If transportation and logistics were not such a vital link in the manufacturing supply chain I would write this post about the sad state of affairs in the parcel shipping business as a comedy piece. The fact of the matter is, however, that UPS and the once vaunted FedEx are about as poorly run as businesses can be and, as a result, are most often the weakest link in the supply chains of many, many companies.
If I were to ship a five pound package from my house to Kevin Meyer's, UPS would charge me $38.20 to get it there in two days, while FedEx would hit me up for $36.75. The government will do the same job for $14.57 – in fact, if it fits into one of their flat rate boxes it will only cost me $10.20. But wait, you say, my company doesn't pay that much because UPS gives us a discount. Enter the BirdDog company …
For those of you who don't know, BirdDog is a company that does a lot of things but a big part of their business is to take your UPS bills every month and audit them, then represent you in filing claims against UPS for over-billing, late shipments and lost stuff. They live off of a percentage of the money they recover for you. BirdDog will go after money you sent down the rat hole with any shipper, but they make their bread and butter off of UPS. That alone should be cause for serious concern for UPS leadership. How bad is your company when legitimate, big time businesses exist to make money solely off of your screw ups?
UPS and FedEx offer discounts in the same manner as used car dealers. Just like the slick salesman tells you that the sales manager agreed to knock a couple hundred bucks off the price for you only – and only if you buy the car today – UPS begrudgingly gives its 'best' customers a 'special' rate. More often than not you will find that some guy down the street got the same deal or better at both the car dealer and at UPS. The discount is more an acknowledgment that they have been gouging you all along. … and after you get the discount, it better be 65% or more off the standard rates and you will need BirdDog to make sure they actually give it to you.
Both FedEx and UPS cloak their businesses in a Byzantine maze of rates and zones that leave most shippers mystified. In all likelihood, they are just as mystified themselves with the complexity of their pricing schemes. In the end, however, they accomplish little other than to do what many people believe to be impossible, and that is to make the Post Office look remarkably efficient and cost effective by comparison.
They also open the door to outfits like UShip. Although UShip competes more with the equally customer unfriendly companies that ship larger items, their business model gets right at the same place. Both customers and shippers are fed up with the nonsense that shrouds the shipping industry. UShip is "a sort of EBay for shipping" that does over $20 million a year in billing for shipping stuff that by all rights should be shipped through the formal transportation network. They are like BirdDog in that they live off the incompetence of the shipping companies.
Too many manufacturers play into the hands of UPS and FedEx, as well as the major trucking companies by engaging these silly games with them. Too often there is a freight manager who has taken a long drink of the UPS Kool Aid and thinks all of this nonsense is normal. I strongly suggest that manufacturers throw some serious kaizen thinking at their shipping. If you do, you are quite apt to find that the local post office and UShip are hands down better than anything 'brown can do for you".
I stopped shipping with UPS & Fedex years ago, (unless at customers request and then under duress!) I know another business, (fine jewelery) who also switched completely to US mail after Fedex lost an insured shipment and refused to make good on that “insurance”.
The US mail gets it right more often than not. (I also use US Mail for my overseas shipments). Now, if they could just figure out how to streamline & improve both the retail (windows are generally miserable)and the business experience. There would really be no reason for them to keep cutting back, once it’s widely realized what a great value they offer for the money. They would grow.
The USPS has done a great with the delivery of mail, what they really gotta work on now is their people.
Andy Wagner says
In your example you for got to mention that the government does not actually overnight your package to Kevin Meyer. They take it from you, give it to FedEX to overnight, then take it back from FedEX to deliver to Kevin’s door.
USPS outsources all the flat-rate priority mail packages to FedEX!
Tim McMahon says
I am not defending UPS or fedex and don’t use them regularly but I not sure this is a fair representation. The USPS is bankrupt. They constantly increase prices despite be subsidized by the tax payers. I have had numerous experiences wher the USPS can’t not meet their delivery promises. While htey refund your money it is not really what i looking for.
I think the key here is more competition will result in more value for the consumer. I am not sure there are many good options today.
A Lean Journey Blog
“that by all rights should be shipped through the formal transportation network.”..
What companies are part of the freight formal transportation network…. Theres too many to list . Maybe you meant the big freight websites/brokers? I think Uship is a smart idea. A reverse auction is a great way to competively bid and save money when time isnt much of an issue for the customer.
