2015 q4 qreview-email version

qreviewOctober - December, 2015 /// NO.5/Q4

Transportation Impact Quarterly Review Parcel news you can use.

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3 KEYS TO PARCEL COSTREDUCTION PAGE 12

REDUCE YOUR PARCEL SPEND WITH EASE

PARTNERSPOTLIGHTPAGE 06

SHE’S ONE OF THE MOST POPULAR NAMES IN NHRA

THIRD-PARTYPOOPER PAGE 08

THIRD-PARTY BILLING IS GOING TO COST YOU

GSR Waivers Partner Spotlight

Parcel Cost Reduction

Third-Party Pooper

Why you might want to wave goodbye to your GSR waiver.

Erica Enders has risen to become one of the most popular and sought-after drivers in NHRA.

Learn three keys to parcel cost reduction that can significantly impact your bottom line.

A new UPS surcharge highlights 2016 GRI, and it will cost ship-pers that bill third parties.

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QREVIEW is a quarterly newsletter published by Transportation Impact. All content in this publication is under inter-

national copyright laws. No part of the content can be reproduced in any form without the prior written permission of

Transportation Impact.

In our industry, peak shipping season is front and center in everyone’s mind these days. Like most companies, for shippers the window between the Thanksgiving

and Christmas holidays can be stressful for staff and management alike. There is much to be done in preparation for the year’s end, and there never really seems to be enough time in a day to complete the plethora of tasks at hand.

But for many others, this time of year can be much more stressful, and for totally differ-ent reasons. One of the things I’m proudest of at Transportation Impact is our tradition of helping local families in need make the most of each holiday season.

Each year, we work with local elementary, middle and high school guidance coun-selors to identify families that could use a helping hand. In what perhaps is our

company’s most important partnership, they come forward with kids they interact with during school hours and share stories of the challenges those children and their families face after their school bells ring. Whether it’s financial hardship, a parent with cancer or loss of a loved one, the stories the school staffers tell bring what’s really important back into focus during a time when we all like to reflect on how fortunate we are.

And each year I can’t help but reflect on how fortunate I am to have a staff that cares so much about the community around them and has the dedication to make a differ-ence. I’m convinced that there is no better team-building exercise than to unleash your employees on local stores, armed with little more than a Christmas list and a shopping cart. Each year, we set a budget and prompt-ly exceed it, returning with decorations, groceries and gifts, the purpose of which,

truth be told, probably impacts each of us just as much as those for whom they are all intended.

This is a stressful time for us all. But as I watch the emails stack up in my inbox, I’ll be thinking less about how I’m going to get it all done and more about those who would trade just about anything to be in my posi-tion. I encourage you to do the same.

Happy Holidays!

Keith ByrdCo-Founder, Principal PartnerTransportation Impact [email protected]

ContentsWelcome

KeystoParcelCostReduction

ANALYZESTRATEGIZEREALIZE /// [3][2] /// QREVIEW · October - December, 2015 · NO.5/Q4 /// transportationimpact.com

A common negotiable, especially for shippers with higher-than-average volume, is a guaranteed service refund waiver, which prevents a customer from requesting reim-

bursement credits for shipments that fail to meet carrier service guarantees.

From the shipper’s point of view, it can be relatively easy to understand why such a concession might make sense. If your company sends hundreds (or thousands) of packages out the door each day, keep-ing track of which ones are eligible for a refund of the shipping charges due to things like late deliveries can seem more trouble than it’s worth.

Moreover, carriers often will leverage some sort of improved discount in ex-change for forgoing the claims process. Most shippers who agree to waive their right to file for service failures might con-sider each major parcel carriers’ on-time delivery rate of more than 99 percent as sufficient justification.

However, less than one percent of thousands (if not millions) of annual shipments can really add up; and that dis-count you received in exchange for waiv-ing your right to file for GSRs and lost or damage claims could be mired in metrics that fail to deliver the surface discount you expect to receive in exchange.

