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UPS Maintains Guarantees For Certain Shipments

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UPS has announced that it will maintain its Money-Back Guarantees for peak-season deliveries of Next-Day Air shipments in domestic and international commerce.

This latest move by UPS is exactly the opposite of the decision by rival FedEx which said they will suspend their money-back guarantees for peak-season deliveries of air express shipments within the U.S. and for export from the US.  The FedEx suspension will be in place for the period from Dec. 13, 2022 to Jan. 2, 2023.

UPS’ Money-Back Guarantees for expedited international deliveries typically depend on the distance and the time zones separating the origin and destination points. For example, a package shipped on the evening of Nov. 29 from UPS’ main global air hub in Louisville, Kentucky, and bound for Cologne, Germany, (the carrier’s European air hub), will be guaranteed if the package arrives on Dec. 1 either by 2 p.m. or by the end of the day, depending on the air service selected.

For decades, FedEx and UPS offered money-back guarantees on late or missed deliveries for most  services , as long as affected shippers could provide sufficient proof of the original service commitments.  However, both carriers suspended all money-back guarantees during the spring of 2020 as pandemic-related changes in buying behavior sent delivery volumes spiking and made it impossible for the carriers to honor all of their guarantees. Both service providers subsequently reinstated their Money-Back Guarantees for Next-Day Air services. However, neither company has reinstated their Ground Service Guarantees.

Because ground deliveries are relatively low margin, the carriers have no financial incentive to restore money-back guarantees for this service,  and risk relinquishing already thin profits.  Over the past several years, both parcel carriers have been placing provisions in their customer contracts to eliminate any Money Back Guarantees.  Many customers have taken exception to those provisions as they feel they will lose sight of the overall service they are receiving.  Many are at least opting for maintaining exceptions for Next-Day Air Services, since these shipments are so much more costly.

Most industry experts don’t expect FedEx or UPS to fully restore service guarantees, partly because there is no overwhelming  pressure from the market to do so. In addition, it can be costly and time-consuming for shippers to scour numerous invoices to unearth the proof the carriers generally require to issue a refund.

The good news is that Third Party Parcel Audit Service Providers (like ICC Logistics!) have the expertise to perform all of these service audits and typically only charge their customers a percentage of the actual refunds received and without any up-front costs.

Therefore, any  shipper that ships a decent amount of volume should surely consider on-boarding an outsourced Parcel Auditing process to recover these lost revenues.  There really is no down side to this!

Supply Chain Disruptions to Continue

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Why Preparation is Key and 6 Tips to Help You Navigate What’s Next

In a recent blog post we addressed FedEx and their financial and delivery woes.  Today, we dive deeper into the Supply Chain to give us a glimpse into the future.  In an October 27, 2022 article, CSCMP, (Council of Supply Chain Management Professionals), quoted an SAP survey stating 52% of US-based senior business decision makers said their supply chains still needed “much improvement” and 49% expected these issues to last until the summer of 2023.

We certainly agree; between the political unrest in the world, a shortage of raw materials and rising fuel costs, supply chain disruptions will continue to be a major issue for companies and consumers.  Take the auto industry for example.  Without computer chips, they cannot deliver cars.  Combine that with the rising cost of pre-owned cars, prices are soaring and delivery times are lengthening.

Covid-19 created an absolute explosion of Business to Consumer shipments which UPS obviously capitalized on.

Another example is the housing market.  With limited inventory for sale, prices climbed 20-30% during the pandemic.  Buyers were paying as much as $100,000 over asking, with a line of buyers right behind them willing to meet the price.  You would think, with the limited inventory, new construction would be up, but the cost of raw materials and the availability of getting them has slowed the new housing market.  A friend recently ordered a new refrigerator and was told 10-12 week’s minimum before delivery.

And the supply chain shortages aren’t just about products, it’s people too.  With the “Great Resignation,” we continue to face a major labor shortage. Unemployment is low with more jobs than people and yet companies can’t find the right people for the jobs they are seeking to fill. This puts pressure on wages to rise and prices to increase, resulting in inflation, lower profits and ultimately workforce reductions.  Specifically add to these the shortage of drivers and we are living the perfect storm and a vicious cycle.

During this election cycle, the economy was the #1 concern for voters. The SAP survey highlighted a big concern for increased prices leading shoppers to reduce their planned holiday spending. But this might be what economists were aiming for, a slowing down of the economy with the aim of avoiding a recession.

What can Supply Chain Executives do?

  1. Build strong(er) relationships with your current suppliers
  2. Increase and Capitalize on your Spend Influence
  3. Modernize your procurement process (digital transformation)
  4. Improve your analytical and reporting capabilities
  5. Be agile and willing to change where needed (have contingency plans)
  6. Minimize Risk and Show Stability

As people shift further and further to online shopping, things like speed of delivery, product availability and price reductions will weigh heavily on their minds.  Shoppers see the only solution is to buy early so companies need to plan ahead.  Once the model of most companies, “Just in Time” is rapidly changing to “Just in Case.”  The fact is, those with inventory will ultimately get the sale.

