enroute
Baffled by confusing
parcel rates and accessorial
charge creep? Parcel
consultants are happy to
help make sense of things.
ON JAN. 5, FEDEX EXPRESS, THE AIR UNIT OF FEDEX CORP., IMPLEMENTED
a 6.9-percent “average” rate increase for its 2009 services, minus 2 percent for a
reduction in applicable fuel surcharges. The same day, UPS Inc., FedEx’s chief
rival, imposed general rate increases of 4. 9 percent and 5. 9 percent, depending on
the product.
For certain shipments, however, tariffs have risen by far more than these averages. As the carriers were gearing up, an analysis by Air Freight Management
Services (AFMS), a parcel consultancy in Portland, Ore., discovered that rates for
FedEx Express’s next-afternoon delivery product on movements of at least 1,200
miles were actually poised to increase by 9. 3 percent, and that prices for the product, known as “Standard Afternoon,” were set to rise above the median threshold
across all eight ZIP-code–based zones and weight classes. AFMS also found that
rates for FedEx Express’s next-morning delivery product, “Priority Overnight,”
were slated to rise by nearly 7. 8 percent from 2008 levels, also higher than the
company’s announced 2009 average rate increase.
And a closer look at UPS’s rate plans revealed a new surcharge to hit more than
19,000 rural U.S. ZIP codes receiving residential deliveries. Residential addresses in
those ZIP codes would essentially be classified as “super-rural” areas and would be
subject to a new “extended” Delivery Area Surcharge from UPS. As a result, those
addresses would now face three separate surcharges: one for delivering to a residence, a second for being in areas already exposed to a rural delivery surcharge,
and the third for the new geographic classification.
Consultants to the rescue
Unless shippers were willing or able to dig below the
surface, those actions—and others just like them—
may have gone unnoticed. That may explain why
shipper executives in contract talks with one of the
major parcel carriers sometimes feel they’ve walked
into a gunfight without their gun.
On one side of the table are the carrier executives,
hard-nosed bargainers who understand the ins and
outs of parcel pricing far better than most shippers
ever will. On the other is the customer, who, unless
it is a truly high-volume shipper, probably doesn’t
devote much time to parcel rate analysis. The fact
that most of today’s parcel contracts run three to
five years makes it even harder for shippers to stay
on top of their game and resist going into “
set-it-and-forget-it” mode with their parcel business.
In addition, most shippers lack the resources to
develop and maintain IT systems to monitor annual
rate changes affecting air and ground delivery services in 50,000 U.S. lane segments across the eight
ZIP-code–based “zones.” Nor is it easy for them to
