PartnerShip Sheds Light on FedEx and UPS Rate Increases for 2013

The following is excerpted from an article by PartnerShip, which offers savings on inbound, outbound, small, and large shipments through its ABA Shipping Program, a free ABA Member benefit.

Near the beginning of every New Year, the shipping experts at PartnerShip dig into the small package carriers’ annual rate increase announcements. Seemingly every year through this exercise, we reveal a familiar story: the actual rate increases most shippers will experience in the New Year are larger than the average rate increases announced by FedEx and UPS — in some cases much larger. This year is no different, except for a new wrinkle. Like years past, many services and lanes will feature rate increases larger than the average increases the carriers announced. But this year our analysis shows the increases are somewhat lower on the more expensive premium services, and higher on the deferred services the carriers offer to capitalize on the impact of shippers trading down to economy services.

Both major carriers have noted a significant shift by customers away from premium package-delivery services toward less expensive “economy” modes. Part of the reason for these changing market dynamics is that the difference between express and ground delivery times continues to shrink for both FedEx and UPS. Trends show customers are willing to defer shipping to slower, more economical services. As such, our analysis of this year’s rate increases shows much higher percentage increases on economy services in an effort to offset customers trading more expensive, faster options for more economical, slower options. Where the carriers will make up that revenue is by simply charging more for the products and services shippers use the most. We think it’s safe to predict that rate increases on lightweight, B2C services will continue to outpace other premium service rate hikes well into the future.

Quick Facts

UPS rate increase in effect December 31, 2012

• 4.9 percent average rate increase for UPS Ground (5.9 percent average increase -1 percent reduction in the fuel surcharge)
• 4.5 percent average rate increase for UPS Air (6.5 percent average increase -2 percent reduction in the fuel surcharge)

FedEx rate increases in effect January 7, 2013

• 4.9 percent average rate increase for FedEx Ground and FedEx Home Delivery services (5.9 percent rate increase -1 percent reduction in the fuel surcharge)
• 3.9 percent average rate increase for FedEx Express services (5.9 percent average increase -2 percent reduction in the fuel surcharge)

The FedEx and UPS average rate increases are just that — averages. The “average rate increase” is arrived at by larger rate increases on certain shipment types and lower increases on others. Like always, several factors will determine your real rate increase impact in 2013, among them your package characteristics (size and weight); the service you most often utilize (ground or air); and the zone to which you ship your packages.

Overall, the largest percentage increase for both carriers occurred on packages weighing 20 pounds and less, regardless of zone. This is a result of many shippers migrating lower zone air shipments to the carriers’ more economical ground services. The increase for all packages under 20 pounds ranges between 5.8 percent and 8.9 percent over 2012 rates.

The increases in base rates for FedEx Priority Overnight ranged from 4.0 percent to 6.5 percent for packages 150 pounds and lighter. On the UPS side, base rates for UPS Next Day Air increased an average of 5.1 percent to 7.7 percent. This year’s highest rate increases appear to have less to do with weight than distance, according to our analysis. Everything from Envelopes/Letters to 150 pound packages is seeing above average rate increases beyond Zone 4/104. This is bad news for higher zone shippers.

FedEx Standard Overnight and UPS Next Day Air Saver saw rates on shipments of nearly all weights and to almost every zone rate increase beyond the stated averages the carriers announced. FedEx Standard Overnight increases range from 4.6 percent to 7.5 percent on packages less than 150 pounds, while UPS Next Day Air Saver increases range from 5.2 percent to 8.5 percent over the 2012 rates.

Correspondingly, our analysis shows that the rates for shipments in every weight break and every zone we examined for FedEx 2Day and UPS 2nd Day Air went up by more than the stated averages the carriers announced. Some of the largest increases occur with FedEx Express Saver and UPS 3 Day Select services — some weights and zones actually hitting double-digit rate increases, which we haven’t seen for a long time.

Both FedEx and UPS also announced increases to other fees and surcharges for 2013. Fees for extra services can account for up to 20 percent or more of your total transportation costs.

The important takeaway when thinking about your shipping expenses in 2013 is that the announced average increases paint an inaccurate picture of the true impact these new rate increases could have on your business. If you find yourself confused by rate bases, average increases, and surcharges — rest assured that you are not alone.

PartnerShip, a leading national freight management company and small business advocate, helps more than 16,000 organizations reduce their small package, express, LTL freight, and tradeshow shipping costs. PartnerShip has the experience and expertise to help you get the most from every shipping dollar. Businesses that participate in one of our exclusive PartnerShip® Shipping Programs receive valuable consultation and carrier routing services, helping them counter annual carrier rate increases with significant savings. Our services are available at no cost. One of PartnerShip’s transportation experts can provide you with a free, no obligation shipping analysis and a review of your existing carrier agreements to ensure you are getting the most for your shipping dollar. Call PartnerShip at 800-599-2902, e-mail sales@PartnerShip.com, or visit the ABA page on the PartnerShip website.

For the complete PartnerShip article “2013 Small Package Rate Increases,” with rate tables,visit partnership.com/rateincrease/.