The 2018 FedEx General Rate Increase (GRI) was announced this week. Nearly every year, rates increase by 4.9% across all weights and zones, but, as always, there are some things that merchant shippers should know.
4.9% is an average….across all weights.
Although 4.9% is the typical number announced for air and ground services as a year over year increase, understand that it is an average across all weights. What that means for you is that the prices for the actual weights of shipments in your shipping profile may be much higher or lower year over year.
FedEx Ground Services
Consider that the following occurred in 2016 for FedEx Ground Services:
|Weight||2016 Year Over Year Increase|
As you can see, lower weight shipments increased at a faster rate than heavier weight items.
Increase In Surcharges
Surcharges increase at a faster rate than package transportation:
While package transportation rates are increasing at 4.9%, consider that several surcharges for 2018 will also increase at a higher rate. For 2018, note the following:
- Residential Delivery Charge will increase by 7.8%, an increase of $0.30, to $4.15 per package for Express and Ground services.
- Address Corrections will increase (7.1%) from $14 to $15.
- Oversized Charge will increase by 10.3%, or $7.50, to $80. Additional Handling Surcharge (9.1% increase) from $11 to $12.
- The Delivery Area Surcharges will increase by $0.10 and $0.20 for the majority of shipments/zones.
As said, surcharges increase at a faster rate than package transportation. Consider the following increases that occurred in 2017:
|Surcharge Name||2016||2017||Difference $||Difference %|
|Additional Handling Surcharge||$10.50||$11.00||$0.50||4.80%|
|Dangerous Goods (accessible)||$85.00||$90.00||$5.00||5.90%|
|Dangerous Goods (inaccessible)||$42.50||$45.00||$2.50||5.90%|
|DAS (Ground & Express Residential)||$3.70||$3.90||$0.20||5.40%|
|DAS (Ground & Express Extended Res)||$4.00||$4.20||$0.20||5.00%|
|DAS (Express Com, Extended Com)||$2.45||$2.65||$0.20||8.20%|
|DAS (Ground Com, Extended Com)||$2.30||$2.45||$0.15||6.50%|
|DAS (FHD Residential)||$3.15||$3.35||$0.20||6.30%|
|Direct or Indirect Signature||$4.25||$4.50||$0.25||5.90%|
|Weekly Pickup Fee (<$75)||$25.00||$26.00||$1.00||4.00%|
|Weekly Pickup Fee (>$75)||$12.50||$13.00||$0.50||4.00%|
|Missing or Invalid Account Number||$13.00||$14.00||$1.00||7.70%|
|Reroute of Shipment||$13.00||$14.00||$1.00||7.70%|
|Residential Delivery (Express)||$3.65||$3.85||$0.20||5.50%|
|Residential Delivery (FHD)||$3.25||$3.45||$0.20||6.20%|
Other Service Options
DIM is finally here….for FedEx SmartPost:
Dimensional Weight (DIM) is a calculation used for calculating the weight of the package in relation to the package’s density, or volumetric weight. Depending on the service used, the calculation is length x width x height, divided by 139 inches (this calculation has varied over the years, but the divisor used for most services is currently 139 inches). For many years, however, a DIM surcharge did not apply to FedEx SmartPost shipments. As the service has become much more popular for e-commerce shippers, a DIM surcharge has now been instituted for FedEx SmartPost shipments.
A third party billing surcharge of 2%
There has always been an old adage for shippers that one must not go to another carrier just because the one they are using is charging a surcharge or fee that the other is not. It has become a common industry practice that when a carrier institutes a surcharge, another one may follow suit with the same. UPS announced a 2% third-party billing surcharge a few years ago. This surcharge affected drop shippers and fulfillment companies, in particular, as well as third-party vendors. FedEx has now announced the same surcharge for 2018 (beginning in late January).
What this means for you:
- You MUST know your shipping characteristics. Do you mainly ship in the 1-5lb weight bracket? If so, be prepared for your shipments likely increasing by a higher rate than 4.9%. If you ship to residences, then how does an increase in a residential surcharge affect you?
- You MUST understand how surcharges affect your shipping. Such surcharges as delivery area surcharge (a charge assessed for delivering to what is considered an “out of the way” zip code) can have an effect on increasing your shipping costs if you aren’t aware of them. Understand what each surcharge means and how it affects your invoice.
- You MUST seek information. Work with your FedEx representative to understand your invoice and identify the right service mix for you. Your representative should also be able to help you with reporting tools that can help pinpoint areas of opportunity.
Carriers increase rates every year; it is important as a merchant to understand how these increases affect you.