On time or it's on us

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On time or it's on us

Lost amidst the scramble by three major less-than-truckload (LTL) carriers to introduce money-back guarantees for late shipments was the main issue — shippers weren’t exactly clamoring for the guarantees to begin with. Their main concern, as it always has been, is on-time delivery.

Nevertheless, the three LTLs — Con-Way, FedEx Freight and USF Corp. — are insistent that their guarantees really are a good thing for shippers. The hope, of course, is that no shipper will ever have to actually take the LTLs up on their money-back offer.

The guarantee really isn’t about the money, though — it’s about the service, says Doug Duncan, president and CEO of FedEx Freight (www.fedex.-com). Doug Wagonner, senior vice president of strategic marketing for USF Corp. (www.-usfreightways.com), notes, “Our market research tells us shippers value reliability more than speed. So we need to be as reliable and as fast as we can.” And Gerald Detter, president and CEO of Con-Way Transportation Service (www.con-way.com), admits, “No shipper wants to get his shipment for free — he wants to get the shipment there on time.”

Nothing in the statements of the three carrier executives points to a glaring need for a no-charge, money-back guarantee for late shipments, yet last month all three rushed forward with details of their plans.

“If we don’t perform to that commitment, we’re willing not to charge,” says Detter. With 97.5% on-time performance system-wide and over 99% in one-day lanes, Detter claims Con-Way sets and meets the toughest standards in the industry. Con-Way’s on-time performance is measured on a self-imposed, no-exceptions policy. “If there’s a snowstorm and instead of being able to run 55 miles per hour, we can only average 25 mph, we don’t take that as a service exception — we take it as a service failure.”

As for the no-charge guarantee, though, Detter admits Con-Way will have to take exceptions, but he is quick to add that customers who are not using the Con-Way 599 tariff and don’t qualify for the no-charge guarantee can still receive a no-exceptions guarantee — but the standard 20% up-charge will apply.

USF’s no-charge guarantee also requires shippers to be on the carrier’s tariff (USF-502). Wagonner says if a shipper wants to move over to the USF tariff, the carrier will adjust the discount to make the move revenue-neutral for the shipper.

“We’re giving shippers an assurance that we will be reliable and deliver what we sell them,” Wagonner says. That said, USF has a separate initiative aimed at improving service standards and speeding up transit times. “We’re reengineering our line haul network,” he says, adding that those improvements will be rolled into upgraded service standards.

USF’s no-charge discount isn’t automatic. Wagonner says shippers will have to meet with a USF representative. “We want to form a partnership that allows us to gather information about requirements — What time does the shipper’s facility close? What time are pick-ups ready? — so that we can operationally have more intelligence to serve a customer better,” he explains.

As for FedEx Freight, “We’ve invested a lot of money in a network that runs on an engineered schedule every night,” says Duncan. “We don’t follow the traditional trucking model of loading trailers until they’re full and then dispatching them. Our trailers move every night to every destination on engineered schedules so that we can meet those service times that we promise customers — not some days, but every day.”

The money-back guarantee doesn’t change the service existing customers are receiving, Duncan explains, but it does serve as an inducement to new customers.

Duncan admits there have long been guarantees in regional LTL, but it never set well with him that carriers charged extra for the guarantee. In that respect, FedEx Freight joins its sister FedEx companies in offering a guarantee at no charge. This is not a knee-jerk reaction, says Duncan, it’s a long, thought-out plan that is part of a corporate strategy.

The no-charge guarantee may not directly change service levels, so why would carriers rush to try to beat each other to offer a guarantee? On a practical level, the guarantee could be an inducement for shippers to try out the carriers, but when pressed, the carriers also admit they are seeking better efficiencies.

One of the principal issues is moving shippers to the carrier’s rules tariff. And, in the case of Con-Way, which requires shippers to file for billing adjustments online, it is an incentive to move more transactions to the Internet. LT

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October, 2003

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