2019 FEDEX RATE INCREASE - VIProcure
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20 19 F EDEX ®
RATE INCREASE
As is the custom this time of year, FedEx has announced its annual general rate increase (GRI). The parcel shipping provider will be
charging more for its Express, Ground, and Freight Services. The following new rates will go into effect on January 7, 2019.
• FedEx Express, Ground, and Home Delivery rates will increase by 4.9% on average, the same rate as in 2018. FedEx Freight rates
within the U.S., and between the U.S. and Canada and Mexico, will go up even more, by 5.9%.
• Many Surcharges will increase as well. As two examples, the Express Freight Surcharge will increase from $140 to $175 per handling
unit, with the Additional Handling Surcharge increasing from $12 to $13.50.
As we always say, it is important to note that these stated increases are simply averages. Chances are the impact on actual shipping costs
will be greater than just 4.9% for most companies. The net effect for you will depend on your own shipping characteristics. The following is
our analysis of the details of the GRIs to help you better understand what these changes will mean for you.
Why Are Rates Going Up?
These increases were completely expected, and, according to the be argued the GRI is also about increasing profitability for the
carrier, they are due to higher operating, fuel, and service costs — company.
and the labor shortage that has plagued the trucking industry for
several years. With these GRIs, the increased cost is simply being Industrywide, and across all shipping modes, higher shipping
passed on by the carrier. rates are to come in 2019. The United States Postal Service has
already announced increases for the new year. Carrier rival UPS
All that said, the 4.9% increase in rates is about double the has yet to announce its annual GRIs, but the company will likely do
expected rate of inflation in the U.S. next year. So, it could easily so soon and they will most likely be in line with FedEx’s.
The Analysis
Overall, our take on the announced GRIs is that although they’re Express Services, especially at higher weights. This is the opposite
on average consistent with previous years, how they’re being of what has occurred in past years when higher increases were
applied is much different. In the recent past, we’ve seen higher common in the lower weights — which are most typical (if
percentage increases at lower weights. This year it’s the opposite, considering the actual weight or packages with a minimal DIM
with higher increases at higher weights. impact). This means folks who currently have DIM relief should be
very thankful because it is possible this increase in higher weights
For example, as you’ll see in our breakdown below, many of the means DIM concessions are going to be more difficult to get.
charts illustrate that the 2019 increases on lower weight shipments FedEx seems to be positioning itself to benefit from DIM pricing by
are less than in 2018. And, except for some additional handling having larger increases in the higher weights.
and oversize surcharges, FedEx is not directly targeting
ecommerce/B2C shippers as it seemed to last year. The relatively conservative nature of this GRI announcement may
It’s important to note that the largest increases are with Domestic be the result of a few factors. The slow drip of surcharges and rate
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changes that took place during 2018 may have made more severe It’s also possible the company feels confident it is getting a handle
increases unnecessary. Maybe the carrier plans to announce on the impact that the ecommerce boom and the growth in B2C
smaller, but more frequent increases throughout 2019 in a similar deliveries have had on its network. Or, perhaps FedEx is fearing
fashion. That said, what is consistent with last year is the Additional the competition as new delivery players enter the market, like
Handling and Oversize Surcharges being among the largest Amazon or the many new crowdsourced delivery providers that
percentage increases. are constantly popping up.
More Details Worthy of Note
There are several details we noticed in the GRI that are worth mentioning through illustration. Again, the actual impact on your company
will depend on the specifics of your shipping characteristics.
We dive deeper into the details of those increases in the following visuals:
Overall Increase by Service Level
Note, the largest increase by far is with Domestic Air DOMESTIC INT’L GROUND INT’L POSTAL
Services. There will be plenty more to come on this. The
smallest increase is with Postal Packages, which is a
EXPRESS EXPORT COMMERCIAL IMPORT PACKAGES
service used most heavily by B2C shippers. 6.98% 5.37% 4.98% 4.71% 4.52%
Increase by Service Minimum Comparison: 2018 vs. 2019 (Domestic)
The following illustration shows that the increases in 2019 are lower than in 2018 for most
service types, with two Express Services being the exceptions.
