UPS and FedEx have always been willing to meet their customers’ expectations - or at a minimum - they’ve always been willing to hear them out and address certain customer requests for discounts or better rates as a means to maintain a solid client-vendor relationship.
But the dynamic between carriers and shippers has changed drastically in the past few months.
Here’s What You Can Learn From This Post:
- The current state of the Carrier - Shipper relationship
- “Attractive” shipping characteristics the carriers are looking for
- How UPS & FedEx feed off each other to gouge shippers
- Current carrier negotiation tactics
How Are UPS & FedEx Dealing With New Customers?
Both carriers have been hesitant to take on new business. In some cases, UPS and FedEx have turned down the opportunity to provide service to “new” shippers. Only those businesses with “attractive” shipping characteristics in the eyes of the carrier have been able to secure reasonable pricing. “Reasonable” - of course - is relative to the current marketplace. Currently, shipping rates are at an all-time high. And it’s only going to get more expensive for businesses to ship in 2022.
We detailed What’s Wrong With UPS Contract Optimization and Negotiation in this recent blog post. The same is still true, but the issues now apply to both carriers.
What Are Some of the Attractive Shipping Characteristics the Carriers are Looking For?
UPS and FedEx are both struggling to deliver residential packages. FedEx has even resorted to rerouting 600,000 each day(!), which is causing longer time-in-transits . It’s been written about, discussed and dissected in many places (including on this blog), but the seismic shift to residential delivery during the pandemic has had a profound effect on parcel industry as a whole.
If your business ships the majority of its packages to residential destinations, the carriers are less interested in your business right now, and they’ll be difficult to negotiate with. However, if you’re shipping the majority of your packages to commercial destinations, either by ground or air, there may be an opportunity to improve your rates.
Not sure how attractive your shipping profile is to the carriers? Identify your rate improvement potential now. When you create a free Lojistic account all your historical shipping data is transformed into powerful analytics you can leverage in your next carrier negotiation.
UPS and FedEx Know There’s Zero Competition in the Marketplace Right Now
It’s a carrier’s market. UPS and FedEx have more leverage now than ever before because there’s more demand than there is supply, and both are taking a similar approach. They’re made it clear they’re only interested in the most profitable business, and those that have “unattractive” freight are left feeling like they’re being punished. When you’re one half of a duopoly, it’s pretty easy to manipulate the marketplace knowing there’s no repercussions for high prices and sub-optimal service.
For example, UPS knows that the shipper (aka you) has little-to-no alternative when considering alternatives to FedEx. You either continue dealing with inconsistent pickups, slow deliveries and deteriorating customer experience with FedEx, or you can agree to a steep rate increase if you’re “lucky” enough for UPS to “accept” you.
While the issues may be different, the same principle applies to UPS shippers when they’re looking to make the switch to FedEx for better rates and/or service. Both carriers are stretching the capacity of their networks, so any new business that they agree to will come at a premium price.
Are There Alternatives To UPS or FedEx?
Yes, USPS is an option for some businesses, DHL is another and so are regional carriers - however - all other options come with their own limitations. If you are looking into an alternative to UPS or FedEx, Lojistic can help support you in making the right decision for your business.
Transform your historical shipping data into powerful insights by creating a free Lojistic account. Once you have a better understanding of who you are as a shipper, you’ll be better equipped to meet your strategic shipping objectives - whether that’s reducing costs or reducing transit times. Lojistic will help you see what’s possible.
Are Carriers Willing to Negotiate with Their Current Customers
Unless your business’ shipping profile is considered “desirable” in the eyes of the carrier(s), probably not. We’ve received first-hand reports of carrier representatives making demands (i.e. automatic-debit as payment method) in order to keep discounts where they’re at. And those who declined were presented with a rate increase. In other cases, where businesses have approached the carriers asking for improved discounts, they’ve been countered with HIGHER rates. It’s an unprecedented approach to a client-vendor relationship.
Imagine constantly raising prices for your customers while lowering the standards of your product and service. You’d probably be out of business pretty quickly. Yet, the carriers have taken that approach while continuing to post historically high profits quarter-after-quarter for nearly two years.
UPS and FedEx will point to their long-standing relationship with your business as a negotiation tactic, when it benefits them. But when shippers talk about the personal relationship they’ve built with their carrier rep - there’s little to no movement in rate and/or service improvements. It’s not much of a relationship when it’s one-sided.
What Can I Do To Lower Shipping Costs For My Business
Despite the current environment, Lojistic’s cost-savings automation and shipping analytics platform can help you get better rates and reduce shipping overspend. Before attempting to negotiate better rates or bigger discounts with your carrier, create a free Lojistic account.