DC Velocity - October 2011

Angeles to San Francisco, a distance of about 400 miles. FedEx and UPS would charge about $36.00 for the same shipment delivered via air by 10: 30 a.m. the next business day, and a bit over $30.00 for next-afternoon delivery.

The rate gap exists on shorter hauls as well. Spee-Dee charges a tariff rate of $3.67 for a one-pound package shipped from Minneapolis to Eau Claire, Wis., and delivered the next day, while UPS charges $5.12 for the same shipment.

Spee-Dee and On Trac have eight and 10 accessorial charges, respectively. FedEx and UPS, on the other hand, have an estimated 42 accessorials, and that’s a conservative figure, according to The Colography Group Inc., a research and consulting firm based in Marietta, Ga.

Because of their focused service areas, the regionals can provide late pickups— sometimes up to 9 p.m.—and still deliver the goods the next day. Rick Jones, CEO of Austin, Texas-based Lone Star Overnight (LSO), which serves four states including every address in Texas, said the later pickups are a boon to his company’s customers because it enables them to push more goods out the door per day.

The regional model also becomes more viable as the nation’s supply chain itself becomes more regional in scope. Mark Magill, OnTrac’s director of business development, said one of his largest customers, a retailer with a distribution facility on the East Coast, uses OnTrac’s network as a mobile DC out West, enabling the retailer to tap into the carrier’s service area of 60 million people without building a brick-and-mortar facility.

OnTrac’s geography is so vast for a regional carrier that a customer can ship a package overnight from Bellingham, Wash., to Yuma, Ariz., achieving NAFTA-like next-day coverage for its deliveries, Magill said.

The top regionals agree that while they cannot replace FedEx and UPS, they can peel off business from the two that might be best suited to moving in regional networks. But their tactics differ. Spee-Dee touts its initial rate as its best offering and does not discount from there. Its rates are the same whether a parcel is delivered to a business or residence,

Eastern Connection’s tariff rates
will match those of FedEx and UPS,
but from there, the regional will dis-
count its prices to undercut the big
two. Lone Star, whose customer mix
is somewhat different in that it is
heavily skewed toward the business-
to-business segment, will offer rates
that, in some cases, are higher than
FedEx’s and UPS’s. The company
does offer an express product, “LSO
Simple,” that matches FedEx’s and
UPS’s base rates but comes with the
promise of no fuel surcharges or
accessorials.

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