Parcel Pricing: How Smart Packaging And Data Slash Your Shipping Costs

Mike Chung: 0:07

Welcome to AutoCare on Air, a candid podcast for a curious industry. I'm Mike Chung, Senior Director of Market Intelligence at the Auto Care Association, and this is Indicators, where we identify and explore data that will help you monitor and forecast industry performance. This includes global economic data, industry indicators, and new data sources. Hello, I'm Mike Chung, and I'm pleased to welcome my guest, Michal McDonough, who is a freight and parcel expert. So, Mihal, welcome to the program.

Good to be here and thank you for having me.

So when we were talking before, you distinguished between freight, parcel, LTL. For the benefit of our listeners, can you just um tell us a little bit about the differences between those elements?

Yeah, so I'll focus on the parcel side and I'll be able to differentiate that way. So, you know, a lot of people would think a parcel is just a small package or a box that gets delivered. That is true. But a parcel can be anything up to 150 pounds, even higher. Anything really that gets shipped with uh, you know, FedEx or UPS in the boxes, that is a parcel. Uh, you know, it could be a cabinet, it could be a rug, it could be a shoebox, it could be an envelope, it could be to residential, it could be commercial. But we're talking like millions and millions of packages a day uh around the US and around the world. So really anything up to 150 for the most part, and usually it's much lower than that, uh, but it can get that big, and it's usually in a box in an envelope or uh in some kind of packaging like that. It's not on a pallet. An LTL or freight is usually on a pallet.

Oh, that's very helpful. And I'm sure as uh people are listening, they're doing what I'm doing, and that's thinking about the types of packages I've received as an individual customer, things that I may have sent to family and friends, and all the businesses that I might receive those types of things from. You mentioned some of the carriers like UPS, FedEx, DHL. And um it sounds like you've seen a lot of these types of packages and contracts in your previous experience at FedEx and even with Google. So can you tell us a little bit more about your background there?

Yes. Uh I went I went uh straight into um FedEx after uh after uh college year. Uh so I also went straight into the pricing division. So FedEx parcel pricing. So basically, I would work with the sales team, I would get data on a customer, weight, volume, uh, origin destination. Uh we'd put it into our models and we would create a pricing program for that customer. Uh, we'd create the discounts, uh the surcharges, and also the language. There's there's a lot of language in these agreements that you need to know. And um so we pulled that all together and we would create the agreement and then it gets signed. But we did I did a hundred or thousands of contracts while I was there with FedEx. And you know, after that, I worked in other uh companies where I worked a lot on UPS contracts or on other contracts, or just you know, uh review them and see you know where customers are in the marketplace.

Oh, that's fascinating. So I'm thinking about I'm an avid tennis player, I might order tennis equipment from a particular vendor. That vendor might have kind of say UPS or FedEx as their go-to provider. So kind of as we get towards the end of the calendar year, um, thinking about discounts, holiday shipping, you mentioned contracts. What are some of the things that come to mind as I bring up those topics, Michal?

So it's very interesting, especially when you talk about the end of the year. So at the end of the year, when everybody's trying to get volume out the door, right? You're trying to hit your quota for the year. It's usually the busier time for the of the year for most uh companies. Their FedEx and UPS actually have what it used to be, it used to be called a peak season, now they call it a demand season. So these are you get it, you get certain surcharges during the year. So a surcharge is anything above and beyond what it costs to take it from A to B. If you just brought it from A to B to a commercial, you're just paying that fee. If it's a residential, that's you have a residential surcharge, which is around $5. If it's an oversized package, you you could be paying an additional $300 $300 for that. So surcharges or anything above and beyond that. During peak season or the demand season, they have secondary surcharges that they apply in your packages. So you but you have to be very strategic on when you ship and how you get your packages out there, what sizes they are, because during the demand period, prices go way up. It is very costly to ship during that period.

Oh, that's good to know. And I think you had shared with me um the uh the the pricing sheet for this the the cost sheet for these upcoming surcharges. And it can be anywhere from, say, a dollar a package up to $500, $600 a package. Can you just kind of tell our listeners a little bit about some of the components or some of the factors that can play into what how much that surcharge might be?

