Retailers have many concerns, and among the most pressing are shipping costs. How can you get packages to your customers quickly and more cost-effectively? FedEx is a large carrier moving nearly 14 million shipments each business day. The company has over 675 aircrafts and 175,000 motorized vehicles transporting items, and for the most part, they do so with nearly perfect accuracy, achieving 98 percent on-time delivery.
But as a retailer, when you’re managing costs, the first thing you need to know is how to determine what a package costs to ship, and equally important, whether it’s possible to reduce those costs. Let’s take a look at how to calculate FedEx shipping rates and more accurately forecast these expenses.
Understanding FedEx service options
Many variables play into the shipping costs equation, but one of the largest is speed. How quickly must your package arrive? In most situations, especially in cases of free shipping offers, slower delivery is fine. As a result, a service such as FedEx Ground is acceptable, delivering the package within several business days.
In special circumstances, faster services, such as overnight delivery, are required. For example, maybe there was a mistake internally and the package didn’t go out in time. As a result, the customer won’t have the item for an upcoming special event, and time is essential in ensuring customer satisfaction.
Understanding all available options, and the potential costs, is a good starting point for determining how these costs fit into your shipping strategy. Let’s take a look at FedEx shipping options, and then we’ll dive into exact costs.
FedEx SameDay. This service provides reliable door-to-door delivery within hours and is available seven days a week, 365 days a year. SameDay is available in all states for package weights up to 150 lbs. For packages that exceed 150 lbs., FedEx SameDay Freight can be used.
FedEx SameDay City. This service offers a door-to-door option for delivery within hours. Delivery time varies based on the distance traveled. For example, for 0-15 miles, packages typically arrive within two hours. Packages that must travel longer distances, such as more than 60 miles, can expect a delivery time closer to several hours.
FedEx First Overnight. This service is a good option when a package must be delivered early the next business day. Next-day business delivery is provided by 8:00 a.m., 8:30 a.m., 9:00 a.m. or 9:30 a.m. to most areas. For extended areas, delivery time might be by 10:00 a.m., 11:00 a.m. or 2:00 p.m., depending on the destination ZIP code. FedEx First Overnight is available throughout all 50 states and is available for packages up to 150 lbs.
FedEx Priority Overnight. This service is a good choice if your shipment needs to arrive by 10:30 a.m. the next day. Delivery might be later, however, depending on the delivery ZIP code. FedEx Priority Overnight is available in all 50 states, and for packages up to 150 lbs.
FedEx Standard Overnight. Perhaps you need a package delivered overnight, but you’re looking for a more affordable option. If so, this service provides next-business-day delivery by 3 p.m. to most U.S. addresses in all 50 states, but at a lower cost when compared with faster options.
FedEx 2Day. There are a couple of variations of this service. The first provides delivery by 10:30 a.m. to most U.S. addresses. The second service is standard 2Day but provides delivery by 4:30 p.m. to businesses and 8 p.m. to residences. Urgency will dictate which is right for your situation, but both services cover package weight up to 150 lbs.
FedEx Express Saver. Express Saver provides delivery in three business days, typically by 4:30 p.m. to businesses and 8 p.m. to residences on the third delivery day. This delivery option is available in all states with the exception of Alaska and Hawaii.
FedEx Ground. According to the FedEx website, “FedEx Ground is faster to more locations than UPS Ground.” This service level provides a more affordable option with delivery times of one to five business days within the contiguous United States and three to seven business days to and from Alaska and Hawaii. It’s also important to note that FedEx Ground cannot deliver to P.O. boxes.
FedEx Home Delivery. This service is for residential deliveries and provides arrival within one to seven business days, depending on the destination. Expectations are similar to FedEx Ground with one to five business days within the contiguous United States and three to seven business days to and from Hawaii. Delivery is typically Tuesday-Saturday between 9 a.m. and 8 p.m., and this service is available throughout all 50 states.
FedEx SmartPost. SmartPost is a contracted service that provides 100 percent coverage, including destinations beyond the U.S. border. Additionally, there are no residential or Saturday delivery surcharges. FedEx SmartPost provides an affordable option by leveraging a partnership with the USPS. FedEx transports the package until the “last mile” of delivery. At this point, the package is passed off to the local post office, and they finish the delivery process.
After looking at the service list, you might have a couple of options in mind. For example, perhaps you want to compare 2Day and FedEx Ground services costs. What should you do next? Fortunately, FedEx makes finding shipping costs easy. There are a couple of different options, both of which we’ll cover to get you started with calculating costs.
