By Keith Myers, Sr. Consultant, Shipware
This article first appeared in PARCEL on September 22, 2021.
Effective January 3, 2022, FedEx Express (Domestic, US Export and US Import), FedEx Ground, and FedEx Home Delivery shipping rates will increase by an average of 5.9%.
FedEx Freight will increase rates by 5.9% for PZONE/EZONE base rate shippers and 7.9% for FXF 1000/501 base rate shippers.
This is the first time since 2013 that the average parcel increase is greater than 4.9%.
Remember, there is often a discrepancy between the announced increases and the effect that the increase has on individual shippers.
Our team at Shipware has identified several important takeaways for shippers to take note of and assess:
1. The fuel surcharge is increasing by 1.75 points on all services
FedEx is increasing the fuel surcharge on November 1. This is due to “incremental costs associated with the challenging operating environment” according to their press release.
2. FedEx will charge $1.00 on all deliveries and returns in the Ground Economy network
This surcharge, new for 2022, raises a couple of questions. First, simply, is why? Passing the (literal) buck. Now that FedEx is delivering these packages without the USPS, they are incurring higher costs and passing those on to their customers.
Second, why not add a dollar to the base rates? Why assess it as a surcharge? Well, FedEx likely applied this $1.00 increase to a new surcharge rather than to list rates to avoid it automatically being discounted for customers.
In other words, a $1.00 increase to all list rates would be discounted by nearly all shippers’ contracts, but as a new surcharge, no one has relief without negotiating further. This fee is effective January 17.
3. Surcharges will increase by more than the announced 5.9% for most high-frequency items
Delivery Area surcharges will increase by over 50% for Ground Economy and around 10% for all other services.
4. The ground minimum package charge (zone 2, 1 pound list rate) has increased by 6.85% to $9.36
Just like last year, the 1-5 lb. ground shipments are taking a higher increase than heavier weights. Note that increases will be different based on negotiated minimum charges and discounts.
5. FedEx moves to zone-based surcharges on Additional Handling and Oversize
UPS implemented this practice in 2021 and FedEx is following suit on January 24. A notable difference is that FedEx has 4 zones instead of UPS’s 3 and increases are substantial for longer zones. This represents as much as a 34.4% increase for zones 7 and 8 for dimensions.
6. Increases are generally similar across zones
Express Saver and 2 Day AM are exceptions, but most other zones are hovering around the announced 5.9% line.
How will this affect individual shippers?
The General Rate Increase will affect some shippers more than others.
If you’re a shipper that uses Ground Economy frequently, ships large packages, ships low weight ground or ground residential, or incurs a large number of accessorial charges (as a percentage of overall spend), it is likely that you will be subject to an increase much larger than the stated 5.9%.
As is the case annually with rate increases, it is vital to understand how all the combined changes will impact your individual characteristics and ultimately your overall shipping costs.
Keith Myers is a Senior Consultant for Shipware, a parcel consulting firm that specializes in cost reduction and recovery services. Prior to his work at Shipware, Keith spent seven years as a Senior Pricing Advisor at FedEx, where he analyzed parcel and LTL programs for accounts up to $100M in spend. Keith earned an MBA with certificate in Supply Chain Management from Northeastern University. He can be reached at [email protected].