In December we shared with you that while both FedEx and UPS announced a 5.9% increase to their general rates for 2022, both companies’ customers would see much higher costs as a result of the new surcharges, rules and fees they introduced over the past year that are not included on rate cards. These fine-print details in your shipping contract can have a dramatic impact on costs.
To find out how those cumulative changes will impact shipping costs in 2022, our data scientists created a model that applied them to shipments our customers made last year. Notably, the impact on your business will be specific to your unique shipping profile; however, the aggregate findings were striking:
- Less than 3% of shippers will see their costs increase by 5.9 % or less;
- The average increase for businesses that ship with FedEx is 12.86%, not 5.9%;
- Companies that use FedEx Ground Economy will see their costs increase 26%; and
- The average increase for businesses that ship with UPS will be 10.25%, not 5.9%.
That last point is particularly salient following UPS’s fourth quarterly earnings announcement on February 1, 2022. UPS capped off its record-breaking financial performance in 2021 with a fourth quarter that saw it achieve the single highest quarterly profit in the company’s history. You read that correctly! During a global pandemic marked by labor shortages, network capacity constraints, global supply chain interruptions and inflation, UPS had its best quarter ever.
To put this financial performance in perspective, one has to look no further than the revenue per piece, or RPP, detailed in the company’s corresponding earnings call presentation. RPP for Q4 2021 increased 10.5%. Surcharges were specifically called out for the role they played, and notably RPP grew across all of UPS’s products and customer segments.
This is important to note for two reasons. First, if you are a UPS customer, it’s imperative that you find out how the company’s new rates, terms, conditions and fees will impact your shipping costs. Don’t let your contribution to UPS’s RPP or your next UPS invoice surprise you. Find out how much the 2022 rates and terms will increase your costs by signing up for a free 14-day trial of Reveel’s Impact Analysis Tool: https://go.reveelgroup.com/impact-analysis.
Secondly, it’s never been more important to negotiate or renegotiate your shipping contract. In Q4 UPS made its intentions to continually increase its RPP crystal clear. Once you know the impact on your business it’s time to take action.
UPS still has room to push shipping rates even higher as it renegotiates more contracts with shippers, even if the pace of the increases slows. As UPS’s CFO Brian Newman said in the company’s earnings call “As you think about rate in the contracts, we’re pushing about 60% in terms of renegotiating contracts. So there’s still mileage to go from a sustainability standpoint. So overall, demand surcharges were elevated last year, so we’re not counting in the plan too much from an increase there. So I think we feel not only is ’22 in good shape, but we’ve got room to run in ’23 and beyond.”