For Parcel Carriers, Rate Hikes are the New Black.
Christmas is coming, and you know what the parcel carriers are getting for you. Just like Aunt Martha’s fruitcake, you can count on the Brown/Purple duopoly for the traditional holiday season offering – a fat rate hike.
This year, the UPS and FedEx rates and rate increases are in lockstep to an extent they have never been before; base rates for both will climb 4.9 percent, and the carriers’ ground rates will match penny-for-penny in continental U.S. ground shipments up to 150 lbs. and accessorials. In an overall down economy, and with fuel prices at the pump currently at their lowest level since 2010, the duopoly has raised rates 32 percent since 2008. With the expanded DIM weight pricing also set to take effect earlier than ever, at the beginning of the year – FedEx “ups” their charges one week behind their rival – this could be the largest price increase in history for package rates.
The 4.9 percent figure, of course, is an average, with actual charges for a given shipment dependent on zone, accessorial charges and DIM weight calculations. International rates are all over the map, with South Korea up just 1/10th of one percent, while UPS’s China charges jump 7.5 percent.
Shippers need to look at all their options, including hundredweight, LTL, and utilizing the oft-maligned but increasingly competitive United States Postal Service, even if only for “last mile” deliveries. Another defensive strategy is reconfiguring packaging to mitigate DIM rates. As UPS helpfully pointed out in their letter to customers announcing the upcoming rate increase, “Dimensional weight pricing encourages reductions in excess packaging materials and overall packing sizes, leading to reduced fuel use, vehicle emissions and transportation costs.” Of course, the benefits go to them, while the higher charges are paid by shippers.
As always, it pays to have someone knowledgeable on your team, working for you and not the carriers, to ensure your supply chain is as efficient and cost-effective as it can be.