newsworthy
parcel wars
FOR THE PAST YEAR, A QUIET
war has been waged between the
nation’s two giant parcel carriers,
FedEx Corp. and UPS Inc., and a
cluster of self-styled parcel consultants whose mission for nearly
a quarter of a century has been to help
their clients save money when shipping with
one or both of the behemoths.
The stakes are high, but they are completely lopsided. It is no
secret that FedEx and UPS would rather work directly with shippers than through third-party specialists who have a deep knowledge of carriers’ pricing methods and who use that know-how to
help their customers save money. Yet if consultants remain in the
game, it won’t cause the two companies—whose combined annual
revenues top $80 billion—to wonder where their next meals are
coming from.
For consultants, however, the outcome could determine their
very existence as an industry.
In August, AFMS LLC, a Portland, Ore.-based parcel consultant
considered by many to be the most influential in the industry, filed
suit against the two carriers in federal district court in California.
The suit alleges that starting about a year ago, FedEx and UPS have
colluded to essentially drive it out of business by forcing its customers to work directly with the carriers or face retaliation such as
the imposition of higher rates, the loss of applicable discounts, or
the refusal by the carriers to bid on requests for carriage.
The suit charges the carriers with violating federal antitrust laws
and state statutes, and seeks unspecified monetary damages. It
alleges that AFMS, which has worked with FedEx and UPS since
1992, has suffered “lost profit damages” of at least $15 million to $20
million as a result of the giant carriers’ refusal to do business with it.
FedEx spokesman Maury Lane said the company believes the
AFMS lawsuit is without merit and that it will “vigorously defend
itself” in court. Susan Rosenberg, a UPS spokeswoman, said the
suit “wants to punish UPS for dealing directly with our own customers. They want to require us to deal with an intermediary, and
that only adds to the ultimate cost of shipping for the consumer.”
According to court documents, the war’s first salvo was fired at
an industry conference in October 2009, when FedEx and UPS representatives publicly announced their “no third-party consultant”
policies and “did not deny collusion” when questioned about the
competitive impact of the edicts. The suit alleges that both companies needed to adopt similar boycotts at the same time to prevent
one from having a competitive advantage over the other.
On April 23, both companies circulated separate internal policy
directives governing future relationships with third-party p. 14
large retailers mull formation
of NVOCC network
Several large U.S. retailers, concerned about
securing reliable and adequate ocean vessel
capacity at reasonable rates, are looking to form
non-vessel operating common carrier (NVOCC)
networks with the goal of locking in cargo
space that can be marketed to other retailers,
according to the authors of a study on the supply chain’s impact on the retail trade.
Professor Brian J. Gibson of Auburn
University’s College of Business, who was part
of a team at Auburn that co-authored the study
with the Retail Industry Leaders Association
(RILA), said that the strategy—which is just in
the discussion phase—reflects the retail industry’s frustration with its inability, especially in
the past two years, to obtain the space it needs
in a timely and cost-effective manner.
It is also part of a broader strategy by retailers to take a more active role in managing the
inbound flow of goods from vendors, rather
than giving their partners free rein to manage
the retailers’ freight. In the United States, large
retailers, notably Wal-Mart Stores Inc., have
begun taking control of inbound freight from
their suppliers and arranging for the transportation themselves. The authors of the report,
2010 State of the Retail Supply Chain Study,
said it may soon be commonplace for retailers
to position their transportation professionals at
foreign factories to coordinate the movement of
goods from the manufacturing site to the port
of origin.
Gibson wouldn’t identify the retailers exploring the NVOCC strategy, saying only that “we
are seeing a greater interest” from those retailers with the volumes and expertise to wield
influence over carrier negotiations. An NVOCC,
which primarily operates in the ocean trades,
buys space from a carrier and resells it usually
to smaller shippers or third parties. The NVOCC
issues bills of lading, publishes tariffs, and otherwise conducts business as an ocean common
carrier, except that it does not provide the actual ocean or intermodal service. ;
—M.S.
