UPS 2021 Rate Increases Impact B2C Shippers

November 4, 2020


COVID-19 related e-commerce growth is creating headaches for shippers in the form of reduced last-mile delivery capacity, suspension of service guarantees and rising costs. In contrast, the on-time performance of last-mile delivery providers is slipping due to the record volume increases.

According to UPS, e-commerce sales are projected to make up more than 20% of all U.S. retail sales this year. Additionally, they do not believe e-commerce retail sales will decline, even after the pandemic.

For the eighth consecutive year, UPS announced an annual average 4.9% increase for rates effective December 27.

However, the real costs to shippers are hidden in the 100 plus surcharges, all of which will increase in 2021.

More than half of UPS's total volumes now favor B2C because of COVID-19. For example, during the third quarter, 61% of total UPS volumes were B2C and grew at 34% year-over-year while B2B volumes declined almost 8% year-over-year.

B2C packages are usually costlier for UPS to deliver versus B2B packages. Also, the rise in big and bulky e-commerce packages has created additional costs for small parcel delivery companies. These packages often require special handling and, thus, more time to manage.

For 2021, shippers' most significant increases will be related to B2C deliveries – Additional Handling, Delivery Area, Residential and Large package.

Additional Handling Fees

The Additional Handling charge is an extra fee for shipments that do not fit into the normal system at a UPS sorting facility and thus require special handling. The Additional Handling charge depends on weight, packaging, and dimensions.

Effective December 27, 2020, a 6.7% increase will be applied to additional handling size where the new rate will be $16.00 per package.  Effective January 10th, UPS will also begin applying the fee to packages whose length and girth combined exceed 105 inches but are still less than 130 inches which is Large Package. By weight, the additional handling fee will increase by 6.2% to $25.50 per package.  For packaging, the fee will increase 7.0% to $15.25 per package.

Additional handling charges will also differ by zone for non-hundredweight service packages effective April 11, 2021, and for hundredweight service packages beginning July 11, 2021.

Delivery Area Surcharges

Packages picked up or delivered to rural and remote addresses may have a delivery area surcharge added to overall shipping charges. UPS determines these locations by publishing a list of zip codes.

Delivery Area surcharges can be added to commercial or residential locations as well as by Air and Ground. Also, there are regular delivery area surcharges as well as delivery area extended.

Among the most significant delivery area surcharge increases are Ground residential delivery area surcharge, which will increase 6.4% to $4.30 per package, while Ground residential delivery area extended surcharge will increase 9.3% to $5.90 per package. Commercial DAS and DAS Extended increases are 5.0% and 7.25% respectively.

Residential Surcharges

A residential surcharge is applied to a residential delivery made to a home or residential location, including a business operating out of a home.

The ground residential surcharge will increase by 8.5% to $4.45 per package, while the air residential surcharge will increase by 6.4% to $5.00 per package.

Large Package Surcharges

Large Package fees are applied when the length is greater than 96 inches or the length plus girth is greater than 130 inches. The Residential charge will increase 8.33% to $130 while the Commercial charge will increase 5% to $105.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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UPS 2021 Rate Increases Impact B2C Shippers

November 4, 2020


COVID-19 related e-commerce growth is creating headaches for shippers in the form of reduced last-mile delivery capacity, suspension of service guarantees and rising costs. In contrast, the on-time performance of last-mile delivery providers is slipping due to the record volume increases. According to UPS, e-commerce sales are projected to make up more than 20% of all U.S. retail sales this year. Additionally, they do not believe e-commerce retail sales will decline, even after the pandemic. For the eighth consecutive year, UPS announced an annual average 4.9% increase for rates effective December 27.

However, the real costs to shippers are hidden in the 100 plus surcharges, all of which will increase in 2021.

More than half of UPS's total volumes now favor B2C because of COVID-19. For example, during the third quarter, 61% of total UPS volumes were B2C and grew at 34% year-over-year while B2B volumes declined almost 8% year-over-year. B2C packages are usually costlier for UPS to deliver versus B2B packages. Also, the rise in big and bulky e-commerce packages has created additional costs for small parcel delivery companies. These packages often require special handling and, thus, more time to manage. For 2021, shippers' most significant increases will be related to B2C deliveries – Additional Handling, Delivery Area, Residential and Large package.

Additional Handling Fees

The Additional Handling charge is an extra fee for shipments that do not fit into the normal system at a UPS sorting facility and thus require special handling. The Additional Handling charge depends on weight, packaging, and dimensions. Effective December 27, 2020, a 6.7% increase will be applied to additional handling size where the new rate will be $16.00 per package.  Effective January 10th, UPS will also begin applying the fee to packages whose length and girth combined exceed 105 inches but are still less than 130 inches which is Large Package. By weight, the additional handling fee will increase by 6.2% to $25.50 per package.  For packaging, the fee will increase 7.0% to $15.25 per package. Additional handling charges will also differ by zone for non-hundredweight service packages effective April 11, 2021, and for hundredweight service packages beginning July 11, 2021.

Delivery Area Surcharges

Packages picked up or delivered to rural and remote addresses may have a delivery area surcharge added to overall shipping charges. UPS determines these locations by publishing a list of zip codes. Delivery Area surcharges can be added to commercial or residential locations as well as by Air and Ground. Also, there are regular delivery area surcharges as well as delivery area extended. Among the most significant delivery area surcharge increases are Ground residential delivery area surcharge, which will increase 6.4% to $4.30 per package, while Ground residential delivery area extended surcharge will increase 9.3% to $5.90 per package. Commercial DAS and DAS Extended increases are 5.0% and 7.25% respectively.

Residential Surcharges

A residential surcharge is applied to a residential delivery made to a home or residential location, including a business operating out of a home. The ground residential surcharge will increase by 8.5% to $4.45 per package, while the air residential surcharge will increase by 6.4% to $5.00 per package.

Large Package Surcharges

Large Package fees are applied when the length is greater than 96 inches or the length plus girth is greater than 130 inches. The Residential charge will increase 8.33% to $130 while the Commercial charge will increase 5% to $105.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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