As you look down the tracks, all you see is the Locomotive approaching you. The locomotive could be alone going to the repair yard, or it could be a local “switch” engine, or is it a locomotive with a number of “increase” box-cars behind it? Well, the train in this article is an SPS (Small Package Services) train with multiple “pricing” cars behind it. The media whistle was not very loud on purpose. They do not want you to pay attention to the number of cars behind. Our shipping society is being “railroaded” with a series of price increases from the Small Package Service (SPS) segment of our business community. 

Be aware that, this passing train is going to leave a lot of debris along the tracks of our small package shipping (and purchasing/supply-chain) business community. The small package shipper will suffer HIGHER PRICES and SURCHARGES (a real collection of increased costs) for many, many months – and even years to come.

Leading up to this “train crossing”, of course, was that whistle alert of some small-&-subtle media announcements.
~ ~ the 1st whistle that we heard was the announcement that both companies will implement “Dimensional Weight Pricing” at the new year on ALL small package shipments for Ground Transportation. (Dim-Wgt [the industry acronym] always existed for Air/Express packages)
~ ~ the 2nd whistle that you heard… UPS-SPS announced that they would be increasing their parcel pricing for 2015 by an “average” of 4.9%.
~ ~ the 3rd whistle was… FedEx-SPS saying “me too” to the UPS-SPS news and FedEx increased their parcel pricing for 2015 by an “average” of 4.9%.
TO CLARIFY to the reader: the parcel price increase for media purposes is always an AVERAGE value. You need to understand that depending on Delivery Zone and Weight and TIER of service, the parcel increase can range anywhere from 3% to 9% (or maybe higher).
~ ~ the next whistle got louder with an announcement from FedEx-SPS that they would be increasing their Fuel Surcharge % closer to UPS-SPS Fuel Surcharge % … even though the EIA spot pricing (index used by FedEx-SPS and UPS-SPS) for diesel and jet fuel declined in December.
~ ~ then, while everyone was watching to see if we will have 6 more weeks of winter from the “Groundhog shadow” on February 2, we were “over-shadowed” [ FOR 52-WEEKS ]by the announcement that UPS-SPS changed (on Groundhog Day of all dates) their Fuel Surcharge %.

COLLECTIVELY SPEAKING……. the shipper has been “run-over” by an SPS Locomotive with a multiple-car train of “aggregate-or-compounding” increases!

To clarify: Package Prices are increased an “average” of 4.9% (media term) for most Zones and Weights.
Not everybody realizes it but, when package prices increase, the Fuel “surcharge amount” will incrementally increase because the Surcharge % is applied to the higher price for the package.

To illustrate: let’s round the “average” of 4.9% increase up to 5%
The previous Package price is $20.00 Increased package price @ 5% is $21.00
Fuel @ 5% is 1.00, so with the increased package price, fuel stays @ 5%, or 1.05

The previous Package cost is $21.00, new package cost (price increase only) $22.05 
WITHOUT an increase in Fuel Surcharge ….. overall rounded increase is 5.0%

HOWEVER …… fuel surcharge %’s have also been increased. Continuing the illustration …….
Fuel @ 5% is 1.00 Fuel increases to 6%, it becomes 1.26
Package cost is $21.00 new package cost (incl Fuel incr) $22.26 
WITH an increase in Price & Fuel ….. the overall rounded increase is 6.0% 

> AND……if the PACKAGE DIMENSIONS calculate to an “equivalent” weight that is GREATER-THAN the scaled-or-actual weight, You will get charged at the “dimensional” weight price AND…… of course, the fuel surcharge will be higher because it will get applied to the dimensional (greater-than) weight price.
> AND…..if increased accessorial charges apply (such as: extended delivery), the new 2015 cost is even higher! 

If you want to see the “aggregate” impact for yourself in your own company, take a previous invoice for November or December and measure it against a 2015 invoice. Be careful to compare invoices with “similar or Close-to or like” shipment volumes.

We expect that you will see that the difference of 2014 invoice vs. 2015 invoice is going to be GREATER THAN 4.9% in “total invoiced charges” because of an “aggregate” of: Package price increases, Fuel Surcharges, and Dimensional-Weight charges, PLUS increased accessorial fees.

YOU HAVE HEARD THE WHISTLES from the SPS Train; 4 of them to be exact ……….. dim-wgt application, price increase, fuel surcharge, and accessorial fees. As the locomotive passes by, you will see each of these 4 box-cars of SPS increases. What have you done to address the freight dollars in each car as it relates to the “Landed Cost” on your purchases and/or the impact of the on your shipping expenses in your “Cost-of-Goods” for your sales margins? Does your company apply a Shipping/Handling charge to your sales invoice? Has your Shipping/Handling charge been adjusted to reflect the “aggregate” of increases that you will encounter with these 4 SPS categories? 

Of note to the readers ……….. there have been a number of recent articles, addressing the SPS price increases, or fuel surcharges or dimensional pricing in some of the recent Logistics/Freight/Management magazines. Each of these increases in their individual perspective, when presented as “on-the-average”, are not necessarily considered outrageous or out of line. In this article, however, we have tried to identify and bring together for you, the impact of the “aggregate” of increases. That becomes a big, big difference when planning budgets, prices, forecasts, etc., and when making decisions on best alternative shipping strategies

J V Shannon is the Owner/Pres. of Profit Or $avings Enterprise, LLC., a Management Services firm with divisions specializing in freight management, business support (MRO-Purchasing), Small Business Fulfillment, and Training/Seminar services. Also known as PO$E, the firm is headquartered in Cleveland, Ohio and serving clients wherever they have needs. Mr. Shannon spent almost 30 years as a member of the Evening College Faculty of Cuyahoga Community College in, 216-941-POSE (7673)