2018 2019 2018 2019 2018 2019 2018 2019
3.8% 2.6% 4.1% 5.4% 4.9% 5.4% 3.9% 3.0%
FIRST OVERNIGHT PRIORITY OVERNIGHT STANDARD OVERNIGHT 2-DAY AM
2018 2019 2018 2019 2018 2019 2018 2019
6.2% 4.0% 4.2% 4.0% 4.6% 3.6% 4.6 3.6%
2-DAY EXPRESS SAVER GROUND COMMERCIAL SMARTPOST
Overall Increase by Export/Import Lanes:
The increases faced by international shippers
vary significantly depending on the lane. This
means diligence is required to understand the
impact on your business. The announced
increase, for example, of a 10 lb. export
shipment will range anywhere from 2.01% to
6.34%.
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DOMESTIC
AIR SERVICE 1 TO 50 LBS. 51 TO 100 LBS.
Domestic Air: Increase by Service Level and Weight Break. 2 Day 5.49% 6.60%
The chart to the right illustrates the large percentage jump over 2Day AM 6.11% 8.89%
51 lbs. for Domestic Air Services. If you are a heavy-weight Express Saver 5.73% 7.67%
domestic air shipper, take note! First Overnight 5.25% 8.32%
Priority Overnight 6.31% 8.96%
Standard Overnight 6.20% 8.23%
Overall Increase by Accessorial Grouping
Note that we’ve analyzed only the accessorials FedEx has announced so time, the carriers all understand this is a need that is not going away and
far. We’ll know more about the other accessorials when FedEx releases its know they can charge accordingly.
full service guide on Dec 17.
Two other notes: FedEx DID NOT announce an increase to its
The most notable increases, like last year, are the Additional Handling and Unauthorized Oversize Surcharge, but it will likely be announced in
Oversize Surcharges. This follows a similar theme to that which we December in the full service guide. Also, the Print Return Label charge
discussed last year: namely, carriers recognize that abnormal packages increased 100%, from $.50 to $1.00, which could be seen as a push on
are costlier, and these fees are about covering those costs. At the same shippers to go paperless.
Oversize Additional Handling Residential Delivery Area
12.50% 12.50% 5.87% 5.78%
Collect on Delivery Address Correction Hazard Signature
7.41% 6.67% 5.72% 5.25%
Domestic Air Overall Increase by Zone
The following chart illustrates the conservative increase on short zones vs. where paying for the faster service is a true necessity for some shippers
long zones. This deserves a closer look because the real impact of the and Ground is not an option.
increase that shippers will feel can be deceptive — it’s really much worse.
The reason is most shippers don’t use Express services for short zones It’s also worth noting here that fuel surcharges are calculated as a
where the smaller increases are. percentage of the cost of the shipment. We are stating the obvious, but
This is because Ground often has the same transit times at much lower costs heavy-weight, longdistance Air shipments are expensive, so any
in short zones. The big increases in Domestic Air are in the longer zones additional increases to fuel surcharges can translate into big dollars.
Overall Increase Ground Commercial
(at 10lb. Weight Breaks)
The following chart illustrates the more conservative percentage
increase for lower weight packages and the significant increase at
higher weights - which peaks at 31 to 40 lbs.
viprocure.com 3Increase by Weight Break Comparison: 2018 vs. 2019 (Domestic)
The following chart supports the analysis that FedEx emphasized rate increases at the higher weight breaks.
The percentage increase spikes for packages over 50lbs.
Home Delivery Package 3lbs Zone 3 Home Delivery Package 63lbs Zone 5
2018 2019 2018 2019
Package Cost: Package Cost:
$9.48 $9.89
Package Cost: Package Cost:
Residential Surcharge: Residential Surcharge: $373.79 $407.43
$3.60 $3.80
Delivery Area Surcharge - Delivery Area Surcharge - Additional Handling: Additional Handling:
Residential Home Delivery: Residential Home Delivery: $12.00 $13.50
$3.45 $3.65
TOTAL Cost TOTAL Cost
TOTAL Cost TOTAL Cost (before Fuel): (before Fuel):
(before Fuel): (before Fuel): $385.79 $420.93
$16.53 $17.34
Overall Increase ($): $0.81 | Overall Increase (%): 4.9% Overall Increase ($): $35.14 | Overall Increase (%): 9.1%
Conclusion
We say this every year: the only way to understand the precise impact of these changes is to analyze how they will affect your rates given
your shipping patterns. This will enable you to quantify exactly what these changes mean, but also give you the knowledge to adjust how
you ship to best mitigate any additional costs you might be facing.
We can help. Our proprietary software makes the process of analyzing precisely what these increases mean to your business easy. With
no obligation, Transportation Impact will analyze your shipping costs as they are now, and compare them to what they will be once the
new rates go into effect. We can also make suggestions on where you can find additional savings everywhere in your small parcel
shipping programs.
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