Pretz,there has always been competition,the problem now is the disparity between the shareholders expectations and the reality of employee intervention.Let me explain.A driver notices that Marks work warehouse is using purolator for store to store shipments,if ups simply offered 5% less than their rate,it would show that they want your business.
There is no dedication to the company anymore ,this will eventually kill ups..
Your right, there has been competition for a long period of time. Initially it was other couriers, then it was the delivery fleet of the stores we sought to do business with. We had competition with REA, we had and continue to have competition with the USPS. FDX came along in the early 70's and RPS (forerunner of FDX Ground) came along in the 80's (I believe), we still have a huge threat internationally in DHL, as well as TNT and other nations post office. ALso, with the push of same day delivery, the courier business will see tremendous growth over the next few years.
Let's go thru a few of the competitors.
1. Other couriers (circa 1910's) -- The company wisely knew it needed to expand and offer services in more then just one city, we knew we needed to expand and get into commercial delivery for deparment stores, this led to great growth with UPS. (Note: at this time, the way nation was, driving your stuff home from department store wasn't done as much as it is today)..
2. REA - This was the king of the hill, they had market, but they got fat, dumb and happy thinking no one could beat them at their own game. They were wrong. UPS was the fast moving competitor that beat the goliath.
3. UPS started Blue label air and then due to a poor economy and a loss in operations, dropped this service. FDX wisely created the need for a great idea, next day delivery. They practically invented the market. A market that UPS didn't see until too late. A bad decision on UPS to not to go after this market aggressively at the beginning. However, this is easy to say after the fact. Maybe it wasn't obvious earlier.
4. FDX Ground\RPS. This was the colossal error UPS made. Again, we are the king of the hills, we gave no customer rebates or reduced rates, everyone paid the same rate. Our rates were solely based on zone and weight (along with a handful of accessorials). RPS realized that picking up from a vendor that shipped 1000 pkgs, where 100 pkgs went to each of ten different stops was very profitable. They realized they could offer UPS rates less 10,20,30 or higher % off. UPS assumed this was a passing fad and they wouldn't last. This was our biggest mistake. This one is one we should have seen beforehand and fixed. We should have had a rate structure that allowed us to make a reasonable profit on all the packages. Which means, offering highly profitable accounts a discount on their rates and increasing rates for customers that were expensive to serve. If we did this, RPS wouldn't have been able to beat our pricing.
5. DHL\TNT etc.. this was mostly a matter of companies that grew and started outside of the US, not much we probably could have done at the time. Although we did look at buying DHL quite a few years ago (30+years ago).
To get to your point, we can't offer purely lower rates to win contracts, if it was solely on rates, with FDX having a vastly lower cost to serve then UPS, we would get killed on a pure rate play. We can't pay our drivers the rate they get (with benefits) and FDX pay less then half for their ground drivers. Not to mention their use of gypsy line haul drivers vs our teamster Feeder dept.
We need to show customers we want their business but at rates where we can pay our people and still make a profit.
