UPS vs. FedEx vs. USPS. Which is best?
The holiday craziness begins a week from today. But long before the anticipated ramp up in sales takes place, experienced merchants have already taken a look at an important component of their revenue and expenses: shipping cost. Next to the cost of goods, freight is probably one of the highest expense lines on your budget. The process for us begins sometime after the holidays in the first quarter when we evaluate our carrier performance and make the appropriate decisions on who will earn our business. As everyone knows, there are 3 major players out there in this arena: UPS, FedEx and the USPS.
Over the years, we have done more business with UPS than any other company but we have also been exclusively with FedEx in the past as well. The bottom line for us is pricing because we pass the savings along to our customers. However there are also lots of other factors that come into play besides the lowest cost. Some of the factors that are important to us are:
Technology & hardware
Get as many shipping stations, scales, scanners and printers as are necessary to your fulfillment process, all provided by the carriers at no additional cost to you. UPS and FedEx differ in this area in what they are willing to provide. FedEx will generally take a look at your process and help to determine how many stations they will provide for you. We have signed technology contracts with UPS in the past where they provide credits to companies like Dell & HP based on your projected volume over 3 years. This could be worth thousands of dollars in desktop computers and other hardware. More recently and because I did not want to sign another contract like that with UPS, they asked me what I needed and they provided it. As long as it is a reasonable request and they want to work with you, they will do what it takes to make you happy. In either case, provided your volume is high enough, you won't have to use your hardware to ship orders.
With some of our suppliers, we have the choice of selecting the inbound carrier. In order to earn our business, we strongly suggest to our shipping partner to deliver our packages as early in the day as possible.
Everyone wants to arrange as late a pickup as possible but this is the time to negotiate it. UPS is much better in this area than FedEx because of the efficiency of a single pickup compared to FedEx's Express and Home Delivery pickups.
Our experience has been a much smoother claims process with UPS than FedEx. This is something that a single account no matter how large, will most likely not be able to affect. There are less hurdles to clear with UPS and fewer questions asked when filing a claim.
For preferred customers, UPS provides non-branded shipping boxes for ground or express shipments. The postal service will also provide custom branded boxes if your volume is at a certain level. From the postal service, specialized boxes are available for free when a customer can handle an annual volume of 12 pallets of any variety of boxes and represent $50,000 of new revenue to the USPS. Customized and co-branded boxes are also available. They can be co-branded with your company logo and be designed to fit your specific size requirements. The criteria for custom/co-branded boxes is a minimum of $250,000 new annual revenue for the USPS. FedEx only provides their own branded express boxes.
Responsiveness of local reps
I once had a boss who determined that the company that would get his business was based on the frequency and cost of the dinners these vendors would treat him to. While I don't follow that philosophy, when you have a problem you need to know your rep will be there for you.
Around 6 months ago we also added a feature at eHobbies which allows our customers to choose First Class mail, Priority Mail and Parcel Post shipping from the USPS for appropriate products. This has been an outstanding addition for us because it serves our customer in the way that they want their order shipped. You can knock the postal service all day long for things that they do poorly (tracking numbers that don't track, slow delivery for parcel post, etc) but they have some terrific services that clearly outperform UPS and FedEx. We sell spare parts for RC cars & trucks, model car kits, and model trains and some of them are very small and lightweight. For these products, first class mail is fast and cheap compared to the competition. In other cases, priority mail is a preferred method because of shipping to Alaska, Hawaii or PO Boxes can either be expensive or not accepted. And one of the best things about delivery from the postal service is that they deliver 6 days per week with no extra premium on Saturdays!
So which service is the best between UPS, FedEx and the US Postal Service? All of them, when it comes to making your customers happy.
Hi Ken, Great story...I am a Letter Carrier w/ USPS and I agree scanning could be better but we only have what they give us, I do want to point out while I am not sure about the guidelines for custom branded boxes, we do supply self branded (priority mail) boxes and will even deliver them to you at no charge and pick up is also free...you basically just pay postage.
Tao Wong says:
Any suggestions for those of us in Canada? I've talked and talked to the various vendors about getting a better deal, but they don't provide boxes, equipment or heck, even rates that are worthwhile to us! In the end, it always seems that Canada Post is the best option
Carlos Rivera says:
I agree with using USPS First-Class Mail, and Priority Mail for parcels up to 2 pounds. These cost-effective shipping methods for small, inexpensive items are a steal compared to the standard 1lb. charges UPS and FedEx have.
