A lot has been happening in the world of shipping as of late. UPS, in particular, has been making a lot of noise. Just last week, we highlighted some of the recent insights from the negotiations between the Teamsters union and UPS, regarding the potential for increasing starting pay and creating a two-tiered structure to increase weekend shipping capacity.
This week, UPS announced it will be increasing its fee for oversize packages by $150. While UPS already had a $500 surcharge for oversize packages, this increase is not insignificant.
In addition, UPS will be introducing higher fees for packages with mislabeled dimensions.
These price increases beg the question: Why?
It’s no secret that shipping costs have been increasing at a rate that surpasses any time in recent memory. There are a few reasons for this increase:
- Greater reliance on on eCommerce for shopping
- Not enough qualified drivers to meet demand
- Federal regulation on hours drivers can be on the road
Not Meant to Increase Revenue
The increased fee for oversize packages is not a strategy for increasing the bottom line for UPS. In fact, its impact on revenues is negligible. The real reason for this increase is to motivate shippers to ship these goods through UPS’ freight network, rather than put greater pressures on its traditional shipping networks.
In fact, there have been rumors recently that UPS is planning on launching an in-home bulk shipment service with at least one trucking company. This price hike may be the first move in a greater plan to take pressure off its traditional network and move it into a secondary service.
What Are the Implications?
As mentioned earlier, a greater reliance on eCommerce has increased pressures on companies like UPS and FedEx. As a result, shipping costs continue to rise.
While there has been a proliferation of online retailers, Amazon is far and away the greatest source of eCommerce shopping (and shipping); at least in the United States.
Considering that Amazon won’t be slowing down any time soon, and new online retailers are popping up all the time, companies like UPS and FedEx will need to continuously find new ways to mitigate cost increases and greater pressures on their networks.
In all likelihood, other package delivery companies will also have to increase their fees for oversize packages. It wouldn’t be surprising if in the next few months, FedEx introduces a similar fee increase.
Another likely outcome is Amazon speeding up their (alleged) plans for introducing their own package delivery service, effectively cutting out companies like UPS and FedEx. For years, there have been murmurings that Amazon planned to do this.
Regardless of what happens, it will be incumbent on both shippers and package delivery companies to create greater efficiencies to find cost savings and provide better service to end-customers.
Intelligent Audit provides its clients with a global, all-mode transportation audit, recovery, freight payment, and business intelligence reporting partner.