2 things you need to know about the 2018 rate changes
The holidays are upon us, and no doubt, we’ll see online shopping continue to increase year over year. As consumers trend toward buying online, shippers—particularly LTL and small parcel—will see an increased volume. The growing economy should be good news for your business, but if you’re not prepared for the rate changes, you could see freight charges eating into your profit margin.
As many businesses are setting their budgets for 2018, now is the time to think about how you’ll manage freight costs as a percent of sales.
If you ship—FTL, LTL or small parcel, or any mode of transportation—here are 2 things you need to know about freight rate increases for 2018.
1. UPS and FedEx announced this fall that their rates for small package will increase 4.9%, effective January 1, 2018.
But that’s only part of the story. With increases in accessorial fees, or surcharges, small parcel shippers may see a total increase of upwards of 200%, if unmanaged. LTL shippers will probably see an increase of 11-14%, including accessorial fees, again, if unmanaged. Additionally, starting January 22, a 2.5% third party billing charge will apply to drop shipments that are billed to a third party.
The bottom line: improvements to the economy could mean increased sales for your company, but if unmanaged, these rate and fee increases will eat into your profits or even result in a negative gain.
2. Carriers are charging by dimension instead of weight.
More and more LTL carriers are charging by the amount of space your shipments use instead of weight. Residential deliveries are quickly rising, but carriers aren’t necessarily seeing an increase in tonnage. Additionally, we’re seeing trucking shortages, predicted back in 2013, as a result of carriers reducing capacity in the wake of the recession. They are now competing for drivers and offering better wages and incentives to attract new drivers, which also drives GRIs.
The bottom line: shippers will need to get more efficient with packaging and smarter with shipping.
CMG can help you manage your shipments smarter.
We take a 4-pronged approach to minimize your freight expenditures and maximize your savings.
- Is your business too small to negotiate rates directly with the carrier? We can help! Up to 25% of potential savings opportunities come from CMG negotiated rates. But that’s only a portion of the money we can save you!
- CMG’s proprietary reporting system identifies those hidden costs that freight carriers aren’t always upfront about, and that can mean greater than anticipated increases in freight costs.
- We also make personalized recommendations for process and operation improvements so you can manage your shipments (inbound and/or outbound) smarter. We often find the bulk of cost savings opportunities here!
- Our freight experts also provide you with strategic planning and new methods to help you maximize your profits.
While these rate increases will take effect this January, rates are always subject to change. But with CMG, you don’t have to bear the full bore of freight cost increases. Let us show you how we much of a difference we can make for your bottom line. We are not a third party logistics company, so you retain full control over your shipping. With no contracts ever, you have nothing to lose!
Find out just how much CMG can save you!
We welcome the opportunity to show you how much of a benefit CMG can be to your team. Contact us below for a no-obligation assessment.