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ICC - UPS Rate Increase - 2016 - Breaking News

UPS SurePost Rates 1 lb. or Greater increase more like 9% for most shippers

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Late last year, UPS announced their Annual General Rate Increase which was advertised as impacting their customers’ rates by an average of 4.9%.  Well we found at least one surprise in these rate increases affecting parcel shippers utilizing UPS’ Sure Post services.

So, first of all, what is Sure Post?   According to the UPS website, “Sure Post combines the consistency and reliability of the UPS Ground network with final delivery typically provided by the U.S. Postal Service”.

The delivery time for SurePost packages is typically one day slower than UPS Ground. This is because on the day UPS would normally be dropping the package off at a customer’s door, it is instead dropping it off at the USPS branch nearest to the customer.

So while UPS announced their average rate increase would be 4.9%, when we examine the ACTUAL increase for UPS’ Sure Post product, we find a completely different story.

As you will see on the attached rate chart, the average increase for Sure Post packages for ALL shipments between 1 and 9 pounds to zone 2 through 8, is ACTUALLY 9%.  The increase for packages weighing between 10 pounds and 70 pounds is actually 5.3%.  And, what’s even more interesting about this is the fact that UPS’ base Ground rates across the board are actually less costly than the Sure Post rates. \

So why would a parcel shipper opt for the “slower” UPS Sure Post-delivery option if UPS’ base Ground rates are less expensive?  That’s a great question and one that every parcel shipper needs to ask themselves before just assuming the slower delivery service results in lower costs.  The reality is that if a parcel shipper is utilizing the Sure Post product, it MUST negotiate a discount with UPS to ensure their net costs will be lower than their net Ground rates.

It’s very clear to us that UPS intended to get the most bang for the buck with this Sure Post rate increase since the bulk of the packages they handle in this service are packages weighing between 1 and 9 pounds.  Remember, the devil is ALWAYS in the details.

And, one final word as we enter this new year.  All parcel shippers, and all shippers for that matter have a choice.  They can accept the status quo as many companies have done year after year by allowing their carriers to increase rates annually without ever being questioned.  Or, they can take charge of their company’s shipping expenses now by benchmarking all of the available services and shipping options available to them before allowing their shipping costs to  go totally out of control.

Most importantly, shippers should not “go it alone.”  Companies will need access to comprehensive parcel shipping analytics in order to make the right business decisions to ensure their shipping rates are the most competitive rates for the services being provided.  They cannot do this in a vacuum without having all of the necessary data analytics to make the proper evaluations.  Remember, help is available.  We’d love to hear from you!

Check out our chart to learn more! SurePost Rates Over 1 lb 2019 vs 2018

The True Value of Free Shipping

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More and more on-line retailers are establishing loyalty programs to gain critical information about a shoppers likes and dislikes.  This data is used to market directly to those shoppers who may want, but may not necessarily need that retailers products.  After all isn’t it the retailers job to entice the shoppers by constantly feeding them product information?  The result, expect more pop-ups and e-mails my friends!  In return for this wealth of information, the retailers are offering “free” shipping which as we all know has become, shall we say, the “standard” for on-line retailers.

The real question however for these online retailers will be as their actual shipping costs rise, (and they are rising continually), how will they manage to continue to offer “free” shipping to their customers.  The answer is and has always been, “the devils in the details.”  And what we mean by that is the retailers must have a wealth of statistical data gleamed from their actual “real time” shipping data to track their costs on an-on-going basis.  Without this data, and more importantly the ability to properly and comprehensively analyze that data, the retailers cannot be assured that their shipping costs aren’t eating into their profits.  Many have found out too late that is exactly what had happened to them.

In addition, the retailers must be willing to continually monitor service offerings as well as shipping costs that are available from various shipping companies who compete with the retailer’s current service provider(s).  While this sounds logical, you would be amazed at how many companies are “locked” into their current service providers and are not aware that shipping options are constantly changing and therefore need to be constantly analyzed.

Is single sourcing the best option for controlling freight costs, perhaps.  Many shippers refuse to “put all their eggs in one basket”, yet others have done so successfully for many years.  Perhaps it makes sense to “share” their annual packages with two or more carriers.  If that’s the approach, what percentage should each carrier receive?  How do these competing carrier’s service levels, rates, ancillary charges, rules and regulations stack up against the incumbent carrier(s)?

