Let’s take a look at the parcel shipping landscape over the past several months and understand why it is the “Perfect Storm” for many shippers. Let us then find out what you can do about it.
1) January 2014 UPS/FedEx Rate Increase
In January 2014 the two largest small parcel shipping companies in the United States, UPS and FedEx, had a significant rate increase. The carriers announced a 3.9% to 4.9% average rate increase to their clients. Have you looked at your carrier invoices lately? The carrier’s assertion that the “Average Rate Increase” is 3.9% to 4.9% is accurate but misleading. When the carriers do their calculations they take an increase of 2.8% for a 150 lb. package and a 7% increase for a 2 lb. package and the average is 4.9%. Unfortunately for most shippers and fortunately for the carriers, there are a whole lot more shipments being sent at 2 lbs. than there are 150 lbs. The increase is closer to 6% to 8% for most companies. Always be vigilant when UPS & FedEx start quoting “averages”.
2) May & June 2014 FedEx/UPS Change the Dimensional Weight Rules
In early May 2014, FedEx announced that as of January 2015 they will be applying dimensional weight pricing to all ground shipments irrespective of the size of the box. UPS, as custom has it, followed suit with the identical announcement seven weeks later (currently, only ground packages measuring greater than 3 cubic feet get assessed dimensional weight pricing by both carriers). However, UPS’s increase will go into effect on December 29th, 2014. This increase may prove to be the carrier’s largest increase in over a decade. Be prepared!
3) “Free Shipping” is becoming the norm and is expected
Free shipping or discounted shipping is expected from many of your clients. Amazon and others are changing how companies and buyers alike are looking at shipping costs. If you are an ecommerce company and you are not offering or mentioning something about free shipping or discounted shipping costs on your home page, whether it is based on spend minimums or some other criteria, potential customers are jumping off your site. If you are a B to B shipper, your clients are becoming a lot more in tune to what you are charging them for shipping and they very well may be shopping a competitor due to shipping costs.
What you can do to combat the perfect storm
- Determine the dimensional pricing impact to your business by examining your current shipments and calculating the Dimensional Weight vs. the Actual Weight
- Consult with your carton manufacturer and /or a package design consultant and ask for package design help as well as Dunnage suggestions
- If you are currently using a minimal amount of boxes, consider increasing the amount of box sizes
- Consider Regional Carriers, U.S.P.S. SmartPost and SurePost
- Consider using a carrier neutral third party shipping system. UPS WorldShip and FedEx ShipManager are not benefiting you.
- Negotiate, Negotiate, Negotiate – do not wait until 2015. Renegotiate your carrier agreement now. View the following negotiation video by clicking the link: http://ydraw.wistia.com/medias/jseczv80oh
Ken Wood is the founder of LJM Consultants. LJM helps clients negotiate “Best in Class” UPS/FedEx agreements. LJM was recently named the “best parcel auditing company in America” and was also inducted into Inc. Magazine’s Top 500/5000 fastest growing companies in America for 2013. To learn how LJM Consultants can help your company get the parcel contract you deserve, call 631-844-9500 or email kenwood@myLJM.com.