Will UPS and FedEx Profits Come at Your Expense?

If you’re paying attention to shipping news, you know that once again shipping rates will increase for the coming year.  And if you are doing the planning you should, you are trying to factor those increases into your projected shipping costs.  Unfortunately, that’s easier said than done.

FedEx has announced an average 5.9% increase, with an offsetting 2% reduction in fuel surcharges,  for January 2012, and UPS is expected to follow suit.  This doesn’t mean you can take your 2011 shipping costs and add that percentage to get an estimate for 2012.  5.9% is an average across all express services, all weights and all zones.  Unless your shipping profile perfectly balances across all those things, you won’t see a 5.9% (or 3.9%) increase.  In fact, it’s not hard to see that almost no one is going to see a 5.9% increase, because almost no shipping profile perfectly balances shipments across all weights, zones and services.

How then, do you know what to expect? Most companies don’t make useful projections because they lack the time and expertise to accurately assess how the rates will affect them.  It can be done, but here is what it takes to do it yourself:  First, look at your actual, historic shipments and assess how that will change in the coming year to create a projected shipping profile. Then, create a rate sheet by applying your discounts to the 2012 list rate schedule.  This alone is onerous—FedEx’s rate increase schedule is 69 pages, and UPS has three separate sets of published list rates.  Now, factor how those rates will affect your company’s profile. Factor in where the fuel surcharge reduction applies. Finally, scour the rate schedule for additional surcharges and fees that may apply to some or all of your shipments, then figure those in where appropriate. Make sure you don’t assume your GRI cap, if you have one, is applied to anything it shouldn’t be! Sound complicated?  It is, which is why so many companies fail to budget properly.

There is an easy solution, however, one which may reap benefits beyond keeping your shipping manager from tearing out her hair.    A third party shipping consultant can do an independent study to show you exactly what the increase will mean to your  bottom line. They will take a detailed sampling at the package level, re-rate each package against the carrier’s published increases, and provide you with an accurate and usable assessment of the increase you will see.  What’s more, these experts have the tools and expertise to examine the details of your contract and help you make sure you are getting the best rates possible for your business. And in most cases, the price of this expert advice will come out of the savings you reap, so you won’t pay anything for it.

So if an expert shipping consultant can do the job better, faster, and for free—why is your company still trying to handle shipping contracts alone?  Savii Group stands ready to help as soon as you realize it’s time.