Yes. So for the most part, uh the national carriers, uh the reason they started this demand or peak surcharge, uh, it was during a time where there was high demand, was usually after uh Black Friday, up until the 22nd or 23rd of December. And obviously, they were saying we need more people in, we need more trucks, we need longer hours. So they said we need more surcharges. And the other thing they they were saying is, hey, we all because we're so busy, we want to keep bigger packages that do not go in the conveyor belt out of our system. So what they do for the most part, they really, really hurt larger packages. Like an additional handling uh surcharge. So you can get an additional handling surcharge if your package is over uh uh 50 pounds, uh if it's over you know uh 109 inches long, or if you don't have certain package uh certain packaging that they find normal. So basically, what they'll do with additional handling, you have the normal surcharge. Like let's just say uh when it's additional handling weight, you could pay $50 more. Where they're going to add in and add on another $9 during this period. So for additional handling, for oversized, they could they add on up to $90 or $108 more per package. And then you have unauthorized oversize, which is over $500 during this period per package. And then if you maybe two years ago, they said, you know what? We're actually gonna include all packages in this. And during certain periods, not only are you gonna pay additional handling, oversize, you're gonna pay resident residential for bigger uh shippers, and also even normal shippers, you're gonna pay between 40 cents and 60 cents per package during this uh peak season. Now the peak season, they got rid of the word they got rid of the name peak because during COVID um they made it for the whole year. So it wasn't peak season, so they changed the name to demand and what used to be a season of 34 days, this year it's 111 days. So they've extended it so that all these packages are getting these additional costs, and now they've broken it into three sections. You know, where the first section for additional handling you'll be paying, you know, from September 28th to November 4th or so, you'll be paying 890. Up until then, December 23rd, that changes to 1080 and it comes back then to 825 or 830. So there are even periods during that peak where uh it it varies. But these are additional costs that add on fast.

Especially passed on to the consumer, right?

So that's the question. Like, you know, that's a question uh companies have to answer. Do you consume it? Do you take it? Does it hurt your margin? Do you pass it on to your customer, or do you try and mitigate it some other way by you know working with a consultant or working with somebody to figure out, hey, what can I do here? Because there are certain things you can do, especially with bigger packages.

So you had told me before that when you were at FedEx, you were part of the pricing team, you had analyzed thousands of contracts, you had analyzed millions of pieces of data. Tell me a little bit about the data that you were looking about, looking at, um kind of the things that you had insight to from a contract perspective. And you you highlighted that perhaps after the end of the year, companies will have a little bit of time to sort of breathe, the dust has settled and perhaps look back at where we could have perhaps saved money and um passed on savings to consumers. I know that's a multi-part question, but can you speak to those things for us, Mihaw?

Yes. So when it comes to data, uh FedEx, UPS, DHL, uh all the carriers, they provide you a lot of great data. So if you don't if you go on uh onto your account with the national carriers or any carrier, you can download your invoice and you you usually can download it in CSV or you might get it in uh ADI. And like some of the invoices have up to 260 data points for one packet. So that's a lot of data. So you can consume all that, and like it gives you everything. It gives you the weight, the actual weight, and the build weight. We can get to that later. They can be very different, the actual on the build. It'll give you origin destination, it will give you which zone. Zone is another thing they do in Parcel, they don't do in LTL. It'll give you all the surcharges, it'll give you all the costs, it'll give you everything. So you have that data set. The issue is it's a huge data set, and you need technology to be able to consume that and consume it fast. Because it's so much. If you're talking about 260 data points for each tracking number, and if you have thousands of tracking numbers, your Excel is going to break down fast. But like all the information is there in relation to to do analysis on what's your average weight, what's your average cost. For the most part, um you know, uh customers just don't know what the market is. You know, when you go to a uh a consultant or uh any of these companies, when they they know what the market is, you have all that data, you see it. Customers usually don't know what the uh what the market is. But the one thing you can do that you don't know need to know what the market is is if you have a lot of additional handling and now you have additional handling um demand surcharges, you can look at that data and say, hey, if I break this package up in two, is it cheaper than putting it in one package? Because now the original additional handling of $50 doesn't count. And the additional nine bucks on the demand you're not getting. So does it make sense to break it up in two? Uh you can also find all your dimensions there. And the dimensions of a package, I've seen customers where they've made their box an inch smaller, so now it doesn't hitch those guidelines that automatically makes it an oversize or makes initial uh additional handling. Uh so the data is very helpful. The uh the other thing you'll find with the data is you know, I I've gone to customers and they would send a lot of stuff express overnight. Anything express is on a plane. It costs way more than ground. It just does. It's fuel, it's uh it's time sensitive, it gets there. You know, you can do an analysis and you can check, okay, I have ground customers in that area, and I have customers that I ship express. You can check which gets there faster. Is it worth moving your express to ground? Say, probably cut your cost in half and get there in the same amount of time, or maybe a wee bit more time that you're willing or your customers willing to take. So the data is there, just there's ways you can use it, just even internally, to figure out why is this so costly? What can I do?

