On the heels of a fuel surcharge adjustment just this February 2015, FedEx is once again adjusting its fuel surcharge index nine months later. Effective November 2, 2015, fuel surcharges for FedEx Express and FedEx Ground will change resulting in Express/International increases of 1.5-1.75%, and Ground increases of .5-1.0% (see Table 1 and 2 below).
These rate increases should impact all FedEx shippers unless a specific fuel surcharge table is part of their contract. The new FedEx fuel surcharge tables is available for viewing at
http://www.fedex.com/us/services/fuelsurcharge-2015.html.
The changes reflect yet another increase in the same calendar year. On February 2, 2015, FedEx Express and International services increased as much as 4% (see Table 3 below).
Had FedEx not made the change, shippers would be paying NO fuel surcharge on Express and International packages since February 2015!
The February 2015 rate change took Ground products up as much as 3.5% from the current fuel surcharge table (see Table 4 below).
Of course, UPS followed FedEx’s lead and also changed its fuel surcharge tables in February 2015 (see Tables 5 and 6 below).
To be fair to FedEx, its chief rival UPS has long enjoyed higher fuel surcharges. The fuel surcharge adjustments FedEx made in February 2015 were designed to bring its fuel surcharge closer to those imposed by UPS. However, like FedEx, UPS also adjusted its fuel surcharge tables simultaneously in February 2015, and Big Brown has collected significantly higher fuel fees from its customers all year (see Tables 7 and 8 below).
Once FedEx adjusts its fuel index on November 2, 2015, whose fuel surcharge table will be a better choice for shippers, FedEx or UPS?
Assuming UPS does not again adjust its fuel surcharge index, when fuel prices are lower FedEx will continue to maintain a slight advantage over UPS. However, when jet fuel is $1.50 or higher and diesel $2.84 or more, FedEx and UPS fuel surcharges will essentially match (see Tables 9 and 10 below).
Of course, FedEx understands fuel prices won’t forever be as low as they are today. However, introducing the increase to its customers at the current cost of fuel, FedEx can tell its customers they are still lower than UPS, perhaps softening the blow of yet another increase.
It’s also interesting to observe a reversal in pricing strategies at FedEx. From 2007-2013, FedEx general rate increases (GRI’s) were always announced in conjunction with a reduction in fuel surcharges to partially offset the increase.
As an example, 2007-2009 FedEx GRI’s for Express and International products were 6.9%, but offset by a 2% reduction fuel for a net increase of 4.9%. 2010-2013, FedEx GRI’s for the same products were 5.9%, with a 1% fuel surcharge reduction for a net increase of 4.9%.
However, in 2015 there was no offset for fuel. GRI was the same 4.9% net, but in Feb 2015, shippers took as much as a 4% increase on fuel. The net impact, of course, is a lot higher than 4.9%. And in 2016, the GRI is 4.9% with no offset, but fuel surcharges increasing as much as 1.75%. A higher net result is achieved again.
One final zinger to FedEx customers was just posted to the FedEx website. FedEx SmartPost DAS surcharges are more than doubling in 2016 and non-machinable surcharges are going up 16.8% (see Table 11 below).
While last year’s dimension-based pricing and other FedEx and UPS revenue management actions led many pundits to call it the “mother of all rate increases”, the aggregate impact of the announced 2016 GRI, fuel surcharges and special handling rate hikes is proving to be no less potent. Forewarned is forearmed. As always, good luck!