UPS recently implemented the highest rate increase sincewell, EVER! The increase consisted of an average boost of 4.9% in list Ground rates and a whopping surge in list Air and International rates by an average of 6.9%. As if that wasnt bad enough, numerous accessorial charges were increased or introduced in 2007 as well. Considering Average rate increases, dimensional rating on ground shipments, fuel implications on list rates, increased accessorial charges, and the end of residential surcharge discounting, parcel carriers have become evermore clever in how to improve their margins while increasing our costs. Learn the specific affect of the 2007 GRI to your bottom line, what you can do to combat it, and how these changes compare with your carriers financial performance.
Throughout this article we will be focusing on six specific aspects of the 2007 general rate increase.
1. Average Rate Increases
Heres that overused and misleading word we shippers love to hear, Average. As a shipper you must always be cautious of the word average. In our decades of small parcel management, we have yet to see a shipper receive an average increase. As you well know, carriers apply larger increases in the highest volume cells (i.e. a weight and zone matrix). The lighter the package and higher the zone, the larger the rate increase is going to be. For instance, from 2005 to 2006 the published rate for Next Day Air, 17 lbs./Zone 7 package increased 10.38%; whereas, a 34 Lbs./Zone 2 package increased 4.24%. Carriers can publish these average GRIs by giving equal weighting for packages weighing from 1 150 lbs. shipped to Zones 2 8. In our experience, no shipper has the perfect package distribution; much less one that actually realizes average published increases. Even shippers with GRI caps in their carrier agreements need to be careful of the cap language used in the contract. Unless, your agreement states that increases will not exceed X% in a cell-by-cell matrix, you will most certainly realize an increase greater than the published average increase. We recommend that shippers overlay the cell-by-cell increases with their actual package volume in order to truly understand the impact of the GRI. Also worth noting, you cannot assume that the cap will not apply to new and increased accessorial charges.
2. Dimensional Rating on Ground Shipments
By now most of you are aware of the change made to how small parcel carriers charge for larger packages shipped via Ground in 2007. This single change will have a massive impact on many shippers depending on their typical package profile. In a nutshell, the Oversized terminology and rating logic goes away for ground shipments. In 2007, packages equaling or exceeding 5,184 cubic inches will be dimensionalized and the shipper will be charged the greater of the dimensional weight or the actual weight. For ground packages qualifying for dimensional rating, the same rating calculation used for domestic air shipments will apply (LxWxH /194). The net affect of this change can be extremely difficult for shippers to quantify, but the carriers intentions are quite obvious.
Actual Weight = 28 Lbs
Length: 34 inches
Width: 18 inches
Height: 18 inches