The 2:00 Minute Warning

In a recent Two Minute Warning, we noted that shippers should be constantly scanning the horizon to see what’s coming their way and anticipate how market and environmental changes might impact their freight costs and overall budget.

Little did we know that right after issuing that Two Minute Warning, UPS would be releasing an important announcement regarding changes in their Peak Season pricing program for 2024 – 2025. There are some important issues to look at in conjunction with this announcement, and information disclosed on its quarterly earnings release this week.

With respect to Peak Season pricing changes, various analysts and shippers have suggested that these higher rates could drive up costs by 7% - 10% - before the negotiations begin. I use the word “negotiations” because our friend and parcel expert Jerry Hempstead likes to proclaim from the mountaintops: “Everything is negotiable.” And in talking with Jerry, he highlighted some things that you might want to include on your “Negotiations Checklist.”

Speaking of your “Negotiations Checklist” if you are wondering: “How will these pricing changes affect my business?” Our Parcel Toolbox includes software that can examine your shipping data and apply the changes of these types of increases, so you can know the exact impact they will have on your business. You can see which changes have a great impact, and which have relatively little. That way, you know exactly what points to negotiate on. Our Parcel Toolbox can compare these sorts of general rate increases as well as any other potential changes to your contracts. Send me an email to learn more about how this invaluable tool can help you.

With respect to the length of the Peak Season, the new timeframe starts on September 29th and runs through January 18th. And one of the most interesting changes is that the “Peak Season” timeframe will now be tiered. The first tier applies to shipments sent from September 29th to November 23rd. The second tier applies to shipments from November 24th to December 28th and carries exceptionally high rates. The third tier applies to shipments from December 29th to January 18th. Large package surcharges have also been increased over 2023 in addition to those charges for packages over the maximum limits.

Before leaving, it is important to highlight other observations from the UPS announcement.

First, UPS has great data for decision-making. They are using and will continue to use this data to increase their yields on parcel shipments.

Second, in UPS’ world, if you listen to their earnings calls in the wake of the deal with the Teamsters, they are intent on raising revenues to cover the higher costs associated with the Teamsters' contract. So shippers can expect to see more changes coming as UPS continues to deal with decreases in revenue and operating profit.

Finally, when it comes to working with UPS or FedEx, what you don’t know can hurt you and be very costly. In addition to our Parcel Toolbox, TranzAct has a wealth of experience and expertise gleaned from working with companies who are large volume parcel shippers. So if you are looking for insights or guidance on how to use your parcel procurement process to realize the best possible results, send me an email or you could schedule a time for us to meet.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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