Oh, that's fascinating. So a couple of follow-up questions there. You mentioned about 260 data points. Um, is that a lot more now than say five years ago, 10 years ago, 20 years ago? And I'm also curious about the um, say, the projected time it would take for that package to get from shipper to destination and the actual delivery time, or those types of uh statistics and data points included in that?

Yeah, you you'll get all that information uh uh with the data set. And again, you know, it's either you download it or you get it in an EDI format, but all that information is there. Uh so you can do that analysis yourself. Uh now just going back to your last question, too, because I I wanted uh uh touch on something you'd mentioned. You had mentioned you spoke about in January when people get a time time to breathe. So you're spot on there. What usually happens is you know, we talked about the demand surcharges, they are uh announced in August, September. A lot of the time, funnily enough, they're announced on a Friday evening. So there's not much talk about them. The other thing that gets announced during that time is the general rate increase. It's a GRI. So the list grades that all these discounts are based on increase every year. So they they're announced, announced usually uh again in September, October on a Friday. And la this year the increase is 5.9%. Right? So last year was 5.9%, the year before was 5.9, and then it was 6.9. So these are when you compare it to inflation, this is a pretty big jump, right? Inflation's usually between two or three. These have historically been quite a quite a bit above inflation. So usually when they're announced, nobody's taking notice. And because they have so much going on. And uh even the term GRI, general rate increase, it seems like, oh, this is general, it just has to happen. And it doesn't, as you said, you get everything out, you get a breather in January, then you start looking at the in rises again in February and March, and you realize, oh, this is a bit pretty big increase. The transportation costs will go up 5.9%, surcharges usually go up more, because that general rate increase is only lift rates that get you from A to B. Surcharges usually go up more, and fuel can go up even more. So usually you're talking about a minimum of 7% increase. But again, they don't get to it until, okay, let's take a breather, it's February, let's look at our finances, see how we did. And then they realize, wow, okay, another increase.

Uh really fascinating, because like you said, there's that rush to get things out the door, keep your customers satisfied. And you mentioned what consultants might look at. So tell us a little more about consulting solutions to perhaps save companies money and perhaps even pass those savings on to their consumers.

Yeah, so you have a lot of consultants out there. Uh, you know, the main one I had worked with previously was FreyPri, where they have, you know, they have the heavy-duty technology that could consume this data and compare it to the benchmark of all the data they have. So they will know what they're what the customers, competitors, where they are in the marketplace, or where customers of that size are in the marketplace. So while you know, I I I've spoken to a lot of customers who think they have a great deal until they realize, oh, wait a minute, that might have been a great deal two years ago, but the market has changed, and customers your size were seeing this, this, and this. And it could be various things. It could be the actual rates, the transportation rates, it could be the surcharges, it could be even some of the wording in an agreement that has changed. So there's a lot to digest. And so we talked about all the data points and the way you have to consume it. Then you want to compare it to some kind of benchmark. Obviously, a a consultant that has that data can do that. And then the other thing is, you know, when when customers are looking at uh uh updating their agreement, you gotta look at the wording. We've seen wording coming in in the past few years where they say, hey, if you move away from us, you owe us two percent of whatever you spent in the past year. So if there was some of the wording, and like a lot of the other wording is uh, you know, basically you can't move away. You you've told us you can't, uh, and instead of two percent, it might be 250,000. There's so much wording there. And again, when I started initially with FedEx, it took me probably a year and a half to get around all the different contracts and all the different wording, and they've just gotten more complicated. Uh like a a national carrier, uh, a lot of the time an agreement is between 18 and 30 pages, even more. It should be four or five. It's just this wording gets thrown in all the time.

