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Manufacturing Stacking &
accounts because it applies to parcels
weighing up to 40 pounds, weight
breaks that are normally associated
with B2B transactions, Jones added.
CHANGES TO PACKAGE FLOW?
It remains to be seen how much
business will flow USPS’s way if
FedEx and UPS customers feel the
new dimensional pricing changes
are untenable. The USPS rate cuts
will have the biggest effect on parcels
moving under 600 miles, which have
become the ideal distance for deliv-
eries as retailers and B2B shippers
add density to their regional ware-
Mail high-volume rates were planned
long before FedEx and UPS made their
respective announcements, according to
the source.
Rick Jones, president and CEO of LSO
(formerly Lone Star Overnight), a regional
parcel carrier in Austin, Texas, said USPS’s
decision not to add dimensional pricing
to its short-haul parcel deliveries reflects
more its lack of infrastructure to measure
each piece than a concerted effort to differentiate itself from the competition.
RISKS INVOLVED
The USPS strategy is not foolproof: FedEx
and UPS may be willing to shed large
numbers of B2C parcels that are marginally profitable on a per-stop basis.
That’s because many of those transactions
involve one package per stop and rob carriers of the economies of scale that come
with handling multiple packages per stop,
which is the hallmark of B2B deliveries. A
torrent of new B2C holiday traffic from
former UPS and FedEx users could strain
USPS’s distribution network, forcing it to
confront the same type of public relations
disaster that befell UPS and, to a lesser
extent, FedEx during last year’s holidays,
a fiasco that USPS was able to avoid.
USPS, which by law must serve every U.S.
address, also runs the risk of taking on
the same uneconomical lightweight, high-cube packages that its rivals would be glad
to be rid of. Jones of LSO said FedEx and
UPS would love to purge their systems of
much B2C traffic so they can reset their
operations and focus more attention on
B2B traffic, historically their bread and
butter.
Jones, who spent 22 years with UPS
before starting his own firm, said UPS
generally discounts its published rates
by at least 25 percent for big B2B customers. Those shippers are more likely
to stay with UPS or FedEx because they
demand a level of delivery sophistication
they feel cannot be achieved with the post
office, he said. In addition, B2B shippers
are less price-sensitive than their B2C
counterparts who angle for the lowest
delivery cost to blunt the bottom-line hit
of providing free shipping to their customers. That being said, USPS’s new pricing is aimed in part at high-volume B2B
