2018 UPS & FedEx Rates Not as Advertised, Research Shows
A version of this article appears at parcelindustry.com.
When businesses like yours review their parcel shipping expenditures for this calendar year, fewer than one-third of you who ship $100,000 or more with UPS and FedEx annually can expect to beat the 4.9% average rate increases those carriers announced for 2018.
In fact, the average effective rate increase projected for 2018 is 6.2%, with just 32% of businesses expected to see increases below the 4.9% benchmark.
These findings, from VeriShip’s 2018 Parcel Rate Effective Impact Analysis Benchmark Study, are the result of simulations informed by the real shipping profiles of more than 3,000 businesses and their more than $1.5 billion and 120 million packages shipped domestically with UPS and FedEx in 2017.
Defining the Impact Analysis
Each company’s raw shipping data — carrier invoices and the tracking and transit logs, for example — are ingested, transformed, and made ready for use by the VeriShip Intelligence Platform (VIP). The VIP then leverages artificial intelligence algorithms and simulation engines to produce descriptive and predictive analytics.
Those descriptive analytics from the VIP — the “what happened?” historical data that, among other things, describes a company’s shipping profile — together with the details of each carrier’s recently-released 2018 rate and service guides gives VeriShip’s Data Science Team what they need to run thousands of simulations through VeriShip’s proprietary simulation engine. This type of rigorous predictive analysis is a first for the parcel industry.
The results are a high-precision prediction of the impact UPS and FedEx rate changes will have on shippers in 2018. (Visit verishipparcel.staging.wpengine.com/gri to learn more.)
Spoiler alert: 4.9% doesn’t tell the story.
Comparing the Carriers
Both UPS and FedEx have been consistent in recent years in reporting that annual average increases — commonly referred to as General Rate Increases (GRI) — are 4.9% when accounting for the revised rates across all service types and accessorial categories. That consistency belies the fact that, for individual businesses, the variance in rates is much wider.
For 2018, at least, it seems FedEx is offering the slightly better deal in the aggregate, based on VeriShip’s analysis. Although FedEx’s effective GRI is 6.22% for the companies analyzed — ahead of UPS’ 6.26% but still far exceeding 4.9% — nearly half of FedEx customers, 48%, are seeing rate increases of less than 4.9%, compared to fewer than 1 in 5 with UPS (19.7%).
Unfortunately, the implication in the math is clear for FedEx shippers: while some FedEx customers have great rates and still more are sneaking by just under that 4.9 bar, a sizable proportion are facing increases much higher, even into the double digits year-over-year.
I hope you know which side of the line you’re on.
A Surcharge Story
As we’ve seen in recent years, adding new surcharges and accessorials (hello, peak season) — or revising and expanding existing ones (I’m looking at you, DIM) — are revenue generators for carriers whose effect on a shipper’s parcel costs isn’t obvious until invoices arrive.
For 2018, both UPS and FedEx have added the greatest premiums onto the fees that hurt their density and efficiency metrics: heavy or large packages and address corrections, according to VeriShip’s analysis.
Ground Shippers Beware
The large increases aren’t limited to add-on fees, either. Some per package service type rates will have outsized impacts on businesses, particularly those who rely on Ground services or FedEx SmartPost.
What It Means
As always, there are lessons in the data and, thankfully, 2018 is less than a quarter old. Now’s a good time to review recent carrier invoices and monitor your shipping going forward. Use the data presented here to gauge where you might stand.
Accordingly, don’t hesitate to engage your carrier rep and work toward understanding and mitigating any unexpected impacts. Of course, the carriers aren’t in the business of making that easy to do alone. VeriShip can provide an impact analysis of your business’ shipping that will save you money in 2018 — and beyond.
Stephen Rolf is a Senior Solutions Engineer at VeriShip, the leader in parcel intelligence. For more information or to request a complimentary impact analysis, visit verishipparcel.staging.wpengine.com/gri. Contact Stephen at email@example.com.