Your Shipping Rates went up. Understanding What Happened.

ShipLion Content Library
It hap­pens all the time.  You are ship­ping your prod­ucts week after week, and sud­den­ly notice that your rates have gone up for the same pack­ages.  There are a num­ber of pos­si­ble rea­sons that this may have occurred.  Below we will pro­vide a list of rea­sons to con­sid­er, so you can deter­mine whether the change is war­rant­ed, and whether it can be addressed. Back­ground Com­pa­nies who are spend a sig­nif­i­cant amount with the small par­cel car­ri­ers (FedEx and UPS etc) will almost always have a con­tract.  The con­tracts, com­bined with the car­ri­er ser­vice guides that they are based on, estab­lish how much you will pay for every ship­ment you send.  The length of the agree­ments (gen­er­al­ly rang­ing from 5 pages to as many as 50+ pages) is tied to the com­plex­i­ty of your ship­ping oper­a­tion and the num­ber of areas that are nego­ti­at­ed. Note that the same pack­age can cost dif­fer­ent amounts based on the loca­tion, ship­ping ser­vice uti­lized, weight, the size of the box etc.  There are sur­charges that will impact price that are asso­ci­at­ed with ship­ments to rur­al areas, res­i­den­tial loca­tions etc.  The infor­ma­tion below is most rel­e­vant if you find that iden­ti­cal ship­ments are now cost­ing a dif­fer­ent amount 
  • Annu­al rate increas­es – Gen­er­al­ly for UPS last week in Decem­ber. For FedEx, the first week in Jan­u­ary (though FedEx has intro­duced some of the adjust­ments at dif­fer­ent times through­out Jan­u­ary).  At this time, the car­ri­ers intro­duce a com­plete­ly new ser­vice guide with wide­spread adjust­ments and increas­es.  For the vast major­i­ty of com­pa­nies, whose agree­ment is com­prised of dis­counts built of the ser­vice guide, this shift means results in a change to almost all charges asso­ci­at­ed with your ship­ments.  This will include rate increas­es, changes to the min­i­mum charges, intro­duc­tion of new sur­charges, and changes in how sur­charges are cal­cu­lat­ed or con­sid­ered (Rel­e­vant: Around New Years)
  • Con­tract Expired – Many FedEx and UPS agree­ments have dif­fer­ent terms. In most cas­es, the 1st term will offer the low­est rates (high­est dis­counts).  Note that some con­tracts will have dif­fer­ent expi­ra­tion dates for dif­fer­ent sec­tions of the agree­ment.  Check through your whole agree­ment to deter­mine if any com­po­nent expired (Tip: Mark the expi­ra­tion dates on your cal­en­dar and set reminders 2–3 months before to begin talk­ing to the car­ri­ers.  Even bet­ter, set a reminder to talk to ShipLion, and we will help you improve your rates.)
  • Change in rev­enue tiers – Most con­tracts have at least a por­tion of their dis­counts tied to annu­al spend. (Annu­al spend can be cal­cu­lat­ed in dif­fer­ent ways and can be cal­cu­lat­ed based on actual/net charges, or gross [pre-dis­count­ed] charges.  You can find your spend in your PDF invoic­es.  Match that num­ber to the table in your con­tract to deter­mine if you have slipped to a low­er tier.
  • Fuel – Fuel prices are based on a table which is tied to the cost of fuel as report­ed by the US Ener­gy infor­ma­tion Admin­is­tra­tion. FedEx and UPS fuel sur­charges are adjust­ed week­ly based on changes in fuel costs.  (Check this first if the shift occurred on a Mon­day as com­pared to the pre­vi­ous week.)
  • Intro­duc­tion of new charges – Out­side of the annu­al rate increas­es, FedEx and UPS will some­times intro­duce new sur­charges dur­ing the year. Peak sur­charges, which are designed to account for times of year when ship­ping vol­umes strain the car­ri­er net­work, are prob­a­bly the most com­mon example
  • Quo­tas on sur­charge dis­counts – at times the car­ri­ers (UPS seems to be doing this more fre­quent­ly than FedEx at this point) will apply a dis­count to a por­tion of ship­ments. An exam­ple would be UPS pro­vid­ing a 50% dis­count on Addi­tion­al Han­dling for the first 100 ship­ments that are hit with this sur­charge, a 25% dis­count for the next 100, and no dis­count after that.  A pri­ma­ry rea­son why this is done is to dis­cour­age ship­ping too many large packages.
  • Billing Errors – It is pos­si­ble that the car­ri­ers have made a mis­take in how they are billing you
Rate increas­es are inevitable, but ShipLion can help you mit­i­gate those increas­es and more by help­ing you opti­mize your con­tracts.  Aver­age clients save 18%+.  For more infor­ma­tion see Links:
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