With shipping volumes remaining at record levels, most all freight methods and carriers have struggled to keep up with the demand. This has led to skyrocketing prices on everything from inbound container loads to small parcel ground delivery. Managing these ever-increasing transportation costs and changes in service levels has become increasingly more complex – especially in the small parcel arena. First, we will discuss the rates increases. Then, how we can assist you in taking action.
Just recently, FedEx announced the largest General Rate Increase in nearly a decade. Effective January 3, 2022, shipping rates will increase by an average of 5.9% for Express, Ground, Economy, Home Delivery, and Freight. This will be a significant impact on all shippers, especially those offering “free freight”, as it will be an additional cost hurdle to overcome.
As with all things carrier-related, the changes are complex. Many companies will be hurt with increases greater than 5.9% as this is an "average" increase for all weights, zones, and service levels. Customers who rely on Residential Ground and Economy (formerly SmartPost) with packages less than 10lbs will be hit with the largest increases with 1-5lb packages increasing 7.5% and 6-10lbs closer to 6.5%. Economy Delivery Area Surcharges (DAS) are up a staggering 53.2% and up 61% for DAS extended. In addition, the FedEx Ground minimum package charge is increasing by 6.9%.
There are other increases to note, these include a Fuel Increase in November of 1.75%. This is the second increase in fuel implemented by FedEx this year even though their existing index accounts for an increase at the pump. This is especially difficult as it applies to most billable revenue.
Within e-commerce businesses, it is not uncommon to have a robust, easy-to-use friendly return policy. Shippers will begin seeing a new Delivery and Returns surcharge of a $1.00 for each package. This will be assessed on packages that are delivered, or returned, using FedEx Ground Economy services (formerly SmartPost) as an “Extension of Peak Surcharges”.
Not lost in the details is a move that adds Zone differences to the cost for Additional Handling and Large Package surcharge with some rates increasing as much as 38%. Notably, this charge can apply to small lightweight shipments based on how they are packaged by the shipper.
This unprecedented increase comes as FedEx is still struggling with on-time deliveries performance, lagging significantly behind UPS.
These increases will undoubtedly put pressure on retailers and shippers to raise product prices, increase shipping rates, or find other ways to manage higher costs. For those companies offering “free freight”, this will put even more pressure on companies to determine the future of these programs. It is critical to have a detailed understanding of how these increases will impact your organization's bottom line and develop a strategy now to mitigate these costs in early 2022.
To assist clients with these changes, F. Curtis Barry & Company and its partners assist with an analysis and financial impact of these significant rate increases to your bottom-line transportation expenses. This type of analysis is critical to understand the measured net impact and potential cost increases to your company while highlighting areas of potential savings opportunities with your parcel carriers … expect UPS to announce their 2022 rate increase any day now!
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