Can the shipper manage through FedEx and UPS’ complex increases for 2023?
UPS announced their 2023 rate increases which will be made effective January 2nd, 2023. The increases came two months after a FedEx announcement of rate increases. Nothing unusual here as both carriers have routinely announced increased rates and rolled out new surcharges /fees despite posting record earnings at the end of the year.
In 2021 -2022, COVID-19 boosted on-line shopping and parcel shipping demand causing capacity constraints which led to the introduction of new and creative surcharges.
These alone accounted for charges increasing over 15% prior to COVID, the annual general rate increases (GRI) and the higher fuel costs have further increased the cost of parcel shipping to unprecedented levels. However, the second half of 2022 saw the sharp decline of demand causing excess capacity which has led to layoffs at FedEx and profitability uncertainty for the parcel giants.
We will dissect the rate increases announced by UPS and FedEx for the 2023 year and provide insights and alternatives that will help the shipper best manage the increases. Below are the highlights of 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; The company mirrored FedEx’s price increase in the following areas that are now in effect as of January 2, 2023.
- 6.9% average increase for Ground, Air and International – this is compared to their usual 4.9% GRI
- The minimum charge for a zone 2, 1lb ground package is increasing from $9.36 to $10.10 an 8% increase. In 2021, the price was $8.76 (2 years – 15% UP)
- 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
- UPS introduced this in 2022
- In 2023, the Home Delivery Residential surcharge is increasing by over eight percent. Delivery Area Surcharges for Home Delivery will increase by 10%+. AHS and Oversize continue to soar with double-digit increases. Even the late payment fee is going up by 33% to eight percent!
FedEx Effective Jan 2nd, 2023:
- REMOTE Surcharge: Almost 4,000 ZIP Codes in the continental US will have a $13.25 fee added for any delivery. The fee is the same for commercial and residential shipments.
- FedEx is increasing the rates for longer zones (6-8) more than for closer zones. The increase by weight ranges is consistent this year, unlike last year, when lighter weights had a much higher increase in comparison to heavier weights.
- FedEx Express, FedEx Ground, FedEx Home Delivery®, FedEx SmartPost® and FedEx Freight rates will increase.
- FedEx will charge a 8% late fee to U.S. FedEx Express and FedEx Ground customers who do not pay their invoice within their agreed upon payment terms
How will this affect individual shippers?
The GRI will affect some shippers more than others since it’s not a linear increase. If you’re a shipper that:
- Ships large packages
- Has a high percentage of long zone shipments
- Or, incurs significant accessorial charges as a percentage of overall spend
- …it is likely that you will be subject to an increase much larger than the stated 6.9%.
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 6.9% average increase is not the “norm” for most shippers especially those that are in the two and three 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 will affect their shipping requirements and make any necessary changes to mitigate shipper’s transportation spend for 2023.
CPC has a proven track record of helping Shippers navigate GRIs 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.