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OPERATIONS SUMMIT ARE REGIONAL CARRIERS & THE US POSTAL SERVICE COST EFFECTIVE OPTIONS FOR YOUR PARCEL BUSINESS? Rob Martinez, DLP, CMDSS President & CEO,

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Presentation on theme: "OPERATIONS SUMMIT ARE REGIONAL CARRIERS & THE US POSTAL SERVICE COST EFFECTIVE OPTIONS FOR YOUR PARCEL BUSINESS? Rob Martinez, DLP, CMDSS President & CEO,"— Presentation transcript:

1 OPERATIONS SUMMIT ARE REGIONAL CARRIERS & THE US POSTAL SERVICE COST EFFECTIVE OPTIONS FOR YOUR PARCEL BUSINESS? Rob Martinez, DLP, CMDSS President & CEO, Shipware, LLC

2 Agenda Challenges Negotiating Great Parcel Contracts Regional Carriers USPS & Parcel Select Enabling technologie s Question & Answer 2

3 Negotiating With Carriers Now: Source: Parcel Pricing Survey, PARCEL (Oct 2011)

4 If Answered “Harder”, Why? (Check all that apply) Source: Parcel Pricing Survey, PARCEL (Oct 2011) Other

5 Additional Challenges Shippers lack benchmarks – don’t know what to ask for Disparity in negotiating skills Carrier rep and shipper have conflicting motivations Complex contracts - not sure how terms, rates & “gotchas” affect your costs Carriers know more about your distribution than you

6 Correlation of Monthly Parcel Volume and Overnight Incentives Received Incentives Received Monthly Parcel Volume % Respondents

7 General Rate Increase History Source: Shipware, LLC GRI HistoryUPS AirFedEx AirUPS GroundFedEx Ground 19983.30%3.50%3.60%3.70% 19992.50%2.80%2.50%2.30% 20003.50%0.00%3.10% 20013.70%4.90%3.10% 20024.00%3.50% 20033.20%3.50%3.90% 20042.90%2.50%1.90% 20052.90%4.60%2.90% 20065.50% 3.90% 20076.90% 4.90% 20086.90% 4.90% 20096.90% 5.90% 20106.90%5.90%4.90% 20116.90%5.90% 20126.90%5.90% 20136.50%5.90% Average 1998-20053.25%3.16%3.06%3.05% Average 2006-20136.68%6.23%5.28%

8 2013 FedEx Express Rate Increase Sources: PARCEL eNews (September 18, 2012) and FedEx website

9 2013 Ground Increases by Weight Range Source: Shipware, LLC

10 Ground Minimum History Up 53.7% since 2006! Source: Shipware, LLC

11 Ground Minimum Increases (%) 4.9% Net Announced4.9% Net 5.9% Net 4.9% Net5.9% Net Source: Shipware, LLC 4.9% Net

12 Impact of Lower DIM Divisor FedEx, Economy, Zone 6 18” x 12” x 12” Actual weight 6 Lbs ($29.50) 194 Dims to 14 Lbs ($55.90) 166 Dims to 16 Lbs ($65.40) 121.7% overall increase! 89.5% 17%

13 Freight Charge $5.84 Residential Surcharge $2.80 Residential DAS Surcharge $3.25 Extended DAS Surcharge $0.25 Fuel Surcharge (8.5%) $1.03 Total Surcharges = $7.33 Total Cost = $13.17 Accessorial Charges Can Double Costs! (2013 UPS Ground Residential, 1 Lbs, Zone 2)

14 If You Could Change Your Pricing Agreement (Check all that apply) Source: Parcel Pricing Survey, PARCEL (Oct 2011)

15 So What Can Shippers Do?

16 Steps Taken Past 12 Months to Reduce Parcel Costs? (Check all that apply) Monthly Parcel Volume Source: Parcel Pricing Survey, PARCEL (Oct 2011)

