UPS just announced 2019 peak season surcharge application, dropping additional holiday levies on residential deliveries while expanding certain surcharge hikes to include the entirety of Q4.

UPS applied a surcharge of between $.28 and $.99 per package on residential shipments during the 2018 holiday season.  FedEx did not join UPS in applying an additional surcharge for residential shipments last year, and have not announced an update for 2019.

UPS will apply peak season surcharges to packages currently subject to Add’l Handling, Large Package, and Over-Maximum surcharges. Additionally, peak season surcharges relating to Large Package and Over-Maximum shipments will be applied over the entirety of Q4 2019, through January 4th, 2020.

Packages subject to Add’l Handling will be assessed a peak season surcharge between November 24th and January 4th; Excluding the YoY concession on residential peak season surcharge, all UPS applications are experiencing tremendous increases in comparison to 2018. Add’l Handling will increase by 14% YoY, to an addition of $3.60 per package.  Large Package classifications will result in an additional $31.45 surcharge, representing an increase of 20%.

​Lastly, Over-Maximum classifications will result in an additional $250 surcharge, an increase of 50% when compared with 2018.

This shift largely targets packages that are either unattractive from a UPS cost basis or shouldn’t be in the network (Over-Maximum), while increasing YoY pricing competitiveness for residential shipments. As UPS continues to experience robust growth in e-commerce volumes and associated delivery/stop density improvements, residential shipments are decreasingly onerous from a cost basis. This factor plus expansion of surcharges in the aforementioned areas will likely keep overall revenues intact while providing significant benefit to B2C shippers.

Contact AFMS, learn how our team can help you reduce these new charges and help lower your parcel shipping costs. 800-246-3521

By Paul Ziobro
Updated July 23, 2019 7:18 pm ET

Read the Full Article Here in the Wall Street Journal: https://www.wsj.com/articles/ups-to-start-7-day-delivery-to-juggle-demands-of-online-shopping-11563918759

For over 25 years AFMS has helped companies review these constant changes and pricing complexities of these carriers and the effects these changes have to your bottom line. Check out the full published profile here - Parcel Magazine

​By Mike Erickson, CEO - AFMS Global Transportation Consultants

Several years ago, there were three full service carriers offering ground, air, hundredweight, and international services.  FedEx and UPS are currently the last two carriers still servicing the entire U.S. with time definite deliveries. Both offer the same type of services and compete for the same clients.  Five years ago, there were over 50 accessorial charges with the two major carriers. Now, there are over 200!  The carrier’s new data capture technology has allowed them to more effectively charge accessorial charges that they physically couldn’t in the past...

How do you find what the market price is for your company? Before a shipper even starts to sit down and negotiate with potential carriers, a company needs to thoroughly analyze its shipping volumes and data as well as take a close look at its own shipping needs. You should benchmark your rates against the market to see where you stand. Contact a company like AFMS, to benchmark and evaluate your agreements.
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Click here to read the full article

AFMS continues to monitor the UPS strike to provide feedback and help to our clients in mitigating any impact changes in the industry may cause. If you need any other information regarding potential impacts from these issues or you would simply like us to review your current carrier pricing and performance, please feel free to contact us at (800) 246-3521.

Tentative Labor Deal. Late Thurs. night, the Teamsters announced an agreement in principle on a new 5-year labor contract with UPS  The deal includes slightly lower wage inflation for full-time employees and reduced costs for weekend deliveries, offset by higher pay for part-time workers. Overall, the deal seems like a good agreement for everyone. 

Lower Annual Wage Inflation. The contract includes a combined wage increase of $4.15/hour over the life of the contract. This implies 2.1% annual wage increases, down from 2.3% and 2.7% annual increases in the prior 2 contracts (see Exhibit 1). The deal also includes “significant” increases in benefits for employees, although the exact amount wasn’t quantified yet. 

But Higher Part-Time Pay. Starting pay for part-time employees (about 50% of total Teamster members) will increase materially from $10 currently to $13 going forward. This is double the increase in part-time pay compared with the last contract and should more than offset the benefit from slightly lower wage inflation for full-time employees. 

2-Tier Hybrid Driver is Positive. The deal will create a 2-tier hybrid driver that should materially reduce the cost of weekend deliveries for UPS. Currently, UPS pays its drivers overtime for Saturday deliveries which the company started last year. Going forward, this new class of employees will act as package handlers during the week and drivers over the weekend, and make a blended rate between the 2 pay scales. This will eliminate overtime pay for weekend deliveries and should allow UPS to start Sunday deliveries. 

Share Shifts from the Rails. The contract requires UPS to shift some volumes off of the rails and back onto UPS trucks. As a result, UPS will create at least 2K new high-paying sleeper jobs for line-haul transportation. 

