Good Consultants vs Bad

I recently got fired up when I read a post from a Transportation Professional on LinkedIn that detailed how he felt that it was not a great idea for a company to engage with a Parcel/Freight consulting company for assistance with carrier contract negotiation. The message the post attempted to deliver was that it’s not worth bringing in outside experts, due to the fact that the costs associated with doing so will erode a lot of the overall savings potential.

I really saw a lot of issues with the message that the author of the post was trying to portray, along with opinions expressed by others in the comments. This left me thinking that there really are a lot of misunderstandings and misconceptions in the Logistics community regarding the value that a Parcel/ Freight consultant can provide. I would expect that this negative sentiment is driven by bad experiences, and bad actors in the Logistics consulting world. 

So, I thought it would be beneficial to put together an article that explains how all Logistics consultants are not created equal. I will also address the reality that the costs associated with engaging Parcel/ Freight consultants may appear at first glance to be high. However, the value that a solid provider delivers should always outweigh the cost multi-fold. If you engage with the right Parcel/ Freight consultant- the ROI should be staggering! 

There were several recurring themes in the original post and comments that attempted to downplay the value of Parcel/Freight consultants. 

  1. The Gain Share pricing model that is often used in the Parcel/Freight Consulting world is too costly and should be avoided, or minimized.
  2. Companies should hire in house Transportation experts instead of using consultants or outsourcing
  3. Parcel/Freight Consultants do not have access to, and cannot provide meaningful Market Intelligence. They only use marketing and scare tactics that suggest that carriers are overcharging shippers. 

As someone that has been on both sides of the negotiating table, I feel that I am well positioned to address each of these scenarios. 

No Pain, No Gain

We have been hearing more and more about companies being concerned with the Gain Share model, due to the costs that can be associated with this. There are often concerns about the percentages being charged, along with the Gain Share term (length of time that is charged). 

The good news for shippers is that the Gain Share amounts that consultants had charged in the past (as much as 50%), have come down. This is somewhat due to increased competition in the consulting world. But, is also tied to improvements in technology. 

The analysis associated with Contract Optimization/Analysis that was done in the past was a bit more manual. Carrier data has gotten better, and consultants have been able to build programs that take away some of the manual work that was required in the past. This has helped to drive down some of the costs incurred by consultants, which is now being passed onto their shipper clients.

However, we must caution you about relying on the use of technology in the Contract Optimization/ Analysis process. Our long term experience tells us that besides having good technology and systems, it is imperative that a consultant also incorporate their knowledge, experience and insight into the process. The bottom line is that good consultants will “put their hands on your data”. 

There are consultants out there that will just inject your carrier invoice data into their system and then have it spit out results, which will be fed to you. These types of consultants are also likely to agree to the lowest Gain Share percentages and terms. There is a reason for this, and you will pay for it in the end. Basically, they are not spending the time or using capable human capital to truly dig into your data to provide a comprehensive analysis.  

Money that you save from those offering lower Gain Share percentages and terms can be far less than what you can save by partnering with a consultant that really digs into your data, and has the resources and intellectual capital that will lead to the best outcome for your negotiations. 

Shippers often push for shorter Gain Share terms to keep their costs down, and maximize their savings in later years of a contract. However, it is important to consider the downside to this.  A top notch Parcel/Freight consultant will check carrier rates for accuracy as part of their weekly Gain Share reporting process. So, shippers basically receive a comprehensive free rate audit as part of a Gain Share scenario. So, once the term of the Gain Share agreement is over, so is the auditing process. 

We can tell you from firsthand experience that carrier rates need to be checked in every year of an agreement.  We have seen customers experience significant overcharges following annual rate changes, since there are a lot of manual processes that carriers use to update shipper’s rates, discounts and incentives. The impact of money lost due to billing errors can easily eclipse charges associated with paying a Gain Share for multiple years. 

Right Man (Person), for the Job

There is no debate that a company should try to hire top notch Transportation professionals for their Logistics functions. We can tell you how important this is, because we work with a lot of them! 

There is a common misconception in the Logistics world, that a company only needs to use a consultant if the folks that they have on staff are lacking in knowledge or experience. Some Transportation professionals feel threatened by consultants because they are afraid that they might make them look bad!  Some Transportation Professionals feel that leadership might question their abilities if they push for a consulting engagement. There is nothing further from the truth than this.

