By Jim Haller | Senior Manager, Parcel Spend Optimization | Chainalytics |
If you’ve been paying attention to the Parcel sphere lately, you’ll have no doubt noticed that not a month goes by without one of the major parcel companies announcing a rate increase, whether it be seasonal or permanent. It appears that September was no exception as FedEx announced on September 18th their latest General Rate Increase (GRI), effective January 1, 2018.
FedEx’s 2018 GRI spans several business units including FedEx Express, FedEx Ground, and FedEx Freight and also includes several surcharges that will go into place January 22nd, 2018, giving shippers approximately four months to figure out how to incorporate these surcharges into their strategy.
The January 1st changes include on average a 4.9% increase on FedEx Express for U.S. domestic, export and import services as well as a 4.9% rate hike for FedEx Ground and Home Delivery. FedEx Freight will also see an increase of 4.9%. With nearly a 5% increase across the board, shippers will see significant impacts on their costs.
Also on January 1st, FedEx Express One Rate service will incur on average a 3.5% price increase. FedEx One Rate is a flat rate shipping product that does not require you to weigh or measure shipments under 50 lbs. FedEx Express packaging is available in 12 different sizes and this service offering is a time definite, one (1), two (2) or three (3) day guaranteed delivery offering.
But wait, that’s not all. Beginning January 22, 2018, an additional 2.5% will be applied to any FedEx Express or FedEx Ground shipment that utilizes a 3rd Party Billing service (UPS has had this in place since 2016). There will also be changes in criteria for packages falling into the oversized, extra handling, and unauthorized categories. These changes will most likely result in more frequently applied surcharges, deterring shippers from putting these products into the network.
The criteria adjustments and surcharges now apply to any FedEx U.S. or International Express package measuring greater than 48 inches on its longest side. FedEx Express U.S. or FedEx Ground oversize surcharges will be applied to any package longer than 96 inches or exceeding 130 inches when measuring both length and girth. Shipping charges for oversized packages will be based on the greater of the package’s actual rounded weight, dim weight, and 90lb measurement. FedEx Freight will apply a Over Length Surcharge of $85 to any shipment measuring between 8 and 12 feet.
Finally, one additional major impact item to note! FedEx will begin applying a dimensional weight (DIM) factor of 139 to all SmartPost packages. This move is now in line with rival UPS, (except for UPS shipments measuring 1 cubic foot or less, where the divisor will remain at 166). Shippers across the country will see cost increases in their e-commerce sector, which suggest consumers will begin to feel these rates increases incorporated into the prices of online goods. It has been estimated that 70% to 80% of all SmartPost packages will be impacted. In fact, a recent retail study indicated shippers will see nearly 85% of all SmartPost shipments will be impacted if no changes are made to the carrier agreement.
As online shopping and consumer service levels expectations continue growing, shippers will push more and more product offerings through the parcel network, creating a steady increase in surcharges and rate increases for the foreseeable future. As shippers continue to see their parcel needs expand, organizations should seek the expertise of those most familiar with the strategies available to mitigate the rising costs.
Chainalytics Senior Manager Jim Haller leads the firm’s Parcel Spend Optimization offering, which enables multi-level organizations to reduce costs, improve service levels, negotiate better pricing agreements and generate cost savings of 8-15 percent on their parcel spend.
Read more about how Chainalytics supports our clients’ parcel spend optimization success:
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- (BLOG) Countering UPS, FedEx Exempts Small Residential Package Delivery from Peak Season Surcharge
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