17 Leverage Sourcing Alternatives UPS/FedEx Parcel Select USPS Regional Carriers

18 Regional Parcel Carriers Service benefits Latest pickups, earliest deliveries Often faster short-zone transits You may be a big fish! Cost benefits Faster path to achieving discounts Fewer accessorial charges Some offer residential delivery no charge Unique pricing (no minimum charge, flat rating by weight) Savings of 10-20% 18

19 National Zonal Analysis Source: Shipware, LLC

20 What benefits have you realized from regionals? (Check all that apply) Source: Survey on Regional Carrier Usage, PARCEL (Oct 2012)

21 Larger Next Day Footprint

22 If you use regional carriers, what kind of cost savings are you realizing over FedEx and UPS? Source: Survey on Regional Carrier Usage, PARCEL (Oct 2012)

23 Are you familiar with the services offered by "Regional Parcel Carriers“? Source: Survey on Regional Carrier Usage, PARCEL (Oct 2012)

24 Do you use regional carriers today? Source: Survey on Regional Carrier Usage, PARCEL (Oct 2012)

25 Are you open to exploring the use of parcel regional carriers for your business? Source: Survey on Regional Carrier Usage, PARCEL (Oct 2012)

26 If you use regionals, what % of overall parcel business is given to regional carriers?

27 Disconnect between Shipper wants and Carrier perception of purchasing decisions ShipperCarrierShipperCarrier CategoryImportant or Higher Not Very or Not at All Important Service96%100%3%0% Cost97%67%3%33% Single-source solution 39%42%59%58% Convenience68%25%32%75% Other12%67%88%33% Source: Shipware Surveys (2012)

28 What % savings would be required to switch some or all business to a regional carrier?

29 Regional Carriers (Partial List) Regional CarrierDelivery AreaWebsite OnTracWA, OR, CA, AZ, NV, UT, COwww.ontrac.com Eastern ConnectionME, NH, MA, NY, CT, RI, NJ, DE, MD, PA, VA, OH, KY, IN, MI, WVwww.easternconnection.com Lone Star OvernightTX, OK, AR, LA, NMwww.lso.com Spee Dee Delivery ServiceNE, SD, ND, MI, IA, WI, IL, MOwww.speedeedelivery.com Pitt OhioMN, WI, IL, IN, OH, MI, PA, WV, VA, MD, DE, NJ, CT, MA, RI, NH, ME, KYwww.pittohio.com TransTekCO, WY, NEwww.transtekonline.com LaserShipDC, FL, GA, MD, NC, VA, CT, MA, NJ, NY, PAwww.lasership.com Express Courier InternationalAL, AR, FL, GA, KY, LA, MS, MO, OK, TN, TXwww.expressdelivers.net DirectLinkNC, SC, GA, VAwww.directlinkcourier.com PurolatorCanadawww.purolator.com Velocity ExpressNY Metro, Canadawww.velocityexpress.com Now CourierIL, IN, KY, OHwww.nowcourier.com Courier ExpressFL, GA, SC, NC, TN, KY, AL, MS, OH, IN, PA, VA, UT and otherswww.courierexpress.net Norco Delivery ServicesCA, AZ, NVwww.norcoovernite.com Golden State OvernightCA, AZ, NVwww.gso.com Unity Courier ServiceWA, OR, CA, AZ, NV, UT, CO, ID, NM, TXwww.unitycourier.com Prestige DeliveryOH, NY, KY, VA, WV, MI, IN, MD, PAwww.prestigedelivery.com 1st ChoiceMO, IL, KSwww.1stchoicecourier.com All Counties CouriersCAwww.accdelivers.com Dunham ExpressWI, MN, MI, IL, IAwww.dunhamexpress.com Expak LogisitcsAL, AZ, CA, CO, CT, DC, FL, GA, ID, IL, IN, IA, KS, KY, LA, MA, MI, MT, MN, NE, NV, NM, NY, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WA, WI www.expaklogistics.com United Delivery ServiceMN, WI, IL, IN, OH, MI, MO, IAwww.uniteddeliveryservice.com Source: Shipware, LLC

30 National Network?

31 Has there been a downside to using regional carrier? (Check all that apply)

32 Adding USPS to Your Parcel Carrier Mix

33 Perception that service reliability is deficientTracking not up to parNo carrier-provided automationPrefer single source solutionIts difficult to compare USPS to UPS/FedEx offeringsPricingOther: Billing, 800 C/S, Reps Why Aren’t More Companies Using USPS for Parcel?

