UPS waited much longer than usual to announce its 2019 rates. Normally, carriers announce their General Rate Increases around Halloween. Rates for FedEx dropped early November. UPS didn’t make its rate increases public until Dec. 5.
There aren’t any surprises in UPS’ 2019 general rate increases. Rates increased 4.9 percent for different service levels including UPS Ground, Air and International services. This is identical to the average rate increases from the last few years.
Based off fuel prices, the company will now start adding fuel surcharges on top of accessorial shipping charges like on the additional handling fee and on large packages exceeding specific weight, length and girth measurements. For example, UPS will charge a fuel surcharge on top of the over maximum limits fee. The fees for a few other value-added services are going up, too.
The United Parcel Service’s rates take effect Dec. 26, giving shippers only a few weeks to figure out what these base rate increases mean for them.
Why Did UPS Wait to Announce Annual Rate Increases?
Rates for FedEx were announced on Nov. 5 without much fanfare. Nothing in the new rate schedule came as a surprise. Rates increased by a steady 4.9 percent. A few fees rose quicker. To name a few, this included additional handling charge, over maximum limits and address correction surcharge.
UPS waited an additional month to announce hikes very similar.
This has been a tumultuous year for UPS. Over the summer, UPS’ unionized employees voted to authorize a strike. The company narrowly avoided a work stoppage by agreeing to some concessions. Then, after UPS and union representation hammered out an agreement, the bulk of parcel service employees who voted on the new contract voted against it, but a quirk of union rules allowed it to be adopted.
On Dec. 5, UPS finally announced its 2019 general rate increases. As expected, rates for the large and bulkiest packages rose by the largest dollar amounts: the UPS large package surcharge jumped from $90 to $110; the over maximum limits surcharge lept from $650 to $850; and the additional handling surcharge for packages weighing more than 70 pounds increased from $19 to $23 per package. Base rates rose by an average of 4.9 percent, exactly in line with increases from previous years.
We can’t know for sure why UPS waited so long to announce what seem like such unsurprising rate increases. But we do know that raising rates is one of the simplest, most effective ways for shipping companies to maintain profitability for their shareholders.
Rate increases are carefully calculated to preserve competitiveness (which is why UPS and FedEx always seem to increase rates in lockstep), cover rising transportation and labor costs and maintain or increase profit margins. For much of this year, UPS executives couldn’t be certain about what was going to happen to their labor costs. It’s possible that executives felt they couldn’t plan for the new year until that contract was finalized.
How Should Shippers Prepare For Rising Parcel Rates?
UPS clients don’t have much time to get ready for UPS’ rate increases that will take effect the day after Christmas.
The first thing shippers need to do is utilize the data they already have. Look at all of the information you have about what you shipped last year, how far it traveled and what surcharges it incurred. Figure out how much you spent on base rates and how much you spent on each type of surcharge. If you expect this year to look pretty much like last year, plugging in UPS’s new rates should give you a good sense of what your shipping spend will look like.
If you don’t yet have that data, resolve to start collecting it in 2019. Auditing your invoices is a great place to start. This is because they’re rife with data and can reveal hidden savings like refunds you’re eligible to claim right now.
Finally, remember that just as UPS can increase its rates at any time, you can request a contract negotiation at any time. If any of these changes are going to impact your business in a way that feels untenable, tell UPS you want to talk about a new contract that targets the fees that will impact your bottom line the most.
What Would Have Happened if UPS Didn’t Increase Rates?
Major shipping carriers announce rate increases every autumn, but there’s no rule that says they have to.
As we waited for UPS to announce its 2019 rates, we started to wonder: what would the residential and commercial delivery industry look like if one of the two major carriers simply decided not to raise rates? Would they announce it right after their competitor released its price increases to look better by comparison? Would the competitor be forced to roll back its rate hikes? Would that carrier quietly increase certain parcel surcharges in the new year anyway?
We’ll probably never get to find out what would happen if FedEx or UPS simply decided not to raise rates. But Reveel’s team of expert consultants are prepared to coach you through even the most unlikely scenarios. We’re on your side in the never-ending fight against overpaying for shipping.
