Dive Brief:
- Parcel barons FedEx and UPS now institute vastly different pricing models in areas such as fuel surcharges and list rates, resulting in more challenging price comparisons, Logistics Management reported Tuesday.
- At FedEx, the greatest change is the dim weight reduction from 166 to 139, while at UPS a handling surcharge will be levied on every package with its longest side exceeding 48 inches, instead of the previous 60 inch standard. FedEx has also reduced its fuel rate surcharge calculations from one month to one week.
- Shippers interested in closely comparing the carriers' rates in order to find the best value are advised to consult carrier representatives at each company for an analysis, since simply staying with your usual carrier may cost more in the end.
Dive Insight:
Previously, UPS and FedEx spent a decade marching in lockstep on pricing rates, presuming that customers would focus primarily on basic ground rates rather than higher cost air and speed shipping offerings. Now, with their sudden divergence, direct competition shifts and pricing is unpredictable at best.
The majority of both carriers' businesses come from discounted bulk shippers, which, if designated as a small business, often receive as much as 18% off on air shipping versus 10% on ground at UPS; 16% and 8% respectively at FedEx. At UPS, startups can receive a full year of free pickups, saving more than $500. It is individual shippers who pay full price, however, and who are feeling the brunt of the increases.
2017 business will likely be much more of this type of competitive differentiation, as when in 2015 and 2016 the pair resorted to pricing based on dimensional packaging of three cubic feet or less, or the majority of e-commerce parcels. Rates rose for both shippers of lightweight and heavier items unable to squeeze into smaller or denser units. Justification came in the form of delivery van space availability; if it's too big, or too light, it costs more. FedEx and UPS lead the way on shipping logistics; the fact that they have found different measures to build upon past success is a clear indication that neither is satisfied and will continue to seek out profit opportunities, as consultant Jerry Hempstead argues, amidst the confusion.
