• DTS.USA
    5.320
    -0.013
    -0.2%
  • NTI.USA
    2.800
    0.000
    0%
  • NTID.USA
    2.760
    -0.100
    -3.5%
  • NTIDL.USA
    1.940
    -0.100
    -4.9%
  • OTRI.USA
    6.190
    0.010
    0.2%
  • OTVI.USA
    12,391.500
    -166.900
    -1.3%
  • DTS.USA
    5.320
    -0.013
    -0.2%
  • NTI.USA
    2.800
    0.000
    0%
  • NTID.USA
    2.760
    -0.100
    -3.5%
  • NTIDL.USA
    1.940
    -0.100
    -4.9%
  • OTRI.USA
    6.190
    0.010
    0.2%
  • OTVI.USA
    12,391.500
    -166.900
    -1.3%
Modern ShipperNewsParcelTop Stories

Will new coast-to-coast parcel service strike a shipper chord?

LaserShip, OnTrac unveil combined delivery network to support midsize retailers

Roughly 10 months after the $1.3 billion merger of regional parcel delivery carriers LaserShip and OnTrac was completed, the combined entity last week announced the launch of a coast-to-coast residential delivery service.

The question now becomes, with a purported national network being built, will parcel users looking to broaden their residential e-commerce footprint come?

The network initially covers 74% of the U.S. population with day-definite deliveries. For example, goods moved between New Jersey and California are expected to arrive in four days, and perhaps as little as 3 days. The plan is to expand the service into Texas during the first quarter of 2023 and then into Chicago at an undetermined later date. These expansions are expected to boost the entity’s American population coverage to roughly 85%. 

The service also is designed to underprice competitors in what has become a crowded market for long-haul residential ground-delivery services.

Chandler, Arizona-based OnTrac covers the western U.S. as far east as Colorado. Vienna, Virginia-based LaserShip, which serves much of the eastern U.S., goes as far west as Indianapolis and Little Rock, Arkansas. In the middle sits a large swath of unserved territory, a good part of which is sparsely populated.

Neither LaserShip nor its parent, private equity firm American Securities LLC, returned requests for comment or would provide details beyond information appearing on LaserShip’s website. On the website, LaserShip said the two companies are creating the “first pure-play, transcontinental partner of choice for last-mile e-commerce deliveries.” 

Satish Jindel, founder of consultancy ShipMatrix and who has worked in the parcel industry for more than 30 years, questioned the validity of that claim. According to Jindel, FedEx Corp., (NYSE: FDX), UPS Inc., (NYSE: UPS), Amazon.com Inc. (NASDAQ: AMZN) and the U.S. Postal Service have offered similar services for years.

Jindel added that the combined entity will need to build a lot more fulfillment centers on both coasts to give shippers the breadth of coverage they normally receive from FedEx and UPS.

The new network appears to be designed to support midsize retailers seeking to expand their bicoastal fulfillment and delivery capabilities without the costs of shipping across national networks and between delivery zones. Shippers can avoid that scenario through a practice known as “zone skipping,” where loads are consolidated at origin points, shipped across multiple regions and injected into the local delivery destination. 

Zone skipping allows shippers to pay for just regional deliveries as well as the shared expenses of the middle-mile line-haul portion of the movement handled by truckload carriers. That combined cost is often less expensive than the charge assessed on each individual zone a shipment passes through.

Still, zone skipping requires significant volume density to offset the costs of filling a truck. Adequate density becomes even more important, considering the middle-mile move would need to be executed by two-person teams, which are difficult and expensive to procure.

So-called long-zone delivery services are lucrative endeavors for carriers. However, the long-term prospects for the service are clouded by the growing trend of retailers positioning inventories closer to the end customers, thus lessening the need for long-zone coverage.

If nothing else, the new service adds another player to counterbalance FedEx and UPS, neither of which have earned praise from shippers through what has become a two-year run of significant rate increases and multitude of delivery surcharges.

The service rolls out at a time when FedEx Ground, FedEx’s ground-delivery unit, is struggling to maintain solid relations with its 6,000 delivery contractors responsible for delivering all parcels via ground. It also comes amid saber-rattling by Teamsters union General President Sean O’Brien that if a new contract with 380,000 UPS Teamster members is not agreed to by the time the current contract expires on July 31, 2023, the union will strike.

The situations at both carriers have intensified calls for parcel shippers to diversify their carrier base.

“The market is more than ripe and ready for a third coast-to-coast delivery solution,” said Trevor Outman, founder and co-CEO of Shipware LLC, a consultancy.

However, Outman said high-volume shippers that are not current customers may have to wait until 2023 to leverage the network because the combined entity’s peak-season capacity is close to being maxed out with its current customer base.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes FedEx (No. 1) and UPS (No. 2).

One Comment

  1. With reports in the news of 120 degree and 150 degree temperatures (with pics of thermometer), UPS drivers reporting being written up for drinking water in the job to stay hydrated, reports of security cameras being installed in delivery Vans but not air conditioning, I hope there’s still somebody in UPS management that remembers August 4, 1997. That’s when the US learned just how much of this countries shipping business UPS controlled. I suspect the money UPS lost in just one (1) day of the strike back in 1997 would pay for upgrading all the UPS vans with a/c. If you are a present day retailer it would be a good idea to have accounts with multiple carriers in place before July 2023. ….and pray they can reach an agreement before then.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.