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UPS Teamster Update: It Still Ain’t Over

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 A Good News, Bad News, Good News Story

Well the results are in-  UPS Teamster members have voted to accept the UPS contract offer that their leadership team had tentatively accepted back on July 25, 2023.  The contract was overwhelmingly accepted with 86.3 % of UPS Teamsters voting yes to the deal. Shippers no longer need to worry about the possibility of a strike.  Obviously this is the Good News Story. But what impact will this new agreement have on the market place and your business?  Our intent is to provide you with some insight regarding what to expect moving forward, and to help you build a strategy to minimize the impact of market changes. 

Now that we know the good news, let’s talk about the bad news.  There is probably no need for us to get too deep into the increases that UPS workers will receive through this new deal. There have been many stories in the media that describe how UPS Driver pay will go to $170K per year. Part time workers will see increases in pay by as much as 48% over the life of the agreement. Additionally, UPS made many other concessions that will prove costly for them in the coming years.

UPS Leadership acknowledged that the new Teamster agreement will have a big impact on their costs. In their latest earnings release earlier this month, UPS cut its full-year revenue and profitability targets, citing higher-than-expected labor costs and business lost during the contract talks with the Teamsters.

So, shippers that use UPS should brace themselves for the record level rate increases that ICC and other experts have been predicting for some time now. For those shippers that use FedEx and other parcel carriers, don’t think that you are off the hook. As we all know, history repeats itself. So, why wouldn’t FedEx just match the increases that UPS will announce later this year to help them improve their profit margins as they have in the past? This is really a no brainer. 

If you think that Amazon’s expansion into the Parcel delivery market will help keep costs down, guess again. The Teamsters have been very vocal about their desire to drive higher salaries for Amazon workers. Teamster General President, Sean M. O’Brien has been quoted as saying, “Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry. This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention.”

Adding to the bad news is the recent Yellow Freight bankruptcy. Thankfully, in the short term, excess capacity in the LTL market seems to have staved off any major impacts on cost. But, what will happen as capacity starts to tighten during the upcoming holiday peak season? Estes and Old Dominion have made offers for Yellow Freight assets, which could help these carriers grow their respective market share. So, what impact could this have on LTL prices? Obviously still a lot of unanswered questions here. But, many things point to higher costs for the LTL market as well 

So now for some more good news. The bottom line is that smart shippers can plan ahead to help protect themselves from substantial increases in costs and further erosion of profit margin. Here are some of our recommendations for you to consider as you build your cost avoidance strategy; 

1.Time to Assess your Parcel and Freight Carrier Agreements. Many things need to be considered here. Many shippers have the ability and resources to take a high level view of where they stand with their Parcel Agreements.  There are some easy things to look at. For example, When does my agreement expire? Do I have any language in my agreement that would prevent me from renegotiating my agreement now? When was the last time I renegotiated my agreements? Is my company in a position to consider a move to another parcel carrier? How much has my business changed since I last negotiated my current parcel agreement? 

2.Time to take a holistic view of your current Transportation & Logistics Programs –  Many shippers are utilizing outdated Transportation and Logistics Systems . In many cases, these legacy programs were built at the start-up of the business, and never changed. They are often built around older internal systems, which limited the ability for changes in order fulfillment. Companies that started out regionally may now be selling nationally and globally. All of this results in added cost for shippers. 

Here are some questions to consider with this; What are your options? Are you in a position to consider the use of Regional Carriers, or other Final Mile, or Middle Mile Carrier options that have sprung up in the last few years? Can your current systems support the addition of new carriers? Are you using the right LTL carriers for your product/ customers/ market?  Is your current Distribution Center, or 3PL in the right place to ensure lowest cost/ fastest delivery to your customers? Should you upgrade your current TMS/ WMS systems? 

3. Time to talk to the experts – Many companies are hesitant or reluctant to bring in outside help or consultants. Transportation and Logistics leaders often feel that they know enough to negotiate their own deals and make their own decisions. CFO’s and other company leaders think they don’t need to bring in experts because they have the right people on their staff that have the expertise to ensure that they are getting the most from carriers. 

The bottom line is this- even if you have the best Logistics and Transportation people on your staff, there is no way for them to possess the vast data and insight that the experts can provide. Here is a great way to look at this. The best and most experienced Transportation and Logistics leaders probably have been involved in dozens of Parcel and Freight negotiations during their careers.  They also could have worked at many different companies. So maybe they have some good insight. However, Logistics consultants have been involved in hundreds or even thousands of Parcel and Freight negotiations, for hundreds/ thousands of different companies. Also, in many cases (like at ICC), they have sat at the carrier side of the negotiating table. 

