Fall is here and so are the FedEx GRI’s
It’s official! Fall is here and for most it means cooler weather, leaves changing color and football! If you’re a business owner, or work in a company with a large parcel shipping spend, it means the GRI’s are coming and you’re bracing for the impact on your 2018 budget. On September 18, FedEx announced an average rate increase of 4.9% will go into effect beginning January 1, 2018, covering U.S. domestic Express, U.S. Export and U.S. Import services. FedEx Ground, FedEx Home Delivery and FedEx Freight will also increase shipping rates by an average of 4.9%. In addition, FedEx One Rate pricing will increase by an average of 3.5%.
Let’s clear the air here…
As you may be aware, 4.9% is the average increase across all services, weights and zones, but the actual increase is not uniform. Based on experience, over 90% of our clients will see an increase of more than 4.9%. And this doesn’t even include the incremental cost from the surcharge increases and other rating logic changes. The chart below reveals how an average 4.9% increase may actually mean an increase of over 7% for some services, weights and zones.
Increase for each service and zone is calculated as the average increase for all weight up to 100 pounds.
As you can see in the charts below, since 2005 FedEx customers have been subject to substantial increases in both FedEx Express (75.5%) and Ground (69.6%). Since each year’s increase is compounded over previous year’s increase, the cumulative net impact is 108.5% and 97.2% for Express and Ground respectively.
Oh but wait, there’s more.
In addition to increased transportation rates, numerous surcharges are receiving substantial increases as well, some as high as 160%. FedEx’s acceptance rules of packages will be tightened and the criteria more restrictive. Effective January 22, 2018, the following rating changes will go into effect:
- Additional handling surcharge will apply to Express packages with the longest side of 48 inches or more, a reduction from 60 inches in 2017. This rule already applies to Ground shipments.
- The Oversize surcharge will apply to any Express and Ground packages exceeding 96 inches (reduction from 108 inches) in length or 130 inches in girth. The charge for such packages will be based on the highest of actual weight, dimensional weight and 90 pounds (new rule).
- Ground Unauthorized package rating will also be subject to the 90 pounds
- FedEx SmartPost will apply DIM weight pricing, consistent with FedEx Express and Ground shipments.
- FedEx Freight will implement an Over Length Surcharge of $85 per shipment and will be applied to shipments with dimensions of 8 ft. or greater and less than 12 ft.
It was only a matter of time…
In 2016, UPS started charging a new Third Party Billing Surcharge of 2.5%. For anyone who monitors industry changes, when one carrier makes a change, it is usually not a matter of if, but when the other will follow suite. It looks like 2018 will be the year that FedEx customers will also see a 2.5% Third Party Billing surcharge. It might be time to add another checkbox to your audit process or better yet, let AFS mitigate these charges for you.
Since we’ve laid it all out there, here’s what AFS can do.
With this announcement, shipping costs would increase over 108% for FedEx Express since 2005. During this time AFS has helped over 1,500 clients find over $100 million in savings. We’re here to help you decipher what this impact will have on your business, whether you’ve been in operation for 1 year or 50 years.
The seasons continue to change, year after year. GRIs are inevitable. As we’ve shown, year after year rates go up and will continue to do so for the foreseeable future. Can your company afford a free review of your logistics strategy or an even bigger question, can you afford not to?
Learn more about this impact from one of our subject matter experts.
Mingshu Bates is the VP of Revenue Management at AFS and has over 18 years of experience in Revenue Management and Pricing Analytics in both transportation and payment processing industries. Most of Mingshu’s professional experience comes from 16 years at FedEx, where she led numerous strategic initiatives in Parcel pricing. Mingshu also played a key role in leading the pricing analytics and restructuring at First Data Corp.