As the Carriers do what is best for them, LJM can do what is best for you.
We’ve all heard the expression the “World is Changing”. But since the onset, and with the impacts from COVID-19, that statement is especially appropriate in today’s world. The pandemic has impacted people and businesses in many ways. We have changed our routines, the way we shop and the way we do business. Buying habits have been shifted to more online purchases, changing business focus from traditional avenues to either adding or complimenting e-Commerce and the ability to cope with demand. It’s also interesting to note that many businesses have had to think out of the box and be ultra-creative in modifying their business model and have even started to offer PPE, sanitizers and health care supplies, which have all seen a spike in demand over the past few months.
The beneficiaries to all the change and shift that has occurred and continues to occur are the parcel carriers, namely FedEx and UPS. The pandemic has caused a surge in demand for their services and both Carriers topped expectations in their recently released quarterly results. Earlier this year, they mandated additional surcharges which impacted the shippers, but also contributed to their own healthy financial status. Although these fees are slated as “temporary”, it remains unknown as to when they will be lifted.
And just this month, these Carrier fees have seen another round of increases, and it would be no surprise if this were not the last update to these fees prior to the fast-approaching busiest season of the year. The Carriers justify these fees attributable to the added stress and capacity requirements that have been put upon their infrastructure and deem them necessary to cover the resources required to cope with the demand. But the bottom line is that both Carriers are still experiencing improvements to margins and profits, apparent on their recent financials.
As we near the start of calendar year Q4, the holiday season, otherwise known as the peak volume season for many shippers is quickly approaching, possibly with ambivalence. The Carriers will have an increased revenue stream but also infrastructures that might be pushed to their limits. Might they introduce new fees again or hike their current peak season fees; there’s always that possibility.
With all these new variables during this unprecedented time, how does a shipper navigate this complicated environment to ensure they are receiving the best rates from the Carriers? Well, that is where LJM comes in. We help to negotiate a new parcel carrier agreement or changes to your existing agreement factoring in all of these dynamic variables, while recognizing and understanding the unique shipping profile of the client.
In summary, here are the important points to consider in today’s environment:
- Both FedEx and UPS have already seen a surge in their volume to the level that it is stressing their own infrastructure, including personnel. We consider your profile, your location, your business needs, and the motivation of the Carrier to retain or acquire you as a customer.
- When you add the peak volume from the fast-approaching holiday season on top of the current volume surge, are there advantages with a certain Carrier when considering your shipping characteristics? And how that may or may not impact that Carrier’s ability to cope with the demand and meet the already impacted service SLAs also needs to be addressed.
- Lastly, what will be the economic conditions in the coming months? Remember that the Carriers also have expenses that are directly related to COVID-19. These include protecting their employees and various business challenges; a great example being the increase of residential e-commerce deliveries, which involve more miles per route and fewer packages per stop translating into being less lucrative than commercial deliveries.
At LJM, we are constantly scrutinizing your data; we know when you will be impacted by changes to fees, when new fees may emerge and when any changes to your shipping profile occur. We evaluate projected increases in spend and make recommendations on ways to reduce the impact from such fees. Many times, we offer suggestions and guidance on how you can work with the Carrier to help reduce your costs. Our relationship with the client goes beyond just the contract negotiation, we become a trusted advisor and an extension of your logistics group.
Businesses need to know when the time is right to negotiate their Carrier rates or their entire Carrier agreement. Not understanding the current industry landscape might just end up costing you money. Making a shift to another Carrier without fully understanding the potential savings or lack thereof might not only be expensive in the long run but it might also cost you customers if your customers’ delivery experience is poor. At LJM, our years of experience, our inventory of knowledge and our unique approach with each client ensures that the time is right to proceed with a parcel contract negotiation and offers comprehensive client awareness of the industry landscape prior to signing a new Carrier agreement.