Every year FedEx and UPS issue a General Rate Increases (GRI) which, while fully expected, causes waves throughout the industry. Most shippers are left feeling uncertain about the impact of the rate increases, with few options but to accept them. While the overall GRI the past two years has been announced at 4.9%, most shippers experience higher rate increases than the average based on their shipping profile.
This article will help shippers understand the 2019 increases so they can make more informed decisions in the new year. Smart shippers should use the annual GRIs to their advantage as it is a perfect opportunity to re-evaluate shipping costs and processes for carrier selection.
Highlights from the 2019 GRIs: Here are the key points that shippers need to know.
Domestic Shipping: FedEx shippers will continue to have a small rate advantage this year compared to UPS for most domestic services. For many services, both carriers are competitive with one another. However, FedEx does offer a price advantage for the 3 Day and Postal services. Also, FedEx had a 2% price advantage for its SmartPost service (as compared to UPS’s SurePost service) in 2018. For 2019, that advantage is much higher (5-8%) for a shipment in the 1-9 lbs. range. Many accessorial surcharges are higher as well, disproportionately impacting ecommerce shippers (see below).
International Shipping: The impact of the GRI in this category depends on the lane and service level. Both carriers have advantages in different areas and there is no clear-cut better option. For example, with 1-3 Day services, UPS has a large advantage with imports from Japan and South Korea, but FedEx has an advantage with Taiwan. UPS fares better for exports to most Asian countries in the 2-5 Day shipping category. International shippers who want to receive the best rates might need to mix and match between the carriers.
Accessorials: The increases in these surcharges are worth taking note of. FedEx shippers enjoy a rate advantage over UPS in several of the most common accessorials, especially those that involve residential shipping. While UPS had some advantages in 2018 in terms of accessorial charges, FedEx is now the cheaper option for most in 2019, such as those related to dimensions, weights, and package. FedEx is also still the winner when it comes to Delivery Area Surcharges, with the gap between the two carriers becoming more prominent in 2019.
Many companies will find that their small parcel rates have changed for 2019 and it is the shipper’s responsibility to react to the increases appropriately. What companies should not do is simply accept the rate increases as a cost of doing business. GRIs can almost always be negotiated in a shipping agreement (and most agreements can be re-negotiated at any time).
Remember… last year, both carriers also announced several mid-year rate hikes. The comparative advantages and disadvantages between carriers changed several times throughout 2018. The takeaway is that all shippers need to be vigilant monitoring what’s going on in the marketplace and make the necessary adjustments in real-time – not just at year-end.
GRIs present an opportunity for shippers to review their carrier agreements and think about which carriers they are using for certain shipments, and why. While assessing shipping patterns is a necessary part of rate increases, there are also ways to reduce shipping costs through different packaging, delivery timeframes, and using other carriers.
What Can a Shipper Do, Right Now?
As mentioned above, an in-depth analysis of each increase against a company’s shipping profile is the first step in understanding the impact of these changes. Kable has the tools to determine exactly what each carrier’s rate increase will mean to your company, and how you can mitigate the impact of the changes.