Promises, Promises

Promises, Promises

Copyright 2003, Traffic World, Inc.

The less-than-truckload marketing wars heated up last week with several major carriers offering shippers their ultimate discount - free freight.

LTL giants FedEx Freight, Con-Way Transportation Services and USF Corp. are upping the ante with free and automatic money-back guarantees.

FedEx is first out of the blocks with its LTL guarantee beginning Sept. 15. Con-Way''s begins Oct. 1. After those announcements, USF unveiled its "USF Guaranteed 4 Free" service to start this week as well.

All three companies purport to offer a free guarantee that shippers will get on qualified shipments without having to request it or check a box on a bill of lading. But only USF promises that refunds will be automatic as well, without having to file a claim.

But shippers, despite the flurry of announcements designed to curry their favor last week, say that the actual worth of the guarantee is peanuts compared with the peace of mind that comes from believing the carrier is paying attention to them, delivering their package on time.

"We''re not too interested in getting our money back, obviously," said Al Giunchi, corporate traffic manager for Hartz Mountain Corp., Secaucus, N.J. "It''s getting (the freight) delivered that counts. That''s why we use the guaranteed service.

"It gives us shippers the perception that carriers are watching that shipment more closely than their standard service. But the major thing in reality is losing delivery or not delivering that product goes beyond the cost of just the transportation dollars," Giunchi added.

He noted that the cost of losing a sale or shutting down a manufacturing plant because a shipment is late could run in the tens of thousands of dollars. "That could never be recouped from the carrier," Giunchi said. "But basically it gives us a higher comfort level that they are paying more attention to the guaranteed shipment we gave them."

That peace of mind is exactly what FedEx Freight had in mind when it led the industry move last week.

"Al is exactly right - it''s not about dollars, it''s about service," FedEx Freight President and CEO Douglas G. Duncan said in response to Giunchi''s comments. "He''s not the one I have to convince we have great service. He''s been using us. This is designed for the shipper who is considering changing their supply chain."

Duncan said the money-back guarantee is an "extension of the industry-leading service and reliability that customers have come to expect from FedEx and will further enhance our ability to offer the peace of mind that comes from choosing FedEx."

Not to be outdone, Con-Way President and CEO Gerald Detter said, "This program demonstrates our confidence in our performance. It sets a new standard for the industry. We have the most direct points coverage and the most aggressive transit time stands of any carrier in the LTL industry."

Con-Way officials emphasized there is no extra cost for shippers under this new program. It also is continuing to offer its "Con-Way Guaranteed!" program under which shippers pay an additional 20 percent charge on their discounted rates in order to get the guarantee. The new program has no premium but has a few other requirements noted below.

"We have more coverage and more direct points than any other carrier," said Ned Moritz, vice president of marketing for Con-Way, claimed Con-Way had been working on this no-cost guarantee for three years. "We''ve known we can do it," Moritz said. "Timing was the issue. We believe it''s now time to belly up to the bar and say your service is good. We''ve provided excellent service for years. Customers know what we''re doing. It takes a carrier that performs at a high level of reliability to take the financial risk of this guarantee."

Moritz said truckers "should all be placed on the same standards" of reliability. "If that were the case, we feel very confident we can perform to our standards and anybody else''s standards," he added.

Chicago-based USF claims its guarantee is the most "straightforward" because it eliminates the need for shippers to even file a claim.

"USF Guaranteed 4 Free is a straightforward assurance program designed to provide our valued regional shippers even greater peace of mind as they take advantage of our nearly 260 million regional service lanes," said USF Senior Vice President for Strategic Marketing Douglas R. Waggoner. "It is all about delivering consistent, reliable service, day in and day out."

Waggoner added the guarantees "will help make ourselves better" in that it provides USF with incentive to perform on-time service. That''s worth far more than simply a rebate for a blown shipment, carriers and shippers say.

"That''s a great point," Waggoner said.

"Shippers don''t want guarantees to make money on their freight or get their freight for free. What they want is reliable, dependable service. They want it because they need reliability. A guarantee basically says you have confidence in your reliability."

Rather than file claims at the back end, Waggoner much prefers USF to form a partnership with the shipper and the account executive on the front end so that the carrier gets as much information as it needs to serve them better.

"There''s some marketing aspect to all this, but it''s really a sales tool to enable our sales personnel to get close to our customers," Waggoner said. "This gives them a good reason to talk about what they can do."

Still, many shippers privately say they could care less about the actual guarantee. What''s far more important, they say, is the information the carriers are providing (for free) to go along with the guarantee. This information can be used to justify carrier selection, or merely to check on carrier performance. Savvy shippers, rather than submitting a claim for an $80 LTL rebate, should make use of the information various carriers are offering in their guarantees to make more cost-effective shipping decisions.

Shipper advocates are warning shippers that no matter how good these guarantees look on paper (or carrier websites), they ought to double-check the fine print to see how shippers'' unique situations might affect guarantees. William J. Augello, executive director of the Transportation Consumer Protection Council, is advising shippers to read their tariffs "very carefully" to find any loopholes.

"If these carriers try to make their guarantee as illusory as UPS''s ''money back guarantee'' or FedEx Ground guarantee, they will generate more customer dissatisfaction than goodwill," Augello said.

Con-Way, for instance, requires claims for refunds to be filed within seven days, and only by the shipper and not outside auditors. Therefore, large volume shippers cannot use the services of outside auditors who use electronic tracking systems, according to Augello.

"Fed Ex and UPS currently try to block auditors'' use of these services because they know it is not cost-effective for shippers to do it themselves," Augello said.

Most other LTL carriers with guarantees require claims to be filed within 15 days.

United Parcel Service presently refuses to provide electronic data on deliveries until 30 days after delivery if one intends to use that information to file for refunds, according to Augello. UPS also tacks on a 30-cent per-shipment charge if shippers want to track more than 30 percent of their shipments, thus giving new meaning to "value-added" service. "Value-added" for whom, shippers are asking.

"I am really against having to pay a premium for primary service," said John Gentle, global leader-carrier relations for Owens Corning, Toledo, Ohio. "It shouldn''t be that way. I recognize they are looking at these premium services as an additional source of revenue. I''m worried shippers will use premium service when standard service should provide the desired results."

Others said the jury was still out on the effectiveness of these guarantees. "Whether these new offers are merely promotional gimmicks or are truly ''guarantees'' or are just puffery remains to be seen," Augello said.

But FedEx Freight''s Duncan seemed confident his company''s reputation would hold forth in the market.

"I''m not sure you can judge competitive response," Duncan said. "We''ve been working on this for some time. Everybody claims great service but very few deliver on it. This is our way to separate the people who really produce on-time service vs. the pretenders."

FedEx Freight is part of a group of FedEx Corp. units who "compete collectively" and Duncan said it was crucial to get his company''s guarantee in the market.

"The money-back guarantee is a core piece of the value proposition of other FedEx companies - it was going to have to be part of ours as well," he said. "At the end of the day, the real winner is the customer who is exercising fast-cycle logistics trying to take inventory out of the supply chain. This raises awareness of the service we offer and makes decisions that much easier."

Duncan said FedEx Freight has invested "a lot of money in this network. We need to get credit for what we do. This is a way to showcase that. Other trucking companies just don''t run that way."