First it was peak surcharges, then addendums to the surcharges, and now UPS has announced General Rate Increases for 2020-2021 (for a quick explanation of how GRIs work and how you can weather them best, watch this video). Starting December 27th UPS Ground, Air, and International services will increase by an average 4.9%. This increase echos UPS’s last round of GRIs and FedEx’s 2021 GRI which they announced last month. As is typically the case with these kinds of increases, UPS’s GRI will impact shippers differently depending on several factors.
UPS new CEO, Carol Tomé made several statements during their Q3 earnings call that provide context for the company’s direction and subsequently announced GRIs (quotes originally published here).
Statement 1: “The final piece of our strategy comes down to being better, not bigger. Now that doesn't mean UPS is not going to grow because we are. It means that we will lean into growth from the right opportunities like SMBs, international, global freight forwarding, and other high-yielding sectors, and we will grow from our revenue quality initiatives. We are on a journey to optimize the volume that flows through our network.”
Statement 2 (answering an investor question about de-marketing large volume shippers that don’t meet margin goals): “When you have tight capacity, it also means that prices tighten. And as prices tighten there is a shift in certain customers who are more price-sensitive than others. We're okay with that if we're losing non-nutritive sales. We're okay with that. It's not about volume share growth. It's about value share growth. So that's how we'd like you to think about us at least in the short-term value share growth.”
But how does this new direction - quality over quantity - affect shippers?
So what does all this mean? Even though GRIs affect some shippers differently than others, everyone can expect some increase in cost. The price hikes will be particularly painful for low weight Ground packages and long distance Air packages. Large packages that require special handling will continue to be discouraged on the UPS parcel network.