shareholders will lay bare the positive impact rate increases have on FedEx’s and UPS’s bottom lines. In its 2017 annual report, UPS repeatedly attributes growth in revenue per piece — a key carrier metric that measures how much money the carrier makes per shipment — foremost to “changes in base rates, customer and product mix, and fuel surcharge rates.” Similarly, FedEx points to improved base yields due to “higher rates, package weights, and fuel surcharges” in its latest annual report. A common complaint among shippers is the fact that the small-package industry is one of the few where rates continually increase on an annual basis. Moving inventory is necessary for businesses, making partnerships with FedEx and UPS essential. Most decision makers acknowledge the important role each carrier plays and the reliability with which they perform. The rub, however,
is that they can’t raise prices on their customers at the same rate the carriers increase theirs. The base rate for the average domestic parcel is 50% higher today than it was in 2010. That presents a problem, especially for retailers, who face constant pressure to move their own prices in the opposite direction. Effective carrier negotiation strategies are based upon facts, and there is no better place than a carrier’s financial filings to dive into the details. Whenever a carrier proudly announces strong earnings, there is a strong chance that it is due in no small part to higher prices, and it will be stated plainly there. That means the customer is ultimately padding the pockets of investors at the expense of its own interests. Pay close attention when these announcements are made, and take advantage of this natural leverage point to build your case for lower rates.
RATE INCREASE ANNOUNCEMENTS This one isn’t exactly breaking news, but it’s surprising how few organizations prioritize rate negotiations in the time surrounding these annual announcements. Admittedly, the timing can be tough. While each carrier will generally make an announcement of its intention to raise rates mid-year, FedEx and UPS typically wait until closer to the fourth quarter — the busiest time of year for many businesses — to provide any details. Understandably, those details can be daunting. The theme is generally the same — a 4.9% average increase, changes to surcharges, etc. — but there are usually a few new rules that companies wouldn’t be able to predict. Still, from a planning standpoint, companies would be wise to expect the announcement and allocate time to understanding the implications
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