What have you heard about the future of Surepost?

[Bubblehead]

Thanks for reply. You did not cover the most important question.What is your solution to UPS retaining current UPS ground residential business when customers want a less expensive alternative? If UPS does not provide a solution, what should the customer do?When a customer tells you they are leaving for Fedex Smart Post or Newgistics because the UPS price has become too higher and their customers are demanding "free shipping" and unless UPS drops their price dramatically, they will divert. What should UPS do?

My solution would be to study the areas, and keep the ones that would be logistically feasible, like the dense urban area I run.We do this for the rate that package is being delivered jointly by us and the USPS.Remember in these instances it's my contention that we are going there or some place close anyway.While these packages may not be highly profitable in the now, I believe they will enable us to have an infrastructure in place to serve the growing needs of the internet driven future, where many people will receive multiple packages to their homes daily. I already see this as the case with many homes on my route. Once again I believe this program to be an assett in certain areas, but believe the broad stroke application to be a short sighted mistake whos only purpose seems to be to reduce or maintain staffing and our fleet at current levels to maximize profits in the now, with no regard for the future.

 

[UpstateNYUPSer(Ret)]

My solution would be to study the areas, and keep the ones that would be logistically feasible, like the dense urban area I run.We do this for the rate that package is being delivered jointly by us and the USPS.Remember in these instances it's my contention that we are going there or some place close anyway.While these packages may not be highly profitable in the now, I believe they will enable us to have an infrastructure in place to serve the growing needs of the internet driven future, where many people will receive multiple packages to their homes daily. I already see this as the case with many homes on my route. Once again I believe this program to be an assett in certain areas, but believe the broad stroke application to be a short sighted mistake whos only purpose seems to be to reduce or maintain staffing and our fleet at current levels to maximize profits in the now, with no regard for the future.

Surepost/Basic would not be needed if they had let the drivers manage Rural Remote rather use it as a dispatch tool.

 

[worldwide]

My solution would be to study the areas, and keep the ones that would be logistically feasible, like the dense urban area I run.We do this for the rate that package is being delivered jointly by us and the USPS.Remember in these instances it's my contention that we are going there or some place close anyway.While these packages may not be highly profitable in the now, I believe they will enable us to have an infrastructure in place to serve the growing needs of the internet driven future, where many people will receive multiple packages to their homes daily. I already see this as the case with many homes on my route. Once again I believe this program to be an assett in certain areas, but believe the broad stroke application to be a short sighted mistake whos only purpose seems to be to reduce or maintain staffing and our fleet at current levels to maximize profits in the now, with no regard for the future.

I think you are missing my point. Look at it from the customer view and not a UPS centric view.

A rate comparision may make it easier. Take a 1-lb ground residential package going to zone 5 to a rural zip code and compare with USPS:

UPS rate = $11.99 ($5.75 + $2.45 residential surcharge + $2.75 delivery area surcharge + $1.04 fuel surcharge)
USPS Priority Mail rate = $5.20 small flat rate box or $5.35 for customer packaging
Package consolidator rate = less then Priority Mail--custom rates for accounts

UPS would have to discount their rate more than 56% to come close to the best Priority Mail rate.

Would you as a consumer pay more than twice as much to use UPS ground versus Priority Mail? Most consumers, given the choce, would not. Because of this, e-tailers demand lower rates from UPS or they threaten to divert business. Since neither one of us know the exact operating ratio of UPS ground residential products, we do not know the profit margins but logic would indicate that the margin is not there to support a 56% discount on ground residential service profitably. If it did, UPS would likely make the offer. In order to offer service at a profitable level, a lower cost alternative has to be available to the e-tailer if UPS hopes to retain business or gain new business.

In the case of a dense urban area like your area, the UPS rate would be $8.98 (no delivery area surcharge). UPS would have to offer a 25% discount--very sizeable for a 1-lb package.

Fedex Ground has a lower cost structure than UPS but they have done the same thing with introducing SmartPost and that service has seen dramtic growth and based on commentsmade on the Fedex investor relations calls, the profit margin is good and the growth has been dramatic. That volume is coming from UPS Ground customers and Priority Mail shippers. UPS can either offer a competitive response or continue to lose market share in the ground market. It appears that with SurePost, they are trying to hold on to some of this market at profitable levels.

 

[TUT]

To someone more in the know. It is my belief that Surepost uses the UPS network up until the final mile, that it is dropped off at the local post office for delivery. Is that true? SmartPost I believe doesn't work that way. You can actually knock off 50% of UPS's costs just because of last mile? Sounds like a dollar loser.

 

[bigblu 2 you]

subcontracting in a nutshell.

