Tony Nuzio, ICC Logistics

Are You Sabotaging Your Transportation and Logistics Negotiations?

Tony Nuzio’s latest article on negotiating transportation and logistics contracts was featured in Parcel Magazine.  Check out the articles below.  Are you sabotaging your transportation and logistics negotiations? The answer might surprise you…

http://www.parcelindustry.com/by-author-1278-1.html

 

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FedEx Announces 2017 General Rate Increases and It Doesn’t Match UPS: What it means for you

Following an announcement made on September 1, 2016 by UPS, FedEx on September 19, 2016 has announced its 2017 General Rate Increases.  UPS’ rates will be increased effective December 26, 2016, while FedEx’ increased rates will become effective on January 2, 2017.  These increase announcements are an annual ritual for the Parcel Carrier Giants, and there are significant changes that you, the shipper need to be aware of to make the best decisions on your shipping moving forward.

This year’s announcement by FedEx brings a few surprises for its customers.  First and foremost, FedEx’ Express Package and Freight standard list rates will increase an average of 3.9% while UPS’ increase announcement indicated their list rates for these same services would increase by 4.9%.  For FedEx Ground and FedEx Home Delivery, the standard list rates will increase 4.9%, the same percentage increase UPS will take on their Ground Delivery charges.

There are other variables in these carrier’s rates when these increases are published and some of these changes will end up taking a big chunk of money out of many FedEx customer’s wallets, for example:

  • FedEx will change the Dimensional Weight Divisor for Ground Shipments from the current factor of 166 to 139; back in 2010, the Dimensional Weight Divisor was 194. Here is an example of the impact this change alone can have on a shipper’s annual freight expense.  This is based on an actual shipper’s current and proposed costs.
  • A 38 lb. Ground package shipped to Zone 6, with package dimensions of 34” x 16” x 13”
  • With a dim factor of 166 the dimensional shipment weight would be 42.6 lbs., rated out at 43 lbs. for a total cost of $35.35.
  • With the new dim factor of 139 this same shipment’s dimensional weight is now 50.8 lbs., rated out at 51 lbs. for a total cost of $38.56
  • The total cost differential is $3.21 more than the previous cost, or 9% higher overall
  • FedEx Freight has also increased its fee for Extreme Length Surcharge from $85.00 to $150.00. Not only that, this increase will be applied when the dimensions of the package are 12 feet and over compared to 15 feet and over which is the current calculation.  This change alone represents an increase of 57%.
  • And another striking change will take effect on February 6, 2017, when FedEx will start adjusting its Fuel Surcharge percentage on a Weekly basis compared to their current adjustments which are on a monthly basis. We can’t help but wonder that FedEx may be thinking the days of low fuel prices may be coming to an end and they want to be in a position to jump on these increases weekly instead of having to wait as long as a month or more to make the adjustment.

If this sounds confusing, that’s because it is.  But have no fear, ICC Logistics has created List Rate Comparison Charts for both FedEx and UPS, comparing the 2016 Base Rates with the 2017 Base Rates to help you, the shipper, better understand how these rates will affect you and arm you with the best information to make decisions.  We also have created The Accessorial Rate Increase Comparison for 2016 vs 2017 which our clients find incredibly valuable.  You can request these charts on the ICC website at www.icclogistics.com.

It’s more important than ever for the shipper to have the knowledge it needs to make the best decisions on shipping. This confusing new reality comes with many variables to consider. But don’t worry, ICC is here to help. Contact one of our profitability specialists today to learn how we can help you navigate the “new normal”. We’re standing by at 516-822-1183.

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Will Amazon Become a Logistics Giant or Just Another Parcel Customer?

It’s no secret that in the last few years, we have been increasingly aware of the influx of small parcels left at consumer’s front doors, 7 days a week. I mean, how many people remember packages delivered to your door on a Sunday? Not me.

Currently, Amazon pays USPS to deliver packages to its customers, not only by adding Sunday as a regular delivery day, but using them to supplement the already-burdened UPS and FedEx delivery networks.

An article recently published on Consumerist.com explores Amazon’s logistics practices and provided some very interesting insights…

If you live in a major metropolitan city, you might notice the increase of white Amazon delivery vans scooting around town. According to Amazon, this is their way of adding yet another guarantee that their customers are getting their packages on time, to make sure that should UPS, FedEx and USPS get overloaded, Amazon’s customers will not be the receiver of a late package.

This was never so evident the article states, than it was in December of 2013, relating to a large backlog of holiday packages at UPS and FedEx.  “The parcel carriers’ appeared to be unprepared for an onslaught of packages they received from Amazon.  Thee parcel carrier’s complaint was that Amazon dumped more deliveries than expected on them at distribution centers, leading to a costly backlog that disappointed gift recipients.”

