Report: Expansion of size limits will effect UPS, FedEx pricing
The new rate increases recently announced by FedEx and UPS could have implications for less-than-truckload carriers and large parcel shippers, according to transportation consultant Satish Jindel.
The rates, which go into effect Jan. 5, will rise 1.9 percent for commercial ground service and from $1.15 to $1.40 for residential deliveries. Both companies are also adding a commercial surcharge for delivery to remote ZIP codes, maintaining jet fuel surcharges for express air shipments while dropping fuel surcharges for ground transportation and increasing size limits on packages.
According to Jindel, the new pricing strategy is another attempt by UPS and FedEx to target the LTL, or piece shipment, market. UPS, for example, has increased the size of boxes it will accept for its hundredweight service from 130 inches to 165 inches in length and girth to go after more LTL business. The integrated delivery companies are trying to lure customers with better pricing.
At the same time, UPS and FedEx will tack on extra charges for different levels of service in order to maintain the same level of revenue they get from smaller parcel shipments, he said. The challenge for shippers will be to figure out when it is better to use UPS, FedEx or a traditional trucking company.
'LTL shippers will find complexity in the way rates are applied to certain kinds of shipments,' Jindel told American Shipper. UPS has more than 35 service charges that can add more than 15 percent to the base shipping rate, he said.
Jindel's company, SJ Consulting Group, has prepared an analysis to help shippers and shipment carriers understand the pricing changes. Copies may be purchased by contacting the company at (724) 934-1400 or via e-mail at info@jindel.com.