 

[upssalesguy]

To someone more in the know. It is my belief that Surepost uses the UPS network up until the final mile, that it is dropped off at the local post office for delivery. Is that true? SmartPost I believe doesn't work that way. You can actually knock off 50% of UPS's costs just because of last mile? Sounds like a dollar loser.

that is our advantage (and it costs more) over SmartPost. Fedex is basically taking it to the first post office, we are getting it to the place that will make the delivery.

what do you mean dollar loser? surepost is good for everyone - UPS can offer ground plus one day, the union gets to carry the package up until the last stop (and a driver is delivering it to the post office) if it was savings us 50% of our COST's than it sounds like a dollar winner. i think you can see the problem with our business if 50% of the costs is for the driver delivering that package. that's too high.

 

[Catatonic]

subcontracting in a nutshell.

In a way yes but a win/win for the Union employees and for UPS.
I doubt if UPS makes much money on SurePost but we get other packages with services where we do ... One stop shopping for the customer with one invoice from UPS.
Union employees get jobs due to inside handling and feeder movements. No PC driver jobs though.
Like WorldWide said ... UPS would not get any of these packages. My wife has these same type of packages (30-40) a week and she never ships UPS unless it is 12 pounds or heavier. Simple math.

 

[TUT]

that is our advantage (and it costs more) over SmartPost. Fedex is basically taking it to the first post office, we are getting it to the place that will make the delivery.

what do you mean dollar loser? surepost is good for everyone - UPS can offer ground plus one day, the union gets to carry the package up until the last stop (and a driver is delivering it to the post office) if it was savings us 50% of our COST's than it sounds like a dollar winner. i think you can see the problem with our business if 50% of the costs is for the driver delivering that package. that's too high.

The package still has the full cost of transportation through the UPS network until final mile (my guess 75% of standard ground costs). If the price of Surepost was 50% less to the payor then standard UPS ground that package just lost 25% margin for UPS vs ground, but that is still better then the competition moving it instead. My guess is Surepost isn't 50% off, but probably closer to the cost of commercial ground with resi delivery tacked on for free via USPS. More like a 25% savings. vs Std Ground Residential.

On SmartPost I believe Fedex doesn't take it to the first post office, but it isn't through the standard Fedex network like UPS is and it can get into the USPS system earlier then Surepost. Yes I do see the UPS advantage in that, but if SmartPost is cheaper then I get that as well.

 

[beentheredonethat]

I've mentioned this before to folks at UPS. The idea of Basic\Surepost is a good one. I don't think we are utilizing it as good as we could. Here's a few facts as I know them from working with Basic and Surepost and comparing it to Smartpost.

1. Smartpost was a seperate company from FDX and was bought by FDX. Currently FDX runs this as a seperate company, the volume does not run thru it's internal FDX ground Hub system. Instead, the volume is processed in their Smartpost Hub Network.
2. FDX reduces their cost (and passes this on to their customers) by holding trailers until they are full before dispatching.
3. FDX does make some loads direct to the local PO, but that is rare, the majority of the volume they process they bring to the nearest USPS BMC (equivalent to the local UPS hub that feeds the Pkg centers).
4. FDX charges less for smartpost then UPS charges for BAsic\Surepost.
5. The UPS Basic\Surepost goes through our hub and feeder network and we deliver virtually all of the volume addressed to the USPS to the local DDU (Destination Delivery Unit - aka the local post office). This gives the customer a net UPS grd + 1 day transit time.
6. The customers are looking to reduce cost. Before we had Basic, customers shipping resi pkgs had a choice of UPS Grd, vs FDX Home Delivery vs FDX Smartpost vs USPS. We had higher costs, and we usually charged more then the other competitors which put us at a disadvantage. Now with Basic\Surepost, our costs are lowered and we can offer lower costs then UPS Ground but still generally a bit higher then Smartpost but we have a better service then Smartpost.
7. Due to FDX having more volume go via USPS with SMartpost then UPS had with Basic, they were actually getting better rates from the USPS for final mile then we were getting. (The lower rates came in the form of rebates from USPS).
8. UPS introduced Surepost to better compete with Smartpost and to increase our volume to get the rebates offered by USPS to get us to similar cost structure for that portion of cost.
***************************
Here's what we should do different (IMO)

1. PAS now knows with pretty good certainty what packages are going to be processed that day on the preload.
2. The system should look at PKG that is a basic\surepost and look at final delivery point for customer.
If the system sees that we are deliverying another ground pkg to the same address, then the PAS system should direct the preloader to load that pkg on the car with the other pkg. In this way, there is no extra stop and the driver can deliver the final mile. This will give virtually no extra cost to UPS with our delivery driver. Also, it will reduce cost, since we have to pay USPS for each pkg they deliver.
3. Assuming step 2 works, we can expand it a bit, so that tight areas if the driver is going to drive by stop then deliver that pkg with an increased stop instead of sending to the USPS. (This will require a lot of work and not easy). But at least a potential for down the road.

