United Parcel Service has been making it a point to inform us that they are delivering packages faster than ever before. Case in point can be found in a frequently run advertisement that shows one of their classic brown package vans with a snow-topped roof parked on a street bordered by palm trees. The message: the packages got there so fast the snow didn’t have time to melt since they are “covering more ground faster than ever”.
In early March United Parcel Service issued a press release announcing “the most significant upgrade ever to its U.S. ground package delivery network, accelerating the transit times for more than a half-million packages nationwide by one day or more”. The company claims the faster deliveries will benefit daily package pick-up customers. I agree.
My first reaction was “terrific”! That was quickly followed by the obvious question, “Why are they reducing their on-time standards?” Obviously, it’s not because they suddenly feel an urge to be faster. What in the world could it be? I’ve got it. Maybe it has something to do with their competitor, FedEx Ground. FDX Corporation recently announced that ground-delivery volume increased a whopping 11% in their fiscal third quarter from the previous year. Management attributes the gain partly to improvements in delivery speed and reliability. You don’t suppose FedEx Ground’s 11% volume increase came at the expense of UPS, do you?
I love it when a market condition, in this case competition, motivates a company, a giant company, to alter their practices. It’s a beautiful thing to see. I also enjoy watching a company try to “spin” a competitive-driven reaction into a positive marketing campaign. It’s exciting to see if they can pull it off.
I am often asked about the logic behind carrier service standards. More to the point, why do packages often arrive earlier than the standard days published by the carrier? Well, let’s consider the facts.
First of all, UPS and FedEx Ground each have their own measure of how long it should take to move a package from point A to point B. A common misconception is that both carriers have identical standard service. That simply isn’t the case. In fact, standard service often differs between the two carriers. Both use their own discretion in establishing their standards. (Visit ups.com/maps and fedex.com/grd/maps to get a print-out of your shipping locations service standards. Enter the origin ZIP into both sites and see how much the service standards differ. The results may surprise you.)
Secondly, it is critical to understand the difference between standard and scheduled service. If you thought these two were the same, as the carriers would like you to believe, you are in for another surprise. Standard service is what the carriers publish and are willing to guarantee. Scheduled service is the real world. Scheduled service is how they plan their operation.
Very often, a package delivered early when compared to standard service actually arrived on time according to the carrier’s operational plan. For example, a carrier plans their operation so they will provide delivery from point A to point B in three days, yet they only promise their customers a four-day standard. We are all familiar with that approach in the commercial airline industry. Did you ever wonder how a plane can take off thirty minutes late and still arrive “on time”? They arrive on time by allowing an “extra” fifteen minutes for take off and landing. Well, your package carriers frequently build in that same “slack” throughout their service matrix. Not bad, if you can get away with it.
UPS could have made these changes years ago but the ground service guarantee caused them to be less aggressive when setting standards. Now the carriers are tightening service standards closer to scheduled service. UPS, for a few meager incentive points, has quietly “bought out” most companies’ option to pursue the guarantee refund. Therefore, UPS is not hurt as bad financially for delivering late packages. It’s too bad for those companies that allowed themselves to be bought out. Sadly, they’ve let the carriers off the hook.
Its high time carriers have come clean with their customers and change their standards to more accurately reflect scheduled performance. Hopefully this trend will continue so shippers have service standards that they can take to the bank.
Joe Loughran is President of Parcel Rate Solutions and an expert in the parcel industry. Parcel Rate Solutions is a transportation consulting company offering services in Carrier Rate Analysis and Carrier Agreement Analysis. Joe can be reached by phone at (724) 934-0626 or email: email@example.com.