Office Depot transport VP has no fear of parcel "duopoly"

Emergence of smaller parcel delivery firms will keep FedEx and UPS from running wild in U.S. market, exec tells NLDC conference in Atlanta.

By Mark B. Solomon

Not every shipper, it seems, fears the big, bad parcel duopoly of FedEx Corp. and UPS Inc.

Brent R. Beabout, vice president, global network strategy and transportation for office supply giant Office Depot, challenged the conventional wisdom that FedEx and UPS can now run wild in the U.S. market in the wake of DHL Express's January 2009 exit. Beabout told the National Logistics and Distribution Conference's annual meeting in Atlanta that smaller parcel delivery firms have emerged to aggressively and effectively compete with the two giants.

The smaller players' customer service and package tracking capabilities may not be quite on par with the big boys', Beabout said, but the deeply discounted rates offered by the small firms more than offset the minor service shortfall. Beabout, who made the comments at a shipper panel discussion on April 13, did not identify specific carriers.

"I see FedEx and UPS losing ground, and we are taking advantage," said Beabout, whose company spends slightly more than $50 million a year on parcel services.

Beabout added that UPS's unionized status results in higher labor costs that make it "non-competitive" with FedEx and others on a per-pound basis. However, he lauded UPS for offering great customer service and superior shipment tracking features.

Looming capacity crunch
Also speaking on the panel was Ben Cubitt, vice president, supply chain for the Rock-Tenn Co., a maker of packaging products, bleached and recycled paperboard, and merchandising displays. Cubitt said shippers need to brace themselves for rapidly tightening truckload capacity, driver shortages, and higher rates, especially as the U.S. economy improves.

The era of ample truckload capacity at rock-bottom rates appears to be over, Cubitt said. "This is probably the easiest three to four years I've ever experienced," he said, adding "there's no trend that looks good for me as far as capacity is concerned." Gough Grubbs, senior vice president, distribution/logistics for Stage Stores, a retail chain of 760 stores located in mostly rural areas of the United States, said he'd like to see "our outbound carriers move more of our inbound freight" to reduce empty miles and create better asset utilization. This so-called continuous moves strategy has proved difficult for shippers to implement, but it can drive down shipping costs and reduce a company's carbon footprint if successful.

The panel concurred that one idea that needs to be closely examined is "collaborative distribution," where multiple shippers combine shipments to create a truckload movement rather than ship individually in more expensive less-than-truckload routings. The panelists said the potential for cost savings and a reduced carbon footprint will trigger more collaboration among competitors and that rivals will increasingly be receptive to the idea of sharing a truck.

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