Beware of the UPS 2017 General Rate Increase (GRI): 4.9% Does Not Always Equal 4.9%

As nearly everyone with a stake in logistics knows, UPS announced its 2017 General Rate Increase (GRI) of 4.9%.  This September 1 announcement was earlier than usual and noted that additional information and rate changes would be announced on November 18, 2016. In addition, UPS announced that UPS freight rates would increase by an average of 4.9% on September 19, 2016.

Although the announcement indicated additional information about other 2017 UPS rate changes and additional charges will be made available on the site on November 18, it appears that a number of these changes have already been made public on http://www.rates.ups.com/. The published surcharge increases average about 4% but, of particular interest to e-commerce companies, some surcharge increases are a good bit higher such as the residential surcharge for air shipments with nearly an increase of 8.8%.

Of course, the published average of 4.9% is not particularly meaningful to any specific shipper since the rate increases include 7 UPS domestic services to 10 zones and 15 international services to 17 zones with rates for shipments from 1 to 150 lbs. Each combination of service, zone, and weight may have a different % increase. In addition, shipments may have applicable charges applied such as residential surcharge, oversize surcharge, delivery area surcharge or address correction surcharges; each of which has a unique increase. Adding to this complexity are rule changes such as the Additional Handling Surcharge will now apply to any package with the longest side exceeding 48 inches, instead of 60 inches for all Air, and International packages. Plus, the Additional Handing Surcharge will apply to UPS SurePost® packages.

A quick sampling of the increases published by UPS shows that the 4.9% average may actually mask higher increases.

Service 2016 2017 % Change
Next Day Air Saver –  1 lb/Zone 5 $48.78 $51.02 4.59%
Next Day Air Saver –  11 lb/Zone 8 $120.88 $126.55 4.69%
2 Day Air – 7lb/zone 7 $51.36 $54.40 5.92%
2 Day Air – 9lb/zone 8 $64.30 $68.10 5.91%
Ground –  4 lbs/zone 3 $8.81 $9.27 5.22%
Ground – 13 lbs/zone 6 $13.78 $14.58 5.81%
Ground –  22 lbs/zone 8 $26.92 $28.48 5.79%

 

With UPS contracts being constructed by means of a percentage discount from published rates, the GRI will affect nearly all shippers. Many shippers will only know the true impact of the GRI after it is implemented. This mind-boggling complexity is by design and makes it extremely difficult for shippers to calculate the actual impact to their shipping. Understanding the actual impact can be a daunting analytical exercise that few have the time or the inclination to pursue.

There is, however, a way to provide shippers with the actual impact of the GRI in a matter of minutes.  Our supply chain analytics SaaS application, Optimize, enables shippers to model their shipping volume under the proposed rates so that the cost impact accurately reflects the actual shipping profile including shipment weight, destinations, applicable surcharges and fees, and volume based discounts. Check it out at http://www.grandcanals.com/.