Blog Posts Why are My Parcel Shipping Costs Increasing?

Parcel delivery costs businesses $99 billion annually, according to The Wall Street Journal. And those costs will continue to rise.

With ecommerce sales volume driving parcel shipment volume to ever greater heights, it’s important to understand the key factors that contribute to these costs. Saddle Creek recently published a new whitepaper to help companies navigate the increasingly complex parcel landscape.

Following is an excerpt from The Rising Role of 3PLs in Parcel.

Rising costs for small-package delivery

Major carriers are instituting an Annual General Rate Increase (GRI) for small parcels for 2019. Merchants must plan for an average net 4.9 percent increase for UPS® Ground and UPS Air as well as FedEx Express and FedEx Ground. FedEx SmartPost shipping rates are increasing as well. The USPS has proposed an increase of 5.9 percent for Priority Mail rates and 3.9 percent for Priority Mail Express. In addition, rates for First-Class Package service (often used for fulfillment) will increase 11.9 percent on average and be calculated based on zone.

Dimensional (DIM) weight rates are another important consideration. In fact, the impact of DIM weight has increased by 33 percent in the past five years, according to PARCEL magazine. Commonly used to determine the price of lightweight packages, these rates are based on package density. DIM weight is calculated by multiplying the length, width and height of a package and dividing by a predetermined divisor.

Beginning in June 2019, the USPS will be extending dimensional weight (DIM weight) to Priority Mail and Priority Mail Express for packages larger than one cubic foot and changing the DIM weight divisor. This will have a significant impact on companies that routinely ship larger, lightweight packages.

Surcharges for fuel, residential, delivery area, etc. also constitute significant increases for most merchants. In fact, surcharges can make up 10 to 40 percent of their total parcel spend, according to Jennifer Doles, Saddle Creek’s Senior Manager, Transportation.

Recent changes in FedEx surcharge rates constitute significant increases for most shippers, while some UPS surcharges have increased by close to 20 percent for 2019. The uptick in peak season surcharges is especially notable for merchants shipping packages that are oversized or weigh more than 70 pounds.

To learn more about parcel shipping challenges and how third-party logistics providers can help, download our new whitepaper.