Lighter weight to become heavier burden for shippers in FedEx, UPS annual rate programs

In what has become an annual ritual for parcel shippers, companies tendering lighter-weight ground packages to UPS Inc. and FedEx Corp. will likely be paying higher list rates in 2014 than the average rate increase across all weight classes that have been announced by the carriers.

On Nov. 21, Atlanta-based UPS announced a 2014 general rate increase of 4.9 percent, on average, for ground, domestic air, and international parcels, effective Dec. 30. However, ground list rates for shipments weighing between 1 and 5 pounds will rise by 7.5 percent, while rates on shipments weighing 6 to 10 pounds will increase by 7 percent, according to estimates from Shipware LLC, a San Diego-based parcel consultancy.

About 55 percent of UPS' ground shipments weigh between 1 and 10 pounds, according to Rob Martinez, Shipware's president and CEO.

By contrast, the heaviest weighted shipments—those running from 140 pounds to the 150-pound maximum, will rise by 3.1 percent, analysts said. Lighter-weight parcels will be hit with the higher increases because they account for most of the carriers' volume density.

Memphis-based FedEx has also raised rates by 4.9 percent for its ground parcel category, which is the fastest growing part of FedEx's overall business and which is expected to one day become the core product line.

In mid-September, FedEx Express, the company's air and international unit, announced a 3.9-percent increase, on average, in tariff rates for U.S. domestic, U.S. export, and U.S. import services. That adjustment takes effect January 6, 2014.

The minimum charge for a UPS 2014 ground shipment is $6.24, a 6.8-percent increase from 2013, according to Shipware. FedEx Ground will match the UPS increase, upping its minimums to $6.24 per shipment, according to Shipware.

The biggest disparity is in the three-day express rate increases, where FedEx's 2014 rates will be 14.5 percent higher than UPS', according to Douglas Kahl and Joe Wilkinson, analysts for enVista Corp., a Carmel, Ind.-based supply chain and IT consulting firm. That disparity is because FedEx's is trying to force that freight into its ground network, while UPS runs those shipments over the road due to its integrated domestic delivery network, the consultants said.

At least since 2007, UPS has raised list rates each year by no less than 5.78 percent on shipments weighing 10 pounds or less, according to Shipware. The one exception was 2008, when rates rose just 2.73 percent. Annual increases in the lightweight breaks (or weight categories) have been 7 percent or higher each year since 2010, Shipware said.

By contrast, rates on parcels weighing between 76 and 150 pounds declined year-over-year in 2007 and have risen by no more than 3.86 percent in any year between 2008 and 2012. The list rate in 2013 rose by 4.81 percent, Shipware said.