The experts are much more in tune with current pricing and market trends. Parcel and Freight agreements usually have 1-3 year terms. A lot can change in the market during these time periods. Good consultants have a vast amount of recent carrier invoice data that can be used to benchmark against the current market. The experts are involved with this on a daily basis, so they know what to ask for and when and how to ask for it. 

Company leaders need to realize that Logistics consulting experts are not looking to replace, or make their Logistics and Transportation teams look bad. The main goal is to make these teams smarter/ stronger and to provide them with the tools that they do not have to help them drive the greatest savings possible, without compromising service to customers. 

Naturally, company leaders are often concerned about the cost of engaging with Transportation/Logistics consultants. The good news here is that most of these consultants are willing to work on a gain share basis, meaning that they will not pay anything unless the consultants can drive savings for them. It is not unusual for shippers that partner with a Logistics consulting firm to experience an ROI of 5X-10X or more. 

The ICC Logistics team has had tremendous success with helping customers build their own good news/ success stories. We are looking to continue to spread the good news. So, please reach out to us today to find out how we can help you prepare for the expected changes in the Transportation and Logistics marketplace. We are certain that we can deliver solutions that will protect your margins and enhance service to your customers. 

 

Understanding Parcel Carrier Rate Increases

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The Devil is in The Details

Following FedEx’s recent General Rate Increase, (GRI) announcement, shippers are anxiously awaiting the anticipated GRI announcement from UPS.  As is customary, there is an expectation that the UPS GRI will be in line with FedEx’s announced 2023 GRI level, which increases rates on average (6.9%). With these annual GRI announcements it is not uncommon for shippers to focus solely on carrier package zone and rate charts to try to determine the impact of these annual increases. However, it is becoming increasingly important to pay close attention to new carrier accessorial rate changes, as these increases can also have a significant impact on parcel shipper’s bottom lines. 

What We’ve Seen in the Past

In 2022 UPS shifted approximately 2700 Zip Codes (approximately 7% of US Zip Codes) from their Extended Delivery Area Surcharge list, to a new list called “US 48 Remote Zips.” They then implemented a new Remote Area Surcharge for these zip codes in the contiguous US.  Prior to this, the Remote Area Surcharge only applied to certain Zip Codes in Alaska and Hawaii.  This increased the surcharge for these packages from the Extended Area Surcharge of $6.50 for Ground Residential shipments and $4.10 for Ground Commercial shipments, to the Remote Area Surcharge of $12.00 per package. An increase of almost 100% and 300% respectively. 

FedEx has jumped on the bandwagon with this new Surcharge for 2023. Their recent GRI announcement included a new Remote Area Surcharge in the amount of $13.25, which applies to almost 4000 Zip codes in the US, which includes almost 10% of US Zip Codes).

On top of this, it is important to point out that historically the major parcel carriers have also increased the number of Zip Codes that are subject to Area Surcharges. For example, in 2018, UPS listed approximately 23,700 zip codes that were eligible for the Delivery Area, Extended Area, and Remote Area Surcharges.  In 2022, the number of Zip Codes receiving these surcharges are approximately 25,600, an increase of over 8%. 

What’s Most Likely To Happen with UPS

Based on what we have seen in the past, along with the fact that FedEx has introduced this new fee to 48% more Zip Codes than UPS, it seems likely that UPS will increase their Remote Area Surcharge rate as well as increasing the number of impacted zip codes.  Given UPS’s new “Better Not Bigger” business strategy, it would only make sense for them to take actions to avoid customers shifting higher cost to serve packages to them without being properly compensated.

Given the complex nature of Small Package pricing, it is crucial for shippers to develop better visibility and understanding of their base rates and all surcharges they are subject to, but also to gain a better understanding of all of their parcel carrier contract terms and conditions.  In addition, it is crucial to implement processes to provide comprehensive audits of their invoices to ensure payment accuracy. 

We encourage you to reach out to ICC so we can show you how our unique industry experience, insight and technology can help uncover these types of hidden costs that can be hurting your bottom line. 

Port Effeciency Requires People and Money

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We are halfway into 2022 and it feels like everything is finally getting back to “normal” after COVID-19 shut the world down. We have a golden opportunity right now to examine the cracks in the supply chain system that were made glaringly obvious over the past few years.

The Port Performance Index for 2021 was recently released with the ports of Los Angeles and Long Beach dead last on the list. These two ports are responsible for moving 42% of consumer goods from Asia into the United States. There’s a cascade of cause and effect that ripples out across the industry. Just looking at the connection between trucking jobs and wharehouse space, you’ll see how one problem conflates the other. For example, there’s a shortage of high skilled workers in the trucking industry to effeciently move goods across the country. That means goods must sit in a warehouse at the ports for longer than importers anticipated. Having said that, There’s also a shortage of warehouse space at various port facilities. This then puts pressure on the trucking industry to move goods faster, which they can’t do becuase there is a shortage of high skilled workers.