Parcel/Freight consultants provide tremendous value to a company’s Logistics function in a variety of ways. First, good consultants have a much broader view of carrier rates compared to an individual Transportation or Logistics Manager.  If a carrier offers a proposal to a Transportation/Logistics Manager, that individual only has the ability to compare the offer to their existing agreement. Maybe there are savings, but how do they know if these are the best rates they can achieve? They have nothing else to compare them to! A good consultant will have the data, experience, and insight that no individual within a company’s logistics operations could possess. 

Another way that consultants support top notch Transportation Professionals is by providing a second set of eyes. Anyone in the Parcel/Freight world knows that carrier agreements and proposals are complex. It is very easy to miss a single discount level, minimum, or contract term, that could have major impacts on shipping costs. So, having a good consultant review carrier agreements and proposals is basically a form of insurance against making costly mistakes! Once again, this could pay dividends far beyond the costs associated with engaging with a consultant. 

Artificial (Market) Intelligence

Just so you know, we did not use AI to write this article! Also to let you know, our Market Place intelligence is real! If a consultant tells you that you are over paying your carriers before analyzing your data, you better start running. If a consultant is willing to quote you a Gain Share percentage before analyzing your data, forget running, get in your car and get the hell out of there as fast as you can! Both of these are signs that there will be little effort, insight, or resources put into helping you negotiate the best deals.

A good consultant will not use scare tactics or misrepresentations to help increase their business. The better consultant will provide potential customers with a free Comprehensive Logistics Analysis to determine if there are any real savings opportunities. The best consultant will use a free upfront analysis, provide marketplace data they possess, along with their experience and unique insight to help you drive maximum savings. They will utilize a multi-faceted approach (not just Contract Optimization) to help you improve your bottom line. 

So, if you would like to explore the benefits of working with a best in class Parcel/Freight consultant give us a call today. We are sure that you will get fired up when you hear some of the creative ways we have helped shippers achieve unbelievable ROI’s through their engagement with us.  

 

2024: Year of Shipping Challenges

2024 Could Present Greater Challenges And Significant Disruptions

Our friends at OEC Group have provided an interesting perspective on what international shippers might expect in 2024.  It is with these challenges in mind, that we urge our clients and prospective clients to reach out to ICC to schedule a free, no obligation, consultation with one of our Supply Chain experts.  Our goal would be to review your shipping plans for 2024 and discuss how ICC, with our vast network of global logistics solution providers, can assist you in ensuring your 2024 will be pain free and cost efficient.

“2023 will be remembered as a unique year in supply chain history because of the precipitous fall of rates from historic highs back to pre-pandemic levels. As 2023 ends, experts believe that 2024 may have its own set of surprises and challenges that could disrupt and alter the industry’s landscape.”

One challenge, the practice of blank sailings, was a defining problem for many shippers in 2023. It is expected to press on throughout 2024. The continuation of aggressive blank sailing program is a result of the carriers direct need to control capacity as the ratio of supply and demand slips through over supply as a result of new ship orders being delivered to market throughout 2023 and 2024. This will force both importers and exporters to continue being agile with their supply chain strategies while carriers continue to struggle with balancing wildly fluctuating vessel capacity with shipper demand.

This continued practice, and the volatile rate swings that come with it, will make for a very interesting contract season. To have success, shippers should partner with a third party logistics provider that can tackle their long-and-short-term fluctuating capacity and price requirements, and advanced planning options.

The call for sustainability is another subject that will remain at the forefront, especially as climate issues continue to plague the industry and the movement of vessels. Issues such as draft restrictions and vessel limitations through the Panama Canal will be increasingly impactful as we move into the new year, and experts will consistently monitor other critical waterways around the globe, such as the Mississippi and Rhine Rivers, that have already had problems due to lack of rainfall.

“These highly delicate problems could have volatile consequences that will potentially reverberate throughout the industry for years to come. Simply turning a page on a calendar will not erase these and other serious concerns that are affecting the industry,” said Anthony Fullbrook, President of OEC Group’s Northeast Region. “Shippers need to align themselves with professionals that can give them as many options as possible to ensure the short and long-term viability of their supply chain. Those who fail to do this will suffer severe consequences.”

