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May 29, 2018 4:30 PM, EDT
UPS Plans Rate Hike for Heavy Freight as E-Commerce Volume Grows
UPS parcels (David Paul Morris/Bloomberg News)

UPS Inc. will increase its over-the-maximum limits and the oversize pallet-handling surcharge to $650 from $500 beginning June 4.

The Atlanta-based parcel-delivery company said in a statement to Transport Topics it is raising the rate because many of the items it is being asked to ship are not suited for its small-package network and instead should be moved through its UPS Freight network.

This is the second increase in less than a year for over-the-maximum limit items such as big-screen TVs, beds and mattresses, and appliances. In December, UPS hiked the rate to $500 from $150.

“They [UPS] don’t want these big, bulky packages in their networks. Their facilities are just not designed to handle this type of volume, and they can’t make it clearer,” said John Haber, CEO of logistics consultant Spend Management Experts in Atlanta.

UPS’ announcement applies to packages with an actual weight of more than 150 pounds, or that exceed 108 inches in length or a total of 165 inches in length and girth combined.

The U.S. Department of Commerce said that in 2017 consumers spent nearly $453.5 billion on online purchases, up 16% from $391 billion in 2016. With the dramatic increase in e-commerce, analysts say consumers are becoming more comfortable with buying larger items such as furniture and appliances online.

Furniture sales are emerging as a major growth area in e-commerce, rising 18% in 2015, second only to grocery, according to financial investment firm Barclays. Of $70 billion in U.S. furniture sales, some 15% is generated online, according to IBISWorld.

 

UPS Freight truck

A UPS Freight truck delivers packages in Louisville, Ky. UPS is raising some rates because many of the large items it is being asked to ship should be moved through its UPS Freight network. (John Sommers II for Transport Topics)

In 2017, Sears announced a partnership with Amazon.com to sell its Kenmore appliances online. In some cases, that means washers, dryers and refrigerators are being delivered to homes in the same truck that is carrying smaller, traditional packages. Those trucks usually are operated by one driver, and larger, heavier items can slow a driver’s productivity. “A lot of it is residential delivery,” Haber said.

Many white glove and last-mile delivery companies are specializing in this growing part of the market, but analysts say the rapid expansion of online shopping is putting more pressure on the entire delivery system as customers expect their purchases to arrive the next day, or even sooner.

“[UPS] and FedEx both have been taking efforts to make sure that their networks are receiving and handling the right freight at the right price,” said R.W. Baird Analyst Ben Hartford in an interview with Transport Topics. “As [business-to-consumer] has evolved, there has been a trend to these very irregularly sized, oversized packages finding their way into the parcel network, which it’s not designed to handle.”

FedEx Corp. has not announced if it will match the UPS price increase.

Also in June, UPS will introduce a shipping charge correction audit fee, which will be assessed if the average shipping charge correction in an invoice week is $5 or more. The fee is being implemented because some shippers use incorrect dimensions when creating labels on shipments.

UPS said it wants to stop the practice in which some shippers enter a smaller size for a package weighing a few pounds but actually is much larger and should be rated at a higher level for domestic ground shipments. If UPS did not re-rate the package, it could save shippers a substantial amount of money. By demanding an audit fee, UPS is sending a signal to shippers that packages must be labeled correctly, and if they are not, they will pay an additional charge.

UPS Inc. ranks No. 1 on the Transport Topics Top 100 list of the largest North American for-hire carriers. FedEx Corp. ranks No. 2.