DC Velocity - December 2010

UPS joins FedEx in changing
“dim weight” formula

UPS Inc., like its rival FedEx Corp., is telling shippers to trim their packaging or pay more for shipping.

In a move that was expected, UPS said it would reduce its “ volumetric divisor,” which is used to calculate the amount of space allocated to a shipment. The result is that shippers will be allowed less cubic space for the same shipment weight at current prices.

Shippers whose packages fall outside the new physical parameters because they can’t shrink their shipment’s cubic dimensions or add more weight to their shipments will pay as much as 17 percent more for domestic services and 19 percent for U.S. export services, according to a research note from analysts at JPMorgan Chase.

FedEx announced similar measures on Sept. 28.

The UPS change coincided with the release of the company’s 2011 list, or non-contract, rates. Rates for ground shipments will rise by 5. 9 percent, minus a one percentage point reduction in the carrier’s fuel surcharge. Domestic air and U.S. air export rates will rise 6. 9 percent, minus a two percentage point reduction in the fuel surcharge. The rate changes take effect Jan. 3, the same day FedEx’s new 2011 rate structure becomes effective.

Karen Cole, a UPS spokeswoman, said the pricing formula change would affect less than 10 percent of its customers. Atlanta-based UPS, the nation’s largest transportation company, has about 1. 8 million worldwide customers who receive daily pickups.

She said the change allows UPS to price larger and lighter air shipments as well as oversized ground shipments in a way that more accurately reflects its true cost to provide service for these packages. Freight tends to cube out in a conveyance before it weighs out, and a less-dense item generally occupies a higher volume of space relative to its actual weight. As a result, carriers often charge more for shipments with higher “dimensional weight” ratings because of their relatively low density.

Cole noted that customers whose packages measure less than three cubic feet aren’t affected by dimensional weight, or “dim weight,” pricing. In addition, customers that ship heavier packages and are billed for the packages’ actual weight may not be affected, she said. ;

accolades

; Minding the Gap. Pitt Ohio Truckload has received the Best Overall Carrier Award from retailer The Gap for the second consecutive year. Pitt Ohio earned the award for its outstanding service performance, which included an on-time delivery record of 99.28 percent.

; Bring it Home. Home Depot has presented Damco with its International Logistics Service Provider of the Year Award. The home improvement retailer also named Damco its Partner of the Year in recognition of Damco’s outstanding service performance. Damco is the combined brand of the A.P. Moller – Maersk Group’s logistics activities.

Teamsters union members at less-than-truck-load (LTL) carrier YRC Worldwide Inc. on Oct. 30 ratified a restructuring plan calling for workers to make a third round of wage and benefit concessions that Teamsters leadership said were necessary to save the company.

The response from arch-rival ABF Freight
System: “We’ll see you in court.”
On Nov. 1, two days after the news broke of
the rank and file’s actions at YRC, ABF sued the
Teamsters, YRC, and the company’s subsidiaries
for violating the current National Master Freight
Agreement (NMFA), the collective bargaining
agreement covering most of the nation’s union-
ized trucking employees.

In a statement, Fort Smith, Ark.-based ABF, the largest subsidiary of Arkansas Best Corp., argued that the repeated concessions the Teamsters have granted to YRC separate from other truckers governed by the agreement run counter to the basic premise that the pact should apply equally to all the companies that signed it.

“We need a long-term, industry-wide solution
that is fair to all NMFA parties,” said Wesley
Kemp, ABF’s president and CEO. “We have the
obligation to our employees, to our customers,
and to Arkansas Best shareholders to enforce
our rights under the NMFA and compete on the
same playing field with our industry peers.”
In May, Teamsters at ABF declined to ratify a
proposed agreement that included labor con-
cessions similar to those agreed to in late 2009
by YRC workers. ABF said it has been put at a
significant cost disadvantage to YRC as a result.

ABF, which is seeking $750 million in damages, contends the union acted illegally by entering into “concessionary side agreements” with YRC to the exclusion of ABF and other companies governed by the NMFA. “These agreements led to ongoing significant wage and benefit reductions and other economic concessions that were applied only to YRC, and not ABF,” ABF said.

In Florida at the National Industrial Transportation League’s annual meeting, Kemp denied allegations that the suit was designed to put legal pressure on ABF’s 8,000 Teamster members to agree to concessions similar to what YRC received from its rank and file.