newsworthy

Hempstead said that although he didn’t solicit any business in 2011, “business found me, and I did very well.” Like virtually all consultants, Hempstead works behind the scenes on behalf of clients and does not negotiate directly with the carriers. Those who stay in the background and let shippers bargain face to face with FedEx and UPS stand a better chance of maintaining their relationships with the carriers because they lessen the risk of antagonizing them, consultants say.

But consultants who take this approach—and third parties rarely bargain directly with carriers anymore—may be doing their customers more harm than good. That’s because shippers unskilled in the complex art of parcel contract negotiation will often leave thousands of dollars of cost savings on the bargaining table even though they were advised by consultants beforehand on what to ask for, according to Rob Martinez, president and CEO of San Diego-based consultancy Shipware LLC.

“Most shippers can’t articulate the message as well as the consultants, and benchmarks can no longer be used effectively since the consultant is in the background. As a result, the savings outcome is negated,” said Martinez, who also stays behind the scenes with very few exceptions.

process, he said.

Under the standard “gain-sharing” formula in place for years, shippers and consultants would split the savings 50- 50 over a three-year period. As a result of the FedEx and UPS policies, shippers are increasingly demanding that consultants accept less than 50 percent of the savings and over a shorter duration, Martinez said.

In a number of cases, consultants are being asked to accept a fixed fee for their services rather than work on the parcel industry version of “contingency.” The fixed-fee model, while generating a predictable cash stream for the consultant, is often not as lucrative as the gain-sharing model.

Michael P. Regan, chairman of Elmhurst Village, Ill.-based consultancy TranzAct Technologies Inc., agreed that while consultants remain busy, they are ringing less at the register today than in prior years. That, he said, is due to shippers’ migrating to fixed-fee quotes and away from gain-sharing.

“Since we have always emphasized the fixed-fee approach, it is not a big deal. But for some of the others, it is huge,” he said.

A CHANGE IN FORMULA

Martinez said that Shipware is “busier than ever” and that revenue has increased as the company writes more business. However, Shipware’s profits have been affected because shippers have changed the formula it has traditionally relied on to divide the savings yielded from the negotiating

accolades

FEAR OF RETRIBUTION

With a court date more than a year away, the dispute is turning into a war of attrition that many consultants fear they can’t win without some form of legal relief. With combined annual revenues of more than $94 billion and a near duopoly in the business-to-business U.S. parcel market, FedEx and UPS can easily live without consultants. However, the same cannot be said for the consultants. In the end, their customers need to have their parcels shipped. And with some exceptions only two are able to do it.

The larger fear for consultants is that shippers will walk away from their relationships if they believe FedEx and UPS will punish them either by removing their discounts or by degrading their service levels.

The AFMS complaint raised that concern, arguing that many shippers that have used third parties are refusing to speak publicly about the dispute because they are concerned about “ retributive price increases” from the carriers. Martinez of Shipware added that “shippers are skittish of violating confidentiality [agreements] or [of] pissing off the carrier. They fear losing discounts or getting ‘shut down,’” industry lingo for not receiving pickups.

Martinez said he has spoken to more than a dozen consultants who have told him how much damage the policies have done to their businesses. Some have begun plying their trade with other transport modes, while a few have gone out of business, he said. ;

—Mark Solomon

U.S. Xpress Enterprises, a provider of transportation services throughout North America, has been named Truckload Carrier of the Year by the National Shippers Strategic Transportation Council (NASSTRAC). … Fortune magazine named Union Pacific as the most admired among trucking, transportation, and logistics companies for the second consecutive year. Union Pacific Railroad was also named 2012 Logistics/Transportation Provider of the Year by American Metal Market. … At the Pacific Maritime Association’s 63rd Annual Safety Awards banquets, Ports America was honored with numerous Accident Prevention Awards for workplace safety in 2011, including the First Place Coast Award and First Place Local Area Award Group A Stevedore Operations for its Los Angeles/Long Beach operations. … Steel King Industries Inc. has announced the recipients of its Excalibur Dealer Awards for 2011: Cisco Eagle Inc., Crown Lift of Grand Rapids, Lift Solutions Inc., Meyer Material Handling Products Inc., Prestige Sales Co. Inc., Riekes Material Handling Co., Twinlode Corp., WW Cannon Inc., Wisconsin Lift Truck Corp., and Wynright Corp.