How to Navigate This Season’s Carrier Rate Increases
Tis the season for shipping! (Today may be UPS’ busiest day ever with 37 million deliveries. That is 425 packages per second — nearly double a normal day.)
FedEx and USPS announced increased rates for 2019, with UPS recently announcing their increased rates for the new year shortly after. Of mention is the critical 1-9 lb range with USPS Priority Mail Commercial Plus increasing 6.9% in Zone 2 and DDU up 9.7%. FedEx Priority rates increased 5.4% and 2Day rates are up 5.9% for continental US 1-9lbs packages. UPS rate increases will be effective December 26, 2018, giving consumers approximately three weeks to analyze, adjust and plan their holiday shopping (and returns) accordingly.
UPS announced that this is the same rate increase they usually abide by — 4.9% for air, ground, international and freights shipments — however, it is important to note that most small package shippers will see an increase ranging from 5.2% to upwards of 9%. Due to these impactful changes, shipping budgets for 2019 may need to be revised.
With shipping costs perpetually on the rise, how can shippers protect current profitability and customer satisfaction? Platinum Circle Partners offers 3 tips for navigating this historical rate increase and controlling your bottom line.
Negotiate NOW for 2019
Although we have approached the height of the retail season, you don’t want your shipping rates left out in the cold come January. Take control of your shipping agreements by studying your shipping data in detail and developing custom requirements that best meet the service and price needs for your business. Organize a request for service and pricing response based on specifics of what is meaningful to your business. Remember that every element of your carrier agreement is negotiable. It is normal for customers to see double-digit reductions. Be proactive with all carriers that meet your service requirements in your RFP process; a competitive process undoubtedly yields incremental savings. Model proposed rates and surcharges to your specific distribution footprint, the greatest way to measure the precise value of any proposal.
Vendor and Supplier Alignment
E-tailers receive inventory from many suppliers, and in most cases, the e-tailer pays for shipping. Requiring your vendors and suppliers to directly bill your account helps your organization in multiple ways. First, it allows you direct visibility into these shipping fees which are often hidden or “included” in vendor handling fees. Therefore, it eliminates the possible padding of any shipping fees. Second, the additional revenue may allow for deeper shipping discounts. In addition, billing these shipments directly to your account number allows for simplified accounting and invoice reconciliation as carrier billing systems will subtotal these charges for you upon request.
Data, Audit, Analytics
Every year, billions of dollars in guaranteed service claims and rating/charge errors are never recouped. No shipper is exempt from carrier billing errors. Consistently performing invoice audits not only lend to 3% to 7 % cost recapture but also lead to a better understanding of your company’s distribution footprint and service areas for improvement. Having command of your shipping data through detailed analytics and management reporting puts you in a position of strength when negotiating with carriers and controlling your bottom line.
Platinum Circle Partners believes this is a historic postal rate increase in both size and complexity to the market. Now is a good opportunity to maintain control. Contact Patti Hester at Patti.email@example.com to see how Platinum Circle Partners can help you today.
Written by Patti Hester
Patti Hester is Chief Strategist for eCommerce & Retail Distribution at Platinum Circle Partners, supporting clients in securing Best in Class distribution service programs while reducing client shipping and sourcing fees by 10-35%.