n the next few weeks, all However, if the majority of your
the carriers will complete shipments are in zones 4 or 5
their 2008 pricing –like many businesses are- the
announcements. As we look at the increase is about 5.16%.
future, it’s probably a good bet Depending on your warehouse
that these carriers’ rates aren’t location and the predominant
going down any more than the cost zones in which you ship to
of oil. So what’s the impact and customers, the impact could be
action plan for your business? more or less than this average.
Given the size of the increases Meanwhile, the Ground residential
that have been announced so far, minimum charge increased to
multichannel companies need to $6.15, a combination of the base
look at all the options open to rate for zone 2 and the Ground
them and develop short and residential surcharge. In a quick
long-term strategies to reduce survey of shipping tables of 66
the impact. multichannel companies, we found
UPS has announced that they will that 71% of the tables were lower
be increasing Ground rates by than this $6.15 minimum
4.9% in 2008, which is equal to charge.
last year. (FedEx will most
As AFMS Logistics Management
likely match the UPS Ground Group’s Managing Director Rick
increase, but that information Collins points out, “The
has not yet been released.) Under announced rate increases of 4.9%
new rates, the Ground commercial for Ground and 6.9% for Air from
zone 2, 1-lb. rate has increased FedEx and UPS masks the true
5.0% over last year—overall, a impact for many shippers. The
16% increase over three years, base rates may average the
from $3.62 in 2005 to $4.20 in announced increases across the
2008. For 1-70 lb. packages the board; however higher zone
average increase is 4.8%. express shippers could experience
increases in the 9-10% range. use this new flexibility to grow
Additionally, surcharges are our competitive business,” said
increasing up to 20% in some Potter, “offering volume
cases. Surcharges for irregular discounts and contract
and large packages are up 8.3% to pricing.”
12.5%. Commercial remote add-ons
Looking at the industry as a
are increasing 7.1% and whole, however, Edward Wolfe,
residential fees are up 5.4% for transportation stock analyst for
Ground.”
Bear Stearns & Co., had this to
All is not totally gloom. say: “Our sense is FedEx is
There was some good news on clearly trying to send a message
November 15, when the Postal of pricing strength to both its
Service Governors announced that customers and to competitors UPS
future prices will be adjusted and DHL.”
using new regulations issued by
I think we’ve gotten the
the Postal Regulatory Commission message. Now we need to do
(PRC) on October 29. Consistent everything we can to reduce
with the Postal Accountability freight costs.
and Enhancement Act of 2006,
With the continual increases
future price increases for in the cost of oil and shipping,
mailing services will be capped we think that companies need to
at the rate of inflation. Said assess both short and longer-term
Postmaster General John E Potter, strategies. Here are 15 short-
“This delivers one of the main and long-term options to
goals of the new law for business investigate:
mailers—a predictable price
1. Renegotiate your
schedule.” The new pricing contract.
regulations give the Postal
2. Can you use USPS to your
Service added flexibility for advantage?
shipping services. “We intend to
3. Are you using best-way rate
shopping? operation and determine if other
4. Consider package weighing, costs can be reduced to help
and take out inserts when they offset these increases.
push the package into a higher
12. Improve your inventory
bracket.
forecasting and systems to
5. Can you leverage economies improve inventory position and
of scale using the same carriers decrease the cost of back orders;
for inbound and outbound keep in mind the $6.15 Ground
freight?
residential minimum charge.
6. Investigate the economics
13. From marketing and
of a second warehouse to reduce merchandising perspectives, how
the distance and cost to ship to can the average order value be
the customer.
increased so that shipping cost
7. Reassess your shipping and is not such a large percent of
handling table in light of the the average or small order?
changes.
14. Review your policies for
8. If you’re going to use free giving away free freight to
shipping, re-assess the minimum return merchandise.
dollar order value and its
15. Is it time to use an
effects on your transportation experienced transportation
costs. Should the minimum be consulting company to help you
increased?
get savings? Or are you big
9. Review whether you should enough to hire an internal
use by-item shipping charges in specialist to continually assess
your web and catalog copy for and hopefully lower your
heavy and oversize products. costs?
10.Can you make use of package
Contract renegotiation is your
consolidators and zone #1 weapon. How much can be saved
skipping?
will depend on a number of
11. Assess your total factors: how well prepared you
are in terms of knowing your longer-term strategies—to keep
package shipping profile; profitability from eroding.
knowledge of carrier pricing and
what can be discounted and
negotiated; the 70+ accessorial type="text/javascript">
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