FedEx Announces Largest General Rate Increase in Nearly a Decade
Fedex recently announced the largest general rate increase in nearly a decade. Effective Jan. 3, 2022, shipping rates will increase by an average of 5.9 percent for Express, Ground, Economy, Home Delivery and Freight.
The changes are complex. Many companies will be hurt with increases greater than 5.9 percent as this is an "average" increase for all weights, zones, and service levels. Customers that rely on Residential Ground and Economy (formerly SmartPost) with packages less than 10 pounds will be hit with the largest increases, with one- to five-pound packages increasing 7.5 percent, and six- to 10-pound packages closer to 6.5 percent. Economy delivery area surcharges are going up a whopping 53.2 percent and 61 percent for DAS extended. The Ground minimum package charge is increasing 6.9 percent.
Other notable details include a fuel increase in November of 1.75 percent. This is the second increase in fuel FedEx implemented this year even though its existing index accounts for an increase at the pump. This is especially difficult as it applies to most billable revenue. An ominous sign to e-commerce “return friendly” models is a new $1.00 per-package Delivery and Returns Surcharge, which will be assessed on packages that are delivered or returned using FedEx Ground Economy (old SmartPost) services as well as an “Extension of Peak Surcharges.”
Not lost in the details is a move that adds Zone differences to the cost for Additional Handling and Large package surcharge, with some rates increasing as much as 38 percent. Notably this charge can apply to small lightweight shipments based on how they're packaged.
This unprecedented increase comes as FedEx is still struggling with late delivery performance, lagging significantly behind UPS.
These increases will undoubtedly put pressure on retailers and shippers to raise prices, increase shipping rates, or find other ways to manage higher costs. It's critical to have a detailed understanding of how these increases will impact your organization's bottom line and develop a strategy now to mitigate these costs in early 2022.
Patti Hester is chief strategist for Platinum Circle Partners, a parcel consulting firm that specializes in cost reduction, service optimization and business intelligence management reporting. Patti can be reached at email@example.com.