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Posts Tagged ‘ups’

UPS Rate Increases for 2012

Effective January 2, 2012, the published rates for UPS services will be increasing. However, according to UPS, this increase enables them to continually expand and improve their portfolio of solutions, helping serve you and making the services you offer your own customers even better.

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Discounts on Domestic Residential Deliveries & High Quality Service?

As every fulfillment center knows, a residential address is one of the most difficult places to get a parcel delivered cost effectively. Recently, Ware-Pak has gained a number of accounts with heavy shipping volumes going directly to consumers. In order to respond to their needs, we have been researching this issue and we believe we have a solution.

The normal shipping methods to residential addresses are: USPS Media Mail (for bound printed matter only), Priority Mail, and UPS. Each of these methods have certain restrictions.

USPS Media Mail is the most cost effective. However, it has limitations.

  • It is restricted to bound printed matter only.
  • It does not have tracking capabilities.
  • There is slow transit time – 7 to 12 business days.

Priority Mail is significantly more expensive than media mail. On the other hand, it does offer limited tracking capabilities. Transit time to major metropolitan areas is 2 to 3 days and to outlying areas it is 3 to 5 business days.

UPS is considered to be the highest quality service, but costs are 10% to 15% more than priority mail. It does offer the best tracking and transit times of any of the three options. However, the normal UPS discount does not apply to residential deliveries. UPS only offers a 1% to 2% discount on this service, making it the most expensive option.

In our search we found a new method of shipping small parcels at a cost effective rate, with improved transit times:

Mail Innovations, a division of UPS, is a small parcel service that marries the best of UPS and the Post Office. Mail Innovations can offer UPS speed and tracking capabilities at rates that rival the USPS. Parcels are picked up by UPS, sorted and transported to the closest USPS office for final delivery by the postal system. The total transit time, 4 to 8 days, is close to half the time of media mail. The cost, however, is just a few cents more than USPS Media Mail.

The shippers who will benefit most are those who ship UPS Ground residential. They can save up to 60% off the UPS rate without having to worry about residential chargebacks and other fees. Small parcels weighing less than one pound can ship for as little as $1.17, which makes Mail Innovations an effective method for residential deliveries.

As of March 8th, this service is now being offered to all Ware-Pak clients.

UPS Announces 2010 Rates

On Friday, November 20th, UPS announced a rate increase to take effect on January 4, 2010. Here is a summary of the increases:

  1. UPS Ground service rates will be increased by 4.9%
  2. UPS Air and International services will increase a net of 4.9% through a combination of a 6.9% increase in the base rate and a 2% reduction in the Air and International services fuel surcharge
  3. Adjustments to many accessorial charges will add to the rates listed above

Of particular concern are lightweight (2lbs. and under) and short distance (Zone 2) shipments. Last year, UPS instituted an increase of 8.8% on this group and they are increasing rates again this year by 6.4%. This increase needs to be taken into consideration when developing a parcel shipping strategy.

A breakdown of the increases looks like this: 6.4% average increase for 1 to 5lbs., 6.0% average for 6 to 11lbs., and 4.9% average for the 11 to 25lb. range. Higher weight categories have smaller percentage increases, with an overall average of 6.4%.

UPS will no longer be offering a no weight limit Express Envelope for Next Day Air, it will now be limited to 8 ounces. If it weighs more than 8 ounces, it will be billed at actual weight. This is very similar to the FedEx structure.

The breakdown for UPS Air service rate increases is as follows:

Service Level Average Increase (%)
Next Day Air Early AM 6.64
Next Day Air 7.90
Next Day Air Saver 8.24
2nd Day Air AM 7.58
2nd Day Air 7.90
3 Day Select 6.90

In addition to base rates, there are a number of increases with different accessorial charges:

