Parcel shippers could be excused if they had a feeling of déjà vu upon hearing yesterday about UPS Inc.'s planned tariff rate hikes for 2015.
That's because Atlanta-based UPS followed the lead of its chief rival, FedEx Corp., by raising its published rates by an average of 4.9 percent across its domestic and international product lanes, effective Dec. 29. And as with FedEx, the UPS increases will vary depending on the weight of a parcel and the distance it travels.
For example, the rate of a parcel weighing between 1 and 10 pounds will increase by 6.2 percent, according to data from Shipware LLC, a consultancy. Rates on parcels that weigh between 11 and 20 pounds will increase by 5.7 percent, while the rate for a package weighing between 21 and 30 pounds will climb by 5.3 percent, according to Shipware data.
By contrast, the rates on parcels weighing 31 pounds and higher will fall below the average increase, according to Shipware. The rate for a shipment weighing between 71 and 100 pounds will increase by just 1.9 percent.
UPS will also raise its "minimum" charge for ground packages by 5.9 percent to $6.61 from $6.24. A minimum charge is typically assessed on a 1-pound package moving under 150 miles.
Packages that move via UPS' air service, most of which weigh less than 50 pounds, will incur significantly higher rate increases than what is shown on the tariff, according to Rob Martinez, Shipware's president and CEO.
The weight of the average package is about 4 pounds, though the weight varies depending on the nature of the transaction involved. E-commerce merchandise mostly bound for residences are generally lighter than shipments moving in a business-to-business (B2B) transaction.
Like UPS, the tariff rates on lighter-weight shipments carried by FedEx Ground, FedEx's ground parcel unit, will exceed the unit's average tariff increase. The typical FedEx Ground B2B package weighs less than 15 pounds. The typical business-to-consumer (B2C) shipment weighs less than 10 pounds. FedEx Ground's minimum charge will rise by 6 percent. FedEx's increases, which cover air, parcel, and less-than-truckload deliveries, go into effect Jan. 5.
Although the adjustments between the two carriers are roughly the same, the UPS increases will have a wider impact because UPS handles far more ground parcels than FedEx.
As previously reported, FedEx and UPS will change their pricing of ground parcels measuring 3 cubic feet or less by rating them by their size instead of their weight. Currently, shippers of lightweight, bulky parcels qualify for a low rate even though their goods cube out aboard a delivery van before they weigh out. The carriers have said the change will enable fairer and more accurate pricing of their capacity. It will also benefit shippers by enabling them to cut back on excess packaging, which will improve efficiencies and help the environment, the companies said. However, many customers could be faced with double-digit rate increases unless they shrink their packages' dimensions.
The new dimensional pricing will affect between 35 percent and 50 percent of all UPS domestic ground packages, according to Shipware data. The increases are expected to fall hardest on B2C shippers because most residential packages measure less than 3 cubic feet, the consultancy said.
FedEx's new pricing takes effect Jan. 5. UPS' pricing goes into effect Dec. 29.
Gartner, Inc.
