Sunday, September 12, 2010

Increased competition in International Parcels

In August, Eastern Connection announced an alliance with TNT Express.   This alliance gives international shippers in Eastern Connection's service area from Maine to Virginia better access to TNT Express's extensive international network.   The closeness of the link can be seen by clicking on the International shipping picture on Eastern Connection's home page which links you directly to TNT's website.

Eastern Connection is a regional parcel carrier, that offers next day ground delivery service from Maine to Northern Virginia at rates that they state are 15 to 25% below that of UPS and FedEx.   Eastern Connection's service area is ideal for companies with the need to distribute parcels from distribution centers in central Pennsylvania to customers throughout the Northeast.

TNT's international service connects to Eastern Connection's ground and priority networks through Eastern Connection's hub near Newark New Jersey.   Eastern Connection can easily transport shipments for flights to TNT's European hubs via Newark as well as deliver TNT shipments with its service area.

Regional distribution of parcel shipments is growing as internationally sourced goods are transported by air or a combination of ship and rail to  distribution points near the ultimate destination and then transported to the ultimate destination by a parcel carrier.   While UPS and FedEx Ground can and do serve these customers, regional carriers working directly with shippers or with companies like TNT Express and non-asset based transportation companies, such as Expediters International, can provide the last 100 mile service at competitive rates and service levels.

TNT Express's alliance with Eastern Connection makes sense for both companies.  For TNT, the alliance gives it access to an already established, profitable carrier to sell international services and pick-up international parcels throughout the Northeast without having to make a significant investment to create the transportation network or develop a customer base for regional shipping.   To the extent that TNT Express uses Eastern Connection to deliver parcels in its service area, it provides it with a single contractor to deliver parcels throughout a 12 state region, allowing it to offer faster and lower cost delivery in the northeast than it had previously.

For Eastern Connection, the alliance gives it the opportunity to add volume throughout its system and a broader product mix that makes it more competitive for customers shipping both regionally and internationally.  To the extent that TNT Express uses Eastern Connection's delivery network, Eastern Connection improves its scale economies without having to make investments in a sales force outside of the northeast.

Eastern Connection is not the only regional carrier that could improve the US service that TNT Express offers.   If the alliance with Eastern Connection works well, then announcements may soon come linking TNT Express with other regional carriers as well.  Then TNT will be faced with the question as to whether it wants to move beyond an alliance with a regional carrier to making the regional carriers a part of TNT's Express global network.

1 comment:

International Parcel said...


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