PARCEL SHIPPERS MAKE MOVES TO OFFSET ECONOMIC FORCES

Transcription

1 PRCEL SHIPPERS MKE MOVES TO OFFSET ECONOMIC FORCES Part 1: Results of the PRCEL nnual Best Practices Survey By Marll Thiee What a year for the PRCEL shipping inustry! This is the year that will pbably reefi ne our inustry for years to come. Why? Transportation companies recognize opportunities. n as more companies see potential in the parcel market, we will have change. But it is not just the transportation companies that see opportunities; it is you, as shippers, who are creating the nee for more competition in the marketplace., your parcel volume may be stagnant but your rive to lower costs (your number one challenge in 08) is pushing the marketplace to create more transportation options in the elivery of packages. s you rea thugh this year s PRCEL Best Practices Survey results, co-conucte by PRCEL an Morgan Stanley, it will become obvious that with s repositioning of its merica service offerings, shippers are consiering more alternatives than an. They are making sure there is a competitive lanscape as they turn to the, regional carriers, consoliators an transportation companies for some relief on pricing. The question remains, however; can these peripheral companies compete with the gol service stanars set by an. But an are not sitting on the laurels; they have become sensitive to the changing lanscape an have been careful not to price themselves out of the market. Rate increases have been minimal an iscounts have impve slightly. To track your moves this year, we actually conucte an aitional mi-year survey. Since Morgan Stanley conucte its survey in March 08, before the major announcements by, we opte to conuct a survey in ugust to note trens after the announcement. (Morgan Stanley will conuct another survey later this fall to continue to look at trens; please take the time to fi ll out that survey as well.) The biggest change: earlier this year, Morgan Stanley aske how many of you ha change primary omestic carriers in the past six months. Six percent change a carriers an 1 switche gun carriers. When aske similar questions in ugust, 3 of shippers sai that they ha change carriers in the last 12 months an 2 of shippers anticipate that they will change carriers in the upcoming 12 months. What will your peers o in the next 12 months? Will they inee move to more, regional, consoliator an moes of transportation? Will, an price accoringly? When will the have its volume iscount pgrams entrenche to be more competitive? Stay tune. We will continue to monitor trens in the inustry an report them to you. The results of the PRCEL ugust survey are base on 443 responses. We thank those who took the time to complete the survey; it is lengthy but by fi nishing it, you have helpe us track an report on inustry trens. Morgan Stanley, a global fi nancial services fi rm an a market leaer in securities, investment management an creit services, coconucts the survey to help the clients make well-foune ecisions on transportation investments. In the vember issue of PRCEL, we continue the survey results focusing on the operations sie of the parcel inustry. We will elve into packaging, technology, management challenges an a host of other concerns for those involve in logistics. lso in vember, look for the results of an aitional survey we conucte with Traffi c Worl on the trens in shipping an hanling charges another hot issue in this economy! Rate Your Carriers 1 Scale of 1 to 10 (10 being the best) Impve fm 07 Worsene fm 07 CSTOMER SERVICE ON-TIME SERVICE PERFORMNCE ELIVERY PERFORMNCE CLIMS PROCESSIN REFNS FOR LTE ELIVERY PRICIN * Compare to Express in 07 *.S. Postal Service 10 October

2 >> Shippers continue to expect more moest price increases this year, except for which unerscores the company s commitment to return to pfi tability. 2 Expecte Changes 5.0% 4.0% 3.4% 3.0% % 2.0% % 1.4% un un un pril 05 Sept 05 March 06 Sept 06 March 07 March 08 In the past 12 months (since ugust ) Percent of shippers that change the carrier mixes 64% 3...move fm (of those who change) 27% 2 #1 reason why average volume move Service 4 Price 3 Price 3 Consoliation Consoliator...move to (of those who change) In the next 12 months (as of ugust ) Percent of shippers that plan to change the carrier mixes 2 Consoliator...moving fm (of those who plan to change) 14% #1 reason why average volume to move Service 34% Price 37% Price 44% Service Consoliator necie 4%...plan to move to (of those who plan to change) 1 9% October 11

3 SRVEY RESLTS More Expecte Changes 100% % 2 60% % 9% 2006 Expecte to ecrease in volume in service offering % 27% 4 Expecte to increase volume in service offering 40% 67% 54% 0% 5 / ht ig ay rn ve ext O N / re y er -a 2 Change 5 >> The clear shift fm premium pucts in an attempt to cut costs.2 un ef 5 >> Shippers still expect tepi parcel volume gwth; likely to struggle the most.2 3.0% % % % PS u n PS 1.7% x E Fe u n i rv Se al ce st o. P Ex L H Fe L H un.s ccessorial Charges % 10.5 >> ccessorial charges continue to escalate as a percentage of overall transportation costs >> Parcels boun to consumers have accessorial fees almost 1.5 % more than those going to business aresses.1 B2B 19.27% B2C im Weight Issues 17% >> Many Shippers have resolve im Weight issues, as only 2 ha issues this year compare to nearly 50% last year. Only 17% of volume was affecte this year, compare to last year. Negotiate 1 Change Packaging 49% thing Change Moe >> More of those shippers who still have im Weight issues are feeling nothing can be one ( this year, compare to 2 in 07). Most shippers are changing packaging to offset im Weight charges. 12 October

4 iscounte Transportation Rates Overall iscounts 1 Next ay Two ay un % 34% 17% 2 2 >> ecrease its iscounts for all service levels, while an increase iscounts fm last year. Enters iscount ame 2 74% on t Know 44% on t Know 2 >> ccoring to Morgan Stanley, More rational pricing fm the is goo for the inustry, but coul also create a more challenging competition for the private carriers. Woul a volume iscount cause you to shift more volume to the? Have you been appache by the regaring volume iscounts? 1 >> There has been no gwth in the number of companies (1) that use consultants to negotiate rates in the past three years, even though it has been emonstrate they help attain eeper iscounts. 1 ggressiveness >> Shippers say carriers are being more aggressive in trying to win business Sept. 06 March Sept. 07 March 08 % of Responents % 39% 3 ccepting smaller rate increase Raise rates more than prior years More willing to negotiate rates 3 change in price behavior While we see no signs of a price war, shippers responses inicate that carriers are becoming slightly more aggressive in using price to win business, accoring to Morgan Stanley. On top of the S economic backp an with s reorganization of its S market, an seem a bit more competitive on pricing to attract any business no longer serve by. Rate increases by carriers have been limite ue to our economy, but larger rate increases fm an are bringing up the fl oor on pricing, which may reuce the nee to iscount, accoring to Morgan Stanley s spring survey results. When aske if legal challenges to FX un s inepenent contractor moel cause any service issues, an overwhelming number of shippers (94%) respone with a resouning no. n of those few who were affecte, only 30% were looking to shift freight to another carrier as a result October

5 Biggest Complaint 1 >> It s no surprise that in this economy, the top three concerns are pricing issues. Complaints about fuel surcharges soare fm to ( 07-08). notable complaints: tracking went fm to 7%, invoicing ppe fm to, an it seems shippers are getting use to accessorial charges as it ppe fm 30% to ( 07-08)! 1 Claims Pcessing ccessorial Charges Customer Service Response 7% 0% river Behavior Fuel Surcharges Fuel Surcharge Reversals Invoices Negotiating Contracts On-time Performance Pricing Refuns for n-performance Resiential eliveries Relationships with Carrier Reps Service Failures Tracking MORE RESLTS ON THE PRCEL OPERTIONS IN THE NOVEMBER ISSE. >> Visit to ownloa these survey results. >> Meet William reene, with Morgan Stanley, at the PRCEL Forum( October 15