UPS waited until the Friday before Thanksgiving to release its 2010 rate increases. If I were a betting man my tummy tells me that they did this so that the press on the topic would be buried in the vacations and hubbub and noise of the holiday season. Right after Thanksgiving comes the race to the year end and Christmas finish line so perhaps the hope is that few will notice or have time to consider the ramifications of what UPS (and FedEx with their match of the UPS ground rates) has done.
Last year UPS announced in mid October which prompted a surge of calls to UPS reps to come in and explain things. Few will have the time to do that between now and year-end.
This year comes with some new and improved increases. I never cease being amazed at the creativity of the carriers to come up with new ways to enhance their revenues.
What you don’t see the carriers promoting is the tool which tells the sales rep how much more your account will pay as a result of the tariff changes. Wouldn’t you like to know the impact the changes have on your budget. You know with the IT resources of the carriers and the detailed data they have on your shipping activity they can tell you to the penny how much more 2010 will cost you versus what you paid in 2009 based on your historical pattern with them.
Let’s look at some of the changes;
First much of the activity of ground shipping, in particular if you have a discount, gets mitigated by the minimum charge. The Minimum is currently $4.57 and this is increasing to $4.84. UPS claims the ground tariff is increasing by an average of 4.9%, but averages can be deceiving. The minimum is going up almost 6% and this affects a lot of shipments. I suspect that
80% of all parcel shipments are 1 to 10 lbs.
Let’s see what they did in that arena:
| weight\zone | Zone 2 | Zone 3 | Zone 4 | Zone 5 | Zone 6 | Zone 7 | Zone 8 |
|
1 |
5.91% |
6.60% |
6.02% |
6.59% |
6.64% |
6.16% |
5.29% |
|
2 |
6.88% |
6.88% |
6.69% |
6.92% |
6.63% |
6.31% |
5.39% |
|
3 |
6.82% |
6.96% |
6.73% |
6.85% |
6.38% |
6.18% |
5.29% |
|
4 |
6.85% |
6.53% |
6.91% |
6.74% |
6.50% |
6.43% |
5.50% |
|
5 |
6.13% |
6.43% |
6.43% |
6.46% |
6.21% |
6.25% |
5.32% |
|
6 |
6.14% |
6.42% |
6.49% |
6.45% |
6.24% |
6.49% |
5.67% |
|
7 |
6.02% |
6.40% |
6.36% |
6.27% |
6.06% |
6.17% |
5.36% |
|
8 |
5.96% |
6.20% |
6.34% |
6.15% |
6.00% |
6.02% |
5.15% |
|
9 |
5.63% |
6.02% |
6.23% |
6.00% |
5.86% |
5.83% |
4.94% |
|
10 |
5.45% |
5.98% |
6.26% |
5.97% |
5.87% |
5.78% |
4.93% |
So no matter how large a discount you have UPS is going to enjoy $4.84 on those transactions.
Wall Street believes that the carriers do not yield the announced average increase. I suspect this year they will capture a lot of it.
The rate I always look at is the Zone 5 – 5 lb price because that to me was always an indicator about what is really going on. But the highest increase is a 3 lb, zone 3 shipments and somehow that makes me think that perhaps, perhaps, the jolly brown giant knows that more shipments fall in this cell than any other. I could be wrong, but I grew up in New York and am forever a cynic and a conspiracy theorist.
Please note that the current fuel surcharge on these ground shipments is 4% and the new index guarantees pretty much that the fuel surcharge is going to be 4.5% or a 12.5% increase in your fuel surcharge. I hope I’m not ruining your week.
Let’s look at the next morning air product increase. Granted they once again buried 2% of the fuel surcharge into the base tariff and the expectation is that your fuel surcharge goes down in concert with your base rate going up, but we already saw this past year how that game plays to the carriers advantage when the fuel surcharge dips to zero. The carriers now have embedded into the base tariff 10+% (because of compounding) and when fuel now goes down the base tariff does not. Sure enough the increases where the shipments are appear to be much larger than the “averages” announced in the carrier’s press release.