We have the technology, and what I propose is doable. The problem is they didn't design PAS to do this, and it would need rewrites (from what I was told).

*****************************
I realize service providers don't like it, but customers want this lower cost service. We can say whatever we want. But do you really think people are using Smartpost because they like the service better then UPS? I don't think many people will agree with that. It comes down to the cost.
If we can reduce cost enough and provide a better service, this is what gets us to keep\win accounts for surepost vs smartpost (IMO).

 

[speeddemon]

My customers hate it. The USPS cant be relied on to get it to them the next day. They lose visibility of the package after we deliver it to the USPS.

 

[Bubblehead]

I think you are missing my point. Look at it from the customer view and not a UPS centric view.

A rate comparision may make it easier. Take a 1-lb ground residential package going to zone 5 to a rural zip code and compare with USPS:

UPS rate = $11.99 ($5.75 + $2.45 residential surcharge + $2.75 delivery area surcharge + $1.04 fuel surcharge)
USPS Priority Mail rate = $5.20 small flat rate box or $5.35 for customer packaging
Package consolidator rate = less then Priority Mail--custom rates for accounts

UPS would have to discount their rate more than 56% to come close to the best Priority Mail rate.

Would you as a consumer pay more than twice as much to use UPS ground versus Priority Mail? Most consumers, given the choce, would not. Because of this, e-tailers demand lower rates from UPS or they threaten to divert business. Since neither one of us know the exact operating ratio of UPS ground residential products, we do not know the profit margins but logic would indicate that the margin is not there to support a 56% discount on ground residential service profitably. If it did, UPS would likely make the offer. In order to offer service at a profitable level, a lower cost alternative has to be available to the e-tailer if UPS hopes to retain business or gain new business.

In the case of a dense urban area like your area, the UPS rate would be $8.98 (no delivery area surcharge). UPS would have to offer a 25% discount--very sizeable for a 1-lb package.

Fedex Ground has a lower cost structure than UPS but they have done the same thing with introducing SmartPost and that service has seen dramtic growth and based on commentsmade on the Fedex investor relations calls, the profit margin is good and the growth has been dramatic. That volume is coming from UPS Ground customers and Priority Mail shippers. UPS can either offer a competitive response or continue to lose market share in the ground market. It appears that with SurePost, they are trying to hold on to some of this market at profitable levels.

See post #50, maybe this will help you understand what I'm trying to say.
I believe there are areas, densely populared urban settings, where we could take these packages the whole way.
The volume is already in our system, no need to cut in the USPS.
WE'RE GOING THERE ANYWAY!!! or at least driving right by it.

 

[Bubblehead]

I've mentioned this before to folks at UPS. The idea of Basic\Surepost is a good one. I don't think we are utilizing it as good as we could. Here's a few facts as I know them from working with Basic and Surepost and comparing it to Smartpost.

1. Smartpost was a seperate company from FDX and was bought by FDX. Currently FDX runs this as a seperate company, the volume does not run thru it's internal FDX ground Hub system. Instead, the volume is processed in their Smartpost Hub Network.
2. FDX reduces their cost (and passes this on to their customers) by holding trailers until they are full before dispatching.
3. FDX does make some loads direct to the local PO, but that is rare, the majority of the volume they process they bring to the nearest USPS BMC (equivalent to the local UPS hub that feeds the Pkg centers).
4. FDX charges less for smartpost then UPS charges for BAsic\Surepost.
5. The UPS Basic\Surepost goes through our hub and feeder network and we deliver virtually all of the volume addressed to the USPS to the local DDU (Destination Delivery Unit - aka the local post office). This gives the customer a net UPS grd + 1 day transit time.
6. The customers are looking to reduce cost. Before we had Basic, customers shipping resi pkgs had a choice of UPS Grd, vs FDX Home Delivery vs FDX Smartpost vs USPS. We had higher costs, and we usually charged more then the other competitors which put us at a disadvantage. Now with Basic\Surepost, our costs are lowered and we can offer lower costs then UPS Ground but still generally a bit higher then Smartpost but we have a better service then Smartpost.
7. Due to FDX having more volume go via USPS with SMartpost then UPS had with Basic, they were actually getting better rates from the USPS for final mile then we were getting. (The lower rates came in the form of rebates from USPS).
8. UPS introduced Surepost to better compete with Smartpost and to increase our volume to get the rebates offered by USPS to get us to similar cost structure for that portion of cost.
***************************
Here's what we should do different (IMO)

1. PAS now knows with pretty good certainty what packages are going to be processed that day on the preload.
2. The system should look at PKG that is a basic\surepost and look at final delivery point for customer.
If the system sees that we are deliverying another ground pkg to the same address, then the PAS system should direct the preloader to load that pkg on the car with the other pkg. In this way, there is no extra stop and the driver can deliver the final mile. This will give virtually no extra cost to UPS with our delivery driver. Also, it will reduce cost, since we have to pay USPS for each pkg they deliver.
3. Assuming step 2 works, we can expand it a bit, so that tight areas if the driver is going to drive by stop then deliver that pkg with an increased stop instead of sending to the USPS. (This will require a lot of work and not easy). But at least a potential for down the road.

