UPS SurePost offering may see some changes, pending contract ratification with Teamsters

While UPS and the Teamsters Union came to a tentative agreement on two, new five-year contracts for UPS’s small package and freight (less-than-truckload) business units last week, one of its key delivery services, UPS SurePost, may be subject to some changes if the deal is formally ratified.

Introduced in early 2011, UPS SurePost is an economy ground service for delivery to residential locations. It is a “contract-only service that combines the consistency and reliability of the UPS Ground network, from pickup through transferring to the Post Office, with the cost benefits of using the United States Postal Service (USPS) for final delivery,” according to company officials.

UPS SurePost is available from the contiguous 48 U.S. states to the 50 U.S. states, Puerto Rico, Guam, U.S. Virgin Islands, all U.S. territories, P.O. boxes and military APO/FPO destinations. When it was first rolled out, UPS officials told LM that UPS SurePost was the next iteration of UPS Basic, the company’s highly-targeted, contract-only service, which leverages a partnership with the USPS and had been in existence for several years.

One key feature change with UPS SurePost is that more final deliveries are completed by the USPS than by UPS’s own network, as UPS drops packages into the USPS DDU (Destination Delivery Network) to complete final mile delivery.

According to a copy of the UPS-Teamsters contract posted by the dissident Teamsters for a Democratic Union (TDU), some changes in how SurePost is used may be coming.

Regarding SurePost, the contract noted that in order to retain existing customers that are solicited by a competitor offering similar services or to attract new customers, UPS may offer service contracts that include the delivery of packages by the USPS.

Eligible packages, according to the contract, will normally be less than ten pounds and less than three cubic feet, with UPS agreeing that SurePost will not be presented as a general service offering and will only be offered for shipping from a business to residential customers.

Other SurePost-related facets of the tentative contract include the continued use and development of technology that identifies two or more SurePost packages to be delivered to the same address and/or any combination of SurePost packages and ground packages to be delivered to the same address. And in such circumstances the contract states that all of the SurePost packages and ground packages will be delivered by package drivers, and UPS will implement, when available, technology that identifies multiple addresses in close proximity to which any combination of SurePost and ground packages are to be delivered.

Once the deal is made official, the contract calls for the development of technology that identifies oversized—more than three cubic feet—or overweight packages within 120 days of the deal being done. And when that technology is operational, the contract said all SurePost packages weighing ten or more pounds with dimensions greater than 3 cubic feet will be delivered by package drivers.

From that point, the Joint UPS/Teamsters Competition Committee will meet on a quarterly basis to review the progress of this service and discuss potential technological advancements that will allow SurePost volume to be placed back in the UPS system for final mile delivery, according to the contract.

After the TDU posted details of the contract, similar information was posted on the Teamsters Web site. While much of the language was the same regarding SurePost, the Teamsters site noted that UPS has agreed that if their competitors stop using a service similar to SurePost either nationwide or in any service area, UPS will discontinue SurePost on the same basis.

And it said it also agreed that if there is a dispute on the expansion of SurePost, the union and the company will take the matter to arbitration.

“As a remedy, if the arbitrator finds that UPS has expanded SurePost beyond the scope of what is set out in the contract without obtaining the union’s consent, the arbitrator may require UPS to terminate the expanded service,” according to the Teamsters site.

Jerry Hempstead, president of Hemsptead Consulting in Orlando, told LM that the language in the contract ensures that FedEx SmartPost, its version of UPS SurePost, will continue to grow because UPS can only offer Sure Post defensively and some shippers will move to FedEx before UPS can propose the similar service offering to the shipper.

“Once a shipper makes the decision to make the transition to Smartpost, a defensive offering will be too late in many cases,” said Hemsptead. “The UPS-Teamsters contract also removes some operating flexibility on the part of management to route a transaction via the most cost efficient method for delivery to a consumer in particular in less densely populated areas. The nature of the hybrid product is to leverage the fact that the USPS must go to every address, six days a week, no matter what and the [USPS] Parcel Select last-mile service offering allows for the least cost option for the vast majority of packages if the transaction is going to a residence, in particular if that parcel is the only piece a recipient is receiving that day. For the most part, the vast majority of shippers that are predominantly residential—at least if they have volume—had received a proposal already from UPS for the Sure Post service and the universe isn’t making scores of new shippers each day.”

As for oversize and heavier packages being directed to a UPS driver rather than to the USPS, Hemsptead said the USPS has brought this on themselves because the most recent price increase applied to Parcel Select makes it a relatively simple business decision for UPS to not tender the transaction to the USPS because the cost is the same as—or less—to have their own driver deliver the package and in many cases the service will be better by a day or more for the recipient on these packages.