Parcel Rate Comparisons 2021 - FedEx, UPS & USPS SPEND MANAGEMENT - Spend Management Experts
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Parcel Rate
Comparisons
2021
FedEx, UPS & USPS
SPEND MANAGEMENT
experts
D E L I V E R I N G YO U R C O M P E T I T I V E E D G E
E-COMMERCE TOOK THE WORLD BY STORM IN 2020.
E-commerce represented over 16% of total retail sales through the first half of the year and UPS estimates e-commerce
will make up at least 20% by the end of the year – with no slow down expected into 2021.
The impact of this shift has been felt along every step of the supply chain
and distribution networks.
Pre-COVID, FedEx projected that the U.S. domestic market would
hit 100 million packages per day by calendar year 2026. Given the
massive shift this past year, it now expects that the U.S. domestic
parcel market will hit this mark by year 2023 – three years ahead of
previous expectations.
Pandemic related e-commerce growth has created endless
headaches for shippers in the form of reduced last-mile delivery
capacity, suspension of service guarantees and rising costs. As a
result, the on-time performance of last-mile delivery providers is
slipping due to the record volume increases, creating a ripple
effect of issues to be addressed along the way.
2A MARKET SHIFT More than half of FedEx and UPS’s total volumes now favor B2C because of COVID-19. During the third quarter of 2020, 61% of total UPS volumes were B2C and grew at 34% year-over-year while B2B volumes declined almost 8% year-over- year. B2C packages are usually costlier to deliver versus B2B packages. Also, the rise in big and bulky e-commerce packages has created additional costs for small parcel delivery companies. These packages often require special handling and, thus, more time to manage. There are hundreds of surcharges that will increase next year. But for 2021, a shipper’s most significant increase will be related to B2C deliveries – Additional Handling, Delivery Area, Residential and Large package. Not surprisingly, these are the same categories that were called out this time last year as extraordinary indicating the carriers are likely to continue the trend. * UPS rates are effective December 27 while FedEx rates are effective beginning January 4. For the eighth consecutive year, FedEx and UPS announced an annual average 4.9% increase for rates. However, the real costs to shippers are hidden in the 100+ surcharges, all of which will also increase in 2021. Year-over-year growth rates may seem minimal for some fees but when one looks at the historical growth rate, it is definitely an eye-opener and proof that shippers need to monitor their invoices closely. 3
LET’S TAKE A In this report, you will find that we have
identified key surcharges from UPS & FedEx.
LOOK AT THE 2021 Continue reading below for small parcel rate
comparisons regarding:
SURCHARGES THAT
WILL HAVE THE I. Additional Handling Surcharges
MOST IMPACT. II. Delivery Area Surcharges
III. Residential Surcharges
IV. Large Package, Over Maximum,
Oversize Surcharges
V. USPS Rate Changes
4I. ADDITIONAL HANDLING FEES
The Additional Handling charge is an extra fee for shipments that do not fit into the normal system at a sorting facility
and thus require special handling. The Additional Handling charge depends on weight, packaging, and dimensions.
Effective December 27, UPS’ additional handling surcharges will increase:
Type Fee (per package) YoY growth 3-year growth
Package $15.25 7.02% 27.08%
Dimensions $16.00 6.67% 33.33%
Weight $25.50 6.25% 112.50%
5Effective January 10th and January 18th respectively, UPS and FedEx will apply fees to packages whose length and girth
combined exceed 105 inches but are still less than 130 inches.
UPS will increase the surcharge two more times during 2021 by introducing charges by zone for non-hundredweight
service packages effective April 11, 2021, and for hundredweight service packages beginning July 11, 2021. We expect
FedEx to follow.
Effective January 4th, FedEx’s additional handling surcharge will increase:
Type Fee (per package) YoY growth 3-year growth
Package $14.00 7.69% 16.67%
Dimensions $16.00 6.67% 33.33%
Weight $25.50 6.25% 112.5%
6II. DELIVERY AREA SURCHARGES (DAS)
Packages picked up or delivered to rural and remote addresses may have a delivery area surcharge added on top of
overall shipping charges. UPS determines these locations by publishing a list of zip codes, which continues to grow due
to the rise in e-commerce.
Delivery Area surcharges can be added to commercial or
residential locations as well as by Air and Ground. In addition to
regular delivery area surcharges, there are also extended delivery
areas which are generally fairly remote. These locations tend to
be costly for UPS and FedEx to deliver and often pass such
packages on to the USPS for final mile.
Alternative delivery pick-up and delivery locations are playing a
big role in FedEx’s rural and remote last mile strategy evidenced
by its partnership with Dollar General. The FedEx and Dollar
General plan was rolled out to 1,500 Dollar General stores in 2019
and will include over 8,000 stores by the end of 2020. By
leveraging Dollar General’s rural store footprint, more than 90%
of Americans will live within five miles of a FedEx hold retail
location. UPS has similar relationships which include Michael’s,
CVS and Advance Auto Parts with similar affect.
