Ready For Rate Hikes? How To Prepare for Increased Shipping Costs in 2017

Preparing your eCommerce business for the new year? Looking ahead is both exciting and daunting. After all, there are always obstacles that force you to adjust your business strategy. One challenge that has become a regular update with each new year is carrier rate hikes.

Shippers and parcel carriers have seen increased costs on their own operations, and need to adjust shipping prices to balance out operational costs. The cost of shipping has increased 25 percent since 2012, which follows typical patterns, according to Logistics Management. Increasing costs allow shippers to continue servicing retailers and help them meet customer expectations.

While increased shipping prices are never ideal for your bottom line, they do present an opportunity to rethink how your product gets from the warehouse to the customer. 

Here’s what to know about upcoming changes, and the best way to handle them:

What rate increases should you be expecting?
This fall, FedEx,USPS and UPS all announced changes to their pricing structure for late 2016 and early 2017. On UPS’s end, can expect  a 4.9 percent rate hike for U.S. Ground, Air and International beginning December 26. A 4.9 percent rake hike was applied to UPS Freight starting September 19. USPS plans to increase their shipping services an average of 3.9 percent, to take effect January 22, 2017.

FedEx will implement the bulk of their rate hikes for the new year as well. For starters, they announced changes to their dimensional weight pricing. This involves an additional handling surcharge for any package with the longest side exceeding 48 inches for all Air and International packages, a foot-long decrease from what the cut-off formerly included. In addition to the dim pricing changes, handling charges will go up by $0.35, and FedEx and FedEx Ground will adjust rates weekly rather than monthly.

How to adjust?
Increased costs mean retailers and brands need to carefully manage their logistics services. Since rates change from week to week with some carriers, planning ahead is crucial. Preparation starts with awareness. Here are steps you and your team should take to ensure a smooth-as-possible transition into these changes.

  • Meet with your fulfillment team to discuss what cost changes mean for operations to ensure everyone is on the same page. Without open discussion of the changes and your options, you risk not making the best long-term decision for your brand.
  • Partner with the experts. A fulfillment partner that has strong relationships with shipping carriers such as FedEx and UPS can work with shippers to clarify shipping charges and negotiate better rates. Experience logistics partner should also use a transportation management system, such as ProShip, to lower your business’s fulfillment costs.
  • Be as thorough as possible when planning your budget. Applying many possible scenarios, especially those that consider new week-to-week rate adjustments, will help to make sure your budget is covered for whatever is thrown your way from shipping providers. Above all, this will help to get you in the right state of mind for the changes new rates will bring. 

Rate hikes sound small in theory, but they will have a noticeable effect on your budget - and a negative one if proper time and effort is not invested in planning. While 2017 shipping increases may not be a welcome change for the new year, taking measured steps to understand and best incorporate them into your logistics budget is the smart option for your business’s well-being. For more information on how to strengthen your business’s fulfillment, head to our resources page.