Bill Waddell says
Tim – In fact the USPS has not received any government subsidies in over 25 years. The closest thing you can find is that they have come up short on the $5 billion they are supposed to send to the Treasury every year to pay for their retirees.
In spite of their constantly increasing prices, they still charge rates far below those of FedEx and UPS – in my opinion, two organizations every bit as bureacratic and inefficient as the government.
Andy – Your comment puts them UPS and FedEx in an even worse light.
Finally, you can’t forget to take into account that the Post Office, by law, has to deliver everywhere in the USA at the same price, while UPS and FedEx routinely declare areas to be outside of their service zones; and the Post Office delivers on weekends – everything on Saturdays and Express Mail on Sundays, while UPS and FedEx are Monday through Friday operations.
Scott Dailey, C.P.M. says
UPS and FedEx both delivery on Saturdays, provided you pay a surcharge of at least $15.
Jim Fernandez says
We are located in a small town. Given the convenience of UPS and the manner in which it fits our niche ie:
Daily scheduled drop off and pick up.
Acceptance and use by our customers and suppliers.
Standardization of shipping methods.
Relative reliability as compared to other handlers.
I think they offer a good fit for us. And, as far as their being a “poorly run business,” I believe it has been only a few years since UPS was somewhat of a champion of lean, lights-out product movement.
However, because of your post we are going to check our discount biling. Thanks.
Great point, Bill. It seems others are thinking the same thing, in this case regarding 3rd party logistics:
I don’t know about UPS being a champion of lean, but about 12 years ago they were embroiled in a long and bitter labor strike because they decided to opt out of using full-time employees wherever possible. As full-timers retired they were replaced with part-timers or temps. The resulting strike cost them a gazillion dollars as well as the goodwill of their employees.
Does anyone remember Mail Boxes Etc.? This was a well-run rival to both the post office and UPS / FedEx back during the 1990s. What happened to them? UPS bought them and turned them into a mediocre drop off point called The UPS Store. If you have enough dough you can destroy your competitors simply by buying them.
These two actions speak volumes about what kind of company UPS is and will be in the future, clever advertisements not withstanding.
Kevin Carson says
Only tangentially related, but it reminds me of my experience with the Interlibrary Loan department at the local university library. A library staffer, in what sounded like a rather self-righteous implication that non-student users like me were free riders, mentioned that each loan cost them $25.
I was utterly astounded. If this was really true, you’d think she’d be ashamed to admit it. I can BUY most of the books I borrow used, from Amazon, for way less than that.
Apparently just another example of the phenomenon Paul Goodman called “the great kingdom of cost-plus,” where the cost of making or doing anything was 300% greater than necessary.
USPS has three great deals:
Light Packages (<13 oz) sent First Class
Flat Rate boxes (for small, heavy stuff)
But overall, I find Fedex better. The most recent box I sent was about 20% cheaper Fedex ground than the USPS. USPS has basically no tracking (just delivery confirmation), plenty of extra charges, and often long window lines.
Part of the problem is that it's really an oligarchy, with just a few strong players (UPS, Fedex, USPS, and, a distant fourth, DHL (which bought out Airborne)). Hmmm, a lot like the cell phones, which is down to just a few major carriers -- and hasn't seen much improvements in rates or customer service.
Idiot. USPS is not run by the US Gob-ment.
Bill Waddell says
No doubt there is ample evidence to support your assertion that I am an idiot. However, the USPS – United States Postal Service – is not only run by the government, it is one of the few government operations specifically authorized by the Constitution. It actually has a rich and interesting history and you might want to read up on it. Even before the Constitution was written, the Second Continetal Congress authorized what became the USPS under Benjamin Franklin, who can lay claim to being the first Postmaster General – fascinating stuff – don’t you agree?
Perhaps you are confusing the USPS – the Post Office – with UPS – the United Parcel Service company with the guys who drive around in brown trucks.
William Pietri says
Just for the record, and contrary to what Tim McMahon writes above, the USPS is not subsidized and hasn’t been since the 80’s:
lean construction logistics says
As what I have heard about the USPS….This company was already bankrupt!!!I don’t have any about the BirdDog Comapany, until I read this blog!!Nice post..I had fun!!