FedEx Corp. announced it will increase shipping rates on FedEx Express, FedEx Ground and FedEx Freight by an average of 4.9%, effective Jan. 1. The changes will impact the following:
- Express package and freight standard list rates for U.S., U.S. export and U.S. import services
- FedEx Ground and Home Delivery standard list rates
- FedEx Freight rates
Potentially one of the most impactful changes comes with the announcement that FedEx will begin applying a dimensional weight (DIM) factor of 139 to all SmartPost packages effective Jan. 22. The change will align SmartPost dimensional weight pricing with that of FedEx Express and FedEx Ground. It also more closely aligns FedEx SmartPost DIM pricing with that of UPS SurePost, although UPS still has a higher DIM factor for packages measuring less than 1 cubic foot. As of this writing, UPS has not announced its 2018 rate changes.
Looking at a few examples can help illustrate the impact of this change. Consider the following three SmartPost packages, all rated using the non-discounted FedEx SmartPost rates for zone 5. The examples compare the 2017, non-dimensionalized rate to the 2018 dimensionalized rate. The percentage cost increase is significant and illustrates why the 4.9% announced average should be taken with a grain of salt and why changes to DIM pricing are often more impactful than other changes.
|L||W||H||Cubic Inches||Actual Weight||2017 Rate @ Actual Weight||DIM Weight||2018 Rate @ DIM Weight||Increase|
|6||10||10||600||1 lb.||$8.50||5 lbs.||$11.80||38.8%|
|9||8||12||864||4 lbs.||$10.24||7 lbs.||$12.41||14.5%|
|12||13||19||2964||9 lbs.||$12.07||22 lbs.||$24.50||103%|
In addition, there will be changes to FedEx surcharges and other fees, also effective on Jan. 1. Notable among the changes for 2018 include:
- The addition of a Third Party Billing Surcharge of 2.5% of the total shipment charge for any shipment billed to a third party. The charge will apply to FedEx Express and Ground U.S. and international shipments. This more closely aligns FedEx with UPS.
- The Additional Handling Surcharge for U.S. and international express will now apply to any package that measures greater than 48 inches on its longest side, which is a change from 60 inches in 2017.
- The minimum net charge for a ground package will increase to $7.58 from $7.25.
Here are some highlights from the announcement, showing the changes to some of the more common surcharges, along with the percentage increase. As in recent years, the largest increases continue to be reserved for those surcharges related to package size and dimensions.
|Surcharge Name||2017 Rate||2018 Rate||Percentage Increase|
|Additional Handling, US Express and Ground||$11.00||$12.00||9.09%|
|Residential Surcharge, express||$3.85||$4.15||7.79%|
|Residential Surcharge, ground||$3.85||$4.15||7.79%|
|Residential Surcharge, International express||$3.85||$4.15||7.79%|
|Dangerous Goods, Dry Ice||$5.00||$5.25||5.00%|
|Delivery Area Surcharge, Extended, express residential||$4.20||$4.40||4.76%|
|Delivery Area Surcharge, Extended, ground residential||$4.20||$4.40||4.76%|
|Residential Surcharge, Home Delivery||$3.45||$3.60||4.35%|
|Delivery Area Surcharge, Extended, Ground||$2.45||$2.55||4.08%|
|Delivery Area Surcharge, Ground||$2.45||$2.55||4.08%|
|Delivery Area Surcharge, Extended, express||$2.60||$2.70||3.85%|
|Delivery Area Surcharge, express||$2.60||$2.70||3.85%|
|Ground Weekly Pick Up||$13.00||$13.50||3.85%|
|Dangerous Goods, Accessible, First Overnight, Priority Overnight||$90.00||$93.00||3.33%|
|Dangerous Goods, Inaccessible, express||$45.00||$46.50||3.33%|
|Delivery Area Surcharge, Home Delivery||$3.35||$3.45||2.99%|
|Delivery Area Surcharge, express residential||$3.90||$4.00||2.56%|
|Delivery Area Surcharge, ground residential||$3.90||$4.00||2.56%|
|Third Party Billing Charge||0%||2.5%|
Most shippers understand by now that there is usually very little correlation between the carriers’ announced average increase and the actual increase by service level, zone and weight. Additionally, shippers understand that the impact to their parcel budget can vary significantly from the announced average increase. The devil is in the details. A more thorough analysis by Shipware’s team of consultants will be forthcoming once the complete rate announcement can be digested.
Dave Sullivan is a Senior Consultant for Shipware LLC