34 Trends Favoring USPS Growing trend of using USPS to deliver “last mile”; Momentum in B2CLow-price leader in many markets starting at $4.58Service & technology improvements Service trending at 95%+ $2B air line-haul contract (FedEx incumbent) 34

35 USPS ® Overview 35 $65B 2012 17.7% or $11.6 billion from shipping services Handled over 3.5 billion packages in 2012 Growing market share Financial Giant Delivery to 151 million addresses daily 20 million PO Boxes 37,000 Postal locations 213,000 delivery and collection vehicles 550 processing facilities Comprehensive Network

36 USPS Key Metrics Market Dominant & Competitive Products (2008-2012) Thousands (000’s)

37 USPS Shipping & Package Services Key Metrics (2009-2012) Thousands (000’s)

38 USPS Competitive Products Pieces (Q1 FY2013)

39 USPS Competitive Products Revenue (Q1 FY2013)

40 USPS Unique Advantages 200+ years of delivering to America’s front door Reach every address in America six days a week FedEx transportation partnership Extend delivery reach 20 million P.O. Boxes APO/FPO addresses

41 Upfront Pricing “What you see is what you get” rates Flat Rate Envelopes & Boxes “If it fits, it ships” No complex contract

42 42 No Fuel Surcharges Ground ServicesAir Services Effective DateUPSFedExUSPSUPSFedExUSPS 5/7/2012 8.50% 0.00%14.50% 0.00% 6/4/2012 8.50% 0.00%14.50% 0.00% 7/2/2012 8.00% 0.00%12.00% 0.00% 8/6/2012 7.00% 0.00%10.00% 0.00% 9/1/2012 7.00% 0.00%11.50% 0.00% 10/1/2012 8.00% 0.00%13.50% 0.00% 11/1/2012 8.50% 0.00%14.00% 0.00% 12/2/2012 8.50% 0.00%13.50% 0.00% 12/31/2012 7.50% 0.00%11.00% 0.00% 2/4/2013 7.50% 0.00%10.50% 0.00% 3/4/2013 7.00% 0.00%11.50% 0.00% 4/1/2013 7.50% 0.00%12.00% 0.00%

43  No Fee For Residential Delivery  No Fee For Rural Delivery  No Fee For Address Corrections  No Fee For Forwarding  No Fee For Saturday Delivery  No Fee For Undeliverable Mail  No Fee For Packaging Supplies  No Fee For Pickup Surcharges

44 44 Saturday Delivery Extra day to pick up and deliver every week, no extra cost 52 more delivery days a year Customers prefer to receive their packages on Saturday DELIVERY STANDARDS Day of the WeekUPS Delivery DayUSPS Delivery Day MondayWednesday2 DaysWednesday2 Days TuesdayThursday2 DaysThursday2 Days WednesdayFriday2 DaysFriday2 Days ThursdayMonday4 DaysSaturday2 Days FridayTuesday4 DaysMonday3 Days SaturdayNAMonday2 Days SundayNA

45 Discounting The standard counter price for postage at the Post Office. Retail Pricing The discounted price available to online postage users. Commercial Base Pricing Deeply discounted prices for volume shippers Commercial Plus Pricing NSA@usps.com Negotiated Service Agreement

46 Service Comparisons FedExUPSUSPS Priority OvernightNext Day AirExpress Mail Standard OvernightNext Day Air SaverExpress Mail 2 Day2 Day AirPriority Mail Express Saver3 Day AirPriority Mail Ground Commercial Priority Mail FedEx Home DeliveryGround ResidentialPriority Mail

