Parcel - January/February 2009 - (Page 21)

Ground Service Ground service represents UPS’ largest volume and revenue source. The base rate increase for packages weighing from one to 15 pounds is 6.9%, while 16–70 pound packages increased 5.9% (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 3.8% for 71 –150 pound packages. Obviously, the “weights” with the greatest volume went up the most. There continues to be a wide disparity between low and high zones. Table 1 summarizes the impact of the increase. Base Rate Delivery Area Surcharge Residential Differential Fuel Surcharge TOTAL % Annual Increase % Cumulative Increase 2009 $6.06 $2.65 $2.05 $0.48 2008 $5.59 $2.30 $1.95 $0.45 2007 $5.33 $2.20 $1.85 $0.23 2006 $5.06 $2.10 $1.75 $0.21 2005 $4.85 $2.00 $1.50 $0.15 .. $11.24 $10.29 $9.61 $9.12 $8.50 9.3% 7.1% 5.4% 7.3% 32.4% TABLE 1 – GROUND (percent increase) lbs/zone 1–15 16–70 71–150 TOTAL 2 3 4 5 6 7 8 Total 8.6 8.5 7.3 6.5 6.3 6.2 6.1 6.9 7.2 6.7 6.0 6.0 5.7 5.6 5.3 5.9 3.1 3.3 4.0 4.0 4.0 4.0 4.0 3.8 ––––––––––––––––––––––––––––––––––––––––––––– 3.8 4.0 4.4 4.4 4.4 4.4 4.4 4.3 The base rate increased 25% from 2005 to 2009, yet the true cost has gone up over 32%. That’s a signiﬁcant increase in shipping costs over a 37-month period (December 2005 – January 2009). SHIPPER ALERT: FedEx has not implemented the Extended Residential surcharge. This may be an oppor tunity to reduce your expenses if you are a large volume residential shipper to Extended ZIP Codes. Ground Hundredweight rates increased 6.1 % for 200 – 499.9 pounds and 6.1% for 500 pounds or more. Tier 2 increased the greatest at 8.8%, while Tier 6 has the smallest increase (4.8%) of all tiers. PERCENT INCREASE UPS increased the Commercial Delivery Area Surcharge on packages going to “remote” ZIP Codes from $1.50 to $1.60. Additionally, a new category within this surcharge, Extended Commercial, has been added. The surcharge is $1.60, identical to the Commercial Delivery Area Surcharge. I expect that will not be the case in upcoming years. There is good news and bad news. The good news is that the number of ZIP Codes has been reduced to 20,276, down from the 23,705 last year. The bad news is that 16,826 ZIP Codes (83% of all “remote” ZIPs) have been reclassiﬁed as Extended, leaving only 3,450 in the original classiﬁcation. When the dust settled, 47% of all US ZIP Codes will face one surcharge or another! That means that you are a rare shipper, indeed, if none of your packages are destined to the aforementioned ZIP Codes. (See Residential Delivery Area Surcharge for additional impact.) The Residential Differential has been increased from $1.95 to $2.05. TIER 1 2 3 4 5 6 7 200-499 LBS 8.8 8.7 5.7 7.0 4.8 5.2 5.5 500-999 LBS 8.8 8.5 5.8 6.9 5.0 5.2 5.3 Time Deﬁnite/Express Services Time Deﬁnite/Express Service rates increased signiﬁcantly this year. Also, they are subject to all surcharges and differentials. UPS has many service options to address your time deﬁnite service requirements. In the process of doing so, it has become somewhat confusing to select the appropriate offering as it relates to cost versus service tradeoffs. Here is a summary of the service offerings and the respective rate increases: Next Day Air: 10:30 AM, 12:00 PM or end of day delivery of letters, documents and packages. Delivery time is determined by the destination. Letters increased an average of 7.6% (5.3–8.6%) for all zones and from $0.75–$1.90. Rates increased a whopping 8.0% for 1 –70 pound packages. There were lesser increases in the shorter, less used zones and greater ones in longer zones. To demonstrate the variability of increases, a 20-pound package shipped to zone 102 increased 5.0%, while the same package shipped to zone 7 went up 8.5%. By going with smaller increases in short zones, UPS continues its efforts to decrease the number of low-zone Next Day Air packages being shifted to the less proﬁtable Ground service. The prudent shipping manager recognizes that zone 2 Ground packages are delivered next day with a guarantee and that the majority of UPS’ deliveries occur before noon. So there is no reason to spend the extra SHIPPER ALERT: Remember, there is no longer a separate Ground residential rate table, and incentives no longer apply to the residential surcharge. The Residential Delivery Area Surcharge has been increased from $2.30 to $2.40 for non-Extended ‘remote’ packages. Unlike the Commercial version of this surcharge, there is a 25 cent differential for the new Extended Residential surcharge. You will be charged $2.65 if you ship a package to a residential address in one of the Extended ZIP Codes. Let’s take a look at an example of the true cost of the various surcharges and differentials. You can no longer simply ‘eyeball’ the annual change in base rates to understand the cost impact to your company. For example, let’s take a 10-pound, zone 2 ground residential package going to ZIP Code 08311 in Cedarville, N.J. This ZIP Code is now classiﬁed as “Extended.” The following represents the change in price since December 2005: www.PARCELindustry.com / JANUARY - FEBRUARY 2009 21 http://www.PARCELindustry.com

Table of Contents Feed for the Digital Edition of Parcel - January/February 2009

Parcel - January/February 2009 Contents Editor’s Note Going Global Transportation ABCs Mastering Management Regional Alternatives Practical IT Best Practices Packaging 12th Annual UPS Rate Analysis Navigating Dim Weight Charges More than Just a Postscript Understanding RFID PARCEL Counsel New Products Reality Check

Parcel - January/February 2009

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