UPS, FedEx, USPS and other carriers will soon be releasing their updated 2020 parcel rates. These general rate increases occur every year and can range in percentages. Understanding how the rate increases will affect your business and your packages is extremely important. You will see statements like “UPS announces 4.9% general rate increase”, but that does not mean your pricing will increase 4.9% it could be more or less depending on the services used. This blog will help give you some tips on how to analyze and what to do after the general rate increases are announced.
1. Understand the New Rates
The idea of needing to understand how the rate increases will directly affect you and your business is important, but how you do this can be a little more difficult. First, you are going to want to get in touch with your carrier representative and have them run an analysis on a month or two of your shipping data. Makes sure you take a big enough sample size of shipments to ensure you are getting a good analysis. Have the carrier rep run the analysis comparing those shipments to your 2019 rates and your 2020 rates. This will give you a good idea of what your general rate increase will be.
From there take it one step further and break down the increases by service type (i.e. Ground, Residential, Next Day, 2 Day etc.). Analyzing the pricing increases by service can help you understand the shipments that have the biggest impact on your spend and help focus your efforts to reduce the overall impact.
Now that you have had your rep run an analysis on your shipments giving you a better understanding of how these rate increases will impact you, it is time to work with your carrier rep to find ways to reduce this impact. Even though you have a negotiated agreement with the carriers it may not mean that those are fixed rates and you can’t negotiate. During these negotiations focus on showing the carrier how these rate increases will lead to less shipments in the network. If a 3lb package shipped via UPS in 2019, but now a 3lb package has a lower shipping cost via USPS in 2020 show them this. The carriers all want more packages in their network and hopefully you can show them that as well, but they also don’t want to lose packages in their network.
3. Implement Changes
After you have negotiated to have as little impact as possible it is time to ensure you have implemented the changes. First, you want to make sure your accounting team or anyone on your team who analyzes your parcel spend has the updated rates.
New rates could mean that packages may ship different methods. In reference to the example above make sure a 3lb package still ships UPS and not USPS. If it should be shipping USPS make sure to change your logic in manifesting software or if you are doing rate shopping in your software make sure the new rates are in place.
If you have rates posted on your website shopping cart it might be time to update those. Most companies charge something for an expedited shipment, make sure those charges reflect the updated pricing. Make any necessary changes to ensure you are capturing the increases to the parcel rates from your customers if that is a business decision you are looking to make.
Carrier rate increases are inevitable for 2020 and when they are presented make sure you have a plan in place to limit the effect on your business. Analyze, negotiate and implement is a good strategy to ensure you are prepared. For more information on how IDS can help limit your parcel spend and reduce transit times, Contact Us Today!