We have the technology, and what I propose is doable. The problem is they didn't design PAS to do this, and it would need rewrites (from what I was told).

*****************************
I realize service providers don't like it, but customers want this lower cost service. We can say whatever we want. But do you really think people are using Smartpost because they like the service better then UPS? I don't think many people will agree with that. It comes down to the cost.
If we can reduce cost enough and provide a better service, this is what gets us to keep\win accounts for surepost vs smartpost (IMO).

Yes, yes, yes!!!!
This is, at least in part, what I've been trying to say.
Through our technology, i.e. PAS and GPS based programs, we can identify the packages that we can take the whole way rather than cutting in the USPS.
WE'RE GOING THERE ANYWAY!!! or at least driving right by it.

 

[menotyou]

What will happen if the post office goes to three days a week?

 

[worldwide]

See post #50, maybe this will help you understand what I'm trying to say.
I believe there are areas, densely populared urban settings, where we could take these packages the whole way.
The volume is already in our system, no need to cut in the USPS.
WE'RE GOING THERE ANYWAY!!! or at least driving right by it.

Understoood what you are trying to say and it might make sense in densely populated urban areas, but a lot of residential volume is surburban, rural and super rural which incurs extrac cost due to mileage and delivery density. Perhaps there are technology solutions down the road through technology. In the current economic environment, customers are demanding a lower cost option to keep their customers and gain new ones. If UPS does not offer solutions, they lose business. The very simple fact is that Fedex is offering a low cost solution and that part of their business is growing very quickly and is profitable. It's obvious that customers are willing to sacrifice an extra day or two in transit time for lower cost shipping. That is reality.

The real world gut check is this--given the choice how many of you would spend $11.99 for a 1-llb ground package to go UPS versus $5.20 for Priority Mail if they both get delivered within 2-3 days? Nevermind UPS shipping, how many of you would pay more than double for something when there are alternatives that provide the same service/product offerings? My guess is not many. UPS' customers are no different.

 

[UpstateNYUPSer(Ret)]

I recently ordered a HDMI cable from Amazon. The 6' cable cost $2.24. There was no sales tax and no charge for shipping. The total bill was $2.24. How can anyone make any money off of that?

One need only to look at Borders and Blockbusters (and countless others) to see that businesses must adapt to changing conditions in order to remain competitive (or even simply stay in business).

To the poster who suggested making the final delivery determination on the preload---the preload has a hard enough time getting the sort down in time as it is. Surepost packages are bagged to save time. If we start playing God on the preload we would never get the sort down.

 

[upssalesguy]

My customers hate it. The USPS cant be relied on to get it to them the next day. They lose visibility of the package after we deliver it to the USPS.

first, only a few customer are on it - and they wouldnt be on it unless they understood the downgrade in service. Your customer always has the option to use UPS Ground for crucial packages. Also, SurePost is a ground plus 1 day, so even the thought of next day delivery leads me to beleive your customer doesn't understand the service.

they lose visibility for 24 hours until the USPS uploads delivery data. all part of the service.

 

[UpstateNYUPSer(Ret)]

Sales guy said it right---the customer simply doesn't understand the service offering.

 

[Anonymous 10]

What will happen if the post office goes to three days a week?

I doubt that would ever happen. Five days will be ther only option.

 

[menotyou]

I doubt that would ever happen. Five days will be ther only option.

It was on newzjunkie this morning. Apparently, one of the heads was saying this is an option.

 

[Bubblehead]

I recently ordered a HDMI cable from Amazon. The 6' cable cost $2.24. There was no sales tax and no charge for shipping. The total bill was $2.24. How can anyone make any money off of that?One need only to look at Borders and Blockbusters (and countless others) to see that businesses must adapt to changing conditions in order to remain competitive (or even simply stay in business).To the poster who suggested making the final delivery determination on the preload---the preload has a hard enough time getting the sort down in time as it is. Surepost packages are bagged to save time. If we start playing God on the preload we would never get the sort down.

The suggestion was for the determination to be made via computer, like PAS and other GPS assisted programs. I don't think anybody envisioned a worker with a map and pile of packages. The system that was suggested would be of no liability to the preload, as it would be business as usual. The ones going to the post office would still be bagged. The rest assigned a PAS label and loaded accordingly.