There are going to be some significant domestic US ground parcel rate increases coming around the first of the year 2015, when UPS and FedEx go to dimensional pricing. Lets take an example. Suppose today you ship 5 pounds from Chicago to Buffalo, NY on UPS in box that measures 18 inches by 12 inches by 12 inches. Today that shipment would be priced on a 5 pound basis at a cost $9.06, using UPS standard rate change with no discounts. With dimensional pricing, the box length, width and height would come to a total 2592 cubic inches. Come the first of the year, both UPS and Fedex ground will divide the box cube by 166, to get 15.6 lbs. and round that up to 16 lbs. That would raise the cost of the shipment from a 5 pound classification to 16 lbs. classification, and the new rate on today’s rate schedule would be $10.41. That is a 15% increase in cost.
This is very well explained by consultant Jerry Hempstead in this weeks Supply Chain News Video at the 3:45 mark through the 13:00 mark. The video can be found at:http://www.scdigest.com/NewsViews/14-07-21-1.php. Currently, dimensional pricing did not kick in until your shipment reaches 3 cubic feet in space. Next year that restriction will be gone, and all shipments will be higher of dimensional or weight pricing.
So what options do you have as a shipper to mitigate this increase? The easiest and most obvious is to move your business to the United States Postal, which is not changing its structure. If your firm ships more than 50,000 parcels are year, some US Postal parcel posts are actually going down if you meet certain technical shipping requirements.
Other options are:
1) Use regional parcel shipment services, whose rates currently are below the UPS and FedEx level.
2) Redesign your packaging
3) If you are a big enough shipper, you might be able to contract with UPS or FedEx to reduce or eliminate the new increase.
4) You get the parcel distance rates if your business has enough shipments to fill a truckload to a regional center for distribution.
Using the later summer and fall to plan how to respond to this change. Now is the time to prepare for this transition. Contact South Loop Logistics if you need assistance on this.