DC Velocity - June 2014

without its FedEx Ground unit doing anything to change its operations, he predicted.

RATIONAL BEHAVIOR

Jindel said pundits who claim FedEx’s actions smack of price gouging have little clue about the cost structure of its ground business. As more e-commerce traffic flows into the system, the package mix will get lighter and bulkier. This will require the company to spend more on various types of equipment, notably larger delivery vans. Add to that the cube-busting bloat of extra packaging, and it is easy to see why FedEx believes it has no choice but to be properly compensated for carrying parcels that don’t pay their way.

“This is not exploitation,” he said. “This is a company
that is adjusting to profound changes in its business.”
Over the next seven months, many FedEx customers will
have key decisions to make. Much depends on the course
UPS takes. Presuming UPS follows suit, they can turn to the
U.S. Postal Service (USPS), which does not employ dimen-
sional pricing. However, USPS may not be able to handle
an avalanche of new B2C business without increased capital
investment in plant, facilities, and equipment, moves that
could force it to take significant rate increases of its own.

Customers could also turn to the regional parcel carriers. Mark Magill, vice president of business development for Chandler, Ariz.-based On Trac, a regional carrier that serves eight western states, said his company employs a more ship-per-friendly volumetric divisor of 194. Magill said he uses that as a selling point, adding that he will go even higher if the customer is large enough. Jones of LSO, which uses the same divisor—166—as FedEx and UPS, said the regionals could exempt shipments measuring one to two cubic feet from dimensional pricing; this would give a break to the many e-commerce shipments that cube out at such micro levels.

Customers could bargain for exemptions. Briski of Genco, who helps customers negotiate with the carriers, said he’s begun advising clients on ways to leverage their contractual volumes to minimize the impact of the pricing change. But it will be virtually impossible to eliminate the impact, he said. The next step, Briski said, will be to work with clients to modify their packaging.

For decades, packaging sizes have been basically uniform. As shipment sizes shrank, the result was a lot of empty space filled with useless padding. Today, packaging comes in all shapes and sizes, and can be customized, almost on the fly, to meet a shipper’s individual needs.

As with so many circumstances, one person’s misery is another’s opportunity. “It’s a good time to be in the packaging engineering business,” said Jones.

—M.S.

The Seegrid automated GT10 tow tractor has won a 2014 Edison Award in the Applied Technology, Industrial Productivity category. … InfinityQS International Inc., a provider of real-time quality and manufacturing intelligence, was recognized by CIO Review magazine in its annual list of “The 20 Most Promising Aerospace IT Solution Providers.” … Toyota Logistics Services has presented Crowley Maritime Corp.’s liner and logistics groups with its 2013 Logistics Excellence Award for quality. … The U.S. Environmental Protection Agency has presented the Council of Supply Chain Management Professionals with a 2014 Smart Way Affiliate Challenge Award. …

Wynright Corp., a U.S.-based provider of intelligent material handling systems, has been included on the RBR50 list, Robotic Business Review’s compilation of the most notable companies in the global robotics industry. … Truckload service provider Heartland Express Inc. has been recognized by Walmart as the 2013 Walmart General Merchandise Diamond Carrier of the Year. … Wisconsin Lift Truck Corp. has been awarded the Excalibur Dealer Award from Steel King Industries Inc. for 2013. … Material handling company Crown Equipment recently recognized its best-performing company-owned branches and independent dealers in North America for 2013. Crown Lift Trucks of Ontario, Calif., and NorthWest Handling Systems Inc. of Seattle both earned the James F. Dicke Pioneer Award as the year’s top-performing branch and dealer, respectively. … ThomasNet.com and the Institute for Supply Management have created the “ 30 Under 30 Rising Supply Chain Stars” Recognition Program to recognize Millennials who are strengthening the purchasing/supply chain management industry. … Freight brokerage Total Quality Logistics has received the CargoNet Best in Cargo Security Award for its cargo theft prevention efforts in 2013. … Material Logistics & Services LLC, a subsidiary of logistics provider WSI, is one of four companies to win the American Chemistry Council’s 2014 New Responsible Care Company of the Year Award. … Joe Joice, vice president of United Sortation Solutions, has been awarded the 2014 Executive Management Award by SmartCEO magazine.