This article first appeared in Multichannel Merchant on Sept. 