Which Carrier Should I Use for Domestic Shipping?

Whether your business is DTC (Direct to Consumer), B2B (Business to Business), or another distribution model, picking the correct carrier to match your needs is more crucial than ever. Things that should be evaluated are service, cost, reputation, and the current parcel shipping environment, which is changing faster than ever. This quick guide is meant to give you a little more background on your choices and to help you start your evaluation process.

United States Postal Service (USPS)

If lightweight packages are your bread and butter (<2lbs), USPS is most likely your cheapest and most reliable option. Also, if you have heavier products that are still relatively small you can use USPS Priority Mail Flat Rate Envelope or Boxes.

Main Service Offerings:

First Class Mail – Transit is typically 2-5 business days
- For Domestic packages this service is available up to 15.9 ounces
- For International packages this service is available up to 4lbs
Priority Mail – Transit is usually 1-3 business days
- Flat rate packaging is available and free from USPS
- If your package does not fit in flat rate packaging you can still use your own container and ship Priority Mail, but the cost will be more expensive.
Express Mail – Transit is usually 1-2 business days
- Least often utilized package offering from USPS as Priority almost gets you the same transit time for much less cost
- o Even with the higher cost than Priority Mail this service is usually cheaper than FedEx or UPS overnight services.

Reliability

USPS has made some incredible strides the past decade with updates to more real-time tracking and additional scan events. The gap between them and other carriers has been closed significantly. Keep in mind too USPS is contractually obligated to deliver mail and packages to every U.S. address 6 days a week (in many areas they are doing 7-day deliveries). You may not get as precise delivery windows, but USPS is wildly consistent. Generally, they have a very low damaged/lost package claim rate, as well. However, if you do have a claim the process with USPS can be cumbersome.

Federal Express (FedEx)

Originally built focusing on Express deliveries, FedEx has seen a major shift to Ground over the past decade. This is primarily driven around a few things: 1) FedEx built out their domestic Ground network to the point where Express was needed less, 2) Customers mind-set shifted as Express prices continued to rise. “Do I really need it there overnight with delivery by 10:30AM?” The answer to that usually is ‘no.’

Typically, FedEx will have cheaper rates than USPS and UPS for packages 3lbs and above. A major point of consideration with FedEx (like UPS) is the accessorial charges you will frequently incur on a package-by-package level. Some of these accessorial charges are items like residential delivery, delivery area surcharge, additional handling, and 3rd party billing fees. Also, FedEx applies a fuel surcharge to their packages which USPS does not.

Main Service Offerings:

Home Delivery
- Ground service that focuses on residential deliveries. Transit is typically 1-5 days
- This service used to deliver Tuesday-Saturday to try and catch more consumers at home
- As of January 2020, this service is being extended to a seven-day delivery service due to increasing ecommerce packages and smoothing out of Operational deliveries.
- Each package will have a set residential delivery fee in addition to the freight and fuel
Ground
- This service focuses on delivering to commercial addresses Monday-Friday. Transit is typically 1-5 days
- Both Home Delivery and Ground services travel the same Ground hub network but get split up at the delivery location
- FedEx Multi-weight discounts are available if you are sending multiple packages to the same destination and reach some basic qualifiers
SmartPost
- A joint service offering from FedEx and USPS. You ship your package with FedEx, but the final mile delivery is done by USPS. Usual transit time is 2-7 days
- Cheapest FedEx option available. However, reliability is a concern. Not definitively guaranteed to deliver by a certain date
- FedEx announced in late 2019 that they will start taking majority of their SmartPost business in house and will run through their Ground network. This will provide them with greater control and delivery density
- There are weight and dimension restrictions for this service
- Requires a negotiated contract to use this service
Express Services
- FedEx First Overnight – delivers by 8am the next day. Wildly expensive. Only use in emergency situations
- FedEx Priority Overnight – delivers to most U.S. addresses by 10:30am. Some rural areas have delivery windows up to 4:30pm
- FedEx Standard Overnight – delivers to most U.S. addresses by 3:00pm the next day
- FedEx 2 Day – delivers to most U.S. addresses (including AK & HI) by 4:30PM on the second day
- FedEx Saver – delivers to most U.S. addresses by 4:30PM on the third day. This is an outdated FedEx product that is at risk of being eliminated

Reliability

FedEx is consistent with their delivery times. There are certainly pockets that can affect on-time delivery (OTD) such as peak shipping seasons, but overall FedEx has a great reputation for on-time delivery with it’s Ground and Express offerings. SmartPost is less predictable, but that is also why it is cheaper and not a guaranteed service. FedEx moving its Ground operation to seven days a week will certainly further improve their delivery speed.

