In the wake of the recent GRIs implemented by both UPS and FedEx, with a 5.9% increase, it's crucial for shippers to reevaluate their budget assumptions. Despite any preconceived notions of being prepared for these hikes, the reality may not be as secure as anticipated.
Many shippers rely on rate caps to cushion the impact of GRIs, believing that they have a handle on the situation. However, the actual impact of GRIs often surpasses the carrier-announced percentages, and rate caps do not extend to accessorial charges.
The true cost implications emerge from a shipper's specific shipment characteristics and the impact of accessorial rate increases. For instance, common accessorial charges like the Residential Surcharge are seeing increases above 7.5% for both FedEx and UPS in 2024. The majority of accessorial rate increases exceed the 5.9% mark, with some spiking over 20% from 2023.
Adding to the complexity is the less obvious but potentially impactful factor: changes in specific zip codes. Carriers, such as UPS, have indicated alterations to zip codes affected by area surcharges and modifications to the alignment of certain zones with ZIP Codes. While some zip codes may experience a reduction in costs, others, particularly those falling under Remote Area Surcharge (RAS), may witness a substantial increase.
A recent analysis of zone changes for 2024 compared to 2023 indicates a significant shift, with some origins experiencing increased zones. This shift in zones, in conjunction with the 5.9% GRI, has the potential to considerably impact the cost per package.
Origin City/ State
Total # of zone changes
# of changes to a higher zone
The table below is based on UPS 2024 published rates, and helps to demonstrate that an increase in Zone could have a big impact on cost per package.
The concern arises from the lack of guidance on how these changes will affect shippers. Carriers may emphasize instances where zones are lowered, but the overall impact on shipper costs remains uncertain. It's imperative for shippers to understand the net impact of these changes and take proactive measures.
However, the pivotal consideration lies in the noteworthy implementation of these zonal adjustments. To the best of our knowledge, such modifications have been absent from carriers' practices for an extended period. If they were enacted before, their visibility in the shipping realm has been notably subdued.
The underlying concern stems from the potential exploitation of this subtle strategy by carriers to bolster their profits, often at the detriment of shippers' profit margins. While carriers may assert that the alterations include both increases and decreases in zones for certain zip codes, the crux of the matter remains confined to the statement, "The list of ZIP Codes aligned to certain zones will change."
What compounds the unease is the absence of any guidance on the impact of these changes on shippers. It raises the question of whether carriers, if these adjustments led to overall reduced costs for shippers, would be forthcoming in sharing this information publicly. The ambiguity surrounding the motives and consequences of these alterations heightens the need for shippers to proactively address and navigate this intricate landscape.
As we face the complexities of parcel carrier rate changes in 2024, the key lies in seeking guidance from seasoned experts. It's imperative for shippers to leverage the expertise of logistics consultants armed with advanced analytics and benchmarking tools. By doing so, you not only gain a comprehensive understanding of the true impact of these changes but also access invaluable insights to devise effective strategies. The right consultant will be your ally in navigating the intricacies of the shipping landscape, ensuring resilience, and safeguarding your profit margins in the ever-evolving industry. Choose the path of informed decision-making and strategic collaboration to pave the way for success in the challenging terrain of logistics.After all, logistics is ever-changing, and with informed decision-making and strategic collaboration, you can navigate the shifting tides and secure success in this dynamic, often challenging arena.
Timothy Binkis is Senior Vice President, ICC Logistics Services, Inc.