To keep our economy growing, we have to solve the effeciency issues at our ports with investments in human resources and technology.

New era, new careers:

By the end of the decade, the baby boomer generation will all have hit retirement age. We hear a lot about “The Great Resignation” and that “no one wants to work anymore.”  When we put our personal opinions on this aside and look at what’s actually happening in the marketplace, there is a cultural shift happening – younger generations wants different things out of their careers than older generations of workers.

Back in 2017, 80,000 people applied for 2,400 new jobs at the Los Angeles and Long Beach ports. These are your quintessential blue collar union jobs that have historically provided access to the middle class. For the older generations, that meant pensions and home ownership, as well as, good health insurance benefits. Younger generations increasingly want more flexibility and greater work-life balance. Additionally, the more technology we add into our infrastructure, the more skilled our workers need to be. Investing in education and training will ensure new hires have the skills they need to sustain a life long career in logistics. Innovation can’t be just about infrastructure and technology or the human capital will continue to lag behind.

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Efficient Modernization

We also need to be spending money on infrastructure upgrades and technological developments with an eye towards improvements in efficiency. For example, warehouse space needs to be expanded and updated, so that ports can better accommodate the influx of goods.

Here on this blog we recently talked about how drone technology is being deployed in logistics and the efficiency benefits that can provide. However, we do need to take a holistic approach in this. In 2021, President Joe Biden advocated for ports implementing a 24-hour operation model, which is in line with the rest of the world.  But if the trucking industry can’t match that level of output to get goods on the road, 24 X 7 operations is not the quick fix to solve the problem.

Furthermore, we need to have a larger conversation as a country about the state of our infrastructure, a conversation by the way that has been going on for years with no real solutions.  Now might be the best time to seriously think about investing in things like high speed rail, bridge and highway improvements. Just this week, Yellowstone Park was closed, perhaps indefinitely, after severe flooding destroyed the northern portion of the highway system into the park. Our aging infrastructure will also face increasing pressure from a changing climate.

So in conclusion, the Port Performance Index has shown that the United States is in danger of falling behind the rest of the world in terms of modern and efficient Port infrastructure. Catching up of course is not impossible but we must act and act soon or continue to lag behind the rest of the world.

Looking for more insight on this topic? Reach out to us.

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Expeditors International forced to shut down most of its OS

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As if Supply Chain Disruptions weren’t enough, a fresh new disruption has hit Expeditors  International after they were targeted in a ransomware attack, the company said.  This information has been reported by American Shipper.

And, the effects on the Seattle-based logistics company’s operations have been widespread.

“While our systems are shut down we will have limited ability to conduct operations, including but not limited to arranging for shipments of freight or managing customs and distribution activities for our customers’ shipments,” Expeditors said in a statement Sunday.

The company said it was investigating the attack as it worked to restore its systems. It did not give an estimate when normal operations might resume.

Expeditors has more than 18,000 employees across 100 countries, providing logistics and customs services for airfreight and ocean shipping. The company brought in $4.3 billion in revenue during the fourth quarter.

The company warned that the cyberattack “could have a material adverse impact on our business, revenues, results of operations and reputation.”

The incident represents one of the significant cyberattacks on a U.S. logistics provider in recent memory. Expeditors did not say whether the incident was the result of ransomware.

Intel 471, a cybercrime intelligence firm, warned in a November report that cybercriminals had been trying to sell network access of multiple transportation, logistics and shipping companies. Cybercriminals could use network access to stage ransomware attacks that could disrupt the global supply chain.

In December, Germany-based Hellman Worldwide was hit in a ransomware attack. The company subsequently warned its partners and customers that they could be targeted by scammers.

ICC - UPS Rate Increase - 2016 - Breaking News

UPS Announces 2022 General Rate Increases

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On Friday, October, 29th UPS announced their 2022 General Rate Increases for the coming year.  In their announcement, UPS stated “during this past year we have all experienced change as our businesses and communities navigate through this challenging time. We remain committed to making a difference investing in the strength of our global network of employees to positively impact your business.  We continue to advance our technology to improve the customer experience and enhance our network so you can keep your commitments to your customers, reliably. To help you plan ahead, below is a summary of the changes to our rates for 2022.”

It’s always a good idea to speak about the positives before explaining then negatives.  UPS’ announcement follows the recent announcement by FedEx of their 2022 General Rate Increases.

Effective on December 26, 2021: 

The rates for UPS® Ground, UPS Air, and International will increase an average net5.9%.

UPS Air Freight rates within and between the U.S., Canada, and Puerto Rico will increase an average net5.2%.

