Not much of a shocker when UPS followed FedEx and announced an average 6.9% general rate increase (GRI) for 2023. Per the announcement, "This helps to support ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS."
So, crunching the numbers and comparing them against FedEx's 2023 GRI, guess what? UPS virtually mirrored FedEx's 2023 GRI, not only on the macro level but also at the service, zone, and weight levels as well.
Both companies manage their businesses through revenue management initiatives while battling rising inflation, higher costs, and declining volumes.
Those revenue management initiatives include one of the highest annual rate announcements and yes, keep in mind that 6.9% is just an average.
For example, Ground rates by zone and weight are all above the average 6.9% except for Zone 2-3 for packages weighing 21-50 pounds.
Speed will cost shippers more, with Priority Overnight and Standard Overnight rates jumping well above the average 6.9%. For Zone 2, 1 pound package, the rate for both services will increase 8.5% in 2023.
It's the same story for 2-Day and 3-Day delivery services, with rate increases ranging from 7.3% to 11.9%.
Given falling parcel volumes and expected excess capacity through the peak season and afterward, FedEx and UPS are trying to squeeze every penny of margin out of every package. A bit short-sighted, do you agree?
Remember the COVID-19 surcharge UPS and FedEx implemented in 2020 to manage demand? The surcharge shifted to a "peak surcharge" (not to be confused with the holiday peak surcharge), and in 2023 it will change once again to a "demand surcharge." This signals to shippers and the market that this surcharge is not going away and they will not be limited to peak season.
Some other changes for 2023 are the late payment fee will increase from 6% to 8% — just like FedEx.
Surcharges are increasing and becoming more complicated to understand. For example:
It's all about density. Retailers that ship to consumers' front doors must utilize such options as:
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Effective on May 11, 2022, UPS Inc has successfully moved from an A-minus rating to an A, according to Standard and Poor's rating requirements.
Available supply chain capacity in ocean and airfreight is still subject to significant uncertainty and can add significantly to total transportation spend.