Parcel Forum 2011

TF 108 MEGA SESSION Everything You Wanted to Know but

Were Afraid to Ask

Rob MartinezPresident & CEO

Shipware, LLCwww.shipware.com

Gerard HempsteadPresident

Hempstead Consultingwww.hempsteadconsulting.com

Topics for Discussion

WHATEVER YOU WANT• Ground Rules• NDA• What’s discussed in this room, stays in this room• No media press

Suggested Topics

• Implications & Predictions of USPS Financial Crisis• 2012 Rate Increase• Pricing Benchmarks• 3rd Party Negotiators

– Update on AFMS lawsuit• State of the Parcel Industry• Carrier Pricing Predictions• Impact of Regional players• Best Ways to Reduce Costs in 2012

USPS: Financial Status, Predictions & Implications

2012 General Rate Increase

General Rate Increase History

Year Ground Air Intl Fuel 2004 1.90% 2.90% 2.90% Introduced DAS 2005 2.90% 2.90% 2.90% 2006 3.90% 5.50% 5.50% 2% Fuel Reduction2007 4.90% 6.90% 6.90% 2% Reduction2008 4.90% 6.90% 6.90% 2% Reduction2009 5.90% 6.90% 6.90% 2% Reduction 2010 4.90% 5.90% 5.50% 2% Reduction 2011 4.90% 5.90% 5.50% 2% Reduction; DIM Changes 2012 ? 5.90% ? 2% Reduction

TOTAL 34.20% 43.80% 43.00% 5 YEAR AVERAGE 5.10% 6.30% 6.34%

Ground Minimum Shipment Charge

2006 2007 2008 2009 2010 2011$3.00

$4.00

$5.00

$6.00

$3.80 $4.00

$4.20

$4.57

$4.84

$5.17

Up 48% since 2005!

Minimum Charge > Announced

2007 2008 2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

5.26%5.00%

8.81%

5.91%

6.82%

Announced Increase 4.90% 4.90% 4.90% 4.90% 4.90%

Aver6.36%

2012 ??? $5.42 = 4.9%$5.48 = 5.9%$5.53 = 6.9%

Strategies to Reduce Parcel Costs

Steps taken past 12 months to reduce parcel costs? (Check all that apply)

Renegotiate

d rates

Customer

pays

Greater USPS,

consolid

ators & re

gionals

Zone sk

ipping

Outsource

d to 3PL

Audit invo

ices

NothingOther

0%5%

10%15%20%25%30%35%40%45%50%

48%

34%

26%

9%4%

27%

12% 13%

Minimum Charge Strategies

• Negotiate Minimum Shipment Charge– Percent off– Dollar off

• Quarterly rebate contribute savings to minimum charge*

• Explore per ounce rating (USPS, SmartPost, etc.)

Strategies for GRI

• Fix incentives to previous year’s tariffs• Cap increases

– Maximum– % below general– Include minimum charges as % or $

• Rebate

DIM Strategies

• Do nothing; contract already above the standard 194• Negotiate the new factor to something greater than 166 or

“grandfather” the 2010 dim factor • Redesign corrugated packaging and packing configurations • Switch carriers (pending UPS GRI announcement)

13

Solutions for Res & DAS

• Negotiate concessions• Identify charges in advance• Download DAS ZIP table• RDI • Sourcing alternatives• Ask for commercial address• Rebate

Accessorial Charges Solutions

• Understand impact• Negotiate concessions– All accessorial charges are negotiable!– Percent or $ off– Range from 0-100%

• Software solutions (mitigate and/or charge back)– Residential surcharge– Address Correction

• Scan based billing• USPS options

Third Party Negotiators

Outside consulting firm to negotiate your carrier contract w/in last 12 months

12%

85%

3%

YesNoWe tried, carriers opt out

Feelings on carrier policy on 3PNs

Not aware Not concerned, don't use them

Up to carriers Who are they to tell me what to do?

0%

5%

10%

15%

20%

25%

30%

35%

35%

30%

6%

29%

Primary motivation for UPS & FedEx 3PN policy? (Check all that apply)

Rate confidentiality Money/margin Avoid adversarial relations Don’t know0%

10%

20%

30%

40%

50%

60%

70%

29%

63%

13%

24%

Do you think UPS and FedEx colluded to boycott third parties?

Yes No Don’t know0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

48%

11%

41%

Pricing Benchmarks

Accessorials negotiated at least a 25% incentive: (Check all that apply)

DAS

Residen

tial Fu

el

Large

Package

AHSCOD

Dangerous G

oods

Weekly

Service

Print L

abel

On Demand Pickup

Yes, b

ut <25%

No, have not n

egotiated

Don't know

0%

5%

10%

15%

20%

25%

30%

35%

26% 25%22%

15% 15%

6% 5%

16%

10% 9%12%

31%

22%

If you could change your UPS or FedEx Pricing Agreement, what would it be? (Check all that apply)

Better d

iscounts

Better t

erms

Fewer

surcharg

es

No rollin

g avera

ges or E

ds>T

erm

>Paymen

t term

sOther

0%

10%

20%

30%

40%

50%

60%

70%

55%

15%

69%

31%

13% 12%5%

Correlation of Monthly Parcel Volume and Overnight Incentives Received

<40% 41-50% 51-60% 61-70% >71%0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

< 10,00010,000-24,99925,000-49,99950,000-99,999> 100,000

Upper Tier Incentives by Service Type

Service Incentive Percent of Shippers

Next Day Air/Priority Overnight 61% or Greater 19%

Two Day Air 51% or Greater 21%

Ground (1 to 10 Lbs) 41% or Greater 18%

Ground (11 to 30 Lbs) 46% or Greater 12%

Ground (31 to 50 Lbs) 51% or Greater 10%

Ground (51 to 150 Lbs) 51% or Greater 7%

Thank You For Attending

Rob Martinez, MQC, CMDSSPresident & CEO

Office [email protected]

OTHER PRESENTATIONS THIS WEEK

Monday, Oct 24, 9:00 am - 4:00 pmWS 100 PRECONFERENCE - Inside Parcel Rate Negotiations

Tuesday, Oct 25, 10:00 am – 10:45 amPL 502 SURVEY RESULTS - Pricing Benchmarks, Trends and Cost-

saving Strategies

Wednesday, Oct 26, 9:00 am – 9:45 amTM 206 Low-Cost Delivery Options for Residential Shippers

Wednesday, Oct 26, 2:45 pm – 3:30 pmTF 108 MEGA SESSION - Everything You Wanted to Know but Were

Afraid to Ask