UPS Freight Raises Rates…More to Follow?

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

Last week, William Cassidy at The Journal of Commerce reported that UPS Freight is enacting a 6.9 percent rate hike effective August 1st. While this rate hike will apply to non-contract rates, it will still have a far-reaching impact across UPS Freight's customer base.

This price increase effectively raises the bar across the less-than-truckload industry. It's the largest LTL rate increase in several years, despite recent concerns about unstable fuel prices. Companies using UPS Freight aren't the only ones that should be concerned. As the first major rate increase of the year to be announced (in LTL), we should expect other carriers to follow suit. Cassidy reports:

"The move is likely to kick-start LTL pricing that has been increasing at a lower rate than truckload charges, as excess capacity slowly leaches from LTL networks... UPS Freight's move could make it easier for companies struggling to increase yield, such as YRC Worldwide, to get customers to agree to higher rates."

Secondly, this move is indicative of the increasingly unpredictable nature of rate increases -- and should prompt both logistics and procurement professionals to stay on their toes when it comes to managing contract and non-contract spending:

"Historically, LTL trucking companies hike non-contract rates at the beginning of the year. Last year several carriers took increases in the fall and winter. Other LTL carriers are likely to follow UPS Freight with earlier-than-usual GRIs (general rate increases)."

Lastly, while this rate hike doesn't directly impact contract customers, it does impact future contract negotiations by raising the pricing floor. It may seem that the second half of 2011 has only started -- but get ready. Rate hike season is upon us.

-- John Haber, EVP of Transportation, NPI

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