A strong word of caution for parcel shippers: Both FedEx and UPS have announced what will amount to significant rate increases in freight costs for certain Ground Service packages.
The increases are a result of the parcel carriers’ recent decisions to implement Dimensional Weight Pricing for cartons that measure less than three cubic feet (5,184 Cubic Inches) when such packages are shipped via the parcel carriers’ Ground Service offerings. The FedEx rate increase will become effective on December 29, 2014 and UPS’s increase will take effect on January 1, 2015.
According to the parcel carriers, these increases are needed to offset their increased costs of handling and transporting these smaller packages within their Ground Service Networks. By some estimates, the impending rate increases will not only impact approximately a third of all of the Ground packages the parcel carriers’ handle on a daily basis, but will also amount to whopping increases of between 25 and 50%.
To add insult to injury, these increases will be IN ADDITION to the parcel carriers’ Annual General Rate Increases that traditionally kick in right around January 1st. As of this writing FedEx and UPS have not indicated what their General Rate Increases will be in the New Year. If history has anything to do with it, shippers can expect the Ground service increases to be in the 6 to 7% range.
While the Dimensional Weight Pricing increases will impact Ground parcel packages, the movement to Dimensional Weight Pricing is part of a larger trucking industry effort to also revise LTL pricing metrics that are currently primarily based on product classifications.
These pricing changes are being made to create pricing metrics that better compensates freight carriers based on the actual space shipments occupy on carrier equipment. Several LTL carriers have already introduced Dimensional Weight Pricing as the “next generation” of LTL pricing. So, this is a trend that will certainly continue throughout the trucking sector. The net result: Increased LTL costs as well!
So the real question is this; now that shippers are aware of the impending price increase, what if anything can you do to offset the impact these increases will have?
While there is no magic bullet, there are a variety of options Parcel Shippers can look at to minimize the impact of the rate increase. For one, shippers will need expert guidance to navigate through those options to seek out the right solution for their company. Also, keep in mind only Parcel Shipping Consultants with the ability to analyze ALL options for their shipper clients will be in a position to analyze these options. Some examples of available options are:
- Modifying Package Dimensions and Configurations
- Comprehensive Analysis of Current Discounts and Incentives
- Researching Competitive Shipping Alternatives
- Comprehensive Analysis of ALL Contract Terms and Conditions
- Implementing Creative Pricing Alternatives
Parcel shippers have two choices. They can decide to do nothing and pay the higher prices, or they can contact a Parcel Shipping Consultant now to perform an analysis of the best options to implement cost reduction solutions for their company.
So, what will your company do? Wait for the increases to hit your budget and get the attention of management, or will you be proactive and jump on the bandwagon with other concerned parcel shippers and do something about this significant increase in costs before they go into effect?