47 Priority Mail Service Service standards Delivery within 2 to 3 days Includes USPS Tracking™ Non-guaranteed service Does not include insurance Cost advantages Saturday delivery and residential delivery at no extra cost Zone pricing keeps costs low No accessorial charges Flat rate pricing available Free Package Pickup

48 Priority Mail Options Priority Mail Flat Rates® Priority Mail - Retail Priority Mail - Commercial Base™ Priority Mail - Commercial Plus™ Priority Mail - Commercial Plus Cubic Priority Mail Regional Rate

49 Flat Rate Products Priority MailExpress Mail Flat Rate ProductRetail Commercial Base Commercial PlusRetail Commercial Base Commercial Plus Flat Rate Envelope$5.60$5.05$4.95$19.95$18.11$12.85 Legal Flat Rate Envelope$5.75$5.25$4.99$19.95$18.11$12.85 Padded Flat Rate Env$5.95$5.70$5.35$19.95$18.11$12.85 Flat Rate BoxesN/A $39.95 Small Flat Rate Box$5.80$5.15$5.10N/A Medium Flat Rate Boxes$12.35$11.30$10.65N/A Large Flat Rate Boxes$16.85$15.30$14.80N/A APO/FPO Lg Flat Rate Box$14.85$13.30$12.80N/A

50 Savings - Priority Mail Comm Plus vs FedEx 2-Day (40% Incentive, No Accessorials) Weight L, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 0.5 Lbs70.3%71.6%74.7%87.0%124.9% 114.4% 1 Lbs57.6%56.5%57.1%70.6%107.8%109.9%99.7% 2 Lbs55.0%52.0%47.4%38.9%69.6%70.9%65.3% 3 Lbs52.9%38.8%29.2%26.5%47.2%47.6%36.1% 4 Lbs41.5%25.7%20.0%21.1%39.9%37.7%25.0% 5 Lbs30.7%13.8%19.1%14.8%34.8%31.4%20.5%

51 Savings Priority Mail Comm Plus vs FedEx/UPS Ground Weight L, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 1 Lbs18.0%22.2%21.6%22.3%23.7%21.0%15.4% 2 Lbs24.8%26.5%27.7%4.8%2.9%-3.5%-7.6% 3 Lbs24.0%16.9%11.4%-7.9%-17.6%-23.1%-26.8% 4 Lbs14.0%5.1%0.6%-19.6%-28.7%-32.9%-36.6% 5 Lbs5.1%-7.0%-4.8%-28.4%-36.2%-40.1%-43.4% Weight L, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 1 Lbs74.5%77.1%74.8%73.5%73.1%68.8%60.2% 2 Lbs79.8%78.9%76.5%43.9%39.4%30.4%23.7% 3 Lbs77.9%63.1%51.9%24.6%10.0%2.1%-4.4% 4 Lbs62.3%45.7%35.4%7.0%-6.0%-12.3%-18.5% 5 Lbs48.5%28.6%26.9%-5.7%-16.7%-22.4%-28.0% List rates, no accessorials List rates, residential surcharge applied Weight L, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 1 Lbs89.4%92.1%89.6%88.2%87.9%83.1%73.8% 2 Lbs95.0%94.1%91.5%56.1%51.3%41.4%34.2% 3 Lbs93.0%77.0%64.8%35.2%19.3%10.7%3.7% 4 Lbs76.1%58.0%46.9%16.1%2.0%-4.8%-11.6% 5 Lbs61.2%39.5%37.7%2.3%-9.6%-15.8%-21.9% List rates, residential and fuel surcharges applied

