UPS shows restraint in its 1999 GRIs

By Ray Bohman -- Logistics Management, 2/1/1999

In line with its usual practice in recent years, United Parcel Service (UPS) implemented its annual general rate increase (GRI) in early February--on the 8th, to be exact. What makes the current round newsworthy is the carrier's restraint in raising prices--these increases are the lowest recorded in 11 years. UPS raised rates on its domestic ground and air services by an average of about 2.50 percent this year vs. an average of about 3.60 percent last year.

UPS's pricing restraint contrasted sharply with actions taken by most of the nation's major LTL carriers--Yellow, Roadway, Consolidated Freightways, and ABF, to name a few. In their recent round of GRIs, these carriers announced increases that fell mostly within the 5.50- to 5.90-percent range.

Here's a look at the impact of the latest round of GRIs on UPS's domestic ground services:

* Domestic commercial ground service. Per-package rates (on packages weighing up to 150 pounds) rose by percentages ranging from 0.54 percent to as much as 4.09 percent. The increases varied depending on package weight and/or delivery zone. On movements to Zone 2 destinations (shortest hauls), for example, rates on packages weighing up to 19 pounds were raised by anywhere from 3.13 percent to as much as 4.09 percent. Packages weighing from 20 to 55 pounds, on the other hand, were subject to lesser increases--between 2.15 percent and 2.85 percent. This pattern of hitting the shortest hauls with the highest increases is pretty much in line with past practice.

* Domestic residential ground service. Last year's rate differential of a dollar more per package for residential vs. commercial deliveries remains largely unchanged in 1999 ... with one notable exception. In an effort to recover the higher costs of serving less-populated or less-accessible areas, UPS this year inaugurated what it calls a "Delivery Area Surcharge," tacking on an additional dollar on package shipments moving to those areas. We are told those areas embrace about 10 percent of the nation's ZIP codes.

* UPS "Hundredweight" ground service. UPS raised rates on this service for shipments weighing 200 pounds or more, which competes with LTL trucking service, by an average of about 2.50 percent (see chart). Our analysis shows that nearly half of the rates per 100 pounds were increased by less than 2.50 percent, with the remainder above that percentage level. The increases ranged from none at all (two rates) to as high as 8.80 percent, although most increases clustered in the range of 2.00 to 3.99 percent.

Sample % Increases in UPS' "Hundredweight" Contract Rates

(shipments weighing from 200 to 499 pounds)

Zone: 2 3 4 5 6 7 8

Tier 02 0.45% 1.38% 2.25% 3,60% 3.06% 3.24% 3.70%

Tier 04 2.46% 0.62% 1.76% 2.12% 1.63% 2.72% 3.74%

Tier 06 3.70% 4.33% 3.36% 2.60% 2.22% 2.64% 2.21%

Ray Bohman is a well-known consultant and author. Mr. Bohman is editor of several highly successful newsletters on transportation and is a consultant to a number of national trade associations. He is president of The Bohman Group, consultants and publishers in the freight-transportation field. His offices are located at 27 Bay Lane, Chatham, MA 02633. Phone: (508) 945-2272.