Further evidence of Amazon’s commitment to their customer delivery promise is very evident in the UK, where Amazon says that the Royal Mail, (although disputed by the Royal Mail), does not have the capacity to deliver all of the packages that Amazon’s customers are ordering.  Amazon currently delivers about half of their customer orders in the UK themselves.

Back here in the US, however, it’s evident to me that at least for now, Amazon is simply supplementing the already loaded UPS, FedEx and USPS delivery systems because of its un-ending commitment to customer satisfaction. And, as a Chief Client Officer, I not only applaud this action, I fully support it.  The underlying question for the future however is this:  Will Amazon become a direct competitor of FedEx and UPS one day, or just another customer, or both for that matter?  Please let us know what you think.

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UPS Announces Rate Increases Effective December 26, 2016

UPS has announced a rate increase effective December 26, 2016.   The increase overall will average 4.9%.  ICC will provide additional details on this increase as soon as they are made available.  We are also waiting to see what FedEx’ increase will be.  For over 10 years now UPS and FedEx have mirrored each other’s increases and we don’t expect anything different this year.

New! 2017 vs 2016 UPS rate increase comparison charts available now. Click here to download.

Learn more here: https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1472754595962-764

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UPS Income on the Rise

Several corporate profit reports recently have not been kind, but that’s not the case with UPS, Inc.

UPS reported second quarter 2016 net revenue at $1.27 Billion an increase of 3.2% in the second quarter last year.  UPS reported that the increase in profits was helped by an increase in volume growth in the e-Commerce international package profitability.  UPS’ Supply Chain and freight business on the other hand was not as rosy with a 15% decline in profitability.  This was a direct result of weakness in both the freight forwarder and LTL market sectors during the second quarter of 2016.

David Abney, UPS CEO stated that UPS was “investing to expand our global network, Implementing new technologies and capturing new revenue in high-growth markets.  These strategic investments in our diversified business again this quarter generated strong value for our customers and shareowners.”

UPS’ package revenue in the US increased by 2.4% to $9 Billion.  International revenue rose to $3.1 Billion let by a 10+% improvement in the Europe to US market.  UPS reported that Supply Chain and freight revenue was 13% higher principally because of the Coyote Logistics acquisition.  And finally, UPS’ LTL business unit saw tonnage fall 10% but the revenue per Hundred Pounds increased by 2.9% indicating better yields per shipment.

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Wal-Mart Takes on Amazon

All it took was a $3.3 Billion deal for Wal-Mart to enter into a head on match with Amazon to see who can win the online shopping Giant of the Year award.  Wal-Mart signed the deal last week to purchase Jet.com to help kick start their e-commerce business operations.  The deal is the largest ever purchase of a US e-Commerce start up according to the Wall Street Journal.

The deal is a clear sign that Wal-Mart sees the growth of on-line sales as a way to boost Wal-Mart’s business now and well into the future.  The new Wal-Mart e-Commerce business unit will be led by Marc Lore, Jet.com’s 46 year old founder.  He will be responsible for both the Wal-Mart and Jet.com business units.  Wal-Mart’s former top on-line executive, Neil Ashe will be leaving the company.

So what does this big investment do for Wal-Mart, glad you asked:

  1. The acquisition marks a significant shift in how Wal-Mart approaches e-commerce which they launched 15 years ago
  2. Wal-Mart has spent billions to build up its on-line distribution network, opening 7 large scale distribution centers in the US
  3. Wal-Mart has always looked at e-Commerce as a secondary business to their big store retail operations, obviously that thinking is changing quickly
  4. Wal-Mart has a long way to ARRIVE AT Amazon’s sales numbers.  Last year Wal-Mart had $14 Billion in e-Commerce sales or 3% of their total annual revenue
  5. Amazon on the other hand had sales last year of $107 Billion including its Web Service Business
  6. Jet has been claiming that it would offer shoppers lower prices than Amazon, a fact that remains to be seen
  7. This acquisition for Wal-Mart will add some 400,000 shoppers monthly and is expected to generate over $1 Billion in sales annually
  8. Wal-Mart will gain access to a larger group of young, wealthy, urban shoppers, a group that up until now has not been on Wal-Mart’s radar screen
  9. In recent months Wal-Mart has added a number of products it sells on line, but continues to lag behind e-Commerce sales growth
  10. Wal-Mart.com now has in excess of 11 million products and is growing rapidly by giving third-party sellers access to their site and encouraging their vendors to up-load product information about their products on Wal-Mart.com

This is truly a “Big Deal” for Wal-Mart and for e-Commerce sales.  While there is a lot of integration that will need to be handled quickly and precisely, we are sure that this new Wal-Mart acquisition will be a boon for business and for the on-line shopping community.

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