Let’s say you’re a lightweight e-retailer that ships 1,000 packages a week with a zone 4, 5-pound average relative to your ground commercial volume. For this example, we’ll assume you have a net annual spend in the neighborhood of $3 million and that you are currently receiv-ing a 30 percent discount from your car-rier on all ground commercial shipments, which would lower your zone 2, 1-pound cost per piece to a net discounted rate of $7.15 from the published rate of $10.21 (assuming the zone 4, 5-pound average and before including fuel and any acces-sorial charges).

If your carrier offered to tack on an additional 3 percent to the discount in exchange for your willingness to waive your right to file for guaranteed service refunds, it would initially appear to be an offer that merits strong consideration given that only about 1 percent of all packages shipped will be eligible for a claim.

However, without any minimum relief ($6.94 is the current zone 2, 1-pound minimum), your company is, in actuality, not likely to see much of the additional discount, since the package charge will never fall below the minimum. What you’re left with is a value that is marginal at best when compared to filing for gen-eral service refunds for all products.

What’s more, if the waiver you sign is for GSRs relative to all service levels, you have, in all likelihood, cost your company money, since you will be unable to recov-er funds for missed commitments on all other service levels.

As you can see, there is much to consider when determining whether to waive your right to file for credits as set forth in the language of each of the major carriers’ general service refund terms and condi-tions. While an offered concession might impact your company in a manner much more beneficial than the above scenario, it is nonetheless important to understand the mechanics of all the moving parts.

If you feel that you have an offer that has the potential to benefit your company in terms of time and resources, then, by all means, give it some serious thought. Protect yourself, however, by asking your carrier rep to provide a bottom line im-pact summary so that you will know what to expect going forward.

If you do elect to sign off on such a waiver, arrange to have your rep provide analytical breakdowns of the net impact on a regular basis in the months to follow to ensure that everything has gone as planned.

If your company sends hundreds (or thousands) of packages out the door each day, keeping track of which ones are eligible for a refund of the ship-ping charges due to things like late deliveries can seem more trouble than it’s worth.

GSR WaiverSupply Chain Solutions

wave goodbyeWhy you might want to

to your GSR waiver


Enders won six races and the Pro Stock championship in 2014, getting the title in the last round of the last race. For 2015, she’s done even better, winning a record nine times and clinching the champion-ship in the season’s penultimate race in Las Vegas.

Transportation Impact began a partner-ship with Enders and her Elite Motor-sports team during this year’s Countdown to the Championship – NHRA’s version of the playoffs – and proudly rode with the team to the 2015 championship.

It’s All About People“Having Transportation Impact as a part-ner was essential to our success and will continue to be essential to our success,” Enders said. “In racing, it’s all about peo-ple, no matter how much money or how much horsepower you have. If you don’t have the right people, you won’t go fast. We have the right people at Elite, thanks to our team owner, Richard Freeman, assembling a great bunch of guys.

“Getting to know Transportation Impact, they’ve assembled the right people, too, which is why they are an industry leader. I see in their staff the same pride and de-termination my crew has at the racetrack. They want to win as much as we do. I’m

confident we can continue to build on our relationship and success.”

At the top of NHRAEnders has risen to become one of the most popular and sought-after drivers in NHRA. All you have to do is stand outside her pit area on any given day during a race weekend and see the throng of people surrounding the proud Texan and her Oklahoma-based crew, watching them work and waiting for a chance to meet one the sport’s brightest stars. She relishes the chance to meet and interact

with her fans, spending many hours talking and signing autographs

each race.

Enders’ presence is felt, too, any time she is an-

nounced to the crowd at a race. The biggest ovation is often

reserved for her, easily topping most in her class

and nearly every driver in the sport.

Her marketing background also has helped her shape her understanding of the business side of the sport, as she has been involved in sponsorship acquisition and marketing throughout her career.

