This past week I've been having some interesting conversations with shippers who've been paying attention to our recent Two Minute Warnings. For example, last week we highlighted the fact that in addition to increasing several different accessorial charges, UPS also announced that they will be increasing their fuel surcharge by 0.5% (or 1/2 of 1%). And they will also eventually be adding a $5.00 surcharge for “servicing paper commercial invoices.”
One of those smart shippers decided to take advantage of our calendar meeting option and book a one-on-one call with me to talk about these changes. After listening to his concerns, not just about UPS, but also some of the increases he is seeing from his LTL carriers, I asked him an important question: “How will these changes affect your freight budget in 2024?” His response was sobering: “We don’t know.”
I assured him that he had lots of company. Specifically, over the past two months I've heard from several shippers that are also struggling to quantify how the increases from parcel carriers (aka FedEx and UPS) and their LTL carriers will affect their 2024 budgets. And the reason they are struggling is because they don't have the right tools for the job.
Practically speaking, quantifying logistics costs has become more complicated with the passage of time. And today, the carriers have more data than ever before and they are using the “ABCs” - as in Activity Based Costing models – to issue rate increases that reflect their cost to serve each and every shipper. This means that they can more easily adjust their General Rate Increases (GRI) or accessorial charges to achieve targeted pricing levels. For example, UPS and FedEx can make subtle but significant changes to areas that result in the application of an extended delivery surcharge. Or the LTL carriers can make small changes that increase the number of shipments affected by a dimensional freight surcharge.
And then there is the “Yellow factor.” With this week’s announcement of the initial results from the auction of the Yellow terminals, more changes are on the way. There will be more terminals sold and the total proceeds from the auction will be well in excess of $2 billion. As noted in the Georgia Logistics Market Snapshot from November: “Prior to the Yellow bankruptcy, analysts expected that the collapse of the nation’s third-largest LTL carrier would send a supply-side shock to pricing. And with the Q3 index highlighting a 2.2% quarter-over-quarter (QoQ) rate growth, the old Yellow freight now has higher average pricing along with a rise in fuel surcharges.”
Fortunately, here at TranzAct we not only have the right tools that can help you quantify the financial and budgetary impact of these increases; we also have the tools, strategies and experience to help mitigate these increases and even help you reduce your costs. So when your CFO or President calls with questions about your company’s freight costs, we can help you move from "I don't know" to having the information and tools to answer those questions and optimize your freight budget.
If the thought of managing or reducing your freight costs appeals to you, or you just want to learn more about how these changes in the parcel and LTL markets will affect your budgets, then join us next Wednesday at 11am Central/ Noon Eastern for our special webcast addressing how the recent results from the auction of the Yellow terminals and other important issues will affect the LTL freight markets in 2024. Our friends, David Ross, EVP of Roadrunner and Steve Robinson, CEO of The Supply Chain Project will share some important insights. I know this is a busy time for many of you, so we'll send the recording to everyone who registers for the webcast.
To learn more, simply give us a call at 630-833-0890, send us an email or schedule a time to meet.