Um, you mentioned from 30 pages contract, it should be four or five. I think about the amount of bloat that is in those contracts. So, like what type of filler or I don't think golden handcuffs is the right word, but it seems like they're really locking their customers in to make that that uh the what would you call it, switching costs extremely expensive.

Yeah, and that's what they're trying to do. So they'll add language about commitment and volume and commitment and revenue for each service. So for ground, for international, for express. Uh they could add language there in relation to, you know, if the GRI increases, if the CPI is at a certain level, you won't get certain discounts because of that. Uh and then, you know, you you do have obviously the normal stuff like payment terms, which you know, payment terms mightn't seem that important, but like with FedEx and UPS has gotten very important. Because a few years ago, like the average payment term might have been what 30 days. Now it's closer to 15. So again, doesn't sound crazy, but what they've both done in the past few years is they brought in a late fee. So if you don't if you don't pay on the due date, you automatically get a 9.9% late fee on the full amount of your invoice.

That's significant. That is significant and you said something intriguing. You said they've both been doing this. So that what I what I'm hearing is it's not just say FedEx or UPS, but it sounds like it's industry-wide.

Yeah, so one thing you will learn uh when you, you know, uh we everybody's learned when they follow is if FedEx does it, UPS will do it, if UPS will do it, FedEx will do it. UPS and FedEx have had the same GRI for the past 10 years, 5.9, 5.9, 5.9, 6.9, 5.9, 4.9, 4.9. Uh when they bring in a so uh initially a few years ago, the late fee uh payment late fee was six percent, they both had six percent, then it went up to eight, they both had eight, then it went up this year to nine point nine, and magically they're both at nine point nine.

It doesn't sound terribly coincidental somehow.

It's yeah, it is what it is. Uh so that's just so you have let's just take that, you have that 9.9% late fee, right? That's something you're not thinking of a lot, right? But you need to have your processes in place. You you talked about the data earlier on. These are some of the little things in the data that you can fix. If you see you're getting late fees, you need to figure out a way to process your payment faster. Because if you're getting it on every package or every invoice, that's an additional 10% that you did not budget for. And then also earlier this year, they've added a processing fee of 2% for invoices that aren't paid by ACH through their system. So that's another 2%. Uh they've added, you know, cost for commercial invoices and other type of invoices between $5 and $25 if it's paper invoicing. So these are additional costs. Uh they've changed some of the uh they've changed some of the during the year, they've changed some of the uh reasoning uh and some of the logic for certain surcharges. Like uh uh two or three years ago, it used to be you know, uh you get an additional handling weight surcharge if your package was £70, then they drop that to £50. So way more packages fall into that. So carry shippers need to know what's going on in the marketplace because if you're at uh you know £51, you know, how do you get to £49? Uh so there's things you need to know that it keeps changing. And as I said, that 9.9 lake fee is something you can do something about if you look at your data. Uh the other thing you can do something about if you look at your data is an address correction there for every address they correct, and you might be changing you know AV to A V E for Avenue, it's still $24. So the transportation cost might be 12. If it's an address correction, that's an additional $24. Your data will tell you this. If there's one customer you're shipping to all the time and in the database, that address is incorrect, correct it.

That's fascinating. And uh a couple things come to mind. Um thinking about you you mentioned some of the strategies that can be some of the tactics like uh changing the box dimension or going from one package to two. As you know, a lot of our listeners are in the automotive aftermarket, so being able to think about and be agile to make sure your weights are conservatively low, the box dimensions are within those within the dimension uh constraints so that it doesn't go to oversized. But these are certainly tactics that companies across all industries would benefit benefit from.

Yes, and and just on that, if you don't mind, you brought up a really good point in relation to diff diff different box sizes and different weights. So what the parcel carriers do is uh if you have a box, let's just say you have a big box that's four foot by four foot by four foot, and it's ten pounds, and then there's a small box that's ten pounds. They're not both gonna get weight billed the same amount, even though they're the same weight. What the carriers do, they look at it and they say, wait a minute, that's taken up way too much space. It might be it might be like 10 pounds, but it was taken up the size of a 30 pound. So what they do is they will bill you on what's higher off the actual weight or the uh dimmed weight. So basically what they'll do, they'll look at your length, width, and height, they'll multiply that and divide it by 139, and whatever that number is, they'll round it up, and that's what they'll bill you. I I'll give you an example and I've written it here. Uh 12 by 18 by 16 box, let's just say it's 10 pounds. But the way it would be inches, 12 inches by 18 inches by 16 inches, that would get it a dim weight because they'll divide they'll multiply them, divide it by 139, that'll get a dim weight of 25 pounds. Even if it's an actual 10-pound box. So if you have smaller stuff that you're shipping and you happen to have a big box around you, and you'll say, hey, I'll show it in there and just ship it, don't. Don't do it because you're going to get billed for a much heavier box. Like the difference here between those two boxes, it's a 40% increase in cost.

