Published Tuesday 28th January 2020
Most of the global parcel carriers will increase their base tariff at the beginning of each year, but how often do you check the detail in them? Average base tariff rises for 2020 are around 5%, which they have been for the last 5 years. That’s an increase of 25%. With the additional increases in fuel surcharge of over 5% in 2019 alone then an export parcel that would have cost you £57.50 including fuel surcharge in December 2018 will cost £66.00 including fuel surcharge in January 2020 or a 14.8% increase.
The UK office for national statistics state that prices have increased by 11.03% in the last 5 years. So how can this be justified?
Most carriers will point to large investments to improve service such as IT and infrastructure or Brexit uncertainty to justify the rate rises, but if you’re finding it challenging to recover increased delivery costs like this from your customers, read on, because this can be a bitter pill to swallow, as it inevitably ends up eating in to margins. Analysis carried out by ERA show that the tariff increases are very varied according to the country, carrier zone and weight, so you could find that you are exposed more than you think based on your volume profile of weights and shipment destinations. Compounding uncertainty this year is Brexit. If you export into Europe, you’ll already be familiar with the price disparities between shipping to EU European destinations compared to non-EU European destinations such as Switzerland and Norway. Is this a clue on what you’ll need to budget in the event of a ‘no-deal’ Brexit?
ERA has assisted clients who have inadvertently agreed to highly complex tariff structures and contracts that can leave organisations very exposed to rate fluctuations, even without the carrier obliged to inform them of rate increases, resulting in invoicing misery and deadlock. If you attempt to renegotiate you have to be extremely cautious if a tariff offer seems good, because there could be a sting in the tail. Motivated by generous commissions sales contacts may attempt to neglect critical detail from you with costly consequences. However, there is an opportunity for you to off- set increases if you understand the price strategy and surcharging mechanisms of the carriers, but as always, the devil is in the extremely complex detail, and requires a lot of time and dedication to unravel.
If you are concerned about your rate rises and would like it addressed, then it is crucial to seek an independent review in order to achieve the best possible result. Most of the parcel carriers’ customers are on very different tariffs structures which are independently calculated on the buy profile volume mix.
ERA have experts that are alumni of some of the largest global parcel carriers. They are able to benchmark your buy profile and current tariff against that of other similar organisations and can advise on the best pricing and strategy for your business to meet its future parcel distribution needs. Alternatively, you’ll be left with a perpetual nagging insecurity that you are not paying the best rates.
Contact us today if you’re interested in protecting the future success of your business, particularly in terms of managing your parcel carrier rates. Our specialists can help you reduce your parcel carrier rates and offer peace of mind that your arrangements are optimised effectively.
About the Author: Simon Perkins, following a degree in Transport and Logistics Simon has 10 years experience working within the national and international parcel distribution industry managing major national accounts across many industry verticals for UPS, the largest global parcel carrier.