Parcel carriers behaving badly
Duopolies should be able to make bundles of money the above-board way without resorting to tactics that could be described as underhanded or just downright dumb.
The latest incident came to light last month when the Justice Department said UPS Inc., one half of the B2B parcel duopoly in the U.S., agreed to pay $25 million to settle claims that, for 10 years, the company knowingly recorded inaccurate delivery times on packages shipped to hundreds of federal agencies to make it appear the packages were delivered on time. UPS also applied inapplicable exception codes designed to excuse late deliveries, and provided incorrect on-time performance data. UPS’ objective, according to DOJ, was to conceal its failure to meet its “Next Day Air” delivery commitments, which would have allowed the government to claim refunds through the money-back guarantees called for under contracts with the General Services Administration and the U.S. Transportation Command.
UPS did not acknowledge liability, and paid the fine to avoid the prospects for lengthy litigation. Susan L. Rosenberg, a company spokeswoman, said the company has worked to improve systems, training, and technology since it became aware of the issue.
The issue is a practice known as “stopping the clock,” where a carrier will, at times, game the system to appear a particular route has few or any service failures. The clock starts when a shipper selects a service level. The clock stops when a package is delivered and a proof of delivery is furnished, when a carrier encounters bad weather, a wrong address is entered, the recipient is not available, or if Customs holds a package. These are all legitimate causes. The problem arises when carriers, under pressure to hit tough deadlines, play fast and loose with events. There are as many as 60 codes at a carrier’s disposal that stop the clock; many can be and are used inappropriately, and the result is that the customer has no recourse to file a claim. Even if they do, most lose because the carrier’s can prove that there was a code invoked that stopped the clock.
Jerry Hempstead, who worked for decades at top positions at Airborne Express and DHL Express in the U.S., called it a widespread problem that demonstrates no respect for the shipper or the consignee. Hempstead said it’s caused by a culture of fear that flows from line supervisors to drivers to “make service no matter what it takes” in order to make their service numbers and get the bonuses and promotions that accompany good results often arise from that. “When employees are under pressure, and performance reviews, and compensation are involved, sometimes poor judgment enters the equation,” he said.
This isn’t the first time of allegedly bad behavior by either company. Nearly two years ago, FedEx Corp. reached a tentative $21.5 million settlement with thousands to shippers to resolve allegations the company overcharged commercial customers by misclassifying their shipments as residential deliveries to extract higher surcharges. Last year, DOJ accused FedEx of being part of a criminal conspiracy by knowingly transporting illegal drugs on behalf of two rogue pharmacies. The year before, UPS settled similar claims out of court; FedEx plans to fight the charges.
UPS and FedEx dominate the US B2B parcel market, and no one is in sight to challenge them. Yet they’ve been accused of acting in ways that would make them out to be scrappy newcomers willing to push the boundaries of the law just to get their names known. The two companies combined cover virtually all corners of the earth and employ hundreds of thousands of people. It’s true that there’s opportunity for sleazy stuff to go on well below the eyes of upper management. Still, the culture if formed at the top, and if messages aren’t permeating all the way down the line, then, like it or not, the buck stops in the C-suite.