And what I'm hearing is if if it goes into that category of if if this or that, it they'll round it in favor of the shipping company or of the transporter.

Yeah. So let's just say the package was 25 pounds and it got dimmed at 10, you're going to you're going to pay for the 25. It's going to be the higher of each number.

Right.

But again, I I've been a lot, I've, you know, I've I've worked with a lot of customers where they got to get stuff out the door. So, hey, I got a load of these boxes. Let me just throw it in and I put a load of donuts in it and they'll send it out. It's costing you money.

Yeah, and it's kind of under the geese of, well, faster is better, time is money, but then you might have a sort of, you might rethink that come February, as you're highlighting. Earlier you mentioned something interesting, Mihal, that the actual weight and the uh given weight, those may not necessarily be congruent.

Yeah.

Can you tell me a little bit more about that?

Yeah, that's kind of where I'm going with this with the dim weight. That's what I meant there, where the actual weight and the dimensional weight, they are different. And again, this is one thing you can see in the data. It'll show you if it was dimmed or not. But again, if you're using big boxes that has a load of air in it, it's not free.

Now, how about something like an irregularly shaped box? Because I think about packages, bubble wrap, the padded envelopes, things that may not necessarily be uniform. Is that something to consider as well?

Yeah, so that's a wee bit tougher because it's hard. Like if it's not a normal packaging, that usually will get an additional handling packaging surcharge. You'd be almost better off to put that in a box, figure it out how to get that in a box. But again, you can do the analysis. You can look at it and say, okay, this is what it costs, uh, what I'm doing at the moment. If I create and it falls into I get additional handling surcharge because I don't have proper packaging. If I put that into proper packaging, even though it might be, it might dim a wee bit higher, if it's still cheaper if not getting the additional handling than doing that. So it there's a it just it's, you know, I've been at this 20 years, and there's still stuff I learn every day, and it took me a long time to figure a lot of this stuff out, even though I work there every day for like nine years.

Yeah, because I'm thinking about just say in the automotive aftermarket where vehicle parts come in all shapes and sizes, and then how many parts may I I might be ordering from a particular vendor, how the vendor is able to present all of those parts on the website at a low price. And then so when I get to my cart at the end of the transaction, that I'm not scared away by, oh, because of all your shipping needs, now your price is going to be a lot more than you may have expected, because that conversion rate is going to be very important. So it sounds like it really behooves companies, not just in the automotive aftermarket, but across all industries, to do that data analysis so that they can really make sure they're packaging things efficiently, taking advantage of the most, I guess, beneficial rates and get it to the end customer at the lowest reasonable cost. And so they're not kind of scaring away people that have like filled up their shopping cart and decide to abandon it after seeing the sticker shock of a very large shipping price.

Yeah, so that goes two ways, uh in all fairness. And I've worked with a lot of customers where they they've that's why they uh they they uh they brought us in is first of all, the question is okay, why are so many people leaving the website at checkout? Right? And a lot of times, you know, obviously it's the cost, and then okay, well, you'll look at your contract, see what you can do better. Uh and then there's a lot of people who have that don't have a dynamic pricing structure in relation to their checkout. So you know, the company themselves think, okay, the average here that we're paying per package is eight bucks, but suddenly they have a promotion and all the packages now it's fifty, it's the the shipping's fifty, sixty bucks, and they've only in their uh budget put in eight bucks, so they can really get hurt on that side. So you know, you need to have the best pricing program for your site company as you possibly can. You need to have uh insights into your data. And for me, uh you know, when I'm talking to customers, you I I try to train them. Train Internally on your packaging, because you know, when you think about it, a package getting to a customer or being delivered or being late or being way too expensive, usually the customer doesn't separate FedEx or UPS from the brand or from the company. Whichever way they get their package, whatever way it costs, if it's delayed, they look at it as a part of the company's brand. And it's hurting the company. Right? So you need to make sure you have good carriers, you have a good contract in place. So uh if you do need to go to the faster service, it's not as expensive for your customers. And also you need to make sure that you look at the data and you can actually figure stuff out for yourself. You know, packet sizes, um, even areas they're going to, uh, what surchargers you're hitting, uh service optimization, getting rid of additional handling, changing the box. There's a lot you can do, and it can really have a big effect. And again, not only on your bottom line, but on customer service.

