The only thing that is constant is change. That saying is as true in today’s business world as it was when ancient Greek philosopher Heraclitus said it in one form or another in the late 6th century BC. For shippers, annual carrier rate changes are a constant, and they constantly increase.
A recent webinar by Pitney Bowes looked at those changes, some of the factors driving them, and things shippers can do to keep overall costs down. It was an excellent webinar offering a wealth of information, and we couldn’t help but share some of the insights.
First, here is a summary of the announced general rate increases for next year for the three major U.S. carriers:
- FedEx: FedEx Express package and freight standard list rates will increase an average of 4.9% for U.S., U.S. export, and U.S. import services.
- UPS: A net 4.9% increase for UPS® Ground, and UPS Air and International services (this is the average across all zones).
- USPS: Commercial Base prices will increase 3.2 percent on average; Priority Mail rates will increase for most packages by an average of 6.2%, and Priority Mail Express (as well as Priority Mail Express International) will increase by an average of 3.9%.
In the webinar, Jim Kelly, Carrier Management Consultant to Pitney Bowes, noted that eCommerce demand is driving up rates at twice the rate of inflation, but costs are expected to be even higher due to increases in special service fees.
“What is interesting is that surcharges are growing at a higher rate than base rates, so you need to keep your eye on the ball when it comes to that,” said Kelly. “Anything they [carriers] can’t handle through automation, they are going to increase the fees. For instance, additional handling at FedEx for packages that weigh greater than 70 pounds has gone from $12 per package to $20 per package and Ground Unauthorized packages have increased from $300 per package to $675 per package. If you have software that will help you rate-shop LTL versus small package it will really benefit you, especially if you have these larger items going out.”
However, even if shippers know the increases, rate shop, and negotiate, they may still be paying more than they need. “The devil is in the details,” said Pitney Bowes Director of Carrier Management Tom Hazel during the webinar. “It takes a little bit of time to explore the details in which to look for the devil in your shipping by reviewing your bills, digging deep, and analyzing your fees, and question the residential charges, the actual versus billed weight, etc. Just because you’ve negotiated a bill, it doesn’t mean you’ve negotiated across the entire enterprise.”
So, what can a shipper do to lower shipping costs? The speakers suggested the following steps:
- Know what you are paying in accessorial fees: “Roughly 34% of total post office revenue sits within accessorial fees,” said Hazel. “Your bills probably reflect the same exact thing which can be a little challenging.”
- Know what percentage your carrier bill adjustment is: A change to the billed weight (DIM adjustment) is one of the most common.
- Negotiate rates and surcharges frequently: Compare actual increase against averages. Base rates and surcharges are negotiable. Don’t forget late delivery refunds.
- Don’t limit yourself to one carrier: Use a multi-carrier approach and have them compete for your business every day of the week.
- Review the packaging: Look for opportunities to add to your inventory of box sizes to prevent using cartons that are too big with a great deal of air. Consider changing packing materials to reduce box sizes.
- Make use of a single shipping solution to manage your shipping needs: If you are using multiple solutions or one that does not help you with most or all of the above steps, you may be missing out on savings.
While rate increases are a way of life for parcel shippers, armed with information, processes, and parcel shipping software, it is possible to keep costs in line, while meeting the demands of customers.
Read our article “The 3 Most Costly Mistakes in Parcel Packing” to learn more about keeping DIM fees in check.