July 26 2006 12:55 PM

I can�t remember any development in carrier pricing that has been more volatile than the dastardly Delivery Area Surcharge. To say I have been inundated with calls and e-mails about the subject would not be an exaggeration. Shippers are savvy. Shippers are cost conscience. Shippers are mad!
As far as I can see, there are two options in dealing with surcharges. First, you can try to reduce the impact by negotiating a lesser charge or, even better, no charge at all. Good luck! Yes, I�ve seen companies have some success in this area. But, in general, this is a tough road to follow. Chances are you will be waylaid along the way.
But don�t despair, because there is an alternative. What I have in mind are parcel consolidation companies (a.k.a. consolidators). You could be missing out on a lot of savings. They specialize in business-to-residential parcel service. Or to put it another way, they gladly service packages going to the �surcharge� ZIPs. With the increase of mail order catalog sales, cable shopping channels and the emerging world of e-commerce, more shipments than ever are headed to residential/surcharge locations.
Consolidators pick up, sort, consolidate, transport and deliver parcels to the most economical point of entry in the USPS delivery system � ensuring the best postal discount. Some consolidators use regional parcel companies for delivery service, in addition to the USPS. Consolidators service their customers through a national network of hubs strategically located around the country. These regional hubs are linked together by a ground linehaul operation. Together, they form the backbone of a consolidator�s operation.
The USPS has strengthened the consolidation market through its Parcel Direct by extending its work-sharing discount programs to those that can sort and deliver parcels to smaller geographic entry points. It has expanded these entry points beyond Destination Bulk Mail Centers and now includes Sectional Center Facilities and Delivery Units. That plays right into the hands of consolidators who process a high- volume level of parcels and can generate significant density to enjoy greater USPS discounts. As you might expect, delivery density is critical to cost minimization. And best of all, the USPS does not have a Delivery Area Surcharge to cause you worry or to cost you big dollars.
How can consolidators beat UPS at the �price game?� It�s simple. UPS� rates are structured to maximize profit on longer haul parcels. Let�s consider a company shipping two identical parcels: one-and-one-half cubic feet in size and weighing 10 pounds. The only difference between these parcels is length of haul to their delivery point. One is Zone 4, while the other is Zone 8. The linehaul cost differential for UPS is roughly a dollar. Yet, the difference in base residential rates is a whooping $2.80! That amount of revenue/cost differential gives consolidators plenty of room to aggressively price their services. That translates into cost reduction opportunities for you!
You don�t have to sacrifice tracking and tracing when you use consolidators. Many offer their customers online access to package-level delivery information. And the USPS has rolled out Delivery Confirmation and Signature Capture for proof-of-delivery. So if the need is there, you can have it.
So, if you are a high-volume shipper who�s tired of the surcharge and interested in reducing your transportation expense, do yourself a favor and contact a consolidator. You have many choices such as R.R. Donnelley (www.rrdonnelley.com) and Parcel Direct (www.parceldirect.com), to name just two. I�m sure all consolidators would be interested in hearing from you. If you do pick up the phone and make contact, I am confident you�ll be surprised at what you�ll learn. It�s never too late to consolidate!
Joe Loughran is president of SmartTran, Inc. and an expert in parcel carrier rate analysis. Joe can be reached by phone at 724-934-0626 or by e-mail at loughran@smarttran.com.