The reality is the right answer can only be reached after comprehensive analysis has been done to determine which carrier(s)selection is best.  Then once that selection has been made, it must be tested and challenged year after year to make sure it’s still the best option.  One and done routing decisions never work; not fully understanding continually changing carrier pricing levels will not work either.  And more importantly, if the retailer does not have the ability to perform these studies, and make solid business decisions based on this information, they will certainly be “leading” from behind.

UPS Logo

UPS Freight Customers Await Potential Strike

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LTL customers of UPS Freight are bracing for the worst with a potential Teamster Strike scheduled to take effect sometime within the next week or so, or perhaps not at all.  You see, workers will begin voting on Wednesday 11/7 on what the Teamsters Union called their “Final Offer” (whatever that really means).

An important point to make here is that if there is a strike by the Teamsters working for UPS Freight, UPS’ parcel network will NOT be affected as that group has already agreed to a new 5 year contract back in October.  We are sure many shippers may have been or perhaps still are quite confused between both of the UPS operations as it can be difficult sometimes to discern the difference between the two separate and distinct operations, LTL and Parcel.  We heard from many parcel shippers that had been panicking as we enter the Peak Holiday shipping period for parcel shipments.  They were pleased to hear that their shipments at least will be out for delivery.

To “aid” their customers, UPS Freight is planning on “emptying their network of freight within their system by Friday, November 9th”.  That means they will not accept any overnight freight pick-ups after November 7th.  Between now and then we believe it will be mass confusion as to whether a shipment already within the UPS LTL network will in fact be delivered.  Shippers would be wise, if they have other options in place, to tender their freight to other carriers and not UPS Freight until this labor issue is finally settled.

So what do we see as the sticking points between labor and management?  For one thing, UPS’ profits as a whole have been skyrocketing, who wouldn’t want a larger piece of that pie?  And, while the economy is still humming why not put as much financial pressure on management as you can.  Another point is that capacity remains tight and LTL rates have been rising in recent months, that is obviously another reason to press on for more.  Bear in mind however that the UPS Freight division is ONLY responsible for 5% of UPS’ sales.  Not only that, the LTL freight division has the lowest profit margin for the company, so really, how much more can UPS afford to give to the UPS Freight workers.  Only time will tell and the answer may very well be in the union’s “Final Offer!”

Visit Transport Topics to find out more

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Breaking: UPS Announces Rate Increases- Get the Comparison Charts Free Now!

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–Be sure to email us to get the UPS and FedEx Rate Comparison Charts for 2017 vs 2018–

In the Parcel shipping game of “Follow the Leader”, UPS, as expected, has followed FedEx’ footsteps by announcing their Annual General Rate Increases which will become effective on December 24, 2017.  As usual, the UPS General Rate Increase will affect all UPS Ground, UPS Air, UPS International Services, as well as all UPS Air rates within and between the US, Canada and Puerto Rico.

In UPS’ announcement the aforementioned rates will be increased “on average” 4.9%.  Bear in mind, the key words here are “on average” with some rates increasing less than 4.9% but others increasing at much higher percentages than the 4.9% average.

Another critical component of UPS’ General Rate Increase becoming effective on December 24, 2017 will be the reduction in the Dimensional Weight Divisor for small packages measuring less than one cubic foot.  The divisor will be reduced from the current divisor of 166 to 139.  UPS will now mirror the Dimensional Weight Divisor that FedEx has previously published.  This change will result in increases for these types of packages well above the 4.9% average and in many cases will result in rate increases of at least twice the 4.9% “average.”

Additional increase percentages worth noting are as follows:

Large Package Surcharges will be increasing 14.3% to $80.00 effective on December 24, 2017 and will increase again on July 8, 2018 to $90.00, which will be an additional increase of 12.5% for an overall increase of 28.6%

Minimum Charge for Ground Shipments will be increasing 3.42%.  The new Minimum Charge will be $7.57

Additional Handling charge will increase 10.6% on December 24, 2018 to $12.00 and then will be increased again on July 8, 2018 to $19.00.  The overall increase from the current charge of $10.85 to $19.00, the charge after the July 8, 2018 increase, will actually be 75.1%

However, the General Rate Increase Winner is the “Over Maximum Limits” Surcharge, because that charge will increase a whopping 233% from $150.00 to $500.00.

