“Freight Freak:” John B Discusses 2017 Rate Increases

Posted by AMS / Thursday, September 29, 2016

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shippingUPS and FedEx – one follows the other in announcing 2017 rate increases.

One of the most significant changes announced by FedEx is that fuel surcharges for FedEx Express and FedEx Ground will be adjusted on a weekly basis instead of the current process in which adjustments are made on a monthly basis.

‘Monkey-see monkey- do’ could be a suitable way of describing recent rate hike announcements by the parcel shipping duopoly of UPS and FedEx. UPS was first to announce, in early September, rate hikes that will take effect in the coming weeks and months, including:

  • UPS U.S. Ground service will increase by an average net 4.9%, effective December 26, 2016;
  • Daily rates for UPS U.S. Air and International Services will increase an average net 4.9%;
  • UPS Air Freight rates within and between the U.S., Canada and Puerto Rico, will increase an average net 4.9%, also effective December 26, 2016;
  • And UPS Freight announced an average net 4.9% general rate increase effective September 19, 2016.

UPS also announced, as FedEx already has implemented “Additional Handling” surcharge will apply to any package with the longest side exceeding 48 inches, instead of 60 inches for all Air and International packages; an additional handling charge increase of $0.35. Effective January 8, 2017, the Additional Handling Surcharge will also apply to UPS SurePost packages also known as The UPS / USPS residential hybrid economy service.

Last week, FedEx responded and announced its own rate increases, which will take effect on January 2, 2017. These increases will include:

  • FedEx Express rates increasing by an average of 3.9% for U.S. domestic, U.S. export, and U.S. import services;
  • FedEx Ground and FedEx Home Delivery rates increasing by an average of 4.9%;
  • FedEx SmartPost rates also by at least 4.9% -TBD;
  • FedEx Express and FedEx Ground U.S. domestic dimensional weight advisor will change from 166 to 139.

Typically FedEx will match UPS, but one can only assume they feel lowering the dim rate divisor changes it in a more advantageous way, allowing them to gain even more revenue – yet just another additional pain point for the shippers. It’s basically a double edged sword because present shipments that are charged a dim weight versus actual will be charged more money and some shipments that were not previously charged dim weight will now be eligible for a dim weight charge if their package dim is greater than actual.

Overall, FedEx Freight rates will increase by an average of 4.9%; with the FedEx Freight extreme length surcharge will change from $88 to $150 and be applied to shipments 12 feet or greater compared to the prior 15 feet.

Recently Jerry Hempstead of Hempstead Consulting expressed the frustration that many feel: “First shipments that are presently charged dimensional weight for a transaction will be charged more. And now a lot of shipments that were not previously charged dimensional weight based on the 166 divisor will now ‘enjoy’ being charged for a greater dimensional weight if the dim weight is greater than the actual. There appears to be no end to the creative ways the carriers employ to increase revenue. Small parcel rates have risen more than 25% on average in the last four years. Can you imagine Inflation of this magnitude? Perhaps a rip-off by the behemoth duel, or I’ve heard others call it a “duopoly”.

With declining fuel prices and both companies concentrating more on USPS for final mile residential deliveries, one has to think… when is it going to stop! Only when and if the marketplace decides to divert volume from the “duopoly” will prices begin to stabilize, otherwise we’ll need to hang on to our wallets and keep our eyes on the bottom line because prices are going continue to rise.

Talk to us at AMS about alternatives and more stable shipping methods. We can offer many options to fit your shipping requirements and budget.

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For more information please contact John Bevacqua by phone or email at the following: Office 661-775-0611 or John.Bevacqua@amsfulfillment.com.

About the Freight Freak:

John Bevacqua is the VP of Logistics at AMS Fulfillment. His area of excellence is in creating distribution and fulfillment operations that function as a capable interface between suppliers, retailers, and wholesale distributors. His experience includes developing and leading FedEx/ Kinko’s Distribution Services into the FedEx post acquisition, USA Wireless Technologies, and a top Logistics Management company. He has also worked with third party fulfillment companies, preparing him for his current position with AMS Fulfillment.

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