It’s that time of year again, when FedEx and UPS announce their general rate increases for shipping costs.

For the last few years, both major carriers have increased base rates by a steady 4.9 percent. But that doesn’t tell the whole story. Surcharges take up about 35 percent of most companies’ shipping budgets. Not every surcharge rises every year, but those that do can double or even triple—and if those surcharges affect your company’s parcels, they can force you to significantly increase your shipping budget based off the price increases.

FedEx announced these general rate increases on the following services:

  • FedEx Express Package Rates
  • FedEx International Package Rates
  • Freight Standard List Rates
  • FedEx Ground
  • FedEx Home Delivery
  • FedEx International Premium
  • Minimum Rates for FedEx Express
  • FedEx Ground Multiweight Rates
  • FedEx SmartPost Rates
  • Shipping Surcharges and Accessorial Charges

The new rates are set to take effect on January 7, 2019.

You can preview the Standard List Rates here; FedEx Ground Multiweight here; Shipping Surcharges and Accessorial Charges here; FedEx’s 2019 GRI overview can be found here.

FedEx 2019 General Rate Increases

In 2017, FedEx was the first to announce its rate increases. The company hiked most of its standard services by 4.9 percent including FedEx Express service, FedEx Ground, FedEx Home Delivery and a number of FedEx Freight categories. This year FedEx Retail Rates and FedEx One Rate will be increasing additionally.

Last year, FedEx also increased its surcharges on packages that require additional handling, address corrections, oversized packages and residential deliveries.

Below are a few surcharge hikes out of the 36 total surcharges that are increasing this year:

Surcharge

2018 Rate

2019 Rate

Increase %

Additional Handling
Fee

$12 per package

$13.50 per package

12.5%

Address Correction

$15

$16

6.67%

Delivery Area
Surcharge

$4

$4.20

5%

Oversize Charge

$80

$90

12.5%

Residential Delivery
Charge

$4.15

$4.40

6.02%

FedEx Print Return
Label

$0.50

$1

100%

 

These rate increases will be applied top of the already increased rate increases that started to take effect in September.

Seasonal Surcharges and Shipping Costs

FedEx and UPS have diverged their holiday surcharge strategies for two years now—as long as they’ve been imposing additional fees during the holidays. FedEx says it handles more than 400 million packages between Nov. 19 and Christmas Eve.

FedEx’s approach to the holidays is to charge additional fees to only the largest packages—those that already carry Oversize, Additional Handling or Ground Unauthorized Package surcharges.

But those fees are huge. FedEx changes $27.50, $3.20 and $150 per package on top of existing fees, respectively.

The rates announced this week do not include information about holiday surcharges, but that doesn’t mean they’re not going up in 2019. Typically, FedEx and UPS announce their holiday surcharges in late summer.

Changes to Dimensional Weight

UPS and FedEx have been following each other in dropping their dimensional divisors for the last several years. For its 2018 rates, FedEx reduced its dimensional divisor for SmartPost parcels to 139, on par with that of FedEx Express and FedEx Ground. UPS SurePost (a similar service) calculates dimensional weight with the same divisor.

The dimensional divisor matters because it determines which parcels will be charged according to dimensional weight—a figure based on a package’s length, width and height—rather than actual weight. The smaller the dimensional divisor gets, the more parcels will be priced according to dimensional weight rather than actual weight. Based off these calculations, shippers should make adjustments to their supply chain as needed.

Naturally, rates for dimensional weight are higher than rates for actual weight. So the more packages are priced according to dimensional weight, the more your carrier can charge.

FedEx did not announce any change to the dimensional divisor for 2019.  

What Shippers Can Do to Manage Rising Costs of Shipping

These rate changes will not affect every shipper the same way. Depending on your shipping needs, you may never pay unauthorized package charges, but you may frequently pay for residential deliveries.

To understand how these rate increases will affect you, you need to know your shipping profile. How many of your packages are charged according to dimensional weight? Will that change in 2019 with these new rates? Do you typically use ground, air or freight services, and how are those rates changing?

Companies that have this data on hand can plug in FedEx’s 2019 rates and get a pretty accurate picture of what their shipping spend will look like in addition to their operating expenses in January. Further, they can take steps to mitigate the damage.

Resource: Estimate Your Shipping Costs: What Goes Into The Rates You Pay With FedEx and UPS

Shippers need to make sure they’re being charged accurately. FedEx, UPS and other carriers incorrectly apply surcharges a lot more often than you’d expect. If you have the time and resources, begin auditing your invoices to make sure they match your records. If your staff doesn’t have the time, consider enlisting a third-party shipping consultant like Reveel. Our 45-point invoice audit routinely saves our clients thousands of dollars as we claim refunds they’re owed.

Shippers can also negotiate friendlier contracts. If you know your data, you can easily spot the surcharges that are impacting your bottom line the most. Then, you can target those specific fees in contract negotiations. Shippers are typically not willing to modify base rates, especially for small accounts, but they may budge on surcharges, price floors and other contractual tools that force shippers to spend more than they should on shipments.

Yes, the cost of shipping is going up in 2019. General Rates probably always will increase. But you can still make this the year you get a handle on your shipping spend by knowing your shipping expenses, shipping profile, negotiating a smarter contract and holding your carrier accountable.

 

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