United Parcel Service (UPS)

Having existed for over 100 years, UPS is the most well-known and utilized courier service. Typically, UPS will be the most expensive service (contract dependent) to utilize. They are good at what they do but charge a premium for their services. UPS is also a little more rigid and less flexible on customized solutions and pricing. UPS and FedEx service offerings and accessorial charges are remarkably similar. A lot of people have remarked that they are a Duopoly. When one announces a new surcharge, the other follows. It is clear they are market setting separately but together.

Main Service Offerings:

Ground
- Economical service that focused on ground deliveries, both residential and commercial
- Typical transit is 1-5 days
- Includes a Hundredweight service which is like FedEx’s Multi-weight service, which offers discounts for multiple packages going to a commercial address if over 100lbs total
SurePost
- Equivalent of FedEx’s SmartPost. Usual transit time is 2-7 days
- UPS does the line-haul across the country and USPS does last mile delivery on most of these packages. UPS does deliver some of these direct, but are contractually obligated by the union contract to have USPS deliver majority of SurePost packages
- There are weight and dimension restrictions for this service
- Requires a negotiated contract to use this service
Express Services
- UPS Next Day Air Early – delivers by 8am the next day. Incredibly expensive and should only be used in emergencies
- UPS Next Day Air – delivery by 10:30AM. Some real areas have later delivery in the day
- UPS Next Day Air Saver – most deliveries occur by 3pm the next day.
- USP 2nd Day Air AM – most deliveries occur by 10:30am on the second business day. This is the one Express service offering that FedEx does not match. That said, this is not utilized often
- UPS 2nd Day Air – delivery by the end of business on the second day
- UPS 3 Day Select – Equivalent to FedEx Saver. Delivery on the third day by end of business

Reliability

UPS is consistent with their delivery times, usually marginally better than FedEx on time delivery, especially for Air Services. There are certainly pockets that can affect on-time delivery (OTD) such as peak shipping seasons, but overall UPS has a great reputation for on-time delivery with it’s Ground and Express offerings. SurePost is less predictable, but that is also why it is cheaper and not a guaranteed service. UPS is also moving its Ground operation to seven days a week will certainly further improve their delivery speed. A thing to be cognizant of with UPS is they have a union agreement with their delivery couriers vs. FedEx’s model of contracted couriers. If they strike it can be devastating. The last major strike was 2017 lasted 17 days of no package delivery.

Regional Carriers

A growing option that has emerged the past decade is regional carriers. These carriers only operate in a specific region which helps them to control delivery predictability and eliminate unnecessary fees. This map does a good job showing how six of the major regional carriers cover the U.S. footprint.

Benefits of using Regional Carriers:

Cost Savings – Since all deliveries are ‘local’ you don’t pay for the expensive line-haul charges typically associated with UPS Ground and FedEx Home Delivery/Ground. Also, there is no need for Express services since deliveries occur in the region. Also, you have fewer and cheaper accessorial charges
Agility – Typically, shippers can get later pick-ups and have more flexibility for ad hoc requests. Their networks aren’t as rigid, and they don’t have to make as many key cut-off times as national carriers

Downsides of using Regional Carriers:

Although they are growing in popularity, they are still relatively unknown to the end customer. Perception of value is a hurdle to overcome.
Integrations – Though there have been some improvements the past few years the integrations with these regional carriers is still clunky.
Unless you have regional distribution centers, you will not have U.S. continental coverage under the regional carrier umbrella.

Amazon

The unknown beast that could flip the traditional transportation offerings on its collective head. Amazon has been, not so quietly, building out it’s transportation network at rapid speed the past several years. Currently, they are focusing on deliveries of orders on their platform, but they are starting to beta test pick-ups and deliveries for non-Amazon platform origin sales. If this goes national it could have a huge impact on traditional and regional carriers alike. Amazon has a proven track record of entering markets and being a loss leader to capture market share. This will certainly be their approach – offer the same level of service for much cheaper cost to shippers. They will most likely eliminate accessorial charges which will further make UPS and FedEx less competitive. This is the key thing to watch in parcel transportation the next 3-5 years.

* An update here: Due to COVID-19 Amazon has temporarily suspended the build out of their own parcel delivery network. It is expected to pick back up full steam in time.

Summary

Hopefully, this quick description of the the key domestic carriers’ services and reliability has been helpful. Picking a carrier(s) is an individual decision for each business. Some are more comfortable from their previous dealings with a certain carrier and others just care about saving money. Whatever your key factors may be, Lessgistics can help do an audit of your current supply chain and advise on the right carrier mix for your business.