The last few months of 2024 could be especially volatile due to potential labor action at U-S East and Gulf Coast ports as the International Longshoremen’s Association’s (ILA) contract expires at the end of September. The ILA, led by its president Harold J. Daggett, has been outspoken about its determination to negotiate hard before the current contract ends. Union representation is digging in on port automation, worker pay and benefits, and compensation for working through the pandemic.

If negotiations go awry, then shippers, carriers, and providers could see a situation far worse than what was experienced earlier this year with ILWU-PMA contract disagreements. Slowdowns and other negotiating tactics could occur at any time during 2024, which could significantly disrupt supply chains and drive rates dramatically upward.

“Importers and exporters need to plan ahead and be open to all options as 2024 could be a very rough ride. Having as many options as possible will be the key to succeeding in this environment,” said Peter Hsieh, Vice President of Sales and Marketing for OEC Group’s Northeast region. “The more port pairings, intermodal options, and final trucking and distribution solutions shippers have access to, the better chance they’ll have at minimizing delays, building a reliable supply chain, and beating what promises to be a very challenging market.”

Full article from OEC Group can be found here: https://www.oecgroup-communications.com/post/shippers-beware-2024-could-present-greater-challenges-and-significant-disruptions

The True Role of AI in Logistics

The True Role of AI in Logistics: Navigating a World of Constant Disruption

In an era marked by relentless disruptions, the logistics sector finds itself at a crossroads of transformation. Artificial Intelligence (AI) stands as a beacon of innovation, promising to steer this industry through the tumultuous waters of change.

But as we look to the horizon, questions arise about the effectiveness of AI in logistics, the functions it will enhance or overshadow, and the role of consultants in guiding companies through these decisions.

AI’s Effectiveness Amidst Disruption

The logistics industry, characterized by its complexity and the need for real-time decision-making, is particularly susceptible to global disruptions. AI’s prowess lies in its predictive capabilities, which allow for the anticipation of such disruptions and the formulation of proactive strategies.

By analyzing vast datasets, AI can forecast demand patterns, inventory needs, and potential bottlenecks, enabling companies to pivot before a crisis hits. The effectiveness of AI, therefore, is not just in managing the present but in preempting the future, transforming logistics into a forward-looking domain that’s always one step ahead.

Impact on Logistics Functions

AI’s impact on logistics is multifaceted, with some areas ripe for transformation and others that will remain human-centric. Warehouse operations, for instance, are undergoing a revolution with AI-driven automation. Robotics, powered by AI, are streamlining sorting, packing, and inventory management, leading to unprecedented efficiency gains.

On the other hand, transportation remains a domain where the human touch is irreplaceable. AI here augments human capabilities, enhancing efficiency and decision-making but not replacing the nuanced judgments and adaptability that human operators provide. The distinction lies in the nature of tasks: repetitive, data-intensive functions are AI’s forte, while roles requiring emotional intelligence, complex decision-making, and adaptability remain human-led.

Logistics Consultants as a Decision-Making Catalyst

In navigating the AI landscape, companies often grapple with the “how” and “when” of integration. This is where logistics consultants like ICC can be instrumental. By providing frameworks for digital transformation, consultants can help businesses assess their readiness for AI adoption. Through its advocacy for cross-border data flows and digital collaborations, we can facilitate the sharing of best practices and success stories, offering a roadmap for companies looking to harness AI.

Steering into the Future: Embracing AI for a Resilient Logistics Landscape

AI’s role in logistics is not just as a tool for efficiency but as a compass for navigating disruption. Its effectiveness will be contingent on the industry’s willingness to embrace predictive over reactive models. While AI will revolutionize certain functions, it will enhance others, ensuring that the human element remains integral to logistics.

Logistics consultants provide the necessary guidance, ensuring that companies do not just adopt AI but adapt to it, fostering a logistics sector that is resilient, forward-thinking, and perpetually ready for the next wave of change. As we stand on the brink of this new era, the question is not whether AI will be effective, but how we will harness its full potential to redefine the landscape of logistics.

Learn more by setting up a free consultation with our logistics experts today.

Beyond the Price Tag

Cultivating a Value-Centric Parcel Carrier Relationship

Navigating the intricate dance of a shipper/parcel carrier relationship requires more than a keen eye on the bottom line; it demands a shift in dialogue from the immediate allure of price to the enduring promise of value. 

