Brad McBride, CEO of Zero Down, says that companies basing their shipping budgets entirely on what they did in the previous year is a "recipe for disaster." McBride argues that package rates set against the prior year are "totally off-base, and not even close to what the real budget should be." The reason: parcel carriers no longer limit themselves to a single annual general rate increase (GRI), as they did for many years when UPS and FedEx were typically the only carrier options. Now there can be seven or eight rate increases in a year. From a supply chain perspective, the parcel market operates with different dynamics than the less-than-truckload (LTL) and full truckload (FTL) segments, and technical details such as zone skipping, dim weight (dimensional weight), and accessorial charges can account for 30-40% of total transportation costs.
McBride states: "If customers don't change the way they manage their parcels, their budgets are going to spiral out of control." Revenue leakage can occur at multiple points. Sometimes rates aren't good from the start. Other times, carriers may wait two or three years before renegotiating with their carriers. McBride says: "They need to be doing that on an annual basis, to make sure they're paying market-competitive rates." From a supply chain perspective, running RFQ (Request for Quotation) processes on an annual cycle requires access to benchmark data. Parcel audit and consulting firms such as Shipware, 71lbs, AFS Logistics, and Reveel offer contract optimization services through contract intelligence platforms.
Large parcel carriers still exert considerable market power, but shippers can mitigate this dominance by knowing their own data "better than ever before." McBride adds that a qualified third party with expertise in market conditions can assist in negotiations. Despite the power of major carriers, room for negotiation exists. UPS and FedEx typically make adjustments for shippers to prevent competitors from gaining ground in the market. From a supply chain perspective, the rise of regional parcel carriers such as Amazon Logistics, OnTrac, LaserShip, and DHL eCommerce partially breaks the duopoly structure and creates carrier diversification opportunities for shippers. USPS channels such as Ground Advantage and First-Class Package Service serve as strategic alternatives for last-mile delivery cost optimization.
According to McBride, a healthy parcel logistics strategy begins with careful carrier selection based on the best available rates. Equally important is having a good carrier mix and understanding customers' specific needs. From a supply chain perspective, a multi-carrier approach requires rating engine and rate shopping capabilities within a TMS (Transportation Management System). Shipping API platforms such as ShipStation, ShipEngine, EasyPost, and Shippo provide carrier comparison and label generation from a single point for e-commerce sellers. Cost line items such as address correction, residential surcharge, delivery area surcharge (DAS), and fuel surcharge—which have equivalents in the parcel segment analogous to demurrage/detention—play a critical role in calculating total package costs. In conclusion, McBride's views demonstrate that parcel logistics is no longer simply a cost item but rather a strategic function that must be actively managed.
Key Points:
1. McBride defines basing annual budgets on the prior year as a "recipe for disaster."
2. Parcel carriers now implement rate increases 7-8 times per year.
3. Revenue leakage can occur at multiple points.
4. Shippers should renegotiate with carriers on an annual basis.
5. UPS and FedEx are open to adjustments under competitive pressure.