Well, it's really helpful. And just kind of going back to those 259, 260 data points, you know, you talked about having that data, the importance of doing an analysis, looking for ways to make that process more efficient, to have favorable contracts, favorable pricing for customers. Tell me a little bit about sort of the future of this data. Are we going to go from 260 to 300 to 350 data points, as well as the quality of that data? What should, you know, what what areas of improvement perhaps could there be in that data set? What are consultants looking at from a data perspective to help their models become a little bit more accurate?

Yes. So there's up to 260 data points. You don't need all those that all those data points. Uh I I sometimes think, and I could be wrong here, that it's an overload of data where a customer looks at it and they say, I I this is way too much. I I can't do anything about it. So that's why you'd have uh consultants or companies where they have these huge platforms that just could consume it. Now, when I'm talking about 260, I would usually look at around 30 of those data points. And they can add to them in the future, uh, but you have enough there, up to 30 data points, that you can do 99.99% of your analysis. So I'm sure they'll add to the future. Uh, when you're looking at the future, I think you know, this data set obviously you enable it with AI and it's it feeds you way more inform it gave it returns way more information faster. So I I think that's where the future is, is how AI can interact with this and how quickly you can. Uh but currently the data that's there is enough data. And if you have the platform, if you have the expertise in-house, great, do it in-house. Otherwise, go get an expert, find a platform. It's a lot of data. It can save you a lot of money. And it can also streamline, it's not all about the bottom line, obviously, it's very important, but it's streamlining processes and not wasting money on something that just doesn't add value.

Right. You know, a couple of things come to mind. Earlier, you talked about that example of going from net 30 to net 15. So certainly uh coordination across your finance, accounts receivable departments, that's very important. So I think there's certainly that uh that collaboration across departments is very important. And I think you touched on something regarding the future, artificial intelligence. And I'm thinking about if I'm a consultant and I'm working with a company, I can see a lot of opportunity for scenario planning. So let's just say we're shipping X amount of packages and the profile across the year looks there's a certain pattern to it. Perhaps I can feed into that AI model. What if we grow our business by 10% and we have more customers and we've reached a new geographic territory? Are those some of the things that perhaps could be possible in the future as these new analytical tools become available?

So there are things that are happening right now. Uh as I mentioned, some of the companies I worked with from previously do that is, and it's very more it's more complicated than you think uh in the because you have the 200 up to 260 data points for each uh uh for each uh tracking number or package. Then you have over 26,000 other data points for stones and cells and weights, and you have over 150 surcharges. And then you have a GRI every year that kicks in and surcharges increase, fuel increases. Uh it used to be fuel would increase once a year. In the past 18 months, it's increased nine times. Uh it's become a profit center. Uh so uh and then you know, i when you look at your data, you're also thinking, okay, well, there's going to be demand surcharges this year. What are they going to be? Um, you know, you have a different handing oversized all packages residential. Like you for a comp the the issue is with shippers is companies that ship their parcel carrier are not their only vendor. So they're not going to spend all this revenue on getting this software, this platform, these experts, and these analysis done every year because you have so many vendors. That's why you have companies out there that do that. Because if you're trying to like just you know, pe people are in lanes and if you have a consultant at the moment, they should be doing this for you. Like forecasting is key because the other thing, as you know, when it comes to forecasting and budgeting, you're usually starting, I usually start late, and it's you know, August, September, and you're finalizing in November and it's being approved. That's when uh all these uh additional costs are hitting you. That's when the GRI is announced, and you might even know the GRI by the time you start budgeting. Because it comes out in September, October. Same with the uh some of the uh demand surcharges. So you don't have time to even get that into your modeling, even if you had everything in place. So uh it's you know, in the future that might happen, but you know, even with AI, the amount of power that's needed, and when you look at all this data for one company, uh it's a lot.