This philosophy is not just about deflecting attention but about guiding clients to a vantage point where long-term benefits outshine short-term savings. Its here that the client-focused consultants can truly excel, helping decision-makers to see beyond the price tag and embrace the holistic value of their investments.  

Understanding the Price-Value Dichotomy

The fixation on price is a natural inclination for clients seeking to maximize their immediate gains from parcel carriers. However, this narrow focus can eclipse the broader picture of total cost and long-term value. The art of consulting is not just about presenting a product or service; it’s about leading a client through a paradigm shift—from price-conscious to value-aware.

How to Shift from Price-Conscious to Value Aware

1. From Price to Total Cost: 

A good logistics consultant helps a client to see beyond the tip of the iceberg. The dialogue should illuminate how your carrier’s offering reduces not just the monetary cost but also the cost of time, potential waste, and inefficiency. By articulating the broader cost implications, a good consultant can reframe the conversation to focus on the comprehensive value your provider’s solution provides.

2. From Savings to Differentiation: 

The allure of savings is potent, but it’s the differentiation that sustains a business relationship. When price is the only factor, it’s crucial to help clients pivot the conversation to what sets a carrier’s offering apart. This shift is about showcasing the unique benefits and superior outcomes that justify the price difference. It’s not just about what the service is, but what the service does differently—and better.

3. From Narrow to Broad Needs: 

Simplistic needs invite simplistic solutions. By broadening the conversation to encompass the full spectrum of the client’s complex needs, you create more value for your client.  A parcel carrier should be a partner, not just a provider.

Empathy as the Gateway to Value

Each conversational shift begins with two powerful words: “I understand.” This empathetic bridge reassures the client that their concerns are heard and validated. A good logistics consultant will work with you to find a parcel carrier that understands this important dynamic.  It’s the starting point for a dialogue that transitions from a transactional interaction to a consultative relationship.

The Focal Point 

In the end, what remains focal is what becomes important. By maintaining a steadfast focus on value, our clients can elevate the conversation, transcend the commoditization trap, and make better decisions that are not just good for today but great for tomorrow.  Learn how ICC Logistics is different by setting up a free consultation today.  Let’s help you get the value you deserve out of your parcel carrier relationships.

UPS and DOWNS in the Parcel World

UPS and DOWNS in the Parcel World

The rise and fall of FedEx and UPS stock prices, and what it means for you

If you have been following UPS and FedEx Stock prices for the past 6 months, you have probably noticed some major differences in performance. During this period, UPS Stock has seen a decline of over 18%, while the FedEx stock price has increased by almost 20%. While you may think that these swings are only important for the stockholders of these respective companies, we feel that this is equally important for shippers.

To explain this, the first important question to ask is, what is driving these major changes? If you have been following the blogs that we have been putting out for the past few months, you probably have a good idea already. 

We had been monitoring and reporting on the UPS/Teamster negotiations that started back in April. The negotiations were quite contentious, and ended with UPS providing an offer that the Teamsters touted as “Historic”, and that will cost UPS $30 Billion over the life of the new five-year agreement. 

UPS leadership has publicly debated how much this new agreement will actually cost the company. However, regardless of how much, it is pretty obvious that it is going to increase their costs in a meaningful way. 

The chart below illustrates the performance of UPS Stock price over the past 6 months. As you can see there was a big drop in value following the kick-off of negotiations, most likely driven by the negative sentiment and risks associated with a potential strike by the Teamsters. 

The stock has continued to fall following the completion of negotiations, and has seen a steady decline since UPS reported Q2 earnings at the beginning of August. This UPS earnings report acknowledged the loss of volume due to customer concerns of the outcome of their negotiations with the Teamsters. UPS also lowered its revenue outlook for the year following the outcome of the new agreement.

For FedEx, there has been a steady uptick in their stock price. As you can see in the chart below, their stock has risen substantially during the same period. 

FedEx earnings reports have suggested that they have been successful in reducing costs and have solid plans to continue doing so. However, they have also acknowledged the fact that UPS/Teamsters negotiations have helped them gain market share. 