In the end, we believe “Inventory will be King”. Shore up each segment of your supply chain and be prepared for a rough ride.  We realize our message is at odds with itself, increasing inventory while reducing costs is hard to do. It might be too late for this holiday season, so start building inventory now to prepare for future near-term sales tomorrow and through 2023.

The need to continually focus on the Big Picture is critical for success.  Plan properly; Execute flawlessly, validate continually, Modify when necessary.

Need help with your Big Picture?  Our Supply Chain and Logistics Executives are here to help your company achieve all of its goals.

The 7 Qs You’re Probably Not Asking

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The Questions You Don’t Ask Your Logistics Consultant Will Cost You

Over the past several years, we have seen a major change in the Logistics landscape. The capacity issues driven by the Covid-19 Pandemic created a vacuum that opened the door for many new Final Mile, and Middle Mile delivery options.  The added complexity in the industry also drove an increase in the number of companies providing Logistics Consulting services. There are many individuals that have left traditional Transportation Sales and Transportation Management roles, and thrown their hats into the Logistics Consulting ring.

Our customers often tell us that they are bombarded with emails from “Logistics Consultants” trying to engage them with the services they provide.

For shippers, this can make it extremely difficult to decide who they should partner with in the confusing world of self-declared “industry experts.” So individuals are left wondering what criteria they should use to develop a short list of candidates that can drive the best results.

We recently witnessed one such attempt to narrow the list of companies being considered for Contract Optimization services. A company with a significant Small Parcel spend sent an email out to a large number of Logistics Consulting companies, indicating that they were looking for help with negotiating their current Small Parcel agreement. This company only provided the name of their current parcel carrier, along with details of their current annual spend.  They asked that the consulting companies respond with the following three pieces of information.

  1. Percent Gain Share (the percent of confirmed savings that the consulting company would charge to provide these services).
  2. Number of years of the gain share (how many years the consulting company would require to be paid for confirmed savings).
  3. Estimated Savings (how much the consulting company feels they could shave off of their existing Small Parcel spend).

parcel and freight contract audit serviceObviously the intent of this email was to identify the companies that could generate the greatest amount of savings, and charge the least amount of money to accomplish those savings. This seems like a logical vetting process to minimize the number of candidates being considered, and we understand why a company might take this approach, given the large number of companies vying to capture their business.

However, based on our long term experience, we feel that this approach overlooks the critical aspects that shippers should consider when choosing a Logistics Consulting partner in the Post-Covid world.

First of all, not having a solid understanding of a shipper’s existing shipment characteristics, pricing and discount structures, as well as their current contract provisions makes it impossible to estimate savings potential. There might have been a time when Small Parcel Carriers would be willing to do anything to avoid losing packages (even if it meant taking package volume at a loss).  This made it easy for shippers and their consultants to expect double digit cost reductions every time agreement renewal time came around.

So, pre-Covid, it was probably safe to provide blind estimates of potential savings.  However, the tightening of high quality Small Parcel capacity has created a new approach for the major Small Parcel carriers. We have all heard about FedEx’s profitability struggles, along with UPS’s “Better Not Bigger” strategy (recently changed to Better and Bolder.) With this, the ability to automatically assume large savings potential no longer exists. Based on our long term industry experience and insight, we feel that providing a savings estimate based purely on carrier spend can be extremely misleading, and often results in major disappointment for shippers.

The only way for shippers to maximize savings is to partner with companies that have developed the experience, expertise, technology and resources that allow them to take a much more surgical approach to negotiating carrier pricing. It is not practical to just throw something at the wall and see what sticks! In the new world of carrier pricing, it is imperative to have a solid grasp of current market conditions, along with the analytical abilities to drive the greatest overall savings.

We realize that Gain Share terms should be an important part of the decision process for shippers. However, it should definitely not be the only factor.

Choosing to partner with a company just because they work on a smaller gain share percentage might not deliver the best overall results.

Shippers need to consider what they will be getting for their money. They must be sure that those that they partner with have the skill set, technology, and resources that will guide them throughout the process.

Important questions to consider are:

  1. Does my consulting partner truly understand my goals and desired shipping strategy?
  2. Will my consulting partner have the ability to provide accurate, ongoing analysis of carrier offers to confirm TRUE potential savings?
  3. Will my consulting partner have the ability/ resources to quickly turn analyses around to help expedite the negotiation process?
  4. Does my consulting partner have access to a large, proprietary data base of current carrier billing data that will enable them to create realistic incentive targets?
  5. Does my consulting partner have a long term, proven track record in the industry?
  6. Is my consulting partner in tune with the current Logistics Market trends, and have they adjusted their strategy to help drive maximum savings for customers?
  7. Can my consulting partner provide coaching and insight that will help reduce anxiety and ensure optimal results?

Choosing the correct Logistics consultant can be extremely impactful.

For example, if a shipper partners with a less experienced consulting company that takes a 20% gain share and they help generate savings of $500,000/yr., the net benefit to them would be $400,000/yr. However, if they had chosen a more experienced company that works on a 30% Gain Share and that company is able to achieve savings of $1,000,000/yr., the net benefit would be $700,000/yr. Obviously experience paid off in this scenario!

