NASHVILLE, Tenn. -- Parcel shippers should prepare for a new normal in the size of general rate increases (GRIs) as well as a different approach to rate adjustments led by more pricing based on planned surges in delivery demand, executives of a parcel consulting firm said Wednesday.
Within the past two weeks, FedEx Corp. (NYSE: FDX) and UPS Inc. (NYSE: UPS) announced GRIs of 5.9% for 2024. The increases are below 2023’s record increase of 6.9% but above the 4.9% rate increases that were the historical norm prior to the pandemic. The first 5.9% GRI increase was in 2022.
Shippers should expect future GRIs to range between 5.9% and 6.9%, and not revert to the pre-COVID level of rate hikes, said Kenneth Moyer, executive vice president of supply chain strategies for LJM Group, a consultancy with about 1,500 shipper clients. Including accessorial charges, fees for services beyond the basic pickup and delivery, many shippers’ rate increases will exceed 10% unless they can negotiate them down or out of their respective contracts.
According to LJM, accessorials account for, on average, 30% to 40% of a typical customer’s parcel spend, well above pre-COVID levels.
In what Moyer described as potentially the most important parcel pricing shift of the past decade, FedEx and UPS will target specific holidays, such as Valentine’s Day and Mother’s Day, for rate increases and will deepen their implementation of “surge” or “dynamic” pricing based on days of the week and shipper behavior, LJM said. For example, the carriers may push for higher rates on Mondays because, for many shippers, that is their heaviest shipping day, Moyer said.
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Olutunde Olarinde
Nice!
Ka
“… It was part of a strategy to put immediate pressure on UPS in the wake of its five-year contract with the Teamsters union, which is expected to raise labor costs by 10% in the first year….
UPS wanted to push for a higher GRI but felt it couldn’t if it wanted to win back volumes from its rival, Moyer said”
What is Moyers sources for these claims?
Midwest Teamster
In a prior article you cited an estimate that 5% lost volume was split evenly between FedEx, USPS and “regional carriers.” Where did “almost entirely to FedEx” come from?”