In a relatively short professional career, Enders has become the most prolific racer in her sport, just like Transportation Impact has become the go-to logistics company in the United States.

One step into the pit area of an NHRA Mello Yello Drag Racing Series national event, and you know things are different.

Every ticket to an NHRA race also serves as a pit pass, as there is no differentiation between a grandstand seat and an all-ac-cess pass to the top drivers and teams of the sport. In fact, fans are encouraged to interact with the stars of the strip and are allowed to view their hot rods from just a few feet away. One conversation with back-to-back Pro Stock World champion Erica Enders, and you know things are different, too. Not only is the personable young driver a hit with fans, but she’s a killer on the racetrack. And beyond that, she studied marketing at Texas A&M and has a firm grasp on how partnerships with race teams and businesses like Transportation Impact should work.

Building A PassionEnders began racing when she was 8 years old, and a building passion for the sport helped her continue to grow and learn until she was one of the most com-petitive racers in her age groups. After championship runs in Junior Dragsters, a class that racers can start as young as 5, she eventually found success in the Sportsman classes before ultimately turning pro in 2005.

She became the first woman in the 65-year history of organized drag racing to win in the Pro Stock class when she won in Chicago in 2012, but that was only the beginning of what is quickly becoming a hall of fame career.

More infoericaendersracing.com

Erica Enders Racing

Rewriting HistoryFROM BEGINNING TO


Partner Spotlight

Parcel News UPS Surcharge

Third-Party Pooper

UPS held true to its long-standing course of closely aligning its annual price increases with those of its No. 1 competitor when it quietly rolled out price changes for 2016 via UPS.com on October 15. This year, though, there was one major difference – a 2.5 percent charge for all third-party billing shipments.

The fee, which will significantly impact shippers, especially in ecom-merce, that bill packages to a third party account number, usually in exchange for better discounts, is the latest effort by UPS to solve online shopping demand that has belea-guered the industry each of the past two holiday seasons.

While the 2.5 percent isn’t likely to stop shippers in their tracks, UPS defines the charge as “applicable to

the total charges on all packages that are billed to third parties,” which blurs the true base price increase that packages – especially those headed for residential addresses – will receive next year. And combined with the fresh-wound DIM adjustments that made waves around the same time last year, customers’ costs will bear little resemblance to those prior to 2014.

Ground shipments with billable weights between 1 and 18 pounds and destina-tions in Zones 3 through 7 will carry an average base-rate cost of $11.81, 5.6 percent higher than the current $11.18 average. Ground shipments with resi-dential destinations will, of course, incur a residential surcharge of $3.25, which is 4.8 percent higher than the current $3.10 charge. That means after January 4, the average net base rate of those shipments will go up 5.5 percent. In the

event that those shipments were also billed to a third-party account number, the picture is more troubling still. Tacking on the extra charge to the total price tag nudges the cost to $15.44, which represents an 8.1 percent net base increase to the to-tal cost in 2016 versus the year prior. The caveat of the example is the charge for fuel, which UPS will also increase. Fuel Surcharge is depen-dent upon the price of one gallon of diesel in any given month and could result in a marginal adjustment to the 8.1 percent increase in the ex-ample above, since it will be added prior to the 2.5 percent charge for third-party billing.

If any shipments are subject to deliv-ery area, extended delivery area or other surcharges, the impact of the third-party charge will be magnified,

New UPS surcharge highlights 2016 GRI, will cost shippers that bill third parties

Rate hikesThe full gamut of accessorial price changes can be found in the table on page 10.


Parcel News UPS Surcharge

fined limitations to what it deems a small package and is clearly aiming to deter shippers from ignoring those guidelines and thus clogging the supply chain. Other more common problem packages involve larger packages in general, or those that require additional handling. UPS levied heavy increases there, too, marking up additional handling service charges 16.7 percent, to $10.50, and service charges for large pack-ages 17.4 percent to $67.50.