FedEx’s chief customer officer, Brie Carere, said “We onboarded new customers who valued our service, and were committed to a long-term partnership with FedEx,” she said on the company’s earnings call Wednesday. “As a result, we added approximately 400,000 in average daily volume by the end of the first quarter.” She then went on to say “My job is to make it very difficult for our primary competitor to win back that share.”

In case you didn’t catch it, the statement made by Ms. Carere should be the aha moment that explains why these fluctuations in stock prices are important to shippers! The bottom line is that both carriers have a need for volume right now. The economy is soft, which is having a negative impact on volume. UPS needs to recoup volumes lost due to Teamster contract negotiations, and FedEx has won volume from UPS that they don’t want to lose. Seems like the perfect storm for shippers. This suggests that carriers might be willing to get aggressive with pricing to protect and or grow their volumes.

So, now you are probably thinking that you need to call your respective UPS or FedEx rep to try to take advantage of this situation. Maybe you have been successful in the past with obtaining better rates and discounts directly from your carriers. Maybe you have built and used successful strategies in the past that resulted in cost reductions for your company. But before you pick up your phone to call your reps, there are some very important questions that you need to ask yourself.

  1. How well do you understand your own Parcel Data? Do you have the visibility that you need to understand your shipment characteristics and trends of your parcel spend? Are you relying on data/reporting that comes directly from the carrier to understand your volumes? (bad idea #1) 
  2. How do you know that you will be able to obtain the best rates possible from your carriers? What do you have to compare this to? Are you going to bench mark new offers against your own existing rates and discounts? (bad idea #2)
  3. Do you have the ability to completely analyze and determine the true impact of offers that you receive? Will your analysis pick up on discount details that you feel will not be impactful, but actually are? Are you going to take your carrier rep’s word for it when they tell you that their new offer is going to save you money?  (you guessed it- bad idea #3!)

Our long term experience tells us that instead of picking up the phone to call your carrier rep, you should first pick-up the phone to call us. Here’s why; 

  1. The proprietary analytical program/process that we have built along with our associated Auditing & Reporting portal allows for unmatched visibility and reporting. THIS WILL TRULY ALLOW YOU TO UNDERSTAND YOUR PARCEL VOLUMES AND SHIPPING CHARACTERISTICS!  
  2. Shippers have no way of knowing that they are receiving the best rates and discounts possible on their own. Do not take your carrier rep’s word for it.  ICC Logistics utilizes a vast database of over $9B/yr. in carrier data that allows for highly accurate benchmarking of rates and discounts. WE KNOW WHAT THE BEST RATES AND DISCOUNTS LOOK LIKE!
  3. Our analysis will provide a true and accurate picture of the impact of all carrier offers. We have protected many customers from accepting offers that carriers claim would reduce costs, and that would actually have had little impact or even increase costs. DON’T BE FOOLED BY SMOKE AND MIRRORS!

So if you are looking to enter into negotiations with your carriers from a position of power, it is imperative to partner with a company that understands the process. Market conditions suggest that now is the time to dust off your parcel carrier contracts, and take advantage of potential cost reductions. The Parcel market is ever changing, and the pendulum can quickly swing back the other way as capacity tightens. We are certain that our approach to negotiations will help shorten the timeline and result in the highest level of savings possible. So, be sure to reach out to us today to get things moving right away! 

 

UPS Announces (and Surprises) with GRI Announcement

Following FedEx’s 2024 General Rate Increase Announcement on August 30th, we published an article that provided some details and insight to help shippers begin planning for the increased costs that this will drive. We had also expressed surprise that FedEx had announced an average GRI that was lower than last year. At the time that this article was released, UPS had not yet publicized their plans for their 2024 rate change. 

So, a lot of us were on the edge of our seats, wondering how UPS would react. They were put in a bit of a sticky situation given the fact that they needed to figure out a way to fund the expensive new Teamster agreement that just went in place. At the same time, they need to be sure to protect their crumbling market share. UPS has faced competitive pressure from FedEx, Amazon, LaserShip/ Ontrac and the slew of other delivery options that have popped up within the last few years. 

Many experts including ICC Logistics, were predicting record level increases for the Parcel shipping community. Some even predicted double digit increases! Well, it looks like we all received another major surprise. It looks like UPS has decided that they are not in a position to announce a higher GRI than FedEx. On Friday September 8th, UPS posted the following on their website. 

