of what was built (or, really, the unnecessary bloat that was piled on over the years) was burned away so completely that refinement took place; not unlike the way that impurities are scoured from gold to create a more pure and valuable form.

I was recently reflecting with my business partner on what this past year has brought (and what it hasn't).  We discussed how interesting it was that the year started with so much activity. Smaller, more nimble businesses were among our new clients as their CFOs and CEOs were about cutting costs and managing indirect spend categories in an effort to thoroughly ensure the careful stewardship of their organizations and to go about the hard tasks of making difficult decisions designed to weather this storm and ensure that the value of what they serve their market would survive when their market returned. Thinking about a matrix for a second, I'll put these leaders and their businesses in the lower, left quadrant -- SMB market leaders at the early part of the year that took advantage of cost reduction, spend management and looked after the health of their organizations.

At the other end of matrix -- larger companies and later in the year -- we found that most of them couldn't get out of their own way to make a decision. Was it the confusing signals coming from employment numbers, the stock market, the media? A number of false starts and no real turnaround to the economy? I think that's part of it.

Another part of it that we found so very interesting was how organizations make decisions. I'm not talking about the obvious differences between the bureaucracy of large organizations versus the lack thereof in smaller ones. This is something much more subtle; almost like the big (leveraged) organizations were so close to the edge that any decisions -- good or bad -- were not being made. Not unlike the avalanche survivor that can see a pinhole of sunshine as they're buried under the snow, yet so afraid to make a move toward it for survival in fear of the rest of what's around them caving in and taking their life.

And, so, we scratched our heads throughout the last quarter of 2009. Never in the nearly 20-year history of PA & Associates did we have a year in which we spoke with more prospects and issue more service agreements for review. Never, or at least as far back as my now 44-year old memory will allow, can I remember a time when CFOs and others considering our services were more enthusiastic about our approach, our references and our results. Yet, many of these same organizations never figured out how to push past whatever was holding them back; likely the fear of making any decision...good or bad. The paralysis had taken hold.

In my younger years I did a fair bit of surfing and windsurfing. Anyone that's spent any amount of time in the ocean with waves knows that swells come in sets; increasing in size and strength. Good surfers understand where to be at all times. This not only allows for them to catch the best waves, but also provides safety. As waves increase in size and power, they can also break further from shore. This requires paddling TOWARD a wave...and not away from it. Counterintuitive, until you've been caught in the impact zone and you get pounded. That's a feeling you never forget and are not keen on reliving soon.

A long way around to get you back to the point...2009 (and 2010 -- a New Year's celebration doesn't mean this is over) saw some organizations paddling to stay out of the impact zone. It expended energy, but their still alive to catch the next great wave. Others were paralyzed -- caught like a deer in the headlights as the monster waves mounted one after another and pounded them.These were the organizations that needed to paddle the hardest and many of them had the resources to do so. They froze in fear. Shaking their head from the last beating and coming up in the white water, they're big enough to weather another set. They're also over-analytical and fearful of making any decision, good or bad. The sets don't seem to be letting up any time soon. I wonder how many will paddle toward the waves and how many will wash up on the shore licking their wounds from the safety of the beach.

As always, your comments are welcome.