Is it Enough? While the reduced cost of weekend deliveries is definitely an incremental positive, we don’t believe this contract provides UPS a material improvement in labor savings and flexibility that we believe is necessary to offset continued mix headwinds from rapid B2C growth.

​It is important to realize that these announced rate increases are only averages and the impact to your company
could vary greatly. To determine the real impact of this rate increase to your specific business and shipments
contact AFMS for a detailed rate impact analysis at 800-246-3521.

Published in Parcel Magazine July-August 2017 Issue
​By Brittany Beecroft

Freight charges can represent up to 10% of a company's total costs. Fuel surcharges and fees drive that cost even higher, and we trust that what our contract says is what our invoice hears. In the world of transportation cost management, auditing invoices can become a clerical routine that gets pushed to the “to-do” pile. But Freight Audit and Pay (FBAP) is a key part of a company’s supply chain and should be seen as intelligence, not inconvenience. Some companies opt to manage FBAP internally — others outsource freight payment. Is one way better than the next? How do we outsource a process so inherently internal?
Click here to read the full article

By Brittany Beecroft
​Vice President, AFMS

We invest time, resources, and money into negotiating our contracts. But are we dedicating the same attention to our carrier invoices? How do we know what we negotiated is what we are actually receiving? In a world of effective incentives, dim weights, and ground residential fees, understanding the invoice is equally important as understanding the agreement.

Base Rate
Before we look for discounts, we need to confirm the base rate is accurate. Most shippers fall under the current year’s service guide. However, if you are the select customer who received a custom list rate, this is stop #1 on your invoice. On the UPS invoice, the rate is called “Published Charges;” FedEx is “Transportation Charge.” Doesn’t hurt to do a quick spot check every quarter to verify the charge. Base rates and data often get overlooked in importance, but they are two key triggers to incorrect savings and invoice overages.

Net Rate
We pay it — do we understand it?
For FedEx, we’ll look at a few areas — Earned Discount, Performance Pricing, and Fuel. If you assessed a fee, the charge would appear here as well. Earned Discount and Performance Pricing show a negative charge as they are reducing the Transportation Charge (Base Charge). They reflect the discounts found on your agreement. Fuel and Fees are additive to the net Transportation Charge. The amount you’ll pay is the “Total Charge.”
For UPS, we see "Incentive Credit." So we’ll see each published rate reduced (versus the net fees with FedEx). "Billed Charge" is your net charge, with "Total" being the amount you’ll pay. We can verify Incentive Credit against the agreement to compare the contract discount with the effective discount.
So we did some simple math to reduce the base rate and produce a total charge. But what drove those charges? How do we know what Earned Discount incentive to use? How do we know if our package was rerated for weight? FedEx and UPS provide that information to us — we just need to know where to look.

Tier Discount
Agreements are set up to reward shippers for gross transportation spend. And carriers put this spend on your invoice to track tiers and discounts. When we talk about falling off tier, but we don’t know how close to the next threshold we are, we simply need to reference our invoice against our agreement. For UPS, we see average weekly revenue, along with the date range, shown below the Published Charges/Incentive Plan. Because the UPS agreement is generally set up with weekly tiers, the invoice reflects the same spend. FedEx tends to mirror its agreement structure, as well, showing the annualized revenue threshold. The threshold language is shown in smaller print directly above the sender/receiver information, which is next to the charges we previously reviewed. Look at the listed tier, cross-reference on your agreement for the corresponding discount, reduce the base charge by this amount — and do a quick scan of your entire threshold structure to make sure you aren’t dollars away from dropping to a lower tier and losing discount.

Billed Weight
Like the tiers, invoices are a great tool to understand your data and shipping trends better — all provided to you by the carrier.
On the UPS invoice, we want to scroll down to “Adjustments & Other Charges.” Here we’ll see which packages rerated on dimensional weight. UPS shows customer entered dimensions and audited dimensions, as well as the rerated weight and new charges. That new charge is your net charge to be paid, regardless if you billed your customer on actual weight.
For FedEx, we see the rerate within the “Charge” section: actual weight versus rated weight. If the two weights show a significant gap, we have work to do on the divisor, the minimum, and/or the actual packaging.

By Brittany Beecroft

One of the biggest mistakes a shipper can make is to nickel and dime a negotiation. Routinely chipping away at pieces only weakens the entire structure. Visualize your agreement as a milk bottle pyramid, with each bottle being a section in your contract. Can you skillfully hit each object and still keep your contract - and bottom line - intact?

OBJECT: MINIMUMS
UPS offers rebates - a quarterly incentive program paying shippers on a percentage of net transportation spend. Rebates reflect incentive off net transportation spend, less fuel and any applicable accessorials. Generally tiered, the revenue bands are determined by a customer’s 52-week rolling net average.
Simple enough. We negotiate spend levels... Click here to read the full article