Parcel Express General Rate Increases: Know the variations

By Ray Bohman -- Logistics Management, 1/1/2008

As most of you know, right around the first of the year the nation’s three major non-governmental package carriers, United Parcel Service (UPS), FedEx Corp (FedEx), and DHL implement their general rate increases (GRIs). For 2008, both air (domestic and international) and ground (domestic) were hiked by an average 4.9 percent. The ground fuel surcharge went up from 5.25 percent to 6.25 percent.

Any time you see a percentage rate increase preceded by the word “average” you should be aware that some increases will exceed the average percent while others will come in below that figure. Sometimes the variations can be quite substantial.

Taking a look at the ground rate increases (which were initiated by UPS and matched by its two competitors), rates on packages weighing 70 pounds or less moving to points in Zones 2 through Zones 8 (continental U.S.) range from a high of 6.1 percent (for 68 pound packages destined to points in Zone 2) to a low of 0.1 percent (for 48 pound packages moving to points in Zone 8).

So, if you invoice your customers 4.9 percent more for transportation on all of your shipments, you might break even for the year, you might loose money, or your might make a profit—it all depends on where the bulk of your shipments fall by weight and by zone.

Let’s say most of your volume involves packages weighing 8 pounds or less moving to points in Zone 2, which accounts for a sizeable percent of volume for UPS. As you can see from the chart above, all package weights were boosted by well over 4.9 percent. If you are adding on just 4.9 percent, you’ll be losing out for the year. Don’t forget, you have to factor in a 6.5 percent fuel surcharge to the base rate.

As far as shipments to Alaska and Hawaii are concerned, except for six package weights which were increased by 5 percent, all others rates to these locations were raised by 4.9 percent (Zone 44). On shipments to Puerto Rico, this is where you want to watch out as the increases range from a low of 0.6 percent on 70 pound packages to a high of 23.6 percent on a 1 pound package. All rates on packages weighing 29 pounds or less were hit with increases above 4.9 percent, while the packages weighing from 31 pounds and 70 pounds had increases of less than 4.9 percent (Zone 46).

	(Zone)
Package weight	Zone 2	Zone 3	Zone 4	Zone 5	Zone 6	Zone 7	Zone 8
1	5	5.6	5.7	5.9	5.8	5.7	5.6
2	5.7	5.8	5.7	5.8	5.8	5.7	4.7
3	5.6	5.8	5.6	5.9	5.8	5.6	4.7
4	5.7	5.8	5	5.9	5.8	5.6	4.7
5	3.8	5.7	4.9	5.8	5.7	5.5	4.7
6	5.5	4.9	5	5.8	5.4	5.3	4.7
7	5	4.9	4.9	5.7	5.2	5.1	4.9

Author Information

Ray Bohman, a well-known consultant and author, 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.