All year long, parcel shippers were advised to diversify their carrier bases in order to reduce their reliance on FedEx Corp. and UPS Inc. Heeding that call, however, was easier said than done. It will likely be just as challenging next year.
Delivery surcharges will proliferate in cost and in quantity, and they will become, perhaps more than ever, mechanisms for profit instead of cost pass-throughs. Carriers worked hard in 2021 to capture as much surcharge revenue as possible. They will remain equally vigilant on that score during 2022, with a focus on heavy or outsized dimensional shipments that cannot be moved through a conveyor and require some form of special handling.
Shippers enter the year knowing they will pay more than in 2021. What they want is timely and reliable service for all their volumes, with deliveries executed by carriers that understand that business-to-consumer (B2C) deliveries are more complex and multidimensional than straightforward business-to-business (B2B) service ever was.
FedEx and UPS will continue to extract their pounds of shipper flesh for volume diversions. Because the carriers link discounts and rebates to weekly revenue thresholds, shippers diverting meaningful volumes may lose their coveted price breaks should their remaining business fall below those thresholds. FedEx and UPS also deploy such strategies as volume penalties and early termination contract language to keep shippers tethered.
Shippers will be diverting traffic because they want to, and because of the volume caps that will remain in place, because they have to. Yet they must remain mindful of the consequences of their actions, said Rob Martinez, co-CEO of Shipware LLC, a parcel consultancy. "The last thing they want to do, to save 10% on the 30% of their shipments they can divert, is to cause a 20% rate increase on the 70% that stays with their primary carrier," Martinez said.
For all its obstacles, carrier optimization strategies, if properly implemented, will generate significant benefits for the shipper, said Martinez. These include faster delivery, custom-tailored pickup and delivery, same-day delivery service options, ease of doing business, simplified contracts and billing, better customer service, and lower cost, he said.
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