UPS® recently announced a General Rate Increase (GRI) of 4.9%. Effective December 26, 2016, the new rate reflects an average net increase for UPS Ground, Air, and International Service. According to UPS’s statement, the increase is being implemented to “support ongoing expansion and capabilities enhancements, while striving to maintain the high service levels [shippers] expect from UPS.”
From the UPS website:
- Daily rates for UPS Ground service will increase an average net 4.9%.
- Daily rates for UPS Air and International services will increase an average net 4.9%.
- The Additional Handling charge will be assessed for UPS Air and International packages with the longest side exceeding 48 inches, instead of 60 inches.
- Additional rate changes including to Retail rates and UPS SurePost® rates, and additional charges will be available later this year. Additional information will be posted here on November 18, 2016.
- To learn more, view 2017 Selected Daily Rates Package Surcharge Changes.
What Does This Mean for You?
In understanding any GRI, it is important for shippers to remember that it is a reflection of an average net increase. In other words, a shipper’s rates will not be uniformly increased by 4.9%; some rates will be higher than others depending on services, while others will be lower. For example, in February 2016, the GRI for UPS fuel surcharge for ground services was 5%. In 2015, FedEx® increased their Express Saver service type by 7.32%. Depending on which services a shipper uses, it is important to realize your rate increase may be substantially higher in effect than the 4.9% average net increase.
It is critical, therefore, for shippers to have a full understanding of their shipping profile in order to plan for and address the GRI so it does not overwhelming affect their parcel spend.
What Can You Do About It?
- Audit: Make sure you are prepared for any potential impacts the UPS GRI may have on your parcel spend. Parcel shippers should utilize technology platforms and auditing services to stay apprised of their data trends by monitoring Key Performance Indicators (like cost per package) on a weekly basis.
- Reassess: If your shipping profile uses a service whose rate increase is substantially higher than the net average increase, determine whether this is still the best and/or only option for your shipping spend. It may be possible to change your shipping services to avoid incurring excessive additional expenses. You may also need to increase your own prices to pass along these new costs to your customers.
- Renegotiate: Lastly, if changing your service type isn’t an option for your business and data suggests the GRI will have a major impact on your parcel shipping spend, it may be worth considering renegotiating your parcel carrier agreement. While it is impossible to avoid the GRI entirely, you may be able to reduce other surcharges, accessorials, and disproportionately affected service types that drive up your overall cost per package.
For help understanding and limiting how UPS’s new GRI impacts your business, contact VeriShip.