The point of all this is that who you choose to partner with can make a world of difference in your company’s efforts to reduce costs.

Now we’d be remiss if we didn’t do a shameless plug. After all, when you’ve been in this business for nearly 50 years, you know what works for clients and what does not.

That leads us to our client’s “bill of rights” if you will. It’s what you can expect to receive, what we guarantee, to you.

If you choose to engage ICC Logistics in your Contract Optimization process, we can guarantee the following;

  1. We will not provide you with misleading savings estimates just to try to gain your business. Our business has been built around integrity, and we will provide this to you throughout the process.  Transparency is key.  No surprises here.
  2. ICC is in a position to drive maximum savings due to our long term experience, expertise, proprietary technology, and unique insight.  Our mandate is to use that experience to YOUR advantage.
  3. We will negotiate a Gain Share percentage that is fair and competitive in the market place. This will be based on your unique pricing scenario, to drive the best results possible.  No cookie cutter programs for you.  We know you’re unique and you need a program that is as unique as your business.
  4. Our free Bench Marking Analysis will provide you with a deeper dive into your shipment characteristics, and reporting that can help you make important transportation decisions.  Data is Powerful.  It will make you a Superhero.  Be the company superhero.
  5. And, finally, you will not be disappointed!

If what you read resonated with you, give us a call, you won’t be disappointed.

 

 

 

GLOBAL SHIPPERS’ FACE ROUGH WATERS AHEAD

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What do global shippers have to look forward to during the last quarter of 2022?

And, what’s in store for them in 2023?

First and foremost is a real threat of a recession. 

The fact is that some financial experts have claimed we are already in a full blown recession.  The 4th quarter of 2022 also promises continued high inflation, including rising fuel prices, as well as rising interest rates which will surely continue into 2023.  When you add all of these financial woes together, you can see why global shippers are really concerned, not only about the fourth quarter of 2022, but what this means for their businesses in 2023 as well.  

Some interesting facts that have added to this concern is the operational and financial troubles at FedEx impacting the global shipping market. With major service and labor issues as well as declining revenues, FedEx is significantly increasing costs for their customers. Their 2023 General Rate Increase, as well as their Peak shipping season surcharges will certainly have a negative financial impact on their customers.

 

With all of this “noise” out there, we are constantly looking at the trends to best advise our clients in preparing for the future.  Much has been written about FedEx’s problems.  In a recent Bloomberg article (Thomas Black, Sept 16, 2022), the headline reads “FedEx’s Problems Are About FedEx, Not the World”.  But let’s face it, that headline in our estimation is very misleading.  The fact is that FedEx’s problems do affect the “world” FedEx plays in and obviously their problems will have a significant impact on their global shipping community.  

One major issue with FedEx is their 2 separate operating units; FedEx Ground and FedEx Express. Ground primarily hires independent contractors to handle packages from sorting facilities to final destination, what we call the Final Mile. This unit struggles with operational inefficiencies and has seen profit margins decline for years.  The recent worker shortages, continued pressure from the government, both federal and state to change employment status from independent contractor to employee have only exacerbated the problem.  On the other hand, the Express unit or overnight deliveries has never been very profitable.  Some have suggested combining these units would improve efficiencies and should reduce costs, but that remains to be seen, even if FedEx would entertain such a decision.

UPS recently announced its 2023 General Rate Increases and we had estimated they would be an average of 6.9%, just as the GRI FedEx will be implementing.  We were right.

And, let’s not forget there is a real threat of a strike at UPS sometime in mid-2023 as the Teamsters Union continues to point to taking a hard line on bargaining with “Big Brown.” How will UPS’ “Better not Bigger” strategy hold up during those negotiations is anyone’s guess.  

To start, the union is obviously well aware of the excellent financial position of UPS, especially over the past several years under their new CEO Carol Tome.  With significant growth in UPS’ bottom line, the Teamsters will definitely attempt to use this unprecedented growth to their advantage in their upcoming contract negotiations.

Other issues affecting global shippers for the past three years is China’s policy to end Covid-19 outbreaks by shutting down city after city after even a minor Covid breakout.  This will continue to cause production and shipping nightmares for global shippers.   

Global shippers that single source their business, especially with FedEx or UPS for that matter, might consider looking into other competitive service providers to protect themselves against these real potential service disruptions.     

In our opinion, it’s a foregone conclusion that both FedEx and UPS shippers are nervous and will be tempted to look at other shipping alternatives available to them. 

However, do they really have good alternative shipping options available? We think not. 

Certainly the upcoming peak shipping season will make it virtually impossible to move large volumes of business seamlessly as has been the case over the past several years.  

All of this leads to the inevitable; increased shipping costs, and the potential for unexpected service interruptions.  So global shippers will just have to lash themselves to a tree and ride out the storm. But it’s not all bad news.  Having a trusted advisor by your side during tough times is critical. 

As always, ICC is here to assist you in navigating these muddy waters.  Contact us today to learn how we can help you navigate and be in the best possible position for these unprecented times. 

Looking to negotiate better rates?  Make sure you read our latest white paper, the 7 Critical Mistakes Shippers Make and learn how to avoid common pitfalls and take back your negotiating power.