Small Parcel Costs to Increase Despite Softening Freight Market
While many freight costs are decreasing due to competitive pressures; we are seeing nearly double-digit price increases in small package freight this year. 2H-2023 experienced reduced small parcel shipment demand YoY. This normally leads to reduced pricing to spur demand in a competitive market. Small Parcel; dominated by the UPS and FedEx duopoly; has implemented higher-than-normal price increases for 2024.
FedEx and UPS Show Near Double-Digit Small Parcel Increase for 2024
Both UPS and FedEx are expecting a decline in shipment volumes this year.
UPS and FedEx are increasing prices to compensate for declining volume and higher costs. UPS signed the new labour union contract in 2023 to prevent a strike that will increase labour costs by about 9% year-over-year. Both companies have implemented a general transportation rate increase of 5.9% for 2024. These increases are higher than the 3.9%-4.9% increases we observed pre-pandemic.
Express services (overnight; 2-day; and 3-day) and longer distances/zones are seeing even higher increases than 5.9%. Additionally; minimum charges for overnight shipments will increase between 7.5%-8%. These minimum charge increases will impact the smaller weight and closer zone shipments.
On top of that; the carriers are raising numerous fees that are significantly higher than 5.9%:
- Additional handling charges ^ 18%-21%
- Weekly pickup rates ^ 10%
- Residential/DAS ^ 7-10%
- Address Corrections ^ 8%
US Postal Service (USPS) is Competitive Small Parcel Option
As consumer and media mailing continues declining; USPS is focusing more on commercial deliveries. With their existing last-mile infrastructure; USPS offers competitive rates for smaller consumer shipments.
USPS is also increasing its rates for 2024. USPS Ground Advantage will increase by 5.4%; Priority Mail will see a 5.7% increase; and Priority Mail Express will see a 5.9% increase.
Considering other fees charged by FedEx and UPS; USPS increases are smaller and will remain competitive in 2024; especially for direct-to-consumer shipments of small packages.
ERA Helps Decrease Small-Package Spending Despite Rising Costs
Zelfs in deze tijd van stijgende prijzen zijn er nog steeds manieren om de kosten te verlagen.
Terwijl de meeste bedrijven zich uitsluitend richten op het bedingen van betere kortingen, heeft ERA ontdekt dat het combineren van onderhandelingen met operationele verbeteringen nog grotere besparingen oplevert.
Onze aanpak, waarbij we de operationele behoeften van onze klanten in kaart brengen en prijsopties analyseren die aan die specifieke behoeften voldoen, heeft tot aanzienlijke besparingen geleid. Bovendien zorgen weloverwogen operationele aanpassingen voor een verdere verlaging van de bijkomende kosten en transportkosten.
By combining these changes with expert rate renegotiations; ERA has helped clients achieve more than an 18% reduction in express and parcel costs.
