July 1, 2011, 2:05 PM

UPS increases freight charges

Costs for non-contractual LTL shipping rates will increase 6.9% on average.

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Online retailers that occasionally deliver or receive orders of over 150 pounds via United Parcel Service will pay an average of 6.9% more for less-than-truckload shipments starting Aug. 1, UPS said today. Such shipments do not require a full trailer, meaning it involves relatively small loads of freight.

UPS announced the rate hike in response to increased costs for technology that support its logistics operations and a $1 dollar per gallon rise in the price of diesel fuel since the last such rate increase, a UPS spokesman says. UPS last increased less-than-truckload non-contractual rates in October, when they rose 5.9%, he adds.

The 6.9% rate hike does not immediately extend to shippers’ contracts with UPS for ongoing shipments; such contracts are negotiated individually.

Ken Wood, president of shipping advisory firm LJM Consulting, says the rate hike also stems from changes in shipping volume available to carriers, who are getting more choosey about if and when they’ll handle shipments of bulky items like furniture and treadmills from online retailers to consumers’ homes. Unlike shipments to companies, shipments to homes must deal with a lack of loading docks, freight-handling equipment and personnel trained in receiving goods, often requiring the carrier to bear additional costs such as running specially equipped trucks with lift gates for unloading heavy items, Wood says. “Carriers are looking at what’s not profitable for them to carry,” he adds.

As a result, carriers are requiring higher minimum per-item shipping fees—in many cases rising about 30% to $85 from $65—with additional surcharges for special equipment and other services, Wood says.

LJM works with UPS and dozens of other carriers to negotiate contracts on behalf of about 35 e-commerce retailers. Wood notes that it’s possible to reduce the 6.9% rate hike to a hike of about 3%, but that retailers and other shippers may still have to absorb surcharges and increases in minimum fees.

The rate hike, however, also coincides with long-range improvements UPS is making to its operations, says Jack Mitchell, president and CEO of shipping consultants PANCGroup. “UPS making such investments during a slowing economy indicates a strong commitment to growing their LTL business, which will be to the benefit of shippers,” he says.

The hike does not affect small-parcel shipments, for which UPS increased rates by an average of 4.9% in January.

 

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