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.