UPS Announces Rate Increases: What You Should Know About the GRI
The wait was more than a month – 37 days since FedEx announced its 2018 rate increases, if you’re counting – but on Oct. 25 UPS finally released its GRI.
On the eve of its positive quarterly earnings report – you might recall that when FedEx announced its GRI in September, it came just hours before a lackluster earnings report – UPS remained consistent and predictable in matching FedEx, despite the unusually late announcement.
The carrier announced an average net rate increase of 4.9% across its Ground, Air, and International service types.
That 4.9% is the shorthand and identical to FedEx, but it hardly hints at the expected impact for any individual business. Remember, that average increase is almost certainly going to be higher for individual businesses because these “net averages” weigh all service types and accessorials.
Of course, no business uses every service or is affected by every applicable accessorial, which is why it’s important to understand the true, effective impact on your company. With less than two months until most of these new rates take effect, UPS hasn’t left much time for businesses to plan — and the Dec. 24 start date will impact 2017 budgets, too. That means measuring and mitigating actual GRI impacts should start now.
The Details and Immediate Takeaways
In fact, some of the specifics within the announced rate increases, which will take effect on Dec. 24, seem especially targeted to businesses shipping large packages.
- UPS will now apply a 139 dimensional weight (DIM) divisor to all packages.
- Large Package Surcharge will go up by $10 (14%) and will apply to any domestic package more than 96 inches long or greater than 130 inches when length and girth are combined.
- The Over Maximum Limit charge becomes $500, a 233% increase from the $150 rate.
What’s more, starting July 8:
- The Large Package Surcharge for any domestic residential delivery will increase another $10 to $90, making it a $20 (29%) increase over 2017 rates.
- After going up by $1.15 on Dec. 24, the Additional Handling surcharge for domestic packages whose actual weight is more than 70 pounds will increase another 58% – or $7 – to $19.
Other significant rate changes, effective Dec. 24:
- Address Corrections jump by $2.50 (19%).
- Delivery Area Surcharge (DAS) will increase by $0.25 or $0.30 depending on service types. Extended DAS adds another $0.10 to $0.25 over 2017 rates.
- Residential Surcharge increases by $0.20.
- Print Label Return fee will double, increasing by $0.50 to $1.
- UPS Delivery Intercept increases by $2.50 for electronic (+19%) and phone (+13%) requests.
Example minimum charge increases, coming Dec. 24:
Peak Surcharges, which were added earlier this year for the 2017 holiday season, will return in 2018 and increase incrementally by a couple of cents on each package.
The To-Do List
- As a shipper, you need to understand the true impact of these rate increases. It’s worth repeating: mitigation begins with understanding, which starts with measuring. The carriers make these decisions based on data. So should you.
- Contact your carrier rep and ask, “How will this affect me?” Remember, they have the data and their response – particularly if they aren’t well-versed on the updates and how they will impact you – can tell a lot. And if he or she replies with a reference to 4.9%, the next point is even more important…
- Like you would with car repair estimates or medical diagnoses, always get a second opinion. Contact VeriShip for a risk-free impact analysis to get an answer to the same question you ask your carrier rep. You’ll receive a more objective perspective because VeriShip has the data – billions of data points collected over years to establish benchmarks that align with your shipper profile.
- In ongoing discussions with your carrier rep, work toward mitigating potential impacts for 2018 and beyond.
- Model what your budget should look like for 2018 and plan accordingly, including opportunities to make operational changes to offset rate increases.
- When rates go into effect starting Dec. 24, monitor, monitor, monitor. While UPS or FedEx make big fall GRI announcements, don’t assume they won’t continue to tweak to their advantage. You still have negotiating power if costs don’t mesh with projections.
- It’s important that you find a parcel intelligence partner with a data-guided contract engineering approach that doesn’t treat every business and carrier agreement with a one-size-fits-all strategy. See what that means with VeriShip’s personalized GRI impact analysis.
- And don’t forget to download this parcel contract negotiations handbook for more tips, insights, and best practices.
Andrew Brueckner is VeriShip’s Chief Customer Officer. Backed by a team of data scientists and 10+ years of benchmarking data, Andy and his team work with shippers to understand and optimize their carrier contracts.