Can the shipper manage through these complex rate increases?

UPS announced their 2021 rate increases which will be made effective in January of 2021. These UPS shipping rates increases came two months after a FedEx’s announcement of its upcoming  shipping rates increases. Nothing unusual here as both carriers have routinely announced increased shipping rates and rolled out new surcharges / fees despite posting record earnings at the end of the year. Both have done this in past years but now cite the impact of COVID-19 and the surge in residential deliveries as the cause for the overall increase rates. They mention the extremely high demand for capacity as they experience increased operating costs across their networks to justify the rate increases. It would seem obvious both carriers will use increases and surcharges to ensure they can maintain profits and continue the profits into the next year as they have in past yearly increase announcements.

We will dissect the rate increases announced by UPS and FedEx for the 2021 year and provide insights and alternatives that will help the shipper best manage the increases. Below are the highlights of shipping rate increases issued by both UPS and FedEx.  Additionally, the “big two” carriers are maintaining the waiver for Guaranteed Service Recoveries – A shipper can’t file a claim for late shipments and no information on when their service guarantees will be reinstated. Once again, the duopoly is exercising their advantage, because they can.

UPS Shipping Rates

The company mirrored FedEx’s price increase in the following areas that are in effect today.

• 4.9% average increase for Ground, Air and International
• Minimum charge for a zone 2, 1lb ground package is increasing from $8.23 to $8.76 (increase of 6.05%)
• Additional Handling charge will be applied to any package with a combined length plus girth that exceeds 105 inches
• Over Maximum (known as “Unauthorized” with FedEx) is increasing from $875 to $920
• Across-the-board surcharge increases
• Effective April 11, 2021, Additional Handling and Large Package Surcharges for non-hundredweight service packages will differ by zone
• Effective July 11, 2021, Additional Handling and Large Package Surcharges for hundredweight service packages will differ by zone

FedEx Shipping Rates

Effective Jan 04^th 2021:

• FedEx initiated the increase on September 14th, 2020 as they announced a General Rate Increase for FedEx Express, FedEx Ground including Home Delivery, FedEx Freight Services and FedEx SmartPost that will go into effect on January 4th, 2020.
• FedEx Express package and freight standard list rates will increase an average of 4.9% for U.S., U.S. export and U.S. import services. FedEx Ground and FedEx Home Delivery standard list rates will increase an average of 4.9%.
• FedEx Express, FedEx Ground, FedEx Home Delivery^®, FedEx SmartPost^® and FedEx Freight rates will increase.
• FedEx will charge a 6% late fee to U.S. FedEx Express and FedEx Ground customers who do not pay their invoice within their agreed upon payment terms

Effective Jan. 18, 2021:

• There will be changes to how Additional Handling Surcharge is assessed for FedEx Express and FedEx Ground packages.
• FedEx Freight will introduce a High Cost Service Area Surcharge that applies to certain shipments.
• Certain U.S. locations will be assessed an International Out-of-Delivery-Area Surcharge or an International Out-of-Pickup-Area Surcharge for FedEx International Express Freight^® services.

Effective Feb. 1, 2021

• There will be changes to how fuel is assessed for U.S FedEx Express Freight shipments. 

What Can A Shipper do?

General Rate Increases are not new and happen at least once a year in late Summer or Fall. It is imperative that the shipper analyze their current rate agreement, discounts, and incentives to see how these changes could affect the shippers’ bottom line. Today each shipper has unique requirements and understanding the complex rate and surcharge charges is more important than ever. Engaging industry experts in providing guidance is germane to optimizing freight costs. Applying the new rates to a Shipper’s profile is the only way to really see the impact.

All shippers have unique requirements and must have a clear understanding how to match up these requirements to the carrier’s rate structures. For instance, the announced 4.9% average increase is not the "norm" for most shippers especially those that are in the 2 and 3 day FedEx shipments, mostly ship large packages, mostly low weight Ground Home Delivery, used to seeing high surcharge costs, or occasionally make late payments. A shipper in these categories will see increases well above 6%. Frequent surcharges such as Residential Surcharge for Home Delivery and Extended Delivery Area Surcharges are increasing 8.75% and 9.26% respectfully.

Each shipper must know how these changes in Fedex Shipping Rates and UPS Shipping Rates will affect their shipping requirements and make any necessary changes to mitigate shipper’s transportation spend for 2021. We see the transportation industry change direction as Covid, and the economy dictate the direction of the flow of rates.

CPC has a proven track record of helping Shippers navigate these uncharted waters and enable optimization unique to each shipper’s requirements in the coming months. By engaging CPC, we will surgically inspect the shipper’s transportation spend and tailor a program that meets short-term and long-term benefits. It all starts with a no-cost/ no-obligation assessment where CPC can identify the best solution.  Contact CPC immediately if your company is ready to simplify and save.