It’s time for shippers subject to the “Over Maximum Limits surcharges to realize UPS and FedEx for that matter, really do not want those products in their parcel networks and for good reason.

To assist our readers in digesting these latest UPS increases, we have created a 2017 vs. 2018 comparison chart for UPS rates and surcharges.  Simply email ANuzio@icclogistics.com to request your free copy and don’t forget, we Also a reminder, we previously published a similar chart for the FedEx General Rate Increase so feel free to ask for that too so you have the increase impact for both FedEx and UPS.

 

Amazon Courier

Bloomberg: Amazon Testing Rival to FedEx/UPS

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Some folks were surprised when Bloomberg News and other news sources reported yesterday that Amazon was experimenting with their own delivery network which could come at the expense of their current business partners UPS and FedEx.  The reality is that Amazon’s move into establishing their own delivery network has been in the works for years now.

The real question that remains to be answered is whether Amazon can and/or is willing to build a complete delivery network here in the US and therefore no longer have a need to use UPS or FedEx for their domestic deliveries.  We doubt that will ever come to pass completely, but we are sure that Amazon will at some point in the future be a major delivery service provider in many of the major metropolitan areas of the US.  They have been building and fortifying those metro delivery networks for years now and will be a strong delivery force in many major metro area’s for sure.

There also remains the possibility that Amazon will compete head to head with both UPS and FedEx for parcel deliveries from other shippers at some point in the future.  We believe that Amazon has felt for quite some time that the costs to deliver parcels through UPS and FedEx are more costly than what Amazon believes they should be.  Perhaps if Amazon does compete head to head with the two parcel giants, they may find out that reducing those costs may not be as easy as it seems.

 

A FedEx truck is parked next to a UPS truck as both drivers make deliveries in downtown San Diego

Will FedEx “Me Too” UPS and add Peak Surcharges?

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Ever since last week when UPS announced the “Peak Surcharges” they will be applying to various shipment types during the November/December holiday shipping season, many shippers are wondering will FedEx follow suit and add their own peak surcharges.  And, that my friends is a very good question.  Without a crystal ball it’s anyone’s guess but we thought we’d explore this issue to see if we could find any signs that would point to the decision FedEx may or may not ultimately make.

For one thing, FedEx recently reported their fourth quarter earnings and they were spectacular, with a quarterly profit of over $1 Billion; very impressive.  So what drove this huge increase in profits for FedEx; a couple of things.  First and foremost was the reporting of revenues derived from FedEx’ TNT Express acquisition.  This included restructuring charges, and $20 Million in TNT Express intangible asset amortization expenses, as well as $37 Million of integration expenses.  From there FedEx reported increased revenues of 7% on increased package volumes, as well as growth in International Export activity which contributed an additional 5% growth.  FedEx also reported that their higher profits were a direct result of higher base rates.

Higher base rates we believe were achievable through several measures FedEx has taken over the past year or so to shore up its profits, including the reduction in Dimensional Weight Divisors resulting in higher yields per package for dimensional rated parcels.  Also, the elimination of refunds for late delivered packages which had been an integral part of FedEx’ contracts with their shipper customers.  While many shippers still maintain the ability to file claims for refunds for late delivered packages, apparently, many of the new contracts Fedex is implementing contain waivers which prohibit shippers from filing refund claims for these late delivered packages.  Obviously, other cost containment initiatives FedEx has been continually implementing and improving continue to pay off.

So, with these increases in profits, will FedEx opt in on surge pricing, AKA “Peak Surcharges” or will they let UPS be the “bad guys” and try to siphon business from UPS during the peak holiday shipping season?  The reality of the matter in our opinion is that FedEx can ill afford to add significant volumes of packages during the peak holiday season as that would wreak havoc on their operations and potentially jeopardize service to their current large shippers.  In fact we believe that much of the profit FedEx has derived from increased package volume has actually come from the peak holiday periods in late November and December.

So having said that, we believe that FedEx has absolutely nothing to lose by “me tooing” the Peak Surcharges UPS has scheduled to become effective for this coming holiday season.  However, whether they do it or not remains to be seen.  Still waiting for that crystal ball.