By comparison, the increases that will be applied to the more common accessorial charges seem rather pedestri-an, yet they too will continue along the upward trend in direct correlation with FedEx. The full gamut of accessorial price changes can be found in the table to the left:

Hiking prices for fuelFedEx made headlines when it announced it will increase its fuel surcharge on November 2, its second increase in 2015. That move appeared as if it would draw the price FedEx charges for fuel – which FedEx long has charged less for – even with UPS. UPS respond-ed, though, by hiking its prices for fuel, also effective Novem-ber 2, a key date for both car-riers considering the impact fuel costs have on residential shipments, which spike during the holiday season.

Both carriers use index-based surcharges that get adjusted on the first Monday of each month. The surcharges are

based on the national average cost of one gallon of diesel fuel (as reported by the U.S. Energy Information Admin-istration [EIA]) for the month that is two months prior to the adjustment, rounded to the nearest cent. Therefore, since the national average for September was $2.51, UPS will tack on 5.25 percent to any Ground Commercial, Ground Residential, Ground Hundredweight, Standard and SurePost package. In addition, the surcharge also will be applied to pickup charges, re-turn service charges, interna-tional extended area charges, delivery charges, residential surcharges and large package surcharges. FedEx will charge 4.25 percent, a percentage point lower than UPS. In general, UPS’s fuel surcharge

for ground shipments will be anywhere from 1 to 1.75 percent higher, depending on the national average.As illustrated by the previous example, the fluctuations in fuel costs will ultimately impact the net cost of all ship-ments, but could be magnified by certain ones billed to third- party accounts, since fuel and other accessorials will drive up base costs before the 2.5 percent gets applied, accord-ing to the wording UPS used to describe how the charge will be applied.

At its core, the move by UPS appears to be aimed at recouping lost margins for packages that are manifest from, more so than delivered to, remote or decentralized locations.

hike for the service.

The UPS base-rate increases themselves, in stride with FedEx, will be disproportion-ately applied to non-premium services many shippers have “traded down” to in order to save money. In addition to adding nearly 7 percent across the board on 3Day Select, UPS increased the base prices of 2nd Day Air and 2nd Day Air A.M. by an average of 8.45 percent, Next Day Air Saver by 6.36 percent and Next Day Air by 5.52 percent. Ground rates will only increase an average of 3.93 percent, but that average is brought down significant-

ly by shipments weighing more than 100 pounds. Such packages will only increase an average of 2.98 percent, whereas more common ship-ments (those weighing less than 50 pounds) will go up an average of 5.06 percent.

Accessorials Accessorials will be on the rise as well, with the heavi-est markup applied to Over Maximum Limits shipments (packages UPS deems too large based on actual weight, length or girth), which will increase 91.3 percent to $110.00 in 2016.

Of course, UPS has well-de-

SERVICE 2015 2016 % CHANGE

Additional Handling Charge $9.00 $10.50 16.7%

Address Correction $12.50 $13.00 4.0%

Delivery Area Surcharge - Commercial (Air) $2.35 $2.45 4.3%

Delivery Area Surcharge - Commercial Extended (Air) $2.35 $2.45 4.3%

Delivery Area Surcharge - Commercial (Ground) $2.20 $2.30 4.5%

Delivery Area Surcharge - Commercial Extended (Ground) $2.20 $2.30 4.5%

Delivery Area Surcharge - Residential (Air) $3.55 $3.70 4.2%

Delivery Area Surcharge - Residential Extended (Air) $3.80 $4.00 5.3%

Delivery Area Surcharge - Residential (Ground) $3.00 $3.15 5.0%

Delivery Area Surcharge - Residential Extended (Ground) $3.80 $4.00 5.3%

Hazardous Materials (Air) $40.00 $42.50 6.3%

Hazardous Materials (Ground) $28.50 $30.00 5.3%

Large Package Surcharge $57.50 $67.50 17.4%

Residential Surcharge (Air) $3.50 $3.65 4.3%

Residential Surcharge (Ground) $3.10 $3.25 4.8%

Over Maximum Limits $57.50 $110.00 91.3%

Third-Party Billling (All) - *2.5% *2.5%

*2.5% will be added to the total charges for all packages billed to a third party.

