UPS is making changes to package flow and shipping density — a switch that could mean more savings for U.S. shippers. Will there be a catch?
Shipping departments want to know 3 main things from carriers: How much they can handle, how fast they can move and how much they will charge. UPS may be edging ahead of its competition by providing the right answers to those questions in 2020 and beyond.
Big changes are planned for UPS’s pricing structure that they claim will see ongoing improvements in their shipping density and package flow efficiency. A report by Brooke Sutherland in The Washington Post spotlighted a leaner, meaner UPS that’s freeing up over $4 billion in cash flow and pummeling FedEx in 2019.
It all sounds like good news for UPS customers on the surface, but it always pays to dig beyond the headlines.
Breaking down the new UPS plan
Increased shipping density and streamlined package flow means shippers can ship more product and satisfy customer demand more quickly. Those are two profitable things, and with UPS reducing unit costs as more packages come through, cheaper operational expenses could also mean lower rates for UPS customers.
Businesses shipping B2B and B2C will benefit the most from pricing changes as UPS ramps up automation and focuses on the construction of 5 “super hubs,” These super hubs will use that automation to be up to 35 percent more efficient, create more than 5 million square feet of space and should all be completed by 2020, boosting sorting capacity by as many as 350,000 pieces per hour.
It all sounds ambitious and impressive, but cracks are visible. The Washington Post article highlighted how UPS unit costs did drop by 2.5 percent domestically, but that revenue per package also dropped by 1 percent. The Post also saw UPS’s decision to stick with Amazon — increasingly their competitor in the carrier space — as a red flag for possible profit losses in the future.
If UPS starts losing money, their customers may have to pay more to make up the shortfall. Concerns about their cost to serve make it necessary to take a closer look at the word from UPS themselves.
The catch that isn’t clear
What does the phrase “cost to serve” mean to you? If you answered, “How much UPS wants from my shipping department to be our carrier,” you’d be half-right. UPS views the term a little more ambiguously. They’re concerned with more than simple payment by expecting to be “fairly” compensated.
This could signal clashing shipper/carrier viewpoints. What is fair, precisely, and how much will this cost shippers? UPS hasn’t announced any terms. If standard big carrier practice is anything to go by, “fair” will be a higher number for UPS than customers.
UPS VP of Public Relations Steve Gaut did little to clear up the mystery, saying that the shipper: “...continually reviews the value we provide and the rates charged to customers in all segments. Our objective is to be fairly compensated for the value we create, while working with our customers to help them be more successful.”
Saying they continuously review their rates doesn’t mean they’re always looking for ways to benefit the customer. Studying UPS’s language is critical to understanding the loophole in their improvements, and how shippers can hold their ground. In their own eyes, UPS isn’t just a carrier — it’s “creating value” for your business.
It’s a risky statement for UPS to make because shippers can counter it by asking, “What is Brown doing for me lately?" That’s the key question every UPS customer should ask as these big-promise changes take effect. If they work, great. If they don’t, shippers can use 71lbs to ensure real value gets created.
The 71lbs service is always grading UPS
As a 71lbs customer, your business can hold UPS accountable for its service quality and logistical promises by getting the data you need to comprehensively monitor their performance. We present your shipping metrics in a simple, easy-to-read way that reveals what your carrier is worth.
From late delivery refunds and lost and damaged claims to invoice auditing and contract negotiations, 71lbs can make your shipping spend the most effective it’s ever been. We work to make sure UPS keeps their end of the shipping bargain and that you’re the one being fairly compensated if they don’t. You can review how much value we’ve created for over 5000 other customers before reaching us at the link below.
At 71lbs, we focus on two things: a) helping customers save money on shipping, and b) helping customers understand their shipping costs. We provide you refunds, savings in shipping insurance, freight and imports, among other services. Our automated dashboard displays easy-to-understand shipping costs and insights so you can make better business decisions. Drop by the contact page to get in touch!
