In its recent survey of express and parcel shippers, financial services firm Morgan Stanley (www.morganstanley.com) suggests that pricing — exclusive of volatile fuel surcharges — by UPS and FedEx will remain fairly competitive. As for DHL, Morgan Stanley feels that it will continue to focus on improving its service relative to the big two, and then, eventually begin to close the pricing gap between it and its competitors.
As survey results indicate, the six-year trend of air shipment growth trailing that of ground will continue. Shippers are expected to continue shifting express shipments from overnight/next day from air to deferred and ground services. 34% of shippers anticipate using less of their transportation budget on overnight/next day, and 32% anticipate ground making up a larger portion of their budget.
The Morgan Stanley survey shows, not surprisingly, that shippers switch from one carrier mostly due to price. Some 70% of those who switched weighed price over service as the biggest motivator for them.
In terms of service, according to Morgan Stanley, FedEx air and UPS ground are the market leaders. DHL service performance/reliability scores in the survey took hits recently for both air and ground service. In an interview with Logistics Today, Robert Mintz, DHL America's manager of public relations, says that service glitches were the result of consolidation of the company's Cincinnati and Wilmington, Ohio, airports. "We are now reporting normal service at this point," he says, "with 98% reliability and above in certain cases." The Morgan Stanley study does take note of the air hub consolidation.
Interestingly, the U.S. Postal Service (www.usps.com) raised its service performance/reliability to an all-time high. According to Morgan Stanley, the USPS is beginning to emerge as a serious player in the lightweight business-to-consumer market, a fact that is beginning to be noticed by more shippers.
Transportation research firm The Colography Group (www.colography.com) sees strong performance for the $98 billion U.S. expedited cargo market in 2006. Although domestic air will continue to suffer, growing just 1.2% over 2005, international air is expected to grow its shipment levels by 7.3%, year-over-year.
Colography expects that forwarders, combination airlines and other intermediaries — nonintegrated carriers — will grow domestic air shipments faster than the traditional express/ expedited carriers.
"The secular factors driving traffic off airplanes and onto trucks will remain intact in 2006," notes Colography's president, Ted Scherck. "Businesses are increasingly reluctant to pay a premium for overnight air service, and continue to build their inventory and distribution models around more economical time-definite deliveries moving in ground parcel, less-than-truckload (LTL) and truckload (including renewed interest in private fleets). It is revealing that the fastest growing segment of air transport — projected at 2% year-over-year shipment growth — is the second-day air package category."
Like Morgan Stanley, Colography notes gains by the USPS in its priority mail product, and in the rural residential market, where commercial carriers are raising their rates most.