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The Evolution Current Industry Trends of the Small Package Marketplace

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The Evolution Current Industry Trends of the Small Package Marketplace

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    1. The Evolution & Current Industry Trends of the Small Package Marketplace ISM Teleconference Monday, November 14th, 2005

    2. We Are Comparing The Four Integrated Carriers DHL (formerly Airborne) FedEx UPS USPS

    3. Today’s Competitive Marketplace Carriers are battling it out for market share and competition is greater than ever before Why is this happening now?

    4. Recent Industry Trend: Carriers Now Offer a Full Portfolio of Services A number of factors have converged to create the most competitive small parcel marketplace ever In prior years, each carrier had a unique market niche, and were content to concentrate on that area: there was little or no market overlap UPS, FedEx, DHL, and the Postal Service now offer a full suite of air, ground, and international shipping options

    5. Late 1990’s: Each Carrier Had A Market Niche UPS was the ground carrier of choice FedEx was the air carrier of choice DHL was the strongest international carrier USPS concentrated on mail and residential small parcel shipments Airborne-low cost express RPS-commercial ground shipments to metro areas

    6. Factors Contributing To Increased Competition Economy Package volume growth has been relatively flat Not as many new packages are being shipped Carriers need to get their additional volume from other carriers Available Capacity New regional hubs, larger truck networks and enhanced technology allow carriers to handle more volume

    7. Factors Contributing To Increased Competition Technology Sorting facilities Barcoding – “smart” labels Tracking Shipping automation Interactive websites EDI billing advances Data capture technology

    8. UPS Technology UPS CampusShip UPS WorldShip UPS OnLine Compatible Solutions ConnectShip UPS Toolkit UPS Address Validation Quantum View Billing format options: Flat File Bill EDI-generated bill Paper bill Package Flow Technology

    9. FedEx Technology FedEx Café FedEx Ship Manager FedEx.com - online shipping FedEx Insight Adhoc Reporting Billing Options EDI DataLink/DirectLink Download invoices from Fedex.com

    10. Factors Contributing To Increased Competition New Services Faster ground networks Residential offerings Special freight services FedEx Freight UPS acquisition of Overnite Transportation UPS stores FedEx Kinko's Portfolio Pricing – The single biggest factor! Carriers offer the maximum discounts only if you give them most, if not all of your business

    11. New Ground Competition UPS and FedEx have enhanced ground delivery times; ground shipments are now day-definite and guaranteed FedEx Home Delivery now serves the entire US The merger of Airborne & DHL creates a new, strong competitor USPS Parcel Select: new service enhancements, new partners

    12. New Air Competition On-time performance is at an all time high for all carriers Carriers have switched most customers from flat-rate (unzoned) pricing, to zone-based pricing Carriers are now targeting specific segments of the air market (letters, heavier and larger shipments, industry groups, etc.)

    13. New International Competition While domestic volume growth is slow, international growth is in double digits FedEx and UPS have added new overseas infrastructure and new hubs Airborne, formerly weak in the international segment, has now become a key player thanks to the deal with DHL

    14. Profile: DHL Low cost - good value Added ground service April 2001 Strong in commercial deliveries DHL@HOME drop ships to USPS DDU’s Merger with Airborne has made DHL a “solid third carrier” Drivers: one driver delivers all packages

    15. UPS does it all, and does it well Technology leader Service levels at all time high Single statement for ground and air Gaining added volume from UPS Stores (over 3200) Drivers: one driver delivers all packages

    16. Profile: FedEx Big improvements in FedEx ground: New hubs Superior IT technology Improved on-time performance Grown rapidly-at expense of other carriers FedEx Home Delivery now fully ramped up Drivers: multiple (Express, Ground, Home Delivery) FedEx Kinko’s partnership promotes new opportunities

    17. Strong in RESIDENTIAL deliveries Has formed relationships with all carriers “Last mile” delivery Six day delivery Increase in Parcel Select DDU shipments No annual rate increase

    19. Package Characteristics #1 Driver of Incentives Commercial & Residential characteristics: Super-Rural Rural Suburban Urban Super Urban Metropolitan

    20. Key Surcharge Areas Address corrections Residential delivery Oversize charges (OS1, OS2, OS3) Dimensional charges (air) Saturday delivery Declared value (insurance) Additional Handling

    21. Additional Surcharges Fuel surcharges on ground shipments Delivery area surcharge on air shipments Excess tracking fee Package return charges Security surcharges At last count, there are more than 80!

    22. FedEx air & ground $2.00 FedEx Home Delivery $1.50 DHL $2.00 UPS ground $1.50 UPS air $2.00

    23. UPS air – 12.5% UPS ground – 4.5% FedEx air – 15.5% FedEx ground – 4.5% DHL air –22.0% DHL ground – 4.5% USPS – No surcharge

    24. DHL and FedEx calculate your discount then add the residential charge UPS adds the residential charge then calculates the discount

    26. Rural Surcharges

    27. UPS, FedEx and DHL have essentially the same base ground rates USPS – has It’s own pricing

    28. RFQ or RFP process Wait for contract to expire Renew your contract per carrier’s recommendation

    29. Know your pricing characteristics You must gather and analyze detailed information about your patterns, trends and characteristics Establish goals for negotiating

    30. Data Collection Required Customer Information Electronic manifests (1-2 months) Invoices (same period as manifests) Package dimensions Carrier agreements and rate charts Carrier management reports List of shipping locations Affiliate companies

    31. Carrier Agreements Important Reasons to Review: Revenue commitments Locations included Discounts offered Terms and conditions Addendum’s Rate charts Portfolio Services

    32. Carrier Agreements Important Contract Terms Tiers (revenue or volume based) Rolling Averages Cell by Cell Net Minimums Portfolio Pricing Ramp-up Period Bonus Discounts (kicker) Flat Incentives

    33. Negotiation Checklist Understand the format of the contract Understand your business better than your carrier Analyze the proposals against your real data Determine what discounts you deserve (benchmark) Know the value of your business to the carriers Create a contract that fits your needs Request a quick response to any changes

    34. 2006 Carrier Rate Increase Expecting formal announcement in November or early December from FedEx/UPS 2006 FedEx (Express/Int’l) Rate Increase 5.5% rate increase – impact may be higher Residential increase $0.10 to $2.10 Commercial DAS up $0.05 to $1.30 Residential DAS up $0.10 to $2.10

    35. QUESTIONS?

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