UPS Announces General Rate Increase: Next Steps for Retailers
Tis the season. Bah humbug …
After FedEx and the USPS delivered their version of coal in our stocking, UPS doubled down with its just released 2019 general rate increase (GRI). The GRI goes into effect on Dec. 26, 2018, leaving customers with less than three weeks notice during the busiest retail season to analyze, adjust and plan accordingly, and will therefore also apply to all holiday returns.
While UPS announced an overall rate increase of 4.9 percent for air, ground, international and freights shipments, most small package shippers will be punished with an increase from 5.5 percent to upwards of 10 percent. This is a serious issue for managing your 2019 shipping budget.
Surcharges and minimums weren't forgotten, as UPS is applying record increases in these categories as well. Dimensional rating, additional weight handling, minimum surcharges, and large package surcharges are all seeing significant increases. Buried in the fine print, third-party billing fees are set to increase by 80 percent!
And as usual, the new year also means new fees. UPS is implementing a new $2.00 fee per package for shippers that fail to provide specific package-level details or a complete electronic manifest.
Don’t expect to get the benefit of market rates for fuel coming down as UPS will increase its fuel fees as well, with details being announced Dec. 27. Fuel surcharges are now extended to additional surcharges, including Signature, Adult signature required, additional handling and over-maximum limits.
So how can shippers protect current profitability and customer satisfaction with shipping costs perpetually on the rise? Here are a few steps to take:
Negotiate NOW for 2019
No doubt we’re approaching the height of the retail season, but you don’t want your shipping rates left out in the cold come January. It’s crucial to take back control of your shipping agreements by studying your shipping data in detail and developing custom requirements that best meet the service and price needs for your business. Organize a request for service and pricing response based on specifics of what's meaningful to your business. Remember that every element of your carrier agreements are negotiable. Be proactive with including all carriers that meet your service requirements in your RFP process, as a competitive process undoubtedly yields incremental savings. Model proposed rates and surcharges to your specific distribution footprint, which is the only way to measure the precise value of any proposal.
Vendor and Supplier Alignment
E-tailers receive inventory from many suppliers, and in most cases the e-tailer pays for shipping. Requiring your vendors/suppliers to directly bill your account helps your organization in multiple ways. First, it allows you direct visibility into these shipping fees which are often hidden or “included” in vendor handling fees. Therefore, it eliminates the possible padding of any shipping fees. Second, the additional charges may allow for deeper shipping discounts. In addition, direct billing these shipments to your account number allows for simplified accounting and invoice reconciliation as carrier billing systems will subtotal these charges for you upon request.
Data, Audit, Analytics
Every year, billions of dollars in guaranteed service claims and rating/charge errors are never recouped as carriers don’t make it easy for shippers to audit parcel invoices. No shipper is exempt from carrier billing errors.
Consistently performing invoice audits not only lend to 3 percent to 7 percent cost recapture, but also lead to better understanding of your company’s distribution footprint and service highlights/areas for improvement. Having command of your shipping data through detailed analytics and management reporting puts you in a position of strength when negotiating with carriers and controlling your bottom line.
This is a historic rate increase in both size and complexity to the market. If there was ever a time to get the upper hand, it's now.
Patti Hester is chief strategist for e-commerce and retail distribution at Platinum Circle Partners, supporting clients in securing best-in-class distribution service programs while reducing client shipping and sourcing fees by 10 percent to 35 percent.
Related story: Managing Through Record 2019 USPS Rate Increases