What Recent Carrier Price Divergences Mean So Far

by | Mar 8, 2017 | Articles

We’re nearly a quarter into 2017, so now is a great time to reflect on the carrier pricing changes initiated in January and the ramifications they’re having on shippers.

As I wrote in November, after FedEx and UPS announced their General Rate Increases (GRI) for 2017, the carriers are engaged in a game of chess. Instead of continued price matching, which tends to drive prices down, the carriers chose to diverge: FedEx emphasizing growth in small package types while UPS focuses on dimensional weight pricing.

But shippers are learning the divergence in pricing runs deeper than the annual GRI. From DIM divisor reductions that penalize those who don’t ship within carrier-preferred dimensions, to revised accessorial charges and fuel surcharges, these new carrier strategies are immediately affecting shippers.

Shippers are learning the divergence in pricing runs deeper than the annual GRI, and these new carrier strategies are immediately affecting shippers.

What are shippers learning in the process? “Comparison shopping” between carriers is not so easy, which is how FedEx and UPS like it. And what seem like small differences can have a noticeable impact on parcel spend, making it all the more important to understand the full scope of how each carrier’s rate updates — whether the incumbent or the competition — affects a shipper’s costs.

These added complications mean that now — perhaps more than ever — it’s worthwhile for cost-conscious shippers to review their carrier agreements, understand their shipping profile, and assess their options by working with benchmarking data and contract engineering experts to mitigate the house edge carriers enjoy as they play rate algebra.

If you’re a shipper looking for tips on where to start, my colleague Travis Rhoades and I delve into best practices in this parcel contract negotiations handbook.

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