Business View Magazine May 2023

8 BUSINESS VIEW MAGAZINE VOLUME 10, ISSUE 5 — and could draw higher pricing as a result. While Maciuba added that dynamic pricing is unlikely to create significant increases in shipping costs, he believes the practice will benefit carriers in the long run. “I don’t think you’re talking 5% or 10% [price increases],” Maciuba said. “I think you’re talking 1% to 3% swings. But the key is, if you look at that cost across the U.S., it’s significant in terms of the bottom line.” Despite the potential for further advancement, there will be limits to what major carriers will institute in terms of dynamic pricing, said Thomas Andersen, partner and executive vice president of supply chain services at LJM Group. For example, he doesn’t expect shippers will end up having to pay a different price each day for the same service due in part to contractual commitments. Under those circumstances, a shipper may hold onto certain packages until prices drop. Additionally, Andersen said price changes would be easier to institute across the board rather than making market-by-market adjustments to account for, say, staffing issues at a specific distribution center constraining throughput. “I think it’d be too limited and too difficult and too much pushback for the reward,” Andersen said. that annual rate increase, everybody’s still doing that, but then there are changes to pricing that are made way more often.” The two delivery giants are now advancing their capabilities beyond tacking on surcharges during high-demand periods. FedEx, for example, used a dynamic pricing program to help bring in $150 million in profit from home delivery fees during peak season. Its surcharges adjusted weekly based on how much more volume customers shipped versus earlier in the year. The company isn’t stopping there — it aims to launch new dynamic pricing capabilities every ten weeks, Chief Customer Officer Brie Carere said during a June presentation to investors. “You can imagine some of the obvious ones would be more day-of-week pricing, more customized in certain hotspots or constraints to work around them from a pricing perspective,” said Carere, who is also an executive vice president at the company. The CEO provided an update on Deal Manager in a January earnings call, saying the company’s “win rate” in the U.S. with the platform was 22 percentage points higher than its baseline. UPS is pushing to expand Deal Manager access to more than 40 countries this year. Tomé also noted that UPS recently launched a pilot enabling “systematic day-of-week pricing.” “Early feedback is promising, and we’ll share more updates on this pilot on future calls,” she said. Dynamic pricing’s next steps — and limitations The next step in carriers’ dynamic pricing journey could have a variable charge based on the street or ZIP code the carrier is delivering in, said Dean Maciuba, managing partner USA at Crossroads Parcel Consulting. He used New York City as an example of a metro area that’s difficult to deliver in — FedEx and UPS have dealt with heavy parking fines in the city through the years Dynamic pricing would benefit both carriers and their customers. If a carrier is under capacity and has extra space in their network, it could lower prices to attract more volume. If capacity is tight, it could increase prices to tamp down demand”