| Weight\Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
Letter |
6.40% |
6.84% |
7.69% |
7.76% |
7.78% |
8.10% |
8.04% |
|
1 |
6.52% |
5.88% |
8.40% |
8.33% |
8.25% |
8.56% |
8.58% |
|
2 |
5.43% |
5.79% |
8.21% |
8.38% |
8.44% |
8.62% |
8.63% |
|
3 |
5.30% |
6.59% |
8.24% |
8.31% |
8.29% |
8.73% |
8.64% |
|
4 |
5.15% |
6.47% |
8.37% |
8.29% |
8.32% |
8.62% |
8.59% |
|
5 |
5.31% |
5.66% |
8.48% |
8.43% |
8.35% |
8.61% |
8.69% |
|
6 |
6.10% |
6.68% |
8.36% |
8.29% |
8.42% |
8.66% |
8.64% |
|
7 |
6.02% |
6.66% |
8.32% |
8.36% |
8.36% |
8.61% |
8.64% |
|
8 |
6.30% |
6.48% |
8.38% |
8.46% |
8.29% |
8.66% |
8.63% |
|
9 |
5.23% |
5.66% |
8.38% |
8.35% |
8.47% |
8.62% |
8.60% |
|
10 |
5.22% |
5.65% |
8.35% |
8.39% |
8.41% |
8.55% |
8.64% |
Next Day Air:
| Weight/Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
Letter |
6.46% |
6.73% |
7.71% |
7.83% |
7.77% |
9.33% |
9.36% |
|
1 |
6.27% |
6.91% |
8.29% |
8.32% |
8.29% |
8.69% |
8.58% |
|
2 |
4.86% |
7.01% |
8.18% |
8.29% |
8.17% |
8.54% |
8.60% |
|
3 |
6.34% |
6.83% |
8.46% |
8.17% |
8.24% |
8.51% |
8.57% |
|
4 |
6.13% |
6.82% |
8.21% |
8.78% |
8.24% |
8.59% |
8.59% |
|
5 |
5.14% |
1.16% |
8.41% |
9.03% |
8.38% |
8.59% |
8.49% |
|
6 |
6.13% |
7.09% |
8.62% |
9.01% |
8.43% |
8.61% |
8.53% |
|
7 |
6.28% |
6.96% |
8.24% |
8.34% |
8.33% |
8.64% |
8.61% |
|
8 |
6.19% |
6.93% |
8.26% |
8.31% |
8.33% |
8.57% |
8.59% |
|
9 |
6.32% |
7.13% |
8.32% |
8.24% |
8.33% |
8.61% |
8.61% |
|
10 |
5.29% |
6.85% |
8.33% |
8.35% |
8.33% |
8.58% |
8.49% |
2nd Day air A.M.
| Weight/Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
Letter |
6.36% |
6.67% |
5.98% |
7.78% |
12.97% |
12.99% |
9.29% |
|
1 |
6.19% |
6.52% |
5.83% |
7.55% |
9.57% |
9.12% |
8.99% |
|
2 |
6.58% |
5.96% |
6.15% |
7.42% |
9.19% |
8.93% |
9.07% |
|
3 |
6.55% |
6.20% |
5.81% |
7.40% |
8.96% |
9.05% |
8.97% |
|
4 |
5.93% |
6.40% |
6.45% |
7.18% |
9.01% |
9.30% |
9.21% |
|
5 |
6.17% |
6.59% |
5.92% |
7.50% |
9.04% |
8.89% |
8.73% |
|
6 |
5.88% |
5.95% |
6.36% |
7.55% |
8.78% |
9.09% |
9.04% |
|
7 |
6.06% |
6.46% |
6.15% |
7.53% |
9.04% |
9.04% |
9.19% |
|
8 |
6.18% |
6.23% |
6.27% |
7.72% |
9.28% |
9.10% |
8.97% |
|
9 |
6.60% |
6.59% |
6.31% |
7.53% |
9.16% |
9.14% |
9.19% |
|
10 |
5.59% |
6.18% |
6.31% |
7.56% |
9.05% |
9.16% |
9.01% |
2 Day Air
| Weight/Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
Letter |
6.35% |
6.74% |
5.97% |
7.69% |
9.85% |
9.82% |
9.35% |
|
1 |
6.19% |
6.57% |
5.83% |
7.46% |
9.32% |
9.25% |
8.75% |
|
2 |
6.63% |
5.94% |
6.19% |
7.41% |
9.06% |
8.90% |
9.12% |
|
3 |
6.60% |
6.25% |
5.86% |
7.49% |
9.01% |
8.97% |
8.93% |
|
4 |
5.91% |
6.51% |
6.25% |
7.40% |
9.02% |
9.23% |
9.17% |
|
5 |
6.22% |
6.31% |
6.13% |
7.56% |
8.97% |
8.91% |
8.81% |
|
6 |
5.94% |
6.06% |
6.34% |
7.45% |
8.84% |
9.11% |
9.11% |
|
7 |
6.17% |
6.32% |
6.17% |
7.54% |
9.11% |
9.03% |
9.25% |
|
8 |
6.36% |
6.16% |
6.38% |
7.62% |
9.19% |
9.09% |
8.97% |
|
9 |
6.45% |
6.62% |
6.50% |
7.50% |
9.18% |
9.13% |
9.23% |
|
10 |
5.75% |
6.21% |
6.28% |
7.62% |
9.15% |
9.14% |
9.01% |
Are you seeing how large the increases are on the longer haul transactions for the deferred shipments? The carriers know that most likely you will not downgrade those shipments to say ground service to save money. Ground can’t buy you the same transit time as it can on the short haul shipments.