52 Priority Mail Regional Flat Rate USPS Regional Priority Mail Box BoxL, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 Box A$5.32$5.44$5.84$7.48$8.19$8.90$9.88 Box B$6.16$7.36$8.47$11.16$13.25$14.29$16.13 Box C$15.11$19.71$23.41$32.74$37.05$40.53$47.01 2013 FedEx Express Saver (with 40% Discount) WeightZone 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 15 Lbs$12.36$15.60$18.06$20.10$27.33$29.73$35.19 20 Lbs$14.43$18.39$21.90$24.33$32.88$37.08$42.87 25 Lbs$17.07$21.90$25.95$28.68$39.42$43.92$50.70 Savings ($) BoxL, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 Box A$7.04$10.16$12.22$12.62$19.14$20.83$25.31 Box B$8.27$11.03$13.43$13.17$19.63$22.79$26.74 Box C$1.96$2.19$2.54-$4.06$2.37$3.39$3.69 Savings (%) BoxL, 1 & 2Zone 3Zone 4Zone 5Zone 6Zone 7Zone 8 Box A132.3%186.8%209.2%168.7%233.7%234.0%256.2% Box B134.3%149.9%158.6%118.0%148.2%159.5%165.8% Box C13.0%11.1%10.9%-12.4%6.4%8.4%7.8%

53 Q1 FY2013 Growth by Product (%) Service CategoryRevenuePiecesWeight Express Mail2.1-2.24.2 First Class Package Service41.336.835.7 Priority Mail0.40.1-0.6 Parcel Select Mail104.6166.516.3 Parcel Return Service Mail8.510.55.4 International Mail-3.7-9.6-6.0 Total Competitive Mail11.844.97.8

54 USPS Parcel Select® 54 Economical ground service for large and medium B2C shippersService specifications 2 to 9 day delivery Lightweight (3.5 oz to 15.99 oz) as well as Over 1 Lbs Free tracking & other value-added services available Three entry points Destination Delivery Unit (DDU) Sectional Center Facility (SCF) Network Distribution Center (NDC)

55 USPS Workshare Model 8 Bypassing: origin post office ONDC= Originating Bulk Mail Center 2 3 4 5 6 7 Package destination:  Los Angeles CA Package destination:  Los Angeles CA Package origin:  Pittsburgh PA Package origin:  Pittsburgh PA DNDC= Destination Bulk Mailing Center SCF= Sectional Center Facility ONMC DNDC SCF DDU 8

56 Parcel Select Providers (Partial List)

57 USPS Parcel Select Pricing 2013 USPSWhat’s Your Company’s Net Rates? WeightDDUDSCFWeight2345678 1 Lbs$2.16$2.971 Lbs$2.89$2.92$3.00$3.13$3.28$3.32$3.37 2 Lbs$2.16$2.972 Lbs$2.97$3.17$3.43$3.51$3.69$3.73$3.87 3 Lbs$2.20$3.163 Lbs$3.47$3.80$4.15$4.28$4.50$4.60$4.91 4 Lbs$2.24$3.354 Lbs$3.55$3.90$4.36$4.56$4.73$4.91$5.27 5 Lbs$2.27$3.555 Lbs$4.16$4.50$5.17$5.41$5.59$5.83$6.34 6 Lbs$2.30$3.756 Lbs$4.27$4.64$5.25$5.53$5.70$6.00$6.48 7 Lbs$2.34$3.947 Lbs$5.09$5.43$6.09$6.45$6.68$7.03$7.60 57

58 SmartPost Operating Margin To DDU Weight2345678 1 Lbs$0.73$0.76$0.84$0.97$1.12$1.16$1.21 2 Lbs$0.81$1.01$1.27$1.35$1.53$1.57$1.71 3 Lbs$1.31$1.64$1.99$2.12$2.34$2.44$2.75 4 Lbs$1.39$1.74$2.20$2.40$2.57$2.75$3.11 5 Lbs$2.00$2.34$3.01$3.25$3.43$3.67$4.18 6 Lbs$2.11$2.48$3.09$3.37$3.54$3.84$4.32 7 Lbs$2.93$3.27$3.93$4.29$4.52$4.87$5.44 To DSCF Weight2345678 1 Lbs-$0.08-$0.05$0.03$0.16$0.31$0.35$0.40 2 Lbs$0.00$0.20$0.46$0.54$0.72$0.76$0.90 3 Lbs$0.50$0.83$1.18$1.31$1.53$1.63$1.94 4 Lbs$0.58$0.93$1.39$1.59$1.76$1.94$2.30 5 Lbs$1.19$1.53$2.20$2.44$2.62$2.86$3.37 6 Lbs$1.30$1.67$2.28$2.56$2.73$3.03$3.51 7 Lbs$2.12$2.46$3.12$3.48$3.71$4.06$4.63 58

