Each year, parcel carriers announce incremental retail increases to ground, air, freight and surcharges. For most shippers, these costs quickly add up, especially in the era of free shipping. UPS recently announced its 2017 retail rate increase plan, and FedEx followed with a similar update to its offering.
What is changing?
One of FedEx’s most significant changes is a modification to its dim divisor, from 166 to 139. There are also increases to freight and accessorial charges (e.g. FedEx’s address correction fee is increasing from $13 to $14). The basic changes to FedEx and UPS Ground and Express Small Parcel shipments are listed below.
|Change Date||Ground Parcel||Air/International Parcel||Surcharges|
|UPS||12/26/16||4.9%||3.9%||Click here for a complete list|
|FedEx||1/02/17||4.9%*||3.9%||Click here for a complete list|
*Includes Home Delivery
What options do I have?
While many large shippers use buying power to negotiate better pricing and smaller incremental rate increases, mid to small shippers are often left with few options.
Working with a 3PL gives shippers greater discounts and buying power off of retail rates. Last year, Ingram Micro Commerce shipped 500 million units via multiple carriers, and we are able to pass our competitive rates on to our customers.
Reviewing the options below may help you create a more competitive small parcel strategy:
- Centralized Locations or 2+ Fulfillment Center Model
Minimizing the number of zones to your customers is a simple solution to decrease parcel costs. One way to do this is to choose a centralized fulfillment center or use multiple strategic locations. In addition to cost savings, leveraging multiple locations allows you to ship to customers faster.
- Multiple Carriers
You can use multiple carriers to reduce small parcel costs. A USPS solution, postal consolidator solution (e.g. DHL eCommerce) or FedEx SmartPost are typically subject to fewer surcharges and are lower cost options. The Shipwire Platform is integrated with 12 regional, international and postal consolidator options that offer varying levels of service, giving you many carrier options.
- Minimize Surcharges
Identify where you incur the highest surcharges to see where the best cost saving opportunities exist. For example, address correction fees are increasing to a staggering $14 in 2017. The Shipwire Platform includes an Address Validation API, preventing invalid address and consequently, address correction surcharges. Packaging presents another common cost savings opportunity. If you’re shipping oversized packages, you may be able to reconfigure your packaging to reduce box size and thus eliminate surcharges for oversized shipping.
- Cost Effective Returns
Returns are often overlooked and are typically very costly. They can deplete or make margins on your product nonexistent. Look at alternative options for returns shipping. The Shipwire Platform uses automatic rating and routing logic to identify the most cost-effective option for returns.
To learn more about minimizing the impact of the 2017 UPS and FedEx rate increases, click here.