On April 26 UPS announced its first quarter earnings for 2022. While there were some disappointments for the company – average daily volume in the U.S. domestic market decreased by 3% and average daily international shipping volume decreased by 6.7 % – revenues continued to soar. In the U.S. domestic market revenue for the quarter grew by 8.0% – “driven by a 9.5 increase in revenue per piece” and a 820 basis point benefit driven by increases in fuel and base rates. In the international market revenue grew to $1.1 billion.
While there are many perimeters at play, including the investments UPS has made to make its network more efficient, revenue per piece (RPP) was the most significant driver of revenue increases. Not only did RPP grow by 9.5% percent in the domestic market, but it also increased by 10.5% in the international market. And importantly, RPP increased across all products and customer segments.
Put in other words, UPS continues to raise its prices a lot. As CNBC reported in its coverage of the earnings “United Parcel Service reported better-than-expected quarterly earnings as the parcel delivery company raised prices to cash in on a boom in the e-commerce industry.”
This of course is not a new trend. UPS capped off its record-breaking financial performance in 2021 with a fourth quarter that saw it achieve its highest quarterly profit ever, again primarily because of price increases. And as we’ve noted on many occasions in the Reveel blog, many of these purposeful price increases are not included on the company’s rate card, but instead are passed onto customers in the form of new surcharges, new rules and new terms on everything from zones to parcel dimensions. Without technology like Reveel’s Shipping Intelligence™ Platform, it is virtually impossible for shippers to identify where this complex web of extra fees is impacting their business – at least not before they get their bill – let alone gain the actionable intelligence needed to lower costs.
You may also remember that Reveel’s data scientists created a model to find out how much all of the new surcharges and rules unveiled last year will really cost U.S. companies by combining them with UPS’s 2022 generate rate increase of 5.9% and applying them to actual shipments our customers made the previous year. What we found is that most companies will actually see their shipping costs with UPS increase by 10.25% this year, not 5.9%. Notably, that was also before additional fuel surcharges, which UPS uses as another lever to generate extra profit, were announced.
All of this points to a singular fact: It has never been more important for shippers to effectively negotiate their shipping contracts. It is the only way to contain and address what is clearly now a relentless pattern of aggressive price increases at UPS and FedEx. Don’t let price increases and record-breaking profits break you.
Now there is another reason to gain shipping intelligence. UPS also just introduced Deal Manager. In the words of CEO Carol Tome during the earnings call, the tool “is providing pricing analytics to our sales team as they go about negotiating deals.”
Clearly, UPS sees the value of analytics. Don’t be overpowered in your next negotiation. Make sure you have the actionable insights and shipping intelligence made by possible by Reveel’s Shipping Intelligence™ Platform and its advanced artificial intelligence and deep analytics capabilities.