UPS and FedEx Rates Increase Analysis


UPS and FedEx Rates Increase Analysis

Every year, UPS and FedEx announce their respective general price increases (GPI). Shippers, both large and small, scramble to determine the effective impact on their shipping costs. Since the announced increases are only averages, the true impact for any given business can vary greatly.

In January 2011, the carrier’s GPI had a very substantial impact on accessorial charges, such as: Residential Surcharge, Delivery Area Surcharge, and Address Correction Fees. The change to the dimensional weight (DIM) factor was the most dramatic of all. With UPS and FedEx both reducing the DIM factor to 166, significantly more packages are now assessed a dimensional charge as opposed to an actual weight charge. For some shippers, the resulting cost increase on these packages exceeds 20%.

Both UPS and FedEx typically announce their price increases a couple months prior to the effective date of such. Since most businesses charge their customer for shipping or work it into the price of the product being sold, it is highly beneficial that every company pre-plans their response to the announced GPI.

BEST PRACTICE SUGGESTIONS:

• Every business, based on their historical and/or anticipated shipping volume and characteristics, ought to analyze the cost impact of their carrier’s GPI before the increase becomes effective.

• If your company’s rates, volume, and characteristics are such that a margin of opportunity exists to improve discounts and incentives, consider initiating negotiations with you carrier before the annual rate increase becomes effective.


Source Consulting can help your company implement the best practices we have suggested above…and much more. Our team thoroughly understands today’s complex carrier pricing environment and has help hundreds of companies implement solutions to reduce shipping costs. Contact us today to review the solutions we can provide for you.