UPS Announces 2015 General Rate Increase
Effective Dec. 29, 2014, the published rates for UPS services will increase. UPS Ground, Air and International rates will increase an average net of 4.9 percent. UPS air freight rates within and between the U.S., Canada and Puerto Rico will increase an average net 4.9 percent. UPS freight tariffs for shipments rated on the current UPS Freight 560 (U.S. 48), 525 (to and from Canada) and 570/571 (to and from Mexico) will increase an average net 4.9 percent.
However, average increases can be misleading. For example, all UPS air products will realize an actual rate increase significantly higher than the overall 4.9 percent average announced. Shipware has prepared the table below to demonstrate the impact of the actual rate increase average for UPS air products.
Similarly, the actual rate increases for ground services are above or below the 4.9 percent average depending on shipment weight. Rates for lightweight packages will increase much more significantly than heavier packages. See the table below for more detail:
Approximately 75 percent of all UPS ground shipments weigh less than 30 pounds, and therefore, most shippers will realize rate hikes well above the announced average. In addition, the 2015 Ground Minimum Charge will be $6.61 (up 5.9 percent from $6.24).
Perhaps more impactful than the general rate increases is UPS's decision to rate all ground packages by dimensional weight next year. Currently, both parcel carriers only apply dimensional weight pricing to ground packages measuring three cubic feet (5,184 cubic inches) or greater.
Regarding the change to dimensional weight pricing for ground packages, UPS foresees benefits for shippers as well as the environment. The UPS website states, "as a result of the dimensional weight pricing method, more shippers will seek to optimize their packaging practices. These efforts will reduce excess packaging materials and overall package sizes, leading to related reductions in fuel use, vehicle emissions and transportation costs."
While arguably true, make no mistake about it: these changes will amount to one of the largest rate increases in the history of the parcel industry. The majority of ground residential packages are less than three cubic feet. Shipware estimates that 35 percent to 50 percent of all UPS ground packages (commercial and residential) will be adversely impacted by the new rules.
It's also noteworthy that UPS Freight (LTL), which historically has taken its rate increase the first week in April, will implement its rate increase on Dec. 29, 2014 to coincide with the rest of the UPS product portfolio. Of course, exercising the increase three months earlier lends tremendous financial benefit to UPS by shifting millions of dollars away from shippers earlier in the year. This year's average increase of 4.9 percent tops the 2014 average increase of 4.4 percent.
Accessorial charges for all services are also increasing. Increases are shown in parentheses (partial list): additional handling service ($.25), address correction ($.15), delivery area surcharges ($.10 to $2.50), collect on delivery ($.50), customs brokerage ($2.50), delivery confirmation ($.10 to $.13), delivery intercept ($.15 to $.50), large package surcharge ($.90), on-call pickup ($.15 to $.50), over maximum limits ($5.85), residential surcharges ($.15 to $10.00).
Shippers interested in determining the exact impact of these rate increases for their unique distribution should contact me at email@example.com.
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.