UPS Inc.’s peak delivery season has so far gone smoothly because customers have sufficiently spaced out the intervals of their holiday promotions to avoid generating so much traffic that would end up being dumped on the carrier all at once. Based on the short notice that UPS has given shippers to adjust to its 2019 rate changes, however, it appears the company won’t practice what its customers have been preaching.
Atlanta-based UPS (NYSE:UPS) said late yesterday that a slate of 2019 rate increases will take effect Dec. 26, 2018. It is not unusual for UPS to set the effective date of its calendar year rate changes for the end of the prior year. What is unusual is the timing of this year’s announcement. UPS disclosed its 2018 rate increases on October 25, 2017, and its 2017 increases on September 1, 2016, according to Shipware, LLC, a consultancy.
By contrast, Memphis-based FedEx Corp., (NYSE:FDX) UPS’ chief rival, disclosed its 2019 rate adjustments on Nov. 5. When asked if there was any specific reason that UPS waited until today to announce its 2019 adjustments, a company spokesman gave a one-word reply: “No.”
UPS-watchers had telegraphed for weeks their concern that the company was waiting an unusually long time to go public with its rate announcement. Jerry Hempstead, a long time parcel executive who today runs a consultancy, said the 21-day notice period will impose “a real burden on IT departments” to input the changes as they manage through which for many businesses is their busiest period of the year. UPS has 1.5 million regular pick-up and 9 million delivery accounts worldwide.
For 2019, UPS’ rates will rise 4.9 percent across most of the company’s portfolio (UPS Freight, its less-than-truckload unit, is not covered by today’s announcement.) FedEx will impose the same increase on its air express and ground parcel movements. Rates for shipments moving on FedEx Freight, its LTL unit, will rise by 5.9 percent.
All of FedEx’s increases take effect Jan. 7. That means UPS’ increases will impact shipments of post-holiday returns that will mostly occur during the first calendar week of 2019, while FedEx’s will not.
UPS’ rates are classified as published rates, meaning they technically apply to non-contract business. However, Rob Martinez, Shipware’s founder and CEO, said contract rates typically follow in near-lockstep with the published rates.
UPS will also impose fuel surcharges on shipments that require additional handling and which are over the company’s maximum weight and dimensions. Fuel surcharges will apply to shipments that require a signature as well as those requiring and adult signature. FedEx, UPS and the U.S. Postal Service continue to explore ways to offset the costs of handling increasing online order volumes of heavier and outsized shipments that are more difficult to manage and that occupy a disproportionate amount of cube in their trailers.
In addition, UPS will apply a new $2 per-package processing fee if “Package Level Detail” information, defined as shipment and package data about the packages processed since the most-recent end-of-day cycle, is not provided prior to their deliveries. According to Martinez, high-volume shippers tender most of their packages electronically and with full package level detail. However, infrequent shippers still complete bills by hand, requiring UPS to incur additional costs to key in all the information, Martinez said.
In addition, handwritten bills might be written illegibly or keyed in incorrectly, leading to shipment mis-routings, delays, and additional costs for the company, Martinez said.
Most contracts currently include language stipulating that shippers would lose 10 percent of their discounts for packages not tendered with full package level detail, according to Martinez. The new surcharge is UPS’ way “taking it one step further” to recover added costs, he added.