UPS Rate Strategy

[peacock71]

The latest from the guy who brought you the WPC thread!

UPS is raising rates this year for most key services, putting an exclamation point on the idea that UPS offers the best 'Value Proposition' in the transportation and logistics business. Of course, the great great majority of UPS customers will pay some percentage of the new rates and not 'list' like the old post card billing days.

There are several positives in the announcements....

1. UPS still has pricing power in the market place and our service is better then the other guys.

2. We are focused on 'end-to-end' value for customers, including residential delivery, maybe not so much on business that is solely price focused (a commodity risk).

3. We seem to be much in command of our Air and International business, growing nicely.

4. The modesty of the rate increase shows effective cost controls.

Some other messages are here also...

1. Not raising base residential rates shows we need to meet the FEDEX Home challenge head on.

2. We will raise rates based on labour contracts even if it risks volume, keeping Unionized job growth below union expectations.

Bottom line, UPS is still acting like the 800 pound gorilla of T&L, and FEDEX is likely to follow with a similar rate increase, in fact, I think they have to in order fund their pension plan, pay debt, and give their people some form of a pay raise.

If the economy recovers, look for a good year for UPS in 2003.

Go ahead Board Members...I'd like to hear your analysis....

Go UPS!
P71
(Yes..I prefer to see the positive in things!)

 

[proups]

Peacock.....our customers will blame the rate increase on the rich contract we just negotiated.

 

[steward]

our customers will blame the rate increase on the rich contract we just negotiated.
the media already is, read the paper}

 

[peacock71]

I can't disagree. I can remember customers blaming rate increases on our Intl Expansion, our investments in Information Technology, and other investments. All were not without risk. Although many of our biggest and best customers expressed concerns (some to me personnally) they were anxious (for the most part) to see UPS do what we said we would do. I think if we can keep that going we will be OK. Customers that see us as a trucking company commodity that justs picks them up and delivers them for a price are at risk.

I think our message is otherwise BUT we have to prove ourselves, continuously. Competition makes us better.

Go UPS!
P71

 

[my2cents]

Does anyone know how fast FedEx ground service is developing? From what I understand, their ground service isn't that great, but if they ever get their ground network in place, it will make these rate hikes tougher to pass off on the customer.

 

[peacock71]

FEDEX has a basic ground net in place the covers 98% of the shopping populace, separate from Ground Commercial, and separate from express. They are integrating at the sales and systems level, selling 'transparency.' The labor problems they face with their couriers, contractors, pilots etc...are not small. Customers should love the competition, its good for all...

Go UPS!
P71

 

[tieguy]

Fedex ground has had a great year. Many UPSers thought the customers would be rushing back in droves once the contract was settled. I think all their eyes are now being opened.

 

[jackvette]

Here's some info:

I think about 200k per day is still at Fedex due to the contract threat. The thought is its not coming back.

Fedex ground service is about 85% on time, compared to our 98%.

Their posted time in transit actually beats ours overall, but as stated above, their reliability is poorer.