An Analysis of UPS 2018 General Rate Increase and Other Changes

Effective Dec. 24 (yes, you read that correctly), rates for UPS Ground, UPS Air and International services as well as UPS Air Freight rates within and between the U.S., Canada and Puerto Rico will increase an average of 4.9%.

A complete analysis from Shipware will be forthcoming over the next week or so which will look at the impact of the rate increase in more detail. As usual, expect there to be a disconnect between the announced increase of 4.9% and reality in several key areas.

In the meantime, here are some important preliminary takeaways:

  • The DIM weight divisor on small packages measuring less than 1 cubic foot will be decreasing from 166 to 139. This will be a significant increase for shippers of smaller boxes and removes a key advantage that UPS enjoyed over FedEx, which also applies a 139 divisor to these packages. If you ship primarily smaller boxes with UPS, you need to understand the impact this will have on your business as it could amount to a substantial rate increase well above and beyond the announced rate of 4.9%. See the table below for some examples of how this change could impact rates.  All examples use the zone 5 rate.
L W H Cubic Inches Actual Weight Weight @ 166 DIM 2017 Rate @ 166 DIM Weight @ 139 DIM 2018 Rate @ 139 DIM Increase
6 10 10 600 1 lb. 4 lbs. $10.83 5 lbs. $11.80 9.0%
9 8 12 864 4 lbs. 6 lbs. $11.51 7 lbs. $12.41 7.8%
12 13 9 1,404 9 lbs. 9 lbs. $12.08 11 lbs. $13.19 9.2%

 

  • There will be a significant impact to shippers of larger packages which historically were not shipped via parcel carriers such as large screen TVs, trampolines, mattresses, etc.
    • The Large Package Surcharge is increasing 14.3% to $80
    • The Large Package Surcharge will apply to packages with a length exceeding 96 inches in addition to packages with length plus girth greater than 130 inches.
    • The Additional Handling Charge will increase 10.6% to $12
    • Over Maximum Limits Charge will increase 233% to $500. (Not a misprint, call your LTL carrier on these!)
  • The minimum net charge for Ground packages will increase 3.42% to $7.57.
  • The charge for an Address Correction will increase 18.7% to $15.90.
  • There will be a secondary rate increase to certain charges that will take effect on July 8, 2018. These will include the following:
    • The Additional Handling Charge for U.S. domestic packages weighing more than 70 lbs. will increase 75.1% to $19.
    • The Large Package Surcharge for US domestic residential deliveries will increase 28.6% to $90.

Here are some highlights from the announcement, showing the changes to some of the more common surcharges, along with the percentage increase. As in recent years and as stated above, the largest increases continue to be reserved for those surcharges related to package size and dimensions. We also see significant increases to the delivery area surcharge and address corrections.

Surcharge 2017 Rate 2018 Rate Percent Increase
Over Maximum Limits $150.00 $500.00 233.33%
Additional Handling, Over 70 lbs (Effective July 8, 2018) $10.85 $19.00 75.12%
Large Package Surcharge, Residential (Effective July 8, 2018) $70.00 $90.00 28.57%
Address Correction $13.40 $15.90 18.66%
Large Package Surcharge $70.00 $80.00 14.29%
Delivery Area Surcharge, Commercial Ground $2.30 $2.60 13.04%
Delivery Area Surcharge, Commercial Air $2.45 $2.75 12.24%
Additional Handling $10.85 $12.00 10.60%
Delivery Area Surcharge, Commercial Ground Extended $2.40 $2.60 8.33%
Delivery Area Surcharge, Commercial Air Extended $2.55 $2.75 7.84%
Delivery Area Surcharge, Residential Ground $3.25 $3.50 7.69%
Hazardous Materials, Air, accessible goods $45.00 $48.00 6.67%
Delivery Area Surcharge, Residential Air $3.80 $4.05 6.58%
Delivery Area Surcharge, Residential Ground Extended $4.20 $4.45 5.95%
Delivery Area Surcharge, Residential Air Extended $4.20 $4.45 5.95%
Residential Surcharge, Ground $3.40 $3.60 5.88%
Residential Surcharge, Air $4.00 $4.15 3.75%
Hazardous Materials, Air, inaccessible goods $45.00 $46.50 3.33%
Hazardous Materials, Ground $32.00 $33.00 3.13%
Dimensional Weight Divisor, Packages less than 1 cu ft (1,728 cu in) 166 139
Minimum Net Charge   2017 Rate 2018 Rate Percent Increase
3 Day $9.90 $10.75 8.59%
2 Day $16.66 $17.69 6.18%
Next Day Air Saver $24.95 $25.91 3.85%
Ground $7.32 $7.57 3.42%
Next Day Air $27.45 $27.97 1.89%

 

Most shippers understand by now that there is usually very little correlation between the carriers’ announced average increase and the actual increase by service level, zone and weight.  Additionally, shippers understand that the impact to their parcel budget can vary significantly from the announced average increase. The devil is in the details. A more thorough analysis by Shipware’s team of consultants will be forthcoming once the complete rate announcement can be digested.

Dave Sullivan is a Senior Consultant for Shipware LLC

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