Effective January 9, 2022:

Remote Area Surcharge will now apply to deliveries to certain ZIP Codes in the 48 contiguous states, as well as UPS On-Call Pickup requests in those ZIP Codes. The Remote Area Surcharge also applies to certain ZIP codes in Alaska and Hawaii, as it has in the past.

Obviously these General Rate Increases are averages so some increases will actual be less than the 5.9% and 5.2% increases UPS will implement, and some will be much higher.  Parcel Shippers should take a long hard look at these increases and analyze the impact they will have on their 2022 freight budgets which are expected to increase over “norms,” (whatever that means) just as shippers have experienced in 2021.

To help parcel shippers navigate this latest General Rate Increase, ICC Logistics will again make available free of charge, UPS List Rate Comparison Charts 2022 vs. 2021.

To obtain your copy, fill out the following form and add “Rate Comparison Charts” in the message field.

Breaking News

USPS Announces Temporary Rate Adjustments

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The United States Postal Service filed notice today with the Postal Regulatory Commission (PRC) regarding a temporary price adjustment for key package products for the 2021 Peak Holiday Shipping Season. This temporary rate adjustment is similar to one imposed in 2020 that anticipated heightened peak-season package and shipping demand, which typically results in extra handling costs.

The planned Peak-Season Pricing, which was approved by the Governors of the Postal Service on Aug. 5, 2021 would affect prices on commercial and retail domestic competitive parcels, such as Priority Mail Express (PME), Priority Mail (PM), First-Class Package Service (FCPS), Parcel Select, USPS Retail Ground, and Parcel Return Service. International products would be unaffected. Pending favorable review by the PRC, the temporary rates would go into effect at 12:00 a.m., Central Time, on Oct. 3, 2021, and remain in place until 12:00 a.m., Central Time, Dec. 26, 2021.

This seasonal adjustment will bring prices for the U.S. Postal Service’s commercial and retail customers in line with competitive practices. No structural changes are planned as part of this limited pricing initiative.

USPS’ Upcoming Price Change

“Delivering for America,” the Postal Service’s 10-year plan for achieving financial sustainability and service excellence, calls for appropriate pricing initiatives. The Postal Service has some of the lowest mail postage rates in the industrialized world and continues to offer great values in shipping. These temporary rates will keep the Postal Service competitive while providing the agency with the revenue to cover extra costs in anticipation of peak-season volume surges, similar to levels experienced in 2020. The forecasted additional revenue from the time-limited increase will depend on the volume of packages shipped between Oct. 3 and Dec. 26, 2021 – the period the Postal Service historically considers its “holiday peak season.”

The planned price changes include:

Priority Mail, Priority Mail Express, Parcel Select Ground and USPS Retail Ground:

  •   $0.75 increase for PM and PME Flat Rate Boxes and Envelopes.
  •    $0.25 increase for Zones 1-4, 0-10 lbs.
  •    $0.75 increase for Zones 5-9, 0-10 lbs.
  •    $1.50 increase for Zones 1-4, 11-20 lbs.
  •    $3.00 increase for Zones 5-9, 11-20lbs.
  •    $2.50 increase for Zones 1-4, 21-70 lbs.
  •    $5.00 increase for Zones 5-9, 21-70 lbs.
ProductCurrentPlanned Increase
Parcel Select Destination
Delivery Unit DDU		Starts at $3.30No Change
Parcel Select Lightweight (DDU)Starts at $2.15No Change
FCPS CommericalStarts at $3.01.30 Cents
FCPS RetailStarts at $4.00.30 Cents
Parcel Select Lightweight
DSCF and DNDC		Starts at $2.55$1.00
Parcel Select DSCFStarts at $4.84$1.00
Parcel Select DNDCStarts at $6.85$1.00
Parcel Return ServiceStarts at $3.21$1.00

 A full list of commercial and retail pricing can be found on the Postal Service’s Postal Explorer website https://pe.usps.com/text/dmm300/Notice123.htm=

The PRC will review the prices before they are scheduled to take effect on Oct. 3, 2021. The complete Postal Service price filings with prices for all products can be found on the PRC website under the Daily Listings section at prc.gov/dockets/daily. The price change tables are also available on the Postal Service’s Postal Explorer website at pe.usps.com/PriceChange/Index.

The USPS reports that its “Delivering for America” 10-year plan aims to reverse a projected $160 billion in losses over the next 10 years. The Plan’s growth and efficiency initiatives will spur cash flow and savings to make $40 billion in capital investments over the next 10 years – including approximately $20 billion towards the Postal Service’s mail and package processing network, facility upgrades and procurement of new processing equipment.  It’s important to remember that The USPS generally receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

Need help navigating rate increases? Reach out to our consultants today to learn how to take control of rising shipping costs.