1 Reply Latest reply on May 4, 2011 9:21 AM by Beverly Dunn

    Got Brown or FedEx?  Small Parcel Event that needs your help!

    Beverly Dunn Master

      As a Customer Success Manager, I get asked strategic/tactical questions regarding event set-ups for Sourcing events.  In particular, I have a customer interested in running a Small Parcel event.

       

      I would like to ask the community:  If you have executed a parcel event, would you please respond back to the questions below for my customer?

       

      1. Pricing strategy: What is the best way to go about pricing for small parcel?
      2. (Would you recommend a RFP and then one-on-one price negotiation or RFP followed by a reverse auction?)
      3. Are zones standardized across the industry for all the vendors?
      4. (UPS has 8 zones, so then, do other vendors like FedEx, USPS, etc. also have 8 zones or do they vary according to vendor?)
      5. Is there a way to we benchmark pricing by zones, service level, and weight for Small Parcel?

       

      Thanks in advance for your replies and help!

       

      Beverly Dunn

      Manager, Customer Success & Renewals

      bdunn@ariba.com

        • Re: Got Brown or FedEx?  Small Parcel Event that needs your help!
          Beverly Dunn Master

          A very kind gentlemen responded directly to my request for information.  Since the response was so thorough, I wanted to post back out to the community for others to have access to.

           

          1. Pricing strategy: What is the best way to go about pricing for small parcel?

           

          Need to source players and have knowledge of following-go right to transporter account exec, with below info as part of RFP.

           

          1.      Volume-have a forecast by volume type (small, oversize, weight- over 70, air and ground, etc.) and a breakdown of zip codes according to forecast if possible.

          2.      Determine inventory carry costs in high cost zones---real estate is cheap, capital is cheap, and in many cases managing inventories in those areas sometimes makes sense.

           

          Utilize a consultant from the providers to help make sense of this if needed.  They do this work for FREE in many cases.

           

          1. Know \what information is utilized and needed by your end customers re: tracking and other info
          2. Try to utilize a means of drop ship to a facility in price reduction strategy
          3. Try to leverage internal means to reduce transporter handles-Ex.  Combine shipments in bags going to like zip codes and bid negotiate reduction in provider handling.

                                        

          1. (Would you recommend a RFP and then one-on-one price negotiation or RFP followed by a reverse auction?)

           

          From experience standpoint in industry.  RFP and one on one will work best with the transportation provider

           

          1. Are zones standardized across the industry for all the vendors?

           

          • Zones are created by transportation providers and are unique to them-they are typically based on overnight mileage, population density,  hub locations, last mile for delivery.
          • Ex.  200 miles is typical mileage for a single zone; the ability to move a  package through one hub sort facility.  Zone one for a carrier will normally be to end users within 200 miles.
          • NY metro area has huge density, but due to traffic problems, zone one for that area may be reduced for FedEx if they only have one or two hubs in the area.
          • Whereas the USPS and UPS have many hubs to increase the size of zone one-the ability to move a package to final destination through one hub sort.
          • That is, USPS and UPS have zip code breaks that better sort the package-- the first movement of packages--getting them closer to the end customer.
          • This may not be fact but hopefully illustrates the reason for different zones by competitor. 

          1. (UPS has 8 zones, so then, do other vendors like FedEx, USPS, etc. also have 8 zones or do they vary according to vendor?)

           

          1. Is there a way to we benchmark pricing by zones, service level, and weight for Small Parcel?

           

           

          This is extremely difficult because each provider will do market analysis to set prices and vary zones according to volume by zone and type of volume

          • Ex.  Each year UPS changes its rate structures according to cost associated in a zone and demand in the zone for the service.  Benchmarking may work, but information will be short lived depending on these and other associated factors. 
          • Ex. USPS may look at competitive analysis and determine they could put volume into a low cost, underutilized hub (hubs are large sort facilities with no delivery drivers) to drive capacity utilization,  In effort to improve overall margins.  The hub may be in a different location then FedEx or UPS and service slightly different final deliver centers( zones are different). The next year, this program may change, as capacity constraints cause the USPS to change hubs (and therefore change prices).

           

                       Additionally, he recommended that for Pricing for small parcel….GET BIDS BY LANE and MODE.