newsworthy
22 DC VELOCITY OCTOBER 2014 www.dcvelocity.com
FedEx Corp. said it will raise average list rates by 4. 9 percent on its three main product segments—domestic express
and international air services connecting the U.S.; ground
parcel service; and less than-truckload (LTL) service. The
rate increases will take effect on Jan. 5, the same day the
company will begin pricing ground parcels that measure
less than three cubic feet based on their dimensions instead
of their weight.
The combined impact of the rate increases and the shift to
so-called “dimensional weight” pricing are a double-wham-my for many customers of FedEx Ground, FedEx’s fastest-growing unit. Those especially vulnerable are businesses that tender overpackaged, lightweight shipments that
occupy a disproportionate share of space in a FedEx van.
Currently, those shippers qualify for a relatively low rate.
Effective Jan. 5, however, they could be hit with double-digit price hikes unless they can shrink their parcels’ cube by
reducing the amount of packaging used; FedEx executives
said on an analyst call that the company is working with
many customers to streamline their packaging.
As if ground shippers don’t have enough angst, the rate
Memo to FedEx ground shippers: Boost your budgets!
increases on millions of lightweight shipments transiting
short distances will be significantly higher than FedEx
Ground’s average rate hike. For example, the rate for a
one-pound ground parcel moving between 151 and 300
miles will rise by 7 percent, according to data from Spend
Management Experts, a consulting company. The rate for a
seven-pound package moving between 301 and 600 miles
will increase by 6. 5 percent, according to the data.
Virtually all of the increases above the 4. 9 percent average
will fall on packages weighing up to 15 pounds; the typical
FedEx Ground business-to-business (B2B) package weighs
less than 15 pounds, while the average residential shipment
weighs less than 10 pounds, according to John Haber, CEO
of Spend Management Experts. In addition, the FedEx rate
hikes will be higher on shipments moving 600 miles or less,
the normal distance of a ground delivery.
Haber expects FedEx rival UPS Inc. to match the FedEx
increases. Like FedEx, UPS will shift to dimensional pricing
for parcels measuring less than three cubic feet (the change
takes effect Dec. 29). At press time, UPS had not disclosed
its 2015 rates.
MORE BLOWS TO THE BUDGET
The increases don’t stop there. FedEx Ground’s so-called
minimum charge, which is the rate assessed on a one-pound shipment moving under 150 miles, will go up by 6
percent to $6.61, plus any applicable fuel surcharge. That
increase will mostly affect larger shippers, according to
Jerry Hempstead, a long-time parcel executive and head of
a consultancy that bears his name.
FedEx will also raise fees on a broad range of “accessorial”
services that are provided beyond the actual linehaul operation. For example, fees for specialized types of deliveries will
increase by anywhere from 4. 3 percent to as high as 16. 9
percent depending on the services involved, according to
consultancy Shipware LLC.
The rate increases on traffic moved by FedEx Freight, the
company’s LTL unit, will be the same as those for its other
units, a departure from past practice, according to Rob
Martinez, Shipware’s president and CEO. In addition, the
effective date for the FedEx Freight increases will be moved
up three months to align with the rate changes in the rest of
the portfolio, Martinez added.
In an e-mail, Martinez said the increases were in line with
expectations. Yet he called them “very significant,” especially when combined with the shifts to dimensional pricing.
Haber added that many businesses shipping by ground
with FedEx and UPS are “looking at double-digit percentage year-over-year increases” due to the impact of the rate
hikes and dimensional price change.
—M.S.
