As has been widely reported in the trade press, United Parcel Service (UPS) went forward with a general rate increase (GRI) on Jan. 7. This year's GRI kicked in about a month earlier than the increases imposed in recent years and is slightly higher than UPS's Feb. 5, 2001, rate increase.

Probably of greatest interest to most UPS shippers are the increases applied on UPS Ground Service (Commercial Deliveries), which accounts for a sizable percentage of the giant package carrier's business. Those rates have gone up by 3.5 percent on average vs. 3.1 percent last year.

The big question on everyone's mind is what's the range of increases in that "average" 3.5 percent rate hike? Our analysis shows that the increases range from a low of 2.85 percent (the only increase out of 490 for packages weighing 70 pounds or less that is under 3.0 percent) to a high of 4.18 percent (with only six of the 490 rate increases coming in at or above 4.0 percent). Everything else fell into the 3.08- to 3.99-percent range—a very narrow range indeed. (See the accompanying table for sample increases.)

Even though the range of increases is narrow, our analysis showed that the increases on packages weighing 15 pounds or less were practically all higher than 3.5 percent, while those applied to packages weighing from 16 to 70 pounds were under 3.5 percent (generally in the range of 3.08 to 3.49 percent).

Any shipper passing on these cost increases to its customers and trying to come out whole should recognize that line of demarcation. Obviously, if your package weights are spread out fairly evenly from one to 70 pounds, you will probably be able to recover your added shipping costs by charging an extra 3.5 percent. But if most of your packages weigh 15 pounds or less, you will need to raise rates closer to 4.0 percent to recoup your added costs.

As far as added costs per package are concerned, every package now costs at least 12 cents more (before any discount is applied) than it did last year. But when you get up to a 70-pound package shipped to Zone 8 (the longest haul), you're looking at an extra $1.10 per package.

One bright development is that after considerable bad press over its decision to retain its 1.25-percent fuel surcharge (which has been in effect since August 2000), UPS had a change of heart and has announced that it will reduce that surcharge to 0.75 percent, effective Feb. 3.

Of course, UPS isn't the only small package carrier going forward with a GRI. Federal Express and FedEx Ground implemented almost identical increases—air and ground—on Jan. 7, while Airborne Express boosted its air and ground rates on Jan. 2, about two months earlier than it did in 2001.