UPS has announced a GRI of 5.9% set to begin on December 26, 2023. As always, both carriers downplay the impact this will have on shippers and while 5.9% doesn't seem like something to be too concerened about, what can be revealed by taking a deeper dive into the price increase?
UPS a look back at the last 6 months
Increase to Surcharges
How does the UPS and FedEx GRI Compare?
Reccomended calls to action
Did you miss our FedEx GRI Review? Find it Here: https://www.bellhopship.com/post/breaking-down-the-fedex-general-rate-increase-gri
UPS and the last 6 months
The UPS name has been in the headlines quite a bit this year with the Labor Contract in play and up for renewal. Tension really started to build up and many thought this time was the first time in 25 years that UPS Teamsters would be going on strike. Luckily for UPS, an agreement was reached and the strike was avoided. When FedEx made it's GRI announcement, it seems as though that UPS was caught off guard and simply copied the announcement. The interesting thing is that while they copied the announcement just a couple of days later, it took UPS 25 business days to actually release its rates.
There is no doubt that the Labor negotiation was a big distraction for UPS, but they also suffered a loss in business during that time. Many shippers started to negotiate deals with FedEx and switch their business over. So, it's no question that shippers going into 2024 are a bit concerend that rates will rise since this is the first year of a newly negotiated Teamsters Contract. It's been said that their labor costs are supposed to be rising by 9% year-over-year and we're pretty sure that UPS did not want to go beyond the 5.9% increase on purpose since this would further alienate current and potential customers.
Unannounced and hidden cost increases
Deliver Area Surcharges (DAS) is UPS and FedEx's fancy way to say the destination is out in the boonies or not found in a typycal metropolitan area. In UPS' announcement, it was noted that the ZIP codes that would apply a DAS fee will be changing. Also noted, the ZIP codes that have historically been connected to certain zones will be changing as well. This will make it increasingly difficult to track changes and how this can impact your overall costs. What's especially concerning, with the very general announcement for you as a shipper is: If they will be altering the Zone structure in areas as close as zones 2 or 3 you could see a significant change to your rates (let alone in zones 4, 5 and 6 possibly getting shoved into a higher zone!).
How low can you go? How low can you goooo? For shippers with exsisting discounts, the minimim charge or your floor price, go hand in hand with the rate increase. The minimum charges is the way carriers protect themselves from any discounts they have already provided to you. For example: If you were given a 100% discount on a Ground shipment in 2023 you would pay a minimum charge of $10.10 and you would pay $10.70 in 2024.
See below the 2023-2024 increase to minimums:
Surcharges make up between 20% to 40% of a parcel shippers annual spend, So, it's critical you understand the impact of these increases. There is an average increase of 12.3% across all surcharges this coming year and . Some common surcharges like Delivery Area Surchage (DAS) and Residential Surcharges are only seeing increases of 5% to 8% this year. The big kick in the teeth will be for those shippers of larger packages or those that require addidional handling (for packages over 50 pounds, over diemsions or is not in a corrugated box) will see increases of 19.5 on average.
See below the notable increases to common surcharges:
How does the UPS and FedEx GRI Compare?
Historically, the carriers copy oneanother and that is no different in the coming year GRI.
Comparison of the Base Pricing:
Comparison of the Surcharge Pricing:
You can find the full UPS 2024 GRI Announcement here: https://www.ups.com/us/en/support/shipping-support/shipping-costs-rates.page
Takeaways and what you can do
Again, even if your contracts have a rate cap clause in it, the clause does not cover or include surcharges and while the GRI seems to be lower than the last two years, your exposure to surchagres will continue to increase your overall costs. Let's not forget that the increase to surcharges ARE NOT included in the 5.9% announced by UPS (the increase only outlines what is happening to the base rates).
Our reccomendation and call to action: Parcel shippers need to understand the big picture and that building a shipping budget for 2024 takes diving into the finer details.
We reccomend you:
Know Your Data - Knowing your data is gong to make all of the difference when fully analyzing how changing rates can impact your overall costs. By knowing where you're impacted the most, you can fight for releif in the right areas.
Engage multiple carriers - Be carrier agnostic and don't just work with National carriers. Regional Carriers can really help in lowering costs in zones 2-4 and these carrier niche can provide you the cost and transit needs you're looking for too!
Negotiate - Beleive us. EVERYTHING is negotiable.The more fees and charges the carriers are adding in is more of a reason to sit down with the carrier and respectfully pushback.
The carriers are hungry for parcel volume whether to retain it or to win it and the time to renegotiate your contract has never been better! Whether you handle this in-house or work with a consultancy, these increases can't be ignored. Your budget is at stake, and you owe your orginization the chance to have an informed and knowlegeble negotiation with your carrier and make sure you're getting everything you should from them.
If we don't know each other yet, allow me to introduce myself (your new ally in logistics).
I can help you compare, analyze and benchmark your current carriers and provide you insight based on the data. As you have seen from my other emails, we also have access to a number of programs that can help you gain the edge you need on the carriers and stop overspending.
Join me for a quick 15 minute introduction. In this call we always uncover opportunities and always find mutiple ways to help your business, company and team elevate their logistics experience.
Did you miss our UPS GRI Review?
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