Yeah. Well, you it makes a lot of sense why there are niche consulting companies. You mentioned Freightwise, I'd imagine there are others that can kind of take this burden off a company's shoulders because it's enough to make your products, sell your products, the manufacturing, your sales team, your engineers, your your production employees, that this could be a very specialized niche. So it makes sense in a way that there are kind of uh specialized companies that that will focus on on optimizing these solutions. So um, you know, just two two two quick questions here. One is you you shared the fuel surcharges have gone up nine times. And thinking about gasoline, it has a kind of a mind of its own. And do these do you ever see this the fuel surcharges surcharges come down based on market conditions? And then the second kind of question is what are some of the most memorable or just sort of either had you shaking your head or the funniest surcharges you've seen across your time in the industry?

Well, so to start off with fuel. So up until what 2023, there was a direct correlation between when fuel, the cost of fuel, like um the in the diesel index or the diesel index is what's used for ground, and the jet fuel index is what's used for express planes. So there up until 2023, there was a correlation when fuel went up, so did when the cost of fuel went up, so did the cost of what the carriers charged you. That's not the case anymore. Fuel has been relatively steady and they've changed it to make it a profit center. And one example I'll give you, I I looked at the data a few weeks ago, and I think the cost, the the index cost was $373 uh at the time. And I looked at when the last time that was, and it was 2021. And in 2021, when the cost of the diesel was exactly the same, the uh the ground surcharge was between 10 and 12 percent. A few weeks ago, when it was the exact same amount of cost, the percentage was uh almost 21%. Now fuel is a percentage of your total spend. So the difference between 10% of your total spend and 21% of your total spend is huge. So that the fuel is like it's it seems like a profit center because the cost that they're that the shippers are paying is going up and the cost that they're paying for it is fairly steady. And these were two data points that were identical. So that's fuel, and I don't see that changing. Uh it seems like with FedEx does as UPS to do the UPS does as FedEx to do, they they follow each other. Going back to surcharges, uh so yeah, it's not that the one that was scratching my head that they released, but there's one time where we had a customer and suddenly their uh surcharges went way out of hand. And we looked at it and they had just gotten a new vendor that wasn't fully trained, that was doing a lot of shipping for them, and they were automatically putting an adult signature on each package. They just clicked it, hey, we need an adult signature surcharge. So that was seven dollars per package. It was something like 900,000 extra that they paid over a few months because they didn't train somebody correctly to say, wait a minute, we don't need that. Uh so that's one thing. The other the other surcharge that I sometimes scratch my head on is declared value. Um so declared value, you know, uh everybody thinks it's an insurance policy. If you look at the description on their services guide, they will say, This is not an insurance policy. Uh they actually state it. And what happens with declared value is you know, you have to prove that it was damaged while it was in transit. So when it's in transit, it's in a box or it's in it's covered up, there's a very high level of burden of proof. It's very high hard to prove. So I the amount of times that something happens and there's no pay out there, uh, I'd always advise people get insurance. There's different insurance you can get, but sometimes declared value. You'll see, again, look at your data. You'll see, wait a minute, I've paid all this stuff out in declared value. Then you can go and look at your claims and say, uh they only paid out a hundred bucks and I've declared I've put in claims for 10,000. Then it's time to look at, okay, what's the best value here?

Fascinating. Um, I've learned so much talking with you. And I know you said LTL, you're referring to less than truckload, correct?

Yes.

Okay, so that could be a conversation for another day, or if maybe I can pursue some other individuals to talk about from a shipping perspective. How do you arrange your shipping? Because if you're sending less than truckload, how are you filling the rest of that truck up? But that's probably another conversation for another day. But um, Mihal, is there anything else that you'd like to kind of talk about as we close up? Is there anything that perhaps we didn't get to touch on during our time together today?

Well, like uh the main thing I would say is, you know, just when it comes to customers, if you don't have the expertise or the software in-house, go and go and get a get an expert in-house uh and know your data. Like the data is right there. Uh also know your contract or get somebody in. Um there's a lot you can do. Don't be afraid of it. Like, people do this every single day. A 30-page contract. Uh I do believe people it's it's there to be confusing, to make people confused because it looks so complicated. Don't be afraid of it. This is somewhere, this is a part of your business that you can cut costs without cutting service. So I I really recommend hey, have a gock at it or get somebody to have a look at it.

