This Week in Parcel: April 21, 2023

This week in parcel, carriers are dynamically changing prices, retailers are cutting costs, and the Teamsters-UPS negotiations are already off to a rocky start. Will the changes in the industry be permanent, or are they just a sign of the turbulent times?

FedEx and UPS shifting to dynamic pricing?

For years, base shipping rates stayed static until carriers unveiled their annual rate increases. But UPS and FedEx are looking to change that. The two carriers already leverage surcharges to increase prices, but now, UPS and FedEx are adding more dynamic pricing to their pricing models. FedEx recently brought in $150 million in profits using a dynamic pricing model for home delivery fees during peak season. This model adjusts surcharges depending on how much more volume shippers are sending out compared to earlier in the year. Another type of dynamic pricing you should expect to see with FedEx is day-dependent pricing, where certain days are more expensive depending on volume, as well as pricing based on hotspots. UPS has moved toward dynamic pricing since the launch of Deal Manager, which looks to make shipping easier for small and medium-sized businesses. You can learn more about dynamic pricing and what to expect from the two carriers moving forward here.

Amazon goes regional with its fulfillment model

In another move to cut costs, Amazon has shifted toward a regional fulfillment model. This model is aimed to not only lower costs but also boost delivery speed. Previously, the retailer would ship an ordered product from another part of the country if the local fulfillment center did not have the product in stock. Now, Amazon is rebalancing inventory in regions, hoping the move will result in faster delivery times and lower costs. This is just one of many shifts Amazon has made in the last year to cut spending. Previously, the company canceled plans for warehouses and trimmed its workforce. If you’re interested in learning more about Amazon’s fulfillment model shift, click here.

Teamsters tell UPS national talks on hold until regional contracts are completed

As Teamsters-represented workers and UPS begin negotiations for the national contract that expires at the end of July, the union has told the carrier that it would not start negotiations until the regional contracts are completed. The union revealed that only 10 of the 40 supplements to the national contract have been resolved. Regional supplemental agreements are important to Teamsters-represented employees because they include stipulations not covered in the national agreement. These stipulations include paid time off, work hours, and discipline language. The lead-up to the negotiation between the carrier and Teamsters has been tense, and if the two sides struggle to resolve the regional contracts, a strike will become even more likely. Read more about the importance of the regional contracts here.