The following changes will be effective December 26, 2023. Previews will be available later.

The rates for UPS® Ground, UPS Air and International services will increase an average net 5.9%.

The list of ZIP Codes to which Area Surcharges apply will change.

The list of ZIP Codes aligned to certain zones will change

Once again we need to emphasize that the announced GRI is just an average, and that the actual impact will vary greatly depending on a shipper’s volume characteristics.

Also, we are certain that both carriers will find other creative ways to help ensure they protect and grow their profit margins. Our last article detailed how Parcel Carrier accessorial charges have been a sneaky way for them to drive rate increases that are higher than the GRI that they announce. We provided some important details and insight related to how Delivery Area Surcharges have been added and changed over time. 

It looks like we hit the nail on the head in relation to Delivery Area Surcharges, as the UPS announcement spells out that the list of Zip Codes that DAS applies to will change! We are willing to bet the farm that the change will not result in less zip codes receiving DAS charges!

It’s also interesting that UPS announced that there will be a change in the alignment of zip codes and zones. We had seen this announced in the past. However, we were not able to identify any major changes in the zone charts that we studied. We will definitely be taking a closer look at this area for the 2024 rate increase impact, as this could have a major impact on shippers. 

For example, currently 5 Lbs. UPS Ground Commercial package going to Zone 4 carries a published rate of $14.60. If UPS adjusted their zone chart, and caused this same package to be classified as a Zone 5 package, the cost would jump to $15.85, an 8.6% increase! This is obviously far above the announced 5.9% GRI. We are not saying that UPS or FedEx will make these kind of changes. However, the fact that UPS has announced that there will be changes to zones has one wondering. 

In addition to the GRI announcement, UPS also provided details related to their Peak Demand, and Holiday Peak surcharges for the remainder of 2023 and into 2024. Besides big increases in Additional Handling and Large Package Surcharges (which will increase 6-7% compared to Peak Demand surcharges from 2022), they also provided specifics of rates for high volume Holiday Peak shippers (A Demand Surcharge will apply to certain UPS Air Residential, UPS Ground Residential and UPS SurePost packages, for customers who are billed for more than 20,000 packages during any week following October 2022). 

Below is the chart that high volume shippers will use to determine their peak demand surcharges. 

 

October 29, 2023 until January 13, 2024
Service Level>105% to 125% of Baseline Volume>125% to 150% of Baseline Volume>150% to 200% of Baseline Volume>200% to 300% of Baseline Volume>300% to 400% of Baseline Volume>400% of Baseline Volume
UPS SurePost$1.35 Per Package$1.85 Per Package$2.15 Per Package$2.60 Per Package$4.45 Per Package$6.40 Per Package
UPS Ground Residential$1.35 Per Package$1.85 Per Package$2.15 Per Package$2.60 Per Package$4.45 Per Package$6.40 Per Package
UPS Next Day Air Residential$2.40 Per Package$2.90 Per Package$3.20 Per Package$3.65 Per Package$5.50 Per Package$7.50 Per Package
All Other UPS Air Residential$2.40 Per Package$2.90 Per Package$3.20 Per Package$3.65 Per Package$5.50 Per Package$7.50 Per Package

We compared this chart to the one that UPS provided for the 2022 Holiday Peak Season. The increase in rates for these volume demand surcharges increased as much as 8% for some tiers! 

So what does this all mean? First of all, we are sticking to our guns, and reiterating that the impact of the 2024 Parcel Carrier rate increase will be higher than 5.9% for many. We are already seeing this in many areas as described above, and expect to continue to see this as the specifics of 2024 rates trickle in from both UPS and FedEx. 

The bottom line is that if you are using the announced 5.9% GRI’s as a basis to budget for 2024, you are probably making a big mistake.  The impact of the increases could be record level for some, depending on which levers the carriers decide to pull! Also, don’t think that you are protected from major increases if you have a Rate Cap in place in your agreements. Rate Caps typically only apply to base rates, so accessorial increases can have a major impact on your actual costs.

Finally, we cannot stress enough the importance of partnering with companies like ICC Logistics, that can help you determine the exact impact of these rate changes. It is crucial to fully analyze your current agreements, pricing structures, and actual data to determine true impact. Without this approach, you are leaving yourself open to surprises that can have a major negative impact on you and your companies’ profits.