Small Package Shipping State of the Industry

1
Small Package Shipping State of the Industry

• Presented By
• Mike Erickson, President/CEO

AIMED Fall Conference - St. Louis Friday, October
22nd 300 - 400pm
2
We Are Comparing The Four Integrated Carriers

• DHL
• Formerly Airborne
• FedEx
• UPS
• USPS

3
Todays 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

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Late 1990s 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 flat
• Not as many new packages are being shipped
• Carriers must get their additional volume from
  other carriers
• Available Capacity
• New regional hubs, larger truck networks and
  enhanced technology allow carriers to handle more
  volume

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Factors Contributing To Increased Competition

• Technology
• Sorting Facilities
• Bar-coding
• 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
• The Quantum View
• Billing Format Options
• Flat File Bill
• EDI-generated bill
• Paper bill

9
FedEx Technology

• FedEx Café
• FedEx Ship Manager
• FedEx.com - online shipping
• FedEx Insight
• Adhoc Reporting
• Billing Options
• EDI
• Datalink
• Download invoices from Fedex.com

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Factors Contributing To Increased Competition

• New Services
• Faster Ground networks
• Residential offerings
• Special freight services
• UPS store
• FedEx Kinkos
• Portfolio Pricing The single biggest factor!
• Carriers offer the maximum discounts only if you
  give them most, if not all of your business

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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 growth is flat, international
  growth is in double digits
• FedEx and UPS have added new overseas
  infrastructure, new hubs
• Airborne, formerly weak in the international
  segment, has now become a key player thanks to
  the deal with DHL

14
Knowledge is Power

• Carrier Reports Equal Knowledge

and Opportunity!
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Common Add On Charges

• Address corrections
• Residential delivery
• Oversize charges (ground)
• Dimensional charges (air)
• Saturday delivery
• Declared value (insurance)

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New Add On Charges

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

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Fuel Surcharges - Are At An All Time High!

• UPS - 9.5
• FedEx - 9.5
• DHL - 9.8
• These new rates were effective October 4th, 2004
• Ground -- All carriers dropped fuel surcharge
• USPS -- No surcharge
• Theyre no longer temporary

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Residential Surcharges

• FedEx air ground 1.75
• FedEx Home Delivery 1.40
• DHL 1.75
• UPS 1.40

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Rural Surcharges

• Carriers call them delivery area surcharges
• 1.00 Commercial
• 1.75 Residential
• 15.00 Alaska
• You can obtain DAS files from carrier websites
• AFMS can email you a DAS file we co-developed
  with Postal World Magazine - has all carriers and
  includes zip, city and state

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Ground Delivery - Delays
UPS, FedEx Ground Express, DHL Monday
Through Friday FedEx Home Delivery Tuesday
Through Saturday USPS Monday Through Saturday
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Ground Transit Times

• FedEx and UPS Dramatically Improved
• Ground Transit Time
• DHL Adding New Ground Hubs (to be completed in
  2005)

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Ground Pricing

• UPS, FedEx And DHL Have Essentially The Same Base
  Ground Rates
• USPS-Has Its Own Pricing

23
Air Pricing Flat Rates VS Zoned Rates

• Carriers Are Moving From Flat To Zoned Rates
• Big Change In Priority Mail Last June - Only 1lb
  is Now Flat Rate
• Are You Better Off With Flat Or Zoned Rates?

24
What They Say

• All Air And Ground Commercial Packages Are
  Guaranteed To Be Delivered On-Time...
• Or You Get Your Money Back!

25
What They Actually Do

• Many New EXCEPTION CODES
• Some New Contracts Prohibit Refunds
• New Penalty Charges
• Shorter Audit Times

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QUESTIONS?
THANK YOU!
mike.erickson_at_afms.com 1-800-246-3521 www.afms.co
m