Shippers are ill-prepared for all of the advancements that the small parcel and less-than-truckload carriers are making in the US.
I know that is a big statement but the disparity between freight carrier sophistication and the way most companies ship their product is not even close. Allow me to elaborate. Right now there are massive innovations in the way freight carriers are handling and pricing shipments. There are several items that are vitally important for the shipping public to know.
First of all, many reading this probably do knowthat in January 2015 something major happened in the US domestic transportation space. UPS and FedEx changed the way they invoice customers by going to a dimensional pricing system. This added major cost and complexity for shippers on small package shipments.
Since then, the less-than-truckload carriers have quietly followed suit with the way they process shipments within their networks and making adjustments to the NMFC (National Motor Freight Classification). More and more freight classes are being adjusted to items that are rated based on their cube.
Industry experts are saying it is only a matter of time when the NMFC classification system will be replaced by a similar dimensional formula that UPS and FedEx moved to...and they say it will be sooner rather than later.
With this topic in mind, here are some important things every shipper must know.
10 Freight Trends Your Company Can't Afford to Ignore
- UPS domestic packaging operating profit was up 7.6% in the Q1 of 2016 while the US economy grew .05%. How does this compare to your Q1 earnings?
- UPS’ “street rates” are up 60% since 2006.
- Packaging giant Sealed Air performed a recent study of 150 customers and found that89% are seeing an increase in shipping cost due to changes in dimensional weight shipping policies.
- 41% report increases of 10% or more.
- UPS and FedEx automatically weigh and laser scan dimensions of each packageat their terminal and apply higher of weight or cube charges.
- Box bulges will add to shipping rate as lasers are very precise. So cramming product into a smaller box doesn't save on shipping cost.
- All major LTL carriers use pallet dimensioners to inspect the profitability of their shipments.
- A pallet dimensioner costs a carrier about $65,000 and with revenues from weight & inspection penalties they have them paid back within 90 days.
- Effective this month (June 2016), UPS and FedEx now charge $10.40 “additional handling fee” if the longest side of the shipment exceeds 48 inches. The old maximum length was 60” (25% difference). The old surcharge was $9.00.
- This most recent change is the 7th price increase of some type applied by UPS in the past 18 months, and the 6th imposed by FedEx.
Additional Things to Watch Out For
- UPS and Fedex will shrink their length surcharge 25% from 48 to 36 inches.
- "Volumetric divisor" used to calculate dim pricing will drop 16% from 166 to 139(same as international shipments).
- Under the current divisor formula, a 1-cubic-foot box measuring 1,728 cubic inches would yield a dimensional pricing equal to an 11-pound shipment. A lower divisor of 139 would yield pricing of 12.3 pounds (a 13% increase).
What You Can Do?
KDL has the ability, resources and technologies to help shippers to keep up with the quickly evolving nature of freight carriers. Contact us to set up an introductory conversation to learn how KDL can keep revenues in your company's pockets - not the freight carriers.