Highway Robbery?

Carriers raise rates while announcing record earnings.

“At the end of the day, we need to be paid for the services we provide.” This pithy quote comes from UPS chief financial officer Brian Newman, in a post-earnings conference call last week.

It’s fair to say that Newman’s goal is being met. Shares of Brown soared to a record close the last Tuesday in October, after the package giant reported profit and revenue exceeding even Wall Street’s bullish expectations, reported MarketWatch. The company earned more in the first three quarters of this year than they have in any full year in their 100-plus year history.

The unprecedented jump in earnings came even as volume slipped 3.4 percent during the quarter; direct labor hours declined even more at five percent. And to help keep Brown in the black, the company’s annual rate increase was announced at 5.9 percent, a 20-percent jump over the 4.9 percent increases that have been a reliable annual feature of the parcel shipping landscape. The increase is in lockstep with FedEx’s already-announced 5.9 percent general rate hike, and apart from or in addition to a variety of accessorials, surcharges, and seasonal rate hikes.

Revised (upwards) charges for additional handling, COD, dangerous goods, delivery area surcharges, delivery confirmation, large packages, remote area delivery, residential service, and many others will take effect on December 26, typically climbing much more than the 5.9 percent GRI. Same day on-call pickup charges will rise from $6.90 to $12. And as of January 9, 2022, UPS will be renaming “peak surcharges” to “peak/demand surcharges” and adjusting the Zip Codes for which area surcharges will apply. “Peak” is the de factor term in the industry for the holiday season, raising the specter that short-term surcharges could be implemented during other times of the year.

Every carrier is getting into the act. Less-than-truckload carriers including XPO, Pyle, and FedEx Freight are imposing oversized or extreme length surcharges ranging from $107 to $3,500, and even the USPS is charging a seasonal price hike on parcels, ranging from 25 cents to $5. While bemoaning the congested, snarled supply chain conditions, carriers are profiting handsomely from the situation.

For shippers looking to minimize price increases or diversify their carrier bases, there are some alternatives. Work with your professional logistics advisors, and get a handle on where your shipments – and your shipping dollars – are going.