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Preparing for FedEx and UPS Rate Hikes

Starting in January, shipping lampshades, toilet paper, and ping-pong balls via FedEx and UPS will get a lot more expensive.

(Boonton, NJ, July 11, 2014) — In a widely anticipated announcement, UPS says it will follow the lead of FedEx in raising prices for light-but bulky packages larger than three cubic feet.

UPS says its so-called dimensional weight pricing will begin in late December. FedEx plans to change its pricing in early January.

The change means that rates will be based not just on weight but also on the space occupied by a package. The price tag? An estimated half-billion dollars a year in new revenue for FedEx and UPS.

In the July issue of Distribution Center Management, Jack Ampuja of Supply Chain OptiMizers, Jerry Hempstead of Hempstead Consulting, and Jaris Briski of third-party logistics provider Genco, suggest strategies for lessening the coming impact.

Step 1: Figure out how bad it will be. Some DCs will feel little pain, others will feel a lot. “Each customer’s contract and each customer’s package profile can be very different,” Briski says. “Customers that have higher- cube, lower-weight packages will be most impacted.”

Step 2: Reconsider your free shipping thresholds. When FedEx and UPS start charging more to ship light packages, you — or perhaps your company’s marketing department — will need to make a decision. Do you continue to entice customers with free shipping, or do you ask them to share the pain of the price increase?

Step 3: Scrutinize your packaging. Time for some MBWA — management by walking around. Ampuja and Hempstead both suggest standing at your shipping line and examining your packages before they’re sealed. If you’re sending small items in big boxes with a lot of empty space, it’s time to rethink your packaging.

Details on these and other strategies for dealing with the coming price increases appear in the July issue of Distribution Center Management.

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