BIG AND OBSCURE WILL COST MORE WHEN NEW RATES TAKE EFFECTRATE HIKES AIM TO ENHANCE CARRIER EFFICIENCY

several high-frequency, light-weight and long-zone 3-day service shipments. While the price differences are exorbitant for all short-zone shipments, the cost becomes moot since few, if any, ship-pers will utilize that service for near-by shipments that would reach their destinations just as quickly on the ground. Heavier, long-zone 3-day shipments, however, will see a potentially large swing. Express Saver shipments weighing between 10 and 50 pounds will cost, on average, 9.78 percent more than if they were shipped 3Day Select, and that’s after consideration of UPS’s 6.84 percent overall

since the 2.5 percent then will apply to a higher base cost.

Same base costsThe differences between the two carriers’ rate increases ba-sically end there. In 2016, as a matter of fact, all FedEx and UPS ground and air services, as well as accessorials, will have the same base costs, with the exception of FedEx Express Saver and UPS 3Day Select services. This marks the first time, in recent memory at least, that both carriers have presented such an exact match to the market.

Express Saver base rates are only marginally higher for

All things considered, ship-pers are continually facing increased pressure from a variety of angles, and higher costs aren’t helping. In today’s hypercompetitive economy, one that makes it possible for competition to enter virtually any market from any loca-tion via online marketplaces, companies have to walk a tightrope between incurring cost increases and passing them along to their custom-ers. And while the additional markups tossed on each year by FedEx and UPS have become predictable, shippers continue to hope the next reactionary adjustment – di-mensional weight in the past and third-party billing in the future – isn’t aimed at their place within the market.

The UPS Third-Party Billing charge will significantly impact shippers, especially in ecommerce, that bill packages to a third-party account number, usually in exchange for better discounts.

Charge for all third-party billing shipments.2.5%


Shipping Strategy Parcel Cost Reduction

Keysto

ParcelCost

Reduction

s we hit the home stretch of 2015, the swimming pool you were diving into during the summer that so quickly has passed is

being replaced by things like reports, pie charts and pivot tables; pools of information that probably have you thinking, “Is it summer yet?”

Everything is changing and companies all over the world are trying to keep pace. Prices are going up, temperatures are going down and shipping costs arguably are the hottest topic around, especially if you’re in ecommerce.

Companies everywhere are clamoring for data-driven solutions that most are ill-equipped to adequately develop on their own, and they’re caught in the crossfire of seizing the opportunities presented by peak season and prepar-ing to take their lumps when prices rise just hours after it’s over.

And we haven’t even started talking about in-laws.

Yeah, the holidays can be a mess. But as you prepare to assess the year that was and to plan for the year ahead, here are three items you should consider if you aim to reduce shipping costs, improve efficiency and gain some peace of mind:

. . . there could be as much as $720 million

dollars on the table


Shipping Strategy Parcel Cost Reduction

the implementation of said business rule, well, you may have just uncovered an addi-tional stream of savings that went unnoticed and untapped before.

Or, maybe you notice that you’re moving multiple ship-ments to the same location at different times during the day. If you can consolidate them, you could be accomplishing the same objective at a lower cost.

The bottom line: Optimi-zation opportunities are endless so long as you have the actionable data relative to your characteristics. Think of package-level visibility as oil that keeps your supply chain’s moving parts running smoothly and efficiently. Don’t be afraid to take it in for an in-spection every now and then!

3 Renegotiate your carrier agreement.

This can seem like the most daunting task to professionals in your shoes. The back and forth, the value propositions, the lengthy waits for legal to review. . . . Let’s be honest, it’s a hassle.