I do want to point out that the UPS base tariff is less expensive than the sample rates Fedex has posted. A comparison of how much less UPS is say for Next morning air service is as follows:
| Weight/Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
Letter |
-7.06% |
-7.18% |
-7.26% |
-7.29% |
-7.28% |
-7.14% |
-7.26% |
|
1 |
-7.16% |
-7.18% |
-7.20% |
-7.27% |
-7.31% |
-7.31% |
-7.22% |
|
2 |
-7.18% |
-7.28% |
-7.29% |
-7.29% |
-7.22% |
-7.25% |
-7.27% |
|
3 |
-7.22% |
-7.18% |
-7.29% |
-7.23% |
-7.29% |
-7.26% |
-7.29% |
|
4 |
-7.30% |
-7.31% |
-7.27% |
-7.29% |
-7.30% |
-7.27% |
-7.25% |
|
5 |
-7.21% |
-7.30% |
-7.25% |
-7.30% |
-7.31% |
-7.27% |
-7.26% |
|
6 |
-7.28% |
-7.19% |
-7.25% |
-7.27% |
-7.28% |
-7.24% |
-7.30% |
|
7 |
-7.30% |
-7.24% |
-7.29% |
-7.24% |
-7.29% |
-7.28% |
-7.31% |
|
8 |
-7.17% |
-7.28% |
-7.25% |
-7.24% |
-7.30% |
-7.26% |
-7.25% |
|
9 |
-7.25% |
-7.26% |
-7.25% |
-7.28% |
-7.25% |
-7.30% |
-7.28% |
|
10 |
-7.24% |
-7.26% |
-7.29% |
-7.25% |
-7.26% |
-7.30% |
-7.26% |
So you need to be comparing net rates between carriers not just the magnitude of the discounts they offer. Don’t assume the base price is the same. This example clearly demonstrates that a much lower percentage discount from UPS may result in a much better net price versus a discount from FedEx.
I wanted to see how much less than UPS Blue (2 day) the Priority Mail Commercial base price is.
Keep in mind that the USPS has no residential surcharge, no delivery area surcharge, no extended area surcharge and no fuel surcharge. The difference is staggering even if you have a huge discount from the carrier.
| Weight/Zone |
Zone 2 |
Zone 3 |
Zone 4 |
Zone 5 |
Zone 6 |
Zone 7 |
Zone 8 |
|
1 |
-53.40% |
-54.03% |
-54.59% |
-58.78% |
-66.23% |
-67.15% |
-66.32% |
|
2 |
-53.11% |
-53.36% |
-51.75% |
-47.74% |
-56.02% |
-56.95% |
-53.94% |
|
3 |
-51.62% |
-46.97% |
-42.21% |
-42.93% |
-51.68% |
-52.61% |
-46.51% |
|
4 |
-46.79% |
-40.96% |
-38.98% |
-39.28% |
-46.80% |
-47.71% |
-43.44% |
|
5 |
-39.91% |
-33.56% |
-35.96% |
-36.43% |
-45.50% |
-45.84% |
-42.36% |
|
6 |
-36.64% |
-29.47% |
-34.04% |
-33.66% |
-45.05% |
-44.51% |
-39.94% |
|
7 |
-34.11% |
-28.77% |
-31.87% |
-31.09% |
-46.00% |
-43.49% |
-38.57% |
|
8 |
-32.19% |
-29.97% |
-30.06% |
-30.42% |
-46.39% |
-43.69% |
-37.24% |
|
9 |
-32.65% |
-27.78% |
-30.82% |
-30.23% |
-46.28% |
-44.04% |
-36.47% |
|
10 |
-30.80% |
-26.95% |
-30.05% |
-29.22% |
-45.63% |
-43.60% |
-36.11% |
The fact is that pricing has become so complex, the volumes so great, the discounting so sophisticated that you need a professional with the tools to tell you how much you are being hit, where to focus you negotiating to mitigate this increase and to make sure your program is staying competitive in the marketplace.