There are two methods to find FedEx rates. The first is using the FedEx Service Guide, and the second is using a FedEx tool. We’ll cover both methods so you can select the one that is easiest for you, starting with using the Service Guide. Follow these steps to help you easily determine your shipping rate:
- Find the zone for your destination. The zone is critical information because it helps determine how far the package must travel. For U.S. shipments, visit the Rate Finder and select the “Rates Tools” table, then enter your origin ZIP code to see which zone your destination ZIP code corresponds to. You can also request zone information by calling FedEx directly at 800-463-3339.
- Determine the package weight. Once you have this information in hand, view the “Dimension Weight” section of the Service Guide. Your chargeable weight is the greater of the actual weight and the dimensional weight. View the exact instructions and formula for calculating dimensional weight on page 122 of the Service Guide.
- Find your rate. Use the pricing guide in the FedEx Service Guide to find the appropriate table.
For example, let’s say that you’re shipping a 5-lb. package in Zone 2, which is generally 0-150 miles from the origin to destination anywhere within the contiguous United States. Looking at page 30 of the service guide, you can see that if you selected FedEx Priority Overnight, the fee would be $34.58. However, if you selected FedEx 2Day, that cost would drop down to $19.22.
Let’s say that you’re shipping in Zone 3, which is typically 151-300 miles from origin to destination anywhere within the contiguous U.S. The cost to ship a 5-lb. package using FedEx Priority Overnight would be $48.13 for a 5-lb. package. Using FedEx 2Day service, that fee would drop to $20.55 for the same package.
In addition to the Service Guide, FedEx provides a rate and transit time tool that allows you to get customized details on rates. Enter your shipping details, including the ship from and ship to locations, the number of packages, and the weight of the package(s), and get a quote that provides pricing information. This is the easier method of the two to determine shipping costs, but it’s good to have a backup option, which is where the Service Guide is useful.
Understanding extra services
FedEx provides a variety of value-added services and surcharges. Depending on what type of package you’re sending and your individual needs, those charges may affect your total price. As a result, it’s important to understand which options are available and might apply to your shipment.
FedEx provides a complete list of options online, but one of the most common options is the delivery signature option. For example, you may use this if you’re shipping an item to an unhappy customer, and you want to ensure that it arrives. Let’s take a look at the different service levels.
No signature required. FedEx will attempt to get a signature at the delivery address, but if no one is available, FedEx will deliver the package to a safe place without obtaining a signature. This level of service is available upon request at no cost.
Indirect signature required. FedEx obtains a signature from somebody at the delivery address, whether it’s a neighbor or a building manager. If no one is available to sign, FedEx will attempt to redeliver the package. This service is available upon request on residential shipments to the United States and Canada with a declared value below $500.
Direct signature required. If you want a person to sign for the package at a specific address, you can purchase this service for $5.00 per package. FedEx obtains a signature from someone at the delivery address only. If no one is available, they will attempt to redeliver the package.
Adult signature required. FedEx obtains a signature from any person of legal age at the address, subject to their providing a valid ID. If no one qualified is available to sign, FedEx will attempt to redeliver the package. Bear in mind that the legal age varies, depending on the destination country. The cost for this service is $6.05 per package.
An additional service that is commonly purchased is declared value coverage. FedEx automatically covers liability up to $100 for damages or losses at no additional cost. But FedEx allows you to purchase extended coverage at an additional charge. Keep in mind, however, that third-party providers also provide this service. In some cases, it can be less expensive than purchasing directly through the carrier, so weigh the costs and benefits of all options.
Additionally, it’s important to note that FedEx charges a residential surcharge of $3.85 that is added to all FedEx home delivery shipments. Companies can bypass this charge by using FedEx SmartPost. Since SmartPost uses USPS for the last leg of delivery, this fee is waived, and the overall cost is much less. Additionally, Saturday delivery is available at no extra charge.
Moving forward with greater efficiency
The majority of consumers prefer to shop online. In fact, 95 percent of Americans shop online at least yearly, and 80 percent shop monthly. As a result, e-commerce is booming, and that growth isn’t expected to slow down anytime soon. But the challenge for retailers is balancing shipping costs with the pressure of providing additional services, such as faster delivery and free shipping. This leaves them asking: How can we figure out shipping costs and then work to reduce them?
Understanding costs is the first step, but after that you can play with comparing various options, such as FedEx Ground vs. FedEx SmartPost to determine which can provide the greatest savings. Striking the right balance will allow you to serve customers with greater experience and position your business to thrive in the future.
Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, the USPS or regional carriers, our invoice audit and contract optimization services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of combined carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts, and have saved our clients an average of 19 percent on shipping.