The upcoming June 30 postal rate hike will increase Parcel Post rates by up to 20%. For the members of the Florida Gift Fruit Shippers Association (FGFSA), which exists to keep the high costs of shipping fruit packages from Florida throughout the country in check, that could have been dire news. Most of the fruit catalogers rely on Parcel Post as a cheaper alternative to United Parcel Service and other carriers.
But by working together, members of the 56-year-old FGFSA are using freight consolidators to reduce their shipping costs. Since the beginning of this year, for instance, West Palm Beach, FL-based Cushman’s has had FGFSA-contracted trucks haul its packages along with those of 60-70 other FGFSA members. Originating from the group’s Orlando, FL, hub, the packages are shipped to regional facilities operated by freight consolidators, such as Parcel Direct and APX.
The consolidators then sort and bulk-ship Cushman’s and other member companies’ packages to local destination delivery units (DDUs) for final delivery. The U.S. Postal Service doesn’t touch the packages until they reach the DDUs — the local post offices closest to customers’ homes — which minimizes postage for the cataloger.
A new connection
FGFSA’s line hauling service isn’t new, but its connection to consolidators is. In the past, Cushman’s and other fruit catalogers used FGFSA trucks to haul their goods directly to postal bulk mail centers (BMCs). From that point, the USPS sorted and shipped the packages. But while Parcel Post rates for packages that are drop-shipped into destination BMCs are going to increase 8%-20%, rates for parcels shipped into destination DDUs will not change.
Cushman’s has already saved 10%-12% this year, says president Alan Cushman, who also serves on the FGFSA’s transportation committee. And he expects that even after the postage increase takes effect, the $10 million cataloger will not end up paying more to deliver its fruit than it had been.
Some larger fruit shippers, such as the $20 million-plus catalog division of Vero Beach, FL-based Gracewood Fruit Co., have had similar success using their own trucks to drop-ship packages to consolidators. By pooling its packages at the consolidator with those of other FGFSA members, Gracewood has saved 10% in parcel delivery this year, says Don Wright, vice president of the company’s gift fruit division.
“The Postal Service is structuring its rates to take volume away from the BMCs and [sectional center facilities],” Wright says. By no longer dropping its packages into regional destination BMCs, the cataloger has saved $1.07 a package on 70% of its volume — or a total of $200,000 in shipping costs since December. Wright says that the average delivery cost per package has dropped from a little more than $6 to about $5.
But Wright is wary of getting too excited about his savings, because he knows he’ll never be able to ship all his packages so efficiently. “I don’t think any consolidators will get 100% DDU coverage, because there are just too many DDUs all over the country,” he says. “Consolidators also need at least three to five packages to make it worth their while to go to each DDU, and we can’t have our fruit waiting in the post office for a pallet to fill up.” That’s why Wright checks with consolidators beforehand to make sure their trucks will be filled and moved out to DDUs right away.
Because Gracewood has enough volume on its own to contract for its own trucks to take its parcels to consolidators’ regional hubs, the company ships a minimal number of its packages using the FGFSA trucks. “We support the FGFSA” for its development of postal discounts and the like, Wright says, “but maybe only 1% of our parcel volume is sent in FGFSA trucks.”
As consultant and former FGFSA vice president Joe Ball points out, fruit shippers that do around $10 million or less in annual sales generally use FGFSA trucks for all their packages except the small portion of packages shipped within Florida. Most FGFSA members send their in-state packages via UPS, because its zone 1 rates are comparable to those for Parcel Post shipped within Florida while the service is speedier.
According to the FGFSA, the average cost of shipping a 25-lb. parcel from Orlando to New York, based on current rates, would be $26.25 via USPS Priority Mail; $14.80 with USPS inter-BMC deliveries; $12.61 using UPS ground residential; and $8.13 with the FGFSA (including pickup).
The key to making the consolidation plan work, Ball says, “is to make sure volume is kept up so that the economics can be maintained.” Otherwise, he says, members would have to pay a bigger percentage of the shipping costs for the FGFSA-contracted line-haul trucks.
Ball credits the FGFSA with forging a better alliance with Postal Service management. This has not only helped the USPS work out rate-reducing ideas for shippers of such heavy perishable items as fruit, but also, the USPS “gives us good service.”
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