DHL, UPS bring air express war to the ground

By John D. Schulz -- Logistics Management, 4/1/2006

PLANTATION, Fla.—UPS and DHL, which along with FedEx Express comprise the "Big Three" air express carriers in the U.S. market, have unveiled service improvements designed to lure shippers who want the speed, reliability, and convenience of airfreight service—but at ground freight prices.

Last month DHL announced that it would roll out new route-optimization software at 340 of its domestic stations over the next nine months. The application is expected to introduce more efficiencies to the typical day of its couriers through better advance planning and route design, and by optimizing start/stop times and the number of pickups and deliveries. DHL also will replace some of its delivery vans with larger vehicles that offer more capacity.

Fred Beljaars, executive vice president for operations, said the route-optimization initiative was just one part of the company's long-term strategy for attracting shippers to its domestic ground service. That strategy revolves around four components: more choices, better pricing, greater dependability, and more flexibility, he said at a press conference announcing the changes.

The express carrier also is aiming for what Beljaars called a more "customer-friendly" approach that includes everything from the manner in which a customer service representative answers a phone call to the personal contact shippers have with a DHL employee or contractor. It's all intended to win over shippers who don't focus primarily on price. Historically, many shippers have chosen DHL because it was the low-cost provider.

DHL's move follows what rival UPS called "the most significant upgrade ever" to its U.S. ground network. UPS is accelerating its delivery of more than a half-million packages by one day or more. The improvements apply to lanes between 11 major metropolitan areas but ripple across the entire country, affecting more than three million ZIP code pairings. According to UPS, the enhancements will improve service for some 1.2 million customers without changing pick-up and delivery hours. A package moving between New York and Dallas, for example, is now guaranteed to arrive in three business days instead of four.

The changes announced by DHL and UPS came about because carriers have discovered that shippers care greatly about delivery speed and reliability, says Satish Jindel, principal of Pittsburgh-based SJ Consulting and a former parcel carrier executive.

When carriers in any mode reduce transit times from four days to three, it typically does not affect shippers' modal choices, Jindel said. But when three days become two and two days become one, some erosion from air to ground occurs, he noted.

"It's a constant race but it will reach a plateau where it can't get any better," Jindel said. "Shippers should not expect these transit-time enhancements to go on forever."