Hey Ken, good article. I find it interesting that our experience has been just the opposite as yours. In every point you made with your experience being UPS was better in your area, our experience was that FedEX was better than UPS in that area.
We have received whatever technology we've asked for from FedEX anytime we've asked without contracts, and your right, it can certainly add up to thousands of dollars. However, particularly on the claims rates and processing, FedEX has been MUCHO better than UPS for us. We consider the claims rate heavily in our decisions believe there is a difference in handling packages of our type, big and heavy, that FedEX does better.Our total cost of delivery, rates-rebates+claims is really how everyone should evaluate their shipping costs.
These should include how UPS and FedEX handle your DIM rate and weights, how they handle oversize charges, and how they will measure your packages with their digital scanners. These all greatly effect your final bill. Good luck everyone with their shipping, FedEX does better in our area, large, heavy, midwest origin to US. BTW, we get our Canadian shipments there no problem either.
One catch you didn't mention ... If you use both UPS and Fed Ex, your "volume" discount will be lower for both because you are splitting your volume between two. We use UPS exclusively unless customer really pushes for us to ship Fed Ex Freight Collect, using their account #. UPS has always serviced us better than Fed Ex and given better rates and discounts. Their online interface works better then Fed Ex's for International shipping as well.
Ken Kikkawa says:
Thanks to all for your comments.
@sachmax02: yes, the self branded boxes are great too and we use them extensively. The flat rate boxes are nice for small but heavy weight orders. We also discovered that we can send Parcel Post to Alaska & Hawaii which is a great option our customers in those states. I was talking to one of our customers who is also a letter carrier and he informed me that the postal service is no longer delivering priority mail on Saturdays. Is that true?
@Tao Wong: sorry, but I don't have much experience in shipping from Canada to other destinations but I've also heard Canada Post is a good option. Good luck.
@Haddrell's Point: I agree and love the Postal Service for those reasons! We have taken what was our minimum shipping charge of $4.99 way down to under $2 and as a result we are doing more business than ever before with small parcels because we passed those savings along to our customers.
@sfw: good to hear your claims experience with FedEx has been better than ours. Most of our packages are 3-8 lbs so the claims process may be different for our parcels. I also agree with you regarding how shipping costs should be evaluated. I have also found that the field IT technicians from both carriers to be very knowledgeable and effective. There was in instance for us last year when we received scanners from FedEx and for some reason we were unable to program a carriage return into the scanner. They came out and handled it right away. They have also assisted in ODBC setup and connections from their software to our warehouse management system for tracking number capture.
@kathywmn: yes, you're absolutely right and the way that we've handled it is that we've been 'exclusive' to one carrier or another on an annual basis. We do fulfillment for other retailers as well and that is the only time we are locked into their carrier because they are paying for shipping. Do you handle your own international shipping? We chose to outsource international shipments last year mainly for credit card protection.
Ken Kikkawa says:
I was able to get the criteria on boxes from the postal service from our USPS rep. I also added them to the post above but here is the criteria:
From the postal service, specialized boxes are available for free when a customer can handle an annual volume of 12 pallets of any variety of boxes and represent $50,000 of new revenue to the USPS. Customized and co-branded boxes are also available. They can be co-branded with your company logo and be designed to fit your specific size requirements. The criteria for custom/co-branded boxes is a minimum of $250,000 new annual revenue for the USPS.
If you must have proof of delivery at the billing address in order to fight a chargeback, do NOT use UPS. They reserve their "right" to re-route your packages. This means that even though you are the one paying UPS for the shipping service, they still can change the address to which they deliver your packages, leaving you, high and dry, in the face of a chargeback. I would rather use bigger boxes and take my chances with the claims process at FedEx.
Gerardo Cruz says:
what i like about ups is that if your not home when they try to deliver they always come back, meanwhile fedex just tries once. p.s. usps offers great service too!
Gerardo cruz, I just can't stand it when people b** about things they don't really know anything about. FedEx makes 3 attempts when attempting to deliver a package that requires a signature. Otherwise they release it and leave it at your doorstep if it is a residence.