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“Will Postal Service Rate Cuts Steal Business From UPS and FedEx?” in SupplyChainBrain

09/02/2014

By Robert J. Bowman, SupplyChainBrain

The battle of the parcel carriers has begun.

While UPS and FedEx are preparing to raise rates on many smaller packages, the U.S. Postal Service is dropping the price of shipping heavier parcels. The move can be seen as part of a concerted effort by the Postal Service to draw business away from the two private carriers, who together handle nearly 80 percent of U.S. ground shipping volumes.

It began with FedEx’s announcement in May that it would begin applying dimensional weight pricing to all ground shipments as of Jan. 1, 2015. FedEx had previously been using weight as the sole criterion for pricing ground packages under three cubic feet in size. (For larger packages, as well as for express and air shipments, the carrier had already been using the dimensional weight formula.) UPS soon matched the move, with the change to take effect on Dec. 20, 2014.

UPS and FedEx were motivated by a desire to increase margins on smaller, lighter packages. Their pricing will now account for the amount of space that boxes take up on a truck. The move is expected to boost ground-shipping costs by 30 to 50 percent.

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