Parcel - February 2008 - (Page 18) delivery UPS RATE ANALYSIS The United Parcel Service Rate Increase: What it means to you! By Joe Loughran On December 31, 2007, United Parcel Service’s (UPS) new rates will go into effect. I am sure the reason for implementing the new rates on New Year’s Eve was purely for your budgeting convenience. As you’ll see, there were dramatic increases in all service areas. No service sector went untouched. Ground service had a healthy increase while Air rates continue to skyrocket. International rates had a strong increase, too. Ditto for surcharges, differentials and accessorials. The increase will reduce your company’s profits while adding many billions of dollars to Big Brown’s cash flow. Someone has to pay for UPS’ new labor contract. Someone has to give UPS additional cash so it can please Wall Street and ignite its sluggish stock price. Someone needs to pick up the slack for all of those recent UPS acquisitions that have been slow to accelerate profit growth. That someone is you! The loyal customer that makes the whole thing go. Thank you very much! Hopefully, after all these years, you’ve learned not to rely upon UPS press releases for accuracy (or your budgeting) as it relates to planned “percentage increases” in rates because they are not reflective of actual shipping behavior. If UPS delivered packages with the same reliability as their press releases, on-time delivery would be a distant dream. The last thing The Tightest Ship in the Shipping Business wants you to figure out is that you’re about to experience The Highest Increase in Shipping History! >> Shipper Alert: If you relied on the UPS release, is not consistent across all weights and zones. Get ready to start the process all over again. Base rate increases have been an annual ritual, but the steady hikes in surcharges and differentials is maddening. What was once a “simple service for a simple fee” has turned into a mathematical exercise. For example, let’s take a 10-pound, zone 2 ground residential package going to ZIP Code 08311 in Cedarville, N.J. The following represents the change in price since December 2004: 2008 2007 2006 2005 2004 Base Rate Delivery Area Surcharge Residential Differential Fuel Surcharge (4%) >> Total % Annual Increase % Cumulative Increase $5.59 $2.30 $1.95 $0.40 $10.24 4.9% 31% $5.33 $2.20 $1.85 $0.38 $9.76 5.3% $5.06 $2.10 $1.75 $0.36 $9.27 6.7% $4.85 $2.00 $1.50 $0.33 $8.68 11.3% $4.65 $1.75 $1.40 $0.00 $7.80 The base rate increased 20% from 2004 to 2008, yet the true cost has gone up a whopping 31%. It is tough to swallow a 31% increase in shipping costs over a 37 month period (December, 2004 – January, 2008). But there aren’t many other games in town. This article provides a detailed analysis of this year’s UPS rate changes. Why UPS? Because it dominates the industry and establishes the pricing direction, while other carriers follow. Our findings show significant increases in all service sectors — Ground and Air, domestic and international. Select accessorial charges were increased. Collectively, they all severely impact your total shipping costs and pack a wallop where it hurts most — in your shipping budget. Let’s take a look! Ground Service Ground service represents UPS’ largest volume and revenue source. The base rate increase for commercial service for one to 70 pounds is 4.5% (based on a straight dollar average of all weight and zone cells, and there is not one shipper in the country that has this package distribution). Rates were increased, on average, by 3.1% for 71 – 150 pound packages. However, there is a wide disparity between zone 2 (1.9%) and zone 7 (5.0%). Table 1 summarizes the impact of the increase. UPS increased the Commercial Delivery Area Surcharge on packages going to “remote” ZIP Codes from $1.40 to $1.50 — a 7.1% increase. There are 23,441 ZIP Codes impacted by the surcharge. That’s 55% of all US ZIP www.PARCELindustry.com press release to help you set your 2008 budget, you will not have budgeted nearly enough dollars because the rate increase, as reported in UPS’ press 18 February 2008 http://www.PARCELindustry.com
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