The annual rate adjustment season is upon us. FedEx announced its plans for a 5.9% average general rate increase (GRI), effective January 6, 2025. Shortly after, UPS followed suit, announcing an identical 5.9% rate increase.
This UPS rate increase will raise the cost of a broad array of UPS services—including Economy, Ground, and Next Day—and applies to U.S. domestic as well as export and import operations.
So, what are the reasons for and ramifications of such an increase on your shipping expenses?
Here’s what you need to know about UPS rate increases.
What Is the UPS GRI?
The General Rate Increase (GRI) is a standardized mechanism employed by leading shipping carriers like UPS and FedEx to update their pricing schedules. It's presented as a necessary step to stay aligned with inflation, counter rising operational costs, invest in new technologies, enhance services, and perform fleet maintenance. However, it's essential to remember that this financial buffer primarily benefits the carriers themselves, not their customers.
When Is the UPS GRI Effective Date?
In its October announcement, UPS confirmed that the 5.9% GRI will go into effect on December 23, 2024. This timing, just after the holiday season, can pose challenges for businesses already dealing with peak shipping demands.
How Does this Compare to Previous UPS Rate Increases?
While this year's 5.9% rate hike is lower than some previous year's, it's still well above historical pre-pandemic norms of 3% to 4%. The rate increase this time around reflects ongoing inflationary pressures and higher operating costs in the logistics industry, which have contributed to a consistent trend of elevated rate hikes. Additionally, this increase continues the trend of applying higher adjustments to certain surcharges, which may have a more significant impact on shippers who rely heavily on those services.
A New Credit Card Surcharge!
In addition to the GRI, UPS introduced a 2% surcharge on invoices paid via credit card starting October 26, 2024—announced a mere two weeks before its implementation. This adds further pain to the already burdensome peak season surcharges that many businesses are grappling with. There’s little doubt that this is an effort to boost UPS’s fourth-quarter numbers, and if customers allow it, this surcharge will likely carry on indefinitely into the new year and beyond.
Other Charges to Consider
The GRI average only paints a partial picture when it comes to understanding and controlling your total shipping expenses. Beneath that 5.9% rate hike are various additional line-item costs that might cause the cost of shipping to unexpectedly balloon. Specifically, businesses must account for the following two factors:
Surcharges – These are separate fees that carriers impose on top of standard rates, such as charges for oversized parcels, additional handling, and delivery area surcharges. Often unseen but impactful, these surcharges can quickly inflate your final shipping rates by more than 10%.
Minimums – The concept of 'minimums' represents the baseline charge for sending any package, separate from any special rates or discounts. These can be particularly surprising for shippers, creating a discrepancy between expected and actual costs.
How Does the GRI Impact Businesses?
Understanding the ripple effects of the GRI on your business is crucial for proactive planning. Here's a quick rundown of how the UPS rate increase can affect various aspects of your operations:
Margins squeeze – A GRI can quickly erode your profit margins, especially if you're operating on thin margins to begin with. When shipping costs rise, you must either absorb them or pass them on to the customer, both of which can affect profitability.
Budget revisions – You may need to re-evaluate and adjust your annual or quarterly budgets to account for increased shipping costs.
Supply chain delays – Increased costs might make businesses reconsider their supply chain logistics, potentially leading to delays as new, cost-effective strategies are devised.
Cash flow – An increase in regular operating expenses like shipping can put a strain on your cash flow, requiring more vigilant financial oversight.
Erosion of competitive edge – If competitors find more effective ways to mitigate the effects of the GRI, they could gain a pricing advantage over you in the market.
In addition to understanding these rate hikes, delving into the history of USPS can provide a broader perspective on how shipping strategies and costs have evolved over time, influencing today's logistics landscape.
Control and Reduce Your Shipping Costs with Lojistic
Brace yourselves—2025 UPS rate hikes are nearly here. Are you fully prepared?
How Lojistic Can Help
Impact Analysis: Our in-depth Impact Analysis can provide businesses a clear picture of how these upcoming rate changes will influence their operations over the next year, and offer strategies to offset these imminent hikes. Knowledge empowers decision-making!
Unified Shipping History: Our free platform enables companies to effortlessly view their consolidated shipping history across various carriers and methods, delivering crucial data for making more informed choices.
Free Invoice Audit: A Lojistic account automatically scans for billing discrepancies, allowing businesses to claim refunds and cut down on avoidable costs.
Change Impact Assessment: Companies can leverage our "Compare Mode" to evaluate the financial impact of adjustments, such as rate increases, on their overall shipping expenditures, then easily implement necessary operational changes and measure the outcome.
In a climate of seemingly ever-increasing shipping costs, savvy businesses need to deploy every tool available to maintain control over their costs. Our platform offers instant analytics and cost-saving automation designed to help you take charge of your shipping costs. Consider it your centralized home for full visibility and command of your shipping spend.
Understanding the implications of these rate hikes is crucial for businesses, and we encourage you to explore our FedEx Rate Increase article as well. Understanding both FedEx and UPS rate adjustments will empower you to make informed decisions to optimize your shipping strategies and manage costs effectively.
VIEW OUR COMPREHENSIVE GUIDE TO THE 2025 UPS & FEDEX GENERAL RATE INCREASE
Author
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.