The new year is here and we're all getting back to the business of shipping. It's time to figure out where to focus those first priority planning days. With all the news, changes, and end of year stress it can be hard to reset and focus on key priorities to kick the year off right. We've published a lot of topics on the Pacejet shipping blog around industry news, strategies, and features of our products that can help, but we thought we'd take a step back, zoom out to 50,000 feet, and recommend the first shipping cost-drivers you should stomp on in 2015 to keep those costs under control.
Read on for more information on this topic …
1: Expect 4.9% rate increases from major carriers, check it's not more for you.
The general rate increases from major carriers are no longer theoretical, so as of now those 4.9% increases you heard about are in effect. But don't think that's the end of the story, since most years (like this year) those general rate increases are an average that also include other, higher rate increases that can sting different organizations depending on the type of shipments and services you actually us. Our best advice is to monitor changes closely with weekly shipping cost/price reports and/or to use freight quoting reviews to see how the impact appears to be hitting your bottom line — before you get those first invoices.
- New rate increases for UPS went into effect 12-29-2014 and include a 4.9% average increase for Ground, Air, International, Air Freight, and Freight services. More details at UPS Rates: 2015 Rate Change Information
- New rate increases for FedEx go into effect 1-5-2015 and include a 4.9% average increase for Ground, Express, Home, and Freight services. More details at 2015 FedEx Shipping Rate Changes
- National changes and restructuring continue at the USPS but new proposed USPS rate increases and service changes have been delayed. Additional hearings and reviews will be happening in 2015. A few news articles of interest: “U.S. Postal Service Reports Rising Revenue Along With a $5.5 Billion Loss in Fiscal 2014”, “U.S. mail about to get slower” , “USPS Delays Decision on Making Mass-Mailers Pay More: Associations Now”
2: New dimensional weight rules are here, check the impact as you go.
The media has certainly pounded the impact of this change continuously over the last 6 months, so there are probably no surprises here. New dimensional weigh rules are in effect, shippers will start seeing the impact of these changes immediately (contract depending, of course), and now is the time to keep an eye on your overall impacts. Pacejet recommendations from previous posts include reviewing how you are packing shipments and the expected impact from reports, taking a look at your packing process and how to improve capture of actual package dimensions, and reviewing your freight quoting processes for accuracy.
- Pacejet Blogs: Getting Ready for New Dimensional Weights Rules
- Pacejet Blogs: Improve How You Pack Shipments in NetSuite to Reduce Surprise Fees and Improve Paperwork
- Pacejet Blogs: Easier Freight Quotes for NetSuite Users Not in the Shipping Department
3: Expect 5% increases for LTL / Freight rates in 2015 - review carrier contracts.
If you didn't catch the notes from the major carrier increases, freight and LTL services were included in the overall pricing changes. Beyond the biggest carriers and despite falling gas prices, other carriers have announced increases of 3-5% or more as the economy continues to improve, truck driver shortages remain tight, and carriers gain confidence. Other news and information on rate increases below.
- Capacity Issues Expected to Push Freight Costs Higher in 2015 | 3PL Supply Chain Logistics - G&D Integrated
- ODFL to raise LTL tariff rates 4.5 percent on average | JOC.com
- Despite rising rates, lower fuel costs curb LTL yield increases | JOC.com
- Long-suffering YRC in the black, posts 3Q net income of $1.2 million - Article from Logistics Management
4: Shipping service fee increases, don't forget to check them for your specifics.
With all the focus on general rate increases, changes to individual surcharges are a easy to forget. For example, additional handling charges per piece going up $5 for some LTL carriers, address correction fees rising $0.50 for express services, delivery area surcharges up $0.15 for some areas, and the list goes on. Check previous shipping reports and invoices for services you've actually used and we'd suggest monitoring how you choose new services going forward, how they are attached to orders, and how/if they end up getting captured and billed appropriately per your business rules.
5: Shift to density based pricing for LTL/Freight, despite shipper reluctance.
New density based pricing tests and options are starting to take hold in the LTL/freight shipping carriers more strongly with both UPS and FedEx freight offering more options. Part of the trend driving this move is that new “dimensioning technology” that can automate the process for carriers is making the process easier and more affordable. While there are still many issues for wider-spread adoption and shippers are not too thrilled with the iead, it's worth watching these changes especially since the parcel dimensional rules are already putting pressure on reviewing this area in your business.
- Will the revolution be dimensionalized? – DC Velocity
- How Density Based Pricing May Change LTL
- UPS joins FedEx in shift to density pricing for ground packages | JOC.com
For more information and ideas
Still looking for more ways to start planning for 2015? See our earlier post for a quick, five-point shipping check-in to get started going after those new year priorities!