7Effective December 27, UPS delivery area surcharges are:
Type Fee (per package) YoY change 3-year change
Regular-Ground-Commercial $3.10 5.08% 19.23%
Regular-Air-Commercial $3.25 4.84% 18.18%
Regular-Ground-Residential $4.30 7.50% 22.86%
Regular-Air-Residential $4.70 6.82% 16.05%
Extended-Ground-Commercial $3.70 7.25% 42.31%
Extended-Air-Commercial $3.85 6.94% 40.00%
Extended-Ground-Residential $5.90 9.26% 32.58%
Extended-Air-Residential $5.90 9.26% 32.58%
8Effective January 4, FedEx’s delivery area surcharges are:
Type Fee (per package) YoY change 3-year change
Regular-Ground-Commercial $3.10 5.08% 21.57%
Regular-Air-Commercial $3.25 4.84% 20.37%
Regular-Ground-Residential $4.70 6.82% 17.50%
Extended-Ground-Commercial $4.70 6.82% 17.50%
Extended-Air-Commercial $3.70 7.25% 45.10%
Extended-Ground-Residential $5.90 9.26% 34.09%
Regular-Home Delivery-Residential $4.30 7.50% 24.64%
Regular-Home Delivery-Residential $5.90 9.26% 34.09%
9THESE SURCHARGES In just one year, 2019 to 2020,
FedEx increased its DAS rates from a
WILL HAVE A low of 4.76% for Residential to a high
MASSIVE IMPACT ON of 27.8% for extended Commercial
while UPS increased its rates from a
SHIPPERS. low of 5.3% for Residential to a high
of 16.9% for extended Commercial.
Combined, the increase in ZIP Codes
and the cost increase will result in
an average 10% to 15% increase for
shippers just for DAS alone.
For a large shipper, this could mean a six-figure increase.
10III. RESIDENTIAL SURCHARGES
A residential surcharge is applied to a residential delivery made to a home or residential location, including a business
operating out of a home.
Effective December 27, UPS residential surcharges are:
Type Fee (per package) YoY change 3-year change
Air $5.00 6.30% 20.48%
Ground $4.45 8.54% 23.61%
Effective January 4, FedEx’s residential surcharges are:
Type Fee (per package) YoY growth 3-year growth
Air $4.95 6.45% 19.28%
Ground $4.95 6.45% 19.28%
Home Delivery $4.35 8.75% 20.83%
Residential deliveries are expensive for the two carriers. Business and alternative delivery pickup points are often more
lucrative for FedEx and UPS and as such, by increasing residential delivery fees, shippers may encourage customers to
pick up in stores or other alternative pick-up locations. This may have an impact on the notion of “free shipping” this
holiday season as shippers grapple with the myriad of surcharges that have piled up in 2020.
9IV. OVERSIZED PACKAGE SURCHARGES
Both carriers are trying to get a handle on big bulky items bought online and going through their networks for
residential delivery. This past summer, UPS announced a surcharge of $50 for large shipments and even $250 for
shipments that exceed its maximum limit. Last year FedEx began investigating ways to address deliveries of bulky
online purchases and started to set up special facilities to handle this traffic.
This type of traffic is simply too big and fast-growing to ignore and the pandemic has given a sharp boost to the
segment’s growth.
“Either they refuse this traffic or they find a way to deal with it. If they refuse it, they hand
a competitive advantage to others and there are a lot of players moving into this space.
Everybody is trying to come up with a solution.”
- John Haber, Founder & CEO, Spend Management Experts
For 2021, UPS has two additional surcharges for those considered oversized. The Large Package fees are applied when
the length is greater than 96 inches or the length plus girth is greater than 130 inches. Over Maximum packages are
those that exceed 108 inches in length or those with length plus girth combined exceeds 165 inches.
10Effective December 27, UPS large package and over maximum surcharges are:
Type Fee (per package) YoY growth 3-year growth
Large Package-Commercial $105.00 5.00% 31.25%
Large Package-Residential $130.00 8.33% 62.50%
Over Maximum $920.00 5.14% 84.00%
Effective January 4, FedEx’s oversize surcharges are:
Type Fee (per package) YoY change 3-year change
Oversize $105.00 8.33% 62.50%
Home Delivery $130.00 8.33% 62.50%
A FedEx oversize charge applies to any package that exceeds 96 inches in
length or 130 inches in length and girth.
11V. USPS RATE CHANGES
FedEx SmartPost and UPS SurePost are hybrid last-mile solutions using the USPS. Rate increases made by the USPS on
certain parcel services impacts FedEx and UPS, with those increases eventually passed on to customers. Retail rates for
Priority Mail will increase by an overall average of 3.5% and 1.2% for Priority Mail Express service. Additionally, commercial
rates for Priority Mail will increase an average of 4.2% and 2.5% for Priority Mail Express.
Per the USPS 2021 rate increase announcement:
Destination delivery unit (DDU) entered parcels average price increase will be 4.9%.
Destination sectional center facility (DSCF) destination entered parcels average price will increase by 10.7%.
Destination network distribution center (DNDC) parcels, the average price will increase by 9.7%.
Parcel Select Ground will see a 1.3% increase in average price.
Prices for Parcel Select Lightweight average price will increase by 20.0%.
In its press release, USPS noted “the Postal Service has some of the lowest letter-mail postage rates in
the industrialized world and continues to offer a great value in shipping. Unlike some other shippers,
the Postal Service does not add surcharges for fuel, residential delivery or regular Saturday delivery.”
USPS implements $100 fee for oversized packages
Additionally, a potentially damaging surcharge will be introduced in 2021. A $100 fee will be assessed on parcels “found
in the mailstream” that exceed the maximum mailable size limit which is a combined length and girth greater than 130
inches. This surcharge will certainly impact a growing trend of bigger, bulkier online orders.
12About Spend Management Experts Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on Twitter, LinkedIn and the Spend Management Experts blog.
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