A couple of weeks ago, I sat down with Rob Martinez and Krish Iyer to discuss the FedEx 2017 rate changes (you can view that article here). In the wake of UPS's Friday announcement, I chatted with these experts again to get their take on what this means for shippers.
Q. Coming on the heels of your webinar, which can be accessed in our archives here, UPS made a major announcement in changing their DIM policy. What about this surprises you?
A. (Krish):The timing does surprise me. A change to 139 inches as a divisor doesn’t completely surprise me, as the carriers have often aligned themselves closer to the policy of one of their services that then generates the most revenue. In this case, international shipments had a 139 inch divisor. With that said, I expected UPS to potentially announce a similar move sometime later in 2017. An announcement in 2016 is a surprise, as it already announced its GRI. It is important to note that UPS’s announcement exempts packages under one cubic foot (1728 cubic inches) and utilizes the 166 inch divisor. I would expect that this will also change to all packages at some point in the future.
A. (Rob): While we correctly predicted that UPS would match FedEx’s move to 139 DIM factor, we didn't think the change would come until later in the year. However, it's never surprising when the carriers act on the opportunity for revenue enhancement, especially in a market in which they virtually have no competition.
Q. What about the announced UPS change regarding refunds if package level data isn’t transmitted to UPS?
A. Most of the changes the carriers have made in the last two years have been under the auspices of network efficiency. They are basically saying, “if we have to do manual work on your package to relabel/re-scan/re-weigh it, we won’t refund you if it isn’t delivered on time.”
I do wonder if this signals a more pronounced move at some point in the future away from manual air waybills. For many years, the carriers tried to give customers incentives to move away from air waybills and to carrier-approved automated systems. This, in turn, reduced their processing costs. Could it be that they will eventually waive money-back guarantee (MBG) for shipments tendered with a manual, written air waybill? It is something to keep an eye on for the future.
A. I think it's a reasonable request. In order for UPS to fully manage delivery expectations, they need timely data transmission. UPS has been asking its customers to transmit nightly for years, yet on any given night, there are a percentage of customers who fail to "close out" the UPS shipping system. This move should drive greater compliance.
Q. UPS also announced that it is going to change the fuel surcharge weekly, as FedEx had also announced for 2017. What is the impact for shippers here?
A.It is clear that fuel costs have become a major issue to carriers and shippers over the years. Now more than ever, shippers will need the tools to see exactly what their rates are going to be at the time of shipment and at the time of invoicing.
A.The move to weekly fuel surcharge calculation by both carriers simply ties fuel surcharges closer to the price of fuel at the time the shipment was made. Currently, the fuel surcharge is based on a fuel price from two months prior to the month in which it is assessed. Meaning, there's a two- to three-month lag. With the announced change starting in February 2017, the fuel surcharge will be based on a weekly fuel price from two weeks prior to the week in which it is assessed.