Attention FedEx and UPS Ground Shippers: New Carrier Policies Amount to Largest Rate Increase Ever!
By now it's likely you've heard that both FedEx and UPS are revising pricing policies for ground packages, moving from weight-based to pricing based on package size starting in 2015. Currently, both parcel carriers apply dimensional weight pricing only to ground packages measuring three cubic feet (5,184 cubic inches) or greater. The elimination of the three cubic foot exception is effective Dec. 29, 2014 for UPS, and Jan. 1, 2015 for FedEx.
FedEx was the first to announce the move to price by package volume — the amount of space a package occupies in relation to its actual weight. Scott Davis, UPS's chief executive officer, recently called the FedEx policy "sensible," and this week UPS too eliminated the three cubic foot exception for ground products.
FedEx justified the change as a way to align the FedEx ground dimensional weight pricing with FedEx Express. UPS says volume-based pricing will enable the carrier to more appropriately align rates with costs. E-Commerce shipping trends have resulted in a decrease of package density, which causes cargo space to be less efficiently utilized, resulting in an increased cost per package.
UPS foresees benefits for shippers as well as the environment. UPS's website states, "as a result of the dimensional weight pricing method, more shippers will seek to optimize their packaging practices. These efforts will reduce excess packaging materials and overall package sizes, leading to related reductions in fuel use, vehicle emissions and transportation costs."
While arguably true, make no mistake about it: These changes will amount to one of the largest rate increases in the history of the parcel industry. The majority of ground packages are less than three cubic feet, especially ground residential packages. Shipware estimates that 55 percent to 65 percent of ALL ground packages between FedEx and UPS will be impacted by the new pricing rules.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.