Still, you wouldn’t walk into a car dealership and pay sticker price, right?

Your parcel agreement is no different. A few questions to consider when deciding whether requesting better rates is the right decision for your company:

• How old is your current carrier agreement?

• Which service levels drive your cost?

• What are your company’s growth projections?

Answering these and other questions will go a long way toward helping you build a business case as to why you’re requesting better discounts. Provide granular details about what’s going on at your company that are attractive to the carrier from a business perspective.

If your company is growing eight percent year over year, then the resultant increase in volume will allow your carrier to offset the improved discounts you’re asking them to provide.

Don’t be afraid that you’ll ruin your relationship by asking for better discounts. Business is business. If the relationship truly is mutual, then both sides recognize that conces-sions have to be made from time to time.

The bottom line: Just because it isn’t exactly easy, doesn’t mean that it isn’t worthwhile. Even though your carrier is reliable and provides great service to you and your customers, it’s not unreason-able to ask for better pricing. You are a great partner, too, after all, and the savings are out there!

Which service levels drive your cost?

thing you’ll notice. If measures are taken to manage your par-cel invoice data through the auditing process, you’ll learn things about your company’s shipping characteristics that you may have never known before.

And if you’re crafty, you can utilize that information to make decisions that will improve your supply chain and result in the soft-dollar savings mentioned earlier.

For example, let’s say your company ships 10 packages to Zone 2: five ground, five air. Perhaps you have busi-ness rules in place that will prevent you from shipping each package via ground even though they’ll arrive the same day, but if you have visibil-ity that allows your team to think more critically about

returns between 1 and 3 percent of its total net parcel spend by implementing a preeminent parcel audit. Additional, soft-dollar savings are another benefit of small parcel auditing; more on that in a second . . .

The bottom line: Potentially billions of dollars are eligible to be credited back to cus-tomers each year. You audit your cell phone bill, cable bill, probably even your grocery store receipt. Don’t overcom-plicate things; a thorough audit of your carrier invoices is a must.

2 Use data-driven met-rics to optimize your supply chain.

Once you have a good audit-ing system in place, company cost savings aren’t the only

1 Audit your shipping invoices.

Make no mistake about it, FedEx and UPS are the best in the world at getting your packages where they need to be when they need to be there. Each carrier delivers with greater than 99 percent efficiency on good days, and even though they have limped through New Year’s each of the last two years, it’s tough to argue that they’re not working hard to figure it out (even if we’re the ones paying for it).

What does that mean?

Well, if you’re looking to cut cost, it means there is a per-centage point unaccounted for. FedEx moves about 10.5 million packages on an aver-age business day, according to its website. That works out to

more than 2.6 billion pack-ages a year. UPS moves 4.6 billion packages annually. For the sake of simple math, let’s say the average cost to ship a package, with either carrier, is $10.00. That’s $72 billion.

So, to answer your question, that means there could be as much as $720 million dollars on the table, for shipping charges alone, in this example. Additional charges generated from things like ad-dress corrections, residential surcharges and all other addi-tional charges, all of which are getting more expensive each year, drive that mark much, much higher. And just as ser-vice failures are inevitable, so are billing errors and invalid surcharges. Nobody’s perfect.

Realistically, a company can expect to obtain hard-dollar

A company can expect to obtain hard-dol-lar returns between 1 and 3 percent of its total net parcel spend by implementing a preeminent parcel audit.


Emailed $419 worth of automated address corrections to distribution center. Scheduled monthly email audit-savings report for parcel review meetings. Set up GL coding for web orders, service department and warehouse. Noted $1,284 in soft-dollar savings opportunities and customized dashboard with Air-to-Ground report.

What did you dobefore your first cup of coffee?

Schedule a 20-minute Parcel Intelligence Dashboard demo and learn how you can optimize your shipping spend and capture all your FedEx and UPS refunds.

transportationimpact.com // [email protected] // 252.764.2885

2015 q4 qreview-email version

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