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
- https://www.eia.gov/petroleum/gasdiesel/ — EIA Fuel table
- https://www.ups.com/…Surcharges_US.pdf — UPS recent memo on peak surcharges
