Electronic contract companies are using the latest increases from UPS and FedEx to wean more businesses away from paper-based processes.

The big selling point: Cutting out postage and the mailroom in favor of transmitting documents electronically is a time-saver and a cost-saver.

Some companies are boasting that switching over provides immediate cost savings for overnight and express shipments — up to 80% in many cases.

Timing is particularly critical right now because new shipping rates from UPS and FedEx are slated to take a leap Jan. 5.

It’s a little more difficult to bargain shop now, too. Once-competitor DHL has dropped out of the business, leaving these two titans. It doesn’t look like they’re going to get in to a price war any time soon.

Electronic contract providers promise they’ll deliver signed agreements, purchase orders, invoices and associated paperwork:

• faster
• more conveniently, and
• at greatly reduced costs.

Important Procurement and Purchasing documents travel from one business to another at the touch of a button. Transactions that once took days or even weeks can now be handled in only minutes.

Another plus: Sending signatures and other critical info through Internet connections has come of age.

Even the most cautious Procurement pros will now admit the concept has merit, and e-signature and e-document practices have earned legal standing and protection.

Parcel shippers already need to be cautious if they’re still using DHL, industry insiders point out.

There are already service issues — including no published service guarantee.

Other problems include:

• no more drop-offs at Walgreen’s and Office Max locations
• vanishing yellow drop boxes
• reports that customers are unable to schedule call-in pick-ups after Dec. 10, and
• that layoffs have already begun.

Industry pros offer two nuggets of advice:

• One, if your company holds any DHL Ship-Ready pre-purchased products, use them as soon as possible, and
• Two, don’t wait to start making plans for life after DHL.

Your options include FedEx, UPS and even the USPS.

Make your portfolio as attractive as possible. For instance, carriers prefer commercial deliveries. Highlight those during the bidding process.

They know you need their business. But it’s your advantage there’s three carriers to choose from.

Keep in mind, though: UPS has quietly scaled back service to more than 1,000 zip codes in the past month. Bring that up during negotiations, to see how much it could impact your deal.

Get ready for bad news — and more bad news.

For two major shippers, prices will go up.

The third major shipper won’t be raising rates, however. That’s because it’s pulling the plug on domestic air and ground services.

Ouch!

What you can expect, as of Jan. 5, 2009:

• FedEx: Traditional shipping rates will go up 4.9%. Need to ship it express? Prepare to shell out for a 6.9% price hike.
• UPS: Air shipping rates will increase 4.9%; UPS Ground rates will go up by 5.9%.
• DHL: No more domestic and ground services. DHL will continue international express service, but even that’ll be a little tricky because it’s closing most of its U.S. hubs.

The move, which takes effect Jan. 5, is the company’s reaction to a more demanding marketplace. It’s also a bid to bolster the big carrier’s bank account.

It’s not all bad, from the corporate and customer standpoint: “Stringent” cost management and lower fuel prices have helped FedEx keep rate hikes in check through the year.

There’s even a small silver lining: The fuel price that currently triggers FedEx’s fuel price surcharge is being raised by 2 percentage points. This revised set point for implementing the fuel surcharge should help many customers absorb some of the price of the increase.

On the whole, FedEx remains healthy. Daily volume in FedEx express and ground operations have increased by 1%; U.S. domestic package volume is off by 5%.

Now might be a good time to consider working on a back-up plan or budgeting a little more money for these functions.

If you rely on FedEx Ground for overnight deliveries, there could be some changes in how you do business — like higher prices, to start with.

If FedEx loses a critical, nationwide lawsuit currently being decided, it could mean an overhaul of the company’s entire business model. That’s because FedEx’s policy of treating ground-service drivers as contractors, instead of company employees, has been called into question — and into court.

It “does not look good for FedEx,” says one legal eagle.

Drivers are seeking $1 billion in damages; more than $2.5 billion in taxes and liability are also at stake. Even more significantly, losing the case would deny FedEx the estimated 30% financial advantage it enjoys over other ground-service carriers.

Treating drivers as a full-time employees rather than contractors will erase significant cost savings – costs you can expect to see passed directly onto customers’ procurement and shipping functions.

Why wait for this one to play itself out? Now’s a good time to assess your current ground-service carrier(s). Can any of your regular functions be consolidated or scaled back?

If you are a FedEx customer, now could even be a good time to check out the competition, like UPS. You never know if other carriers might be planning a little something special designed to appeal to nervous FedEx customers.