Two months after a similar move by FedEx, UPS has announced changes to its dimensional weight pricing schedule – with a twist.
FedEx plans to decrease its DIM divisor from 166 to 139 as of Jan. 2, effectively increasing the shipping costs on millions of ecommerce parcels. UPS is also lowering its divisor to 139 as of Jan. 8, but is exempting, at least for now, domestic air and ground parcels that are less than one cubic foot (1,728 cubic inches).
Effective Jan. 8, UPS will follow FedEx by assessing its additional handling charge on any package whose longest side exceeds 48 inches, down from the previous 60 inches. UPS is also increase the over-maximum package charge from $110 to $150; items shipped by UPS Freight will be exempt from the charge.
As of Feb. 6, the U.S. fuel surcharge from UPS will be adjusted weekly, instead of monthly, another move that mirrors FedEx. On that same date, UPS’s fuel surcharge on imported shipments will increase and be assessed independently of the U.S. air and export fuel surcharge.
You can see all of the UPS rate changes here.
“Costs are going up significantly for shippers, and the 2017 general rate increase (4.99% for both UPS and FedEx) is once again among the highest in history,” said Rob Martinez, president of parcel negotiation firm Shipware. “Moreover, the published rates, accessorial charges, DIM policies and fuel surcharges will not align between FedEx and UPS, making it difficult for many shippers to have an accurate, true comparison between the two.”
Martinez said UPS was right to assert that the under 1 cubic foot exemption from the new DIM factor was a price advantage on a significant number of packages. An October query of Shipware customer shipments found 41.5% of packages were equal to or less than 1 cubic foot.
As for the delays in implementing the handling charges and fuel surcharges, Martinez said UPS was giving customers more time to measure the impact and negotiate custom agreements. He also said he didn’t see the new rates and charges from UPS and FedEx driving a significant amount of business to competitors like the U.S. Postal Service, DHL eCommerce and Purolator, as well as regional carriers.
“For savvy shippers, yes but for most, unfortunately no,” Martinez said. “We saw in 2011 when the carriers moved the DIM divisor from 194 to 166 there was relatively little migration to alternative carriers. Similarly in 2015, when UPS and FedEx eliminated the cubic inch threshold on ground products, there was no disruption in market share for the big two.”
Jerry Hempstead, another parcel shipping consultant, said merchants should ask their carrier representative for a “dilution study” that will show how the rate and rule changes are going to impact their particular business.
“This way they can inform management and plan accordingly,” Hempstead said. “This is particularly important to firms who offer free shipping, which really isn’t free.”
Hempstead pointed out that any increase in transportation cost erodes a shipper’s margin. “Some margins are so razor thin that a slight movement in shipping cost could turn an item into a loss leader,” he said. “And you may not be able to visualize it until the end of the first quarter when all the changes are fully implemented.”
In light of the increases from UPS and FedEx, merchants need to reopen negotiations with the carriers, or put their business out to competitive bids, Hempstead said.
“Shippers don’t get what they deserve, they get what they negotiate,” he said. “And what’s negotiable? Everything. The only lever they have is threatening to leave.”