UPS, FedEx ground rate hikes hit lightweight packages hardest
By Ray Bohman -- Logistics Management, 1/1/2006
On January 2, both UPS and FedEx Corp. implemented their 2006 round of general rate increases for both ground and air shipments.
Rates for ground shipments, which rose by an average of 2.9 percent last year, increased by an average of 3.9 percent for 2006. Rates for domestic and international air shipments rose by an average of 5.5 percent, but after shaving two percentage points off the carriers’ air fuel surcharges, the overall increase amounts to 3.5 percent.
When you take a closer look at the rate increases for both UPS and FedEx ground shipments, pay special attention to the word “average.” Start computing the percentage increases for various package weights and you’ll readily see that packages weighing up to 15 pounds have taken a much higher percentage increase than have packages weighing more than 15 pounds. Here’s how those increases break down for business-to-business shipments:
Percentage Increases Over 2005
| Package Weight (in lbs.) | Zone 2 | Zone 3 | Zone 4 | Zone 5 | Zone 6 | Zone 7 | Zone 8 |
| 2 | 4.63 | 4.63 | 4.68 | 4.61 | 4.50 | 4.60 | 4.53 |
| 5 | 4.68 | 4.66 | 4.63 | 4.64 | 4.53 | 4.52 | 4.57 |
| 10 | 4.33 | 4.24 | 4.30 | 4.36 | 4.27 | 4.34 | 4.30 |
| 15 | 4.30 | 4.24 | 4.23 | 4.30 | 4.33 | 4.29 | 4.32 |
| 16 | 3.54 | 3.48 | 3.50 | 3.46 | 3.44 | 3.51 | 3.53 |
| 20 | 3.49 | 3.49 | 3.48 | 3.49 | 3.54 | 3.50 | 3.52 |
Don’t overlook the fact that on top of the higher per-package rates, you must also add a fuel surcharge, which at press time was set at 5.25 percent.
Further, the carriers implemented increases for some accessorial charges, such as shipments to residences, shipments to rural areas, and shipments to commercial delivery areas. You’ll also find that separate charges for C.O.D. shipments went up by another dollar, or 13.3 percent; the charge for declared value over $100 per package is up to 50 cents for a 25 percent increase (subject to a minimum charge of $1.50, versus $1.25 last year), to mention just two examples.
When you add in the fuel surcharge and any accessorial charges that may be applicable, you may find that they may account for up to 30 or 40 percent of the total charges you are required to pay.
If you are absorbing the cost of shipping packages or are adding those charges to your customers’ invoices, make certain you are factoring in not only the 2006 rate increases but the fuel surcharges and accessorial charges as well. Otherwise you may not come out whole at the end of the year.
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