headaches will come in small packages for retailers and manufacturers
in the next few years as delivery companies grapple with a surge in
demand. Stores, catalogers, online retailers and companies working on
just-in-time production schedules will need to minimize the risk of
small-parcel delays that can increase costs or tarnish a firm's
Alternative delivery services such Universal Express, Ground
Express, Lone Star Overnight and City Performance Logistics can help.
They're targeting the needs of small-parcel shippers. These delivery
upstarts are hungry for business and charge as little as half what big
carriers such as FedEx and UPS charge. Most of the smaller services
don't provide nationwide delivery, but many of them plan to enlarge
their service areas in the near future.
The smaller firms usually are more flexible about when they make
deliveries. UPS, for example, won’t deliver packages during eight
federal holidays and Sundays and won’t attempt re-delivery on weekends
if recipients aren’t home on the first call. FedEx shares some of these
restrictions, although it will deliver on holidays for a large price
premium. In general, small operators are available 7/365 to get the job
The smaller delivery companies also tend to be less rigid on
packaging formats and pickup times. Big shippers are moving more toward
shipment standardization—as well as fixed pickup times—to lower costs.
You can try to lock in prices and priority delivery service with the
national package carriers, but that is pricey. Keep in mind that the
major carriers raised rates 3.9% on average this year and likely will
do so again in 2004.
The robust growth of online sales is generating huge increases in
small package shipments. Online sales rose 48% in 2002 to $76 billion
and will jump another 25% or so to nearly $100 billion this year. Such
sales are likely to reach $130 billion in 2004 as the economy picks up
Apart from online commerce, delivery growth is being driven by
two-career couples who don't have time to pick up or cart home the
goods they want to buy, in stores or elsewhere. Many others want to
spend more of their non-work time doing leisure activities rather than
trolling through stores and lugging goods home.
Consumers are also becoming more demanding about timely deliveries.
The ability to track a delivery's progress online has prompted
consumers to put more pressure on vendors or shippers to live up to
their delivery promises. Richard Hallal, a principal with Logistics
Development Corp., a logistics consultant, warns that "consumers who
buy products online, or through catalogs, absolutely expect delivery in
two days or so... and if delivery is spotty—shows up a few days
late—they’ll take their business elsewhere."
The bigger delivery firms will be slow to respond to the pickup in
package volume because FedEx and others are more concerned right now
with slashing huge fixed costs and bolstering their bottom lines.
Heavily unionized UPS isn’t likely to get its employees to work
holidays anytime soon, while FedEx is hoping to trim its staff by
nearly 10% through buyouts and other inducements.
Enter the upstart competitors that keep overhead low by outsourcing
and using tracking and logistics management software to eliminate the
need for expensive in-house traffic dispatch departments.
Universal Express is typical of new delivery services moving fast to
fill small-package shipping needs. Since the 1980s, Universal has
provided logistics support to 9000 privately owned parcel and package
stores, arranging volume discounts for them with FedEx, UPS and others.
Now Universal is going directly into the primary delivery business.
"These [parcel] stores feed FedEx and UPS $6 billion a year for
small-package shipments paid directly by customers, but we can do a
better job," says Richard Altomare, Universal’s president and CEO. How?
By holding down operating expenses. Universal claims that it charges
15% to 20% less than other overnight package carriers for second-day
delivery used by most retailers and companies to ship customers’ orders.
Researcher/Reporter: Nikki Eyman