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Parcel rate increases ahead in 2017—A first look at the impact for shippers

Paying the freight will cost more next year. In our Spend Trends analysis can help you prepare.

Delivering the goods

In September 2016, United Parcel Service of America (UPS) announced its general rate increases (GRIs) for 2017, with an average hike of 4.9 percent expected for ground and air/international services (including shipments between the U.S., Canada and Mexico).

It’s important to remember that not all rate increases are created equal, and it requires some analysis to understand what the GRI means for your shipping network.

As our analysis showed last year, the actual cost impact can vary dramatically, depending on an organization’s parcel shipping network, origin-destination pairs, shipment weights and service levels.

That means the strategy a given business applies to higher shipping rates also varies. There are a few things to know.



"Not all rate increases are created equal, and it requires some analysis to understand what this means for your shipping network."

Surcharges: attention must be paid

UPS is also increasing several of its surcharges, including these:

  • Additional Handling Surcharge will apply to any package with the longest side exceeding 48 inches (instead of 60 inches for all Air and International packages).

  • Additional Handling surcharge will increase by 35 cents.

  • Effective January 8, 2017, the surcharge will apply to UPS SurePost® packages.

  • Address Correction surcharge will increase by 40 cents.

  • Delivery Confirmation Signature Required and Delivery Confirmation Adult Signature Required will increase 25 cents.

  • Large Package Surcharge will increase by $2.50.

To date, UPS is the only major parcel carrier that has released its general rate increases for 2017.

As history shows, the two largest parcel carriers, FedEx and UPS normally announce rate increases in close proximity to one another, so expect to see FedEx make its own announcement soon

As a point of reference, UPS’s published 2016 GRI was 4.9 percent for Ground Services and a 5.2 percent increase for Air and International Services, while FedEx’s published 2016 GRI was 4.9 percent across Express, Ground, and Freight Services.

The full list of published changes can be found here.

UPS Next Day Air Freight - Guaranteed Service
UPS 2nd Day Air Freight - Guaranteed Service
UPS 3 Day Freight - Guaranteed Service

Shippers' next steps

As a shipper, it is critical to assess the true impact of the published GRIs.

The expected 4.9 percent rate increase is simply an average across the spectrum of rates, and as our analysis from last year showed, the impact for certain service types, weight, and zones can mean cost increases for shippers of 10 percent or more.

Fully analyzing your shipping network can help your company to fully understand the true impact of the 4.9 percent GRI when the tariffs are published in late December.

Armed with this analysis, organizations can zero in on specific, targeted negotiations, focused on high-impact service types, weights, and zones.

Meantime, as we wait for FedEx to publish its 2017 GRIs and surcharge increases, we recommend reviewing our article from late 2015 on the true impacts of the 2016 published GRIs (How Will 2016 Parcel Rate Increases Impact Shippers?)

Sources and References:

2016 UPS® Rate and Service Guide. July 11, 2016. Accessed September 6, 2016. https://www.ups.com/media/en/daily_rates.pdf

2017 Rates, Air Freight Within and Between Canada, the U.S. and Puerto Rico. Accessed September 6, 2016. http://www.rates.ups.com/pdfs/preview_af_zones_rates_upc.pdf


Authors
Shyam-Michael Miglani

Shyam-Michael Miglani

LinkedIn
Mark Hillman

Mark Hillman

LinkedIn


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