Beating back the Largest General Rate Increase (GRI) by FedEx and UPS

On January 4th, 2010 UPS and FedEx do their annual rate increase dance. The market calls this dance the GRI or the General Rate Increase. The Dance is usually performed as a “Two-Step” – Increase rates and surcharges and tell the market that it is being offset by a reduction in the fuel surcharge. Happens every year, here is our blog on January 2009 UPS & FedEx GRI.

We’ll see if mid-year 2010 the third step of the dance is performed again? The pulling back of the fuel surcharge reduction. That’s right, that two-step dance, is actually a complex tap dance that extends over a few months, and repeats year after year. So obvious, it’s easily missed.

If you are a volume shipper; what do you do in the face of these increases?   First, understand the dance, then checkout out the increases and then decide how you want to grow your business. If you are a numbers and charts person, our Carrier Shipping Rates Calculator can be eyeopening.

Understand the Dance

We’ll look at the increases in a minute and what a few experts are saying about ways to combat it. In late 2007-early 2008, Shipwire published a bit of a manifesto opinion on this annual dance and why Shipwire powered merchants are better positioned to level off the “margin hit” from annual shipping increases. It’s a slightly long blog post about winning against the General Rate Increases. In it:

• Discounts verse retail and how surcharges are a game played by the carriers
• The rules of order fulfillment, shipping and how true economies of scale work (aka How Top Online Retailers and manufacturers run their supply chains)
• Move products closer to buyers and cut the last mile costs (UPS, USPS, Fedex) forever. Especially for Overseas/International shipments
  • This is how top sellers do it!
  • This is why Shipwire has warehouses all over the U.S.A., Canada and the U.K, Europe
• Spend two minutes with our Shipping Calculator Rates. See how many thousands of dollars Shipwire can save you. Will your business save 75% off international?
  

Check out our manifesto on beating back the General Rate Increase and send us comments.

Jan. 2010 UPS and FedEx Increases

Thanks to Dan in Shipwire warehouse ops for helping us cut to the chase here.

UPS Rate Increase: It looks like the Average Rate Increase is going to be about 4.9% (UPS Air and International Services will increase a net 4.9% through a combination of a 6.9% increase in the base rates and a 2% reduction in the fuel surcharge.) This doesn’t mean that all shippers will see that number. Shippers of light weight packages will see a 5.9% increase. Average increase is calculated on base rates only. Surcharges are also going up.

The big hit for 2009 is the Address Correction surcharges. Address Correction Air goes from $10 to $11, Ground increases from $8 to $10. That’s 25%!!!

Here are some of the other UPS surcharge hikes:

• Extended Area Surcharge Export & Import increases $2.00 to $24.00, or $0.24 per pound whichever is greate
• Residential Surcharges increase $0.10 for Air to $2.50 and $0.15 for Ground to $2.20.
• Large Package Surcharge is up $5.00 (now it’s $50.00).
• 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

Fedex Rate Increase: Here is the Fedex post on their 2010 increases and Parcel Industry’s PDF of 2009 verse 2010 Fedex rate comparison (nice!) FedEx Express package and freight rates will increase 5.9%. They will again be partially offsetting the increase by adjusting the fuel surcharge calculation. FedEx will also change the following rate categories:

• FedEx Express US Import Rates
• FedEx Express US Rates to Puerto Rico
• FedEx International Premium Rates
• FedEx International Priority and International Economy Rates

Caveat, you need to look at how you ship, what you ship and what carriers you tend to use to really understand the impact to your business. As always these rate increases will require a comprehensive analysis by each shipper to ascertain the impact to the individual shipper.

Freight Rates are also going up:   UPS Freight and FedEx Freight, will also increase their rates in January, 2010.

What are some Tips and Recommendations from Other Bloggers?

Shipwire is a big fan of the Shipping Coach. Straight talk from somebody knowledgeable. Mark has a few tips to offset the UPS increases. If you ship yourself his tip to use an Address Verification system will help you fight that 25% surcharge for getting an address wrong. Definately give Mark’s blog a read. Ship USPS (and soon UPS) you can get free shipping tools from Shipwire to print USPS postage rates and get usps international rates right.

Eric Joiner over at Freight Dawg hasn’t posted tips yet this year; but, he usually does, so perhaps check him out in a few weeks for freight tips. Eric has had some good tips in the past.

The rest of the bloggers are just noting the changes and giving examples of what to watch out for. Logistics Management calls it the largest rate increase ever with a break down.

Shipwire also blogged more 3-4 more tips for the general rate increase at Practical E-commerce. Check them out.

Feel free to comment with more tips and guidance to help SMB’s deal with rate increase.