I that's really wise advice because I think even when we as individuals sign a service agreement for an app on our phone, it might be miles long and we just scroll, scroll, scroll. I I accept, without necessarily knowing all the ramifications, all the more important for a business that could be spending millions of dollars on shipping and could reduce that by a substantial fraction.

Yes, totally.

So just a couple of fun questions here. Um I know we've talked about your name. Can you tell us a little bit about you know, Gaelic Irish, your background, if that's okay to talk about?

Yes, I'd love to. Uh, I'm from the west of Ireland, uh, a place called Galway. So Galway's on the total west, Dublin is the capital, on is totally on the east coast, and to drive east to west is like three hours. So Ireland's not a big country. Uh, but uh we do have a language, not a huge uh percentage of people speak it. Uh it's Irish or Gaelic. So I grew up in an area uh where we spoke Irish, and when I go home I speak Irish. So Meet Hall is the Irish for Michael. And like a lot of people think Irish is uh just speaking English with an Irish accent, but like hello in Irish is uh Diryt, how are you is Pierre Wilto. Uh I went to the shop as a whole magazine shopping. So there's no real correlation with English. So uh West of Ireland, uh I grew up there, um and uh I I probably started speaking English uh when I was four or five.

Terrific. And I introduced you as Michal Madonna. And can you say it for me in Irish Gaelic Irish for us?

Yeah, it just rolls off the tongue. Michal mocked on the ha.

Fantastic. Well, better said from you than from me. Terrific. Thank you for sharing us a little bit about your background and maybe one more is places you've enjoyed traveling throughout the world and maybe cuisines that perhaps go along with it.

Uh so the the place I was most surprised with that I enjoyed so much was Edinburgh. And the reason I enjoy I was surprised is I thought it'd be, you know, I grew up in Ireland, I thought it'd be very similar. Uh, but we went there in uh in August and they had a comedy festival. It was just amazing. And you have the huge castle in the middle of the city just looking down. Barcelona, the food in Barcelona, uh, I just loved it at lunchtime. Um the and London. London's a great city, like it's expensive. Um, so they would be the main ones in Europe. Uh in the States, uh, I spent a lot of time in Pittsburgh. And uh it's funny because even when I go back to Pittsburgh now and I'll tell somebody, yeah, I'm on vacation in Pittsburgh, the locals were saying, What are you doing in vacation in Pittsburgh? I love Pittsburgh. Uh it's it's a great city. That's where it works with FedEx. They had their one of their pricing divisions there. Um and food-wise, you know, I do like my uh Indian food, but I also like uh do you ever have an Irish breakfast?

Uh I'm not sure that I have. Tell us about an Irish breakfast.

So it's bangers, sausages, potatoes, beans, eggs. And I only you can only have it once or twice a year.

So bangers, is that a form of potato?

So bang, uh, so you we we would call uh so they'd be sausages and bacon. And we would just call them different names. Uh, but yeah, I would have that once or twice a year. Obviously, there's way too many calories and cholesterol issues to eat it too often. But uh, and then uh when I go home, uh my mother always has a shepherd's pie.

Oh.

And it's just delicious. It's I don't even let my kids eat it. It's all mine. So they're my faves.

Good to know. Well, uh I have a colleague in the office who is from Pittsburgh, so I'm sure she'll be delighted to know that you are right at home there when you're when you're on vacation.

So actually, and the the only time I really ate a lot of salad was in Pittsburgh, because in Pittsburgh your salads, they come with it comes with fries. There's fries in the salad. Huh. So that's why that's why he ate salads in Pittsburgh.

Mihal, I've learned so much from you. It's been such a pleasure and a delight to have on our program. Thank you so much for joining us. And to all our listeners, we hope you found this one informative, educational, and entertaining. So signing off here from Bethesda, and we wish you all a great day. Thanks for tuning in to another episode of Auto Care on Air. Make sure to subscribe to our podcast so that you never miss an episode. Don't forget to leave us a rating and review. It helps others discover our show. Auto Care on Air is proud to be a production of the Auto Care Association, dedicated to advancing the autocare industry and supporting professionals like you. To learn more about the association and its initiatives, visit autocare.org.