59 Weight Distribution

60 First-Class Package Service Ounces5-Digit3-DigitADCMixed 1$1.25$1.38$1.47$1.69 2$1.25$1.38$1.47$1.69 3$1.25$1.38$1.47$1.69 4$1.42$1.55$1.64$1.86 5$1.60$1.73$1.82$2.04 6$1.77$1.90$1.99$2.21 7$1.95$2.08$2.17$2.39 8$2.11$2.24$2.33$2.55 9$2.29$2.42$2.51$2.73 10$2.46$2.59$2.68$2.90 11$2.64$2.77$2.86$3.08 12$2.79$2.92$3.01$3.23 13$2.94$3.07$3.16$3.38

61 Routing Guide Air Service - No Min Air Service - High Vol Min Ground Option Lbs Zone FC Pkg Serv Comm Base PM Comm Base Regional RT PM Est PM Flat Rt Est. FC Pkg Serv Comm Base PLUS PM Comm Plus - Cubic PM Comm Base PLUS Parcel Select LightWT Mixed NDC Parcel Select Single Pc Non Prst 1 1/23.235.055.325.10 4.054.584.952.325.42 1 33.235.235.445.10 4.054.655.102.325.47 1 43.235.355.845.10 4.054.745.272.325.57 1 53.235.547.485.10 4.054.995.472.325.63 1 63.235.758.195.10 4.055.235.662.325.68 1 73.236.028.95.10 4.055.475.862.325.73 1 83.236.519.885.10 4.055.826.252.325.78 2 1/2 5.32 5.10 4.585.09 5.47 2 3 5.44 5.10 4.655.35 5.75 2 4 5.84 5.10 4.745.74 6.43 2 5 7.48 5.10 4.997.15 7.76 2 6 8.19 5.10 5.237.66 8.33 2 7 8.908.95.10 5.478.27 8.85 2 8 9.88 5.10 5.828.95 9.71 3 1/2 5.495.3210.65 4.585.20 6.14 3 3 6.395.4410.65 4.656.05 7.02 3 4 7.365.8410.65 4.746.92 8.05

62 Resources USPS Resources: Rates: http://pe.usps.com/text/dmm300/Notice123.htm MailPro: http://about.usps.com/mailpro/ API’s: https://www.usps.com/business/web-tools-apis/welcome.htm USPS National Customer Support Center: https://ribbs.usps.gov Product info Federal Register notices Track mail performance by region FedEx/UPS Service Guides & List Rates www.ups.com/content/us/en/shipping/cost/zones/daily_rates.html http://images.fedex.com/us/services/pdf/Service_Guide_2013.pdf PC Postage www.endicia.com www.stamps.com www.pitneyworks.com

63 Question & Answer

64 THANK YOU! Attend Our Other Sessions! Rob Martinez, DLP, CMDSS President & CEO Office 858.879.2014 www.shipware.com rob@shipware.com @shipw are Tuesday, April 23*Parcel Shipping: A Blueprint to Maximize Service & Reduce Shipping Costs (12:00pm-4:30pm) Wednesday, April 24*Roundtable - eCommerce Transportation Trends: Exploring Same Day Delivery Services for Your Online Business (7:45am-8:25am) *Are Regional Carriers or US Postal Service Cost Effective Options for Your Parcel Business? (1:35pm-2:30pm) Thursday, April 25*“Opportunities” Shipping Power Panel (10:15am-11:10am) *Roundtable - Delivery to the Home: The Challenges and Cost Effective Solutions for Residential Parcel Shipping (12:45pm-1:30pm)


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