  1. C.O.D Tags & Electronic Processing increasing from $9.00 to $10.00
  2. Declared Value charges increasing from $0.65 up to $0.70 per $100 value, minimum charge changing from $1.95 to $2.10
  3. Delivery Intercept moves from $10.00 to $11.00
  4. UPS Delivery Confirmation, Signature Required and Adult Signature Required all increase $0.25
  5. UPS Return Services of Print Return Label $0.50, Electronic Return Label $1.00, and Print & Mail Return Label $2.25 are not changing. UPS Return Plus 1 Pickup Attempt increase from $4.00 to $5.00 while 3 Pickup Attempts increase from $6.00 to $7.00
  6. Additional Handling raises $0.50 to $8.00
  7. Address Correction Air goes from $10.00 to $11.00, Ground increases from $8.00 to $10.00
  8. Delivery Area Surcharges:
    • Commercial ($1.60) will now be $1.70
    • Residential ($2.40) will now be $2.50
    • Extended Commercial ($1.60) will now be $1.70
    • Extended Residential ($2.65) will now be $2.75
    • Extended Area Surcharge Export & Import increases $2.00 to $24.00, or $0.24 per pound –  whichever is greater
  9. Hazardous Materials increases $2.25 for both – to $25.00 for Air and to $25.00 for Ground
  10. Large Package Surcharge is up $5.00 to $50.00
  11. Residential Surcharges increase $0.10 for Air to $2.50 and $0.15 for Ground to $2.20

As you look at the cost of parcel delivery and the impact it will have upon your budget, remember that this rate increase is only part of the overall picture. You will need to study your shipping history to know exactly how this will impact your business.

FedEx Announces 2010 Rates

On September 17th, FedEx announced their rates for the year 2010.

According to their website, “FedEx package and freight rates will increase an average of 5.9% for U.S. and U.S. export services. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharges begin, reducing the fuel surcharge by 2 percentage points.”

For a complete list of FedEx’s new rates click here.

When Ware-Pak studied the rate changes, we noticed that the smallest rate increases seem to be occurring in the Express Saver and First Overnight services. The Express, Standard and 2-Day services appear to have increases greater than the average that was announced.

In addition to the standard rate increases, FedEx is also raising accessorial charges by close to 10%. They are also adding an additional Delivery Area Surcharge to select remote zip codes for residential shipments.

Minimum billable weight will be increased for FedEx Express U.S. and FedEx Express U.S. export services. The minimum billable weight will apply to shipments packaged in FedEx Express boxes and tubes.

For FedEx Express Multiweight® shipments, qualifying shipments weighing 100lbs. or more are rated on both a per-package and total-shipment weight basis, and the lower rate applies. The average minimum package weight will increase from 10lbs. to 15lbs.

FedEx did not announce any ground service increases at the present time. My guess is that when UPS makes their announcement, they will follow suit.

Is Another Postal Increase in Our Future?

In recent years, the United States Postal Service (USPS) has made significant strides with improvements to their service levels and increased profitability, but the economic downturn is not taking its toll. According to Morgan Stanley, USPS is on track to lose between $6 and $10 billion this year.

Under normal conditions, the process for determining the postal rate increase is tied to the Consumer Price Index (CPI). The amount of increase cannot be higher than the CPI by class of mail. The current trend for the CPI is a negative number, which would mean no postal rate increase.

However, the USPS has another means to raise rates in emergency situations, known as exigent pricing. For example, if a natural disaster causes a dramatic increase in cost, they are able to pass that cost increase along to the consumer.

The question is: Does the current economic recession qualify as an emergency situation? Some think it does.

In the past, Postmaster General John Potter, has said that he does not want to increase rates. But given everything that Congress has been spending on, it puts a great deal of pressure on the USPS to perform, at the least, a breakeven status.

The USPS has laid out several initiatives to reduce their losses. These include reducing funding for retirement benefits, closing post offices and eliminating Saturday service in the second quarter of 2010. These changes will also have some effect on other carriers such as UPS and FedEx. As some of you know, UPS and FedEx rely upon the USPS for the final mile delivery for hard to reach or isolated areas. This reduction in service levels would impact their ability to provide timely service to some areas.

The USPS can file an exigency case at any time, meaning the new rates could be implemented before May of 2010, which is when normal increases are implemented. However, if they take this action, the increase will probably not be implemented before the May timeframe.

The Bottom Line
Put some money in the budget for a USPS rate increase. In my opinion, the losses are too great and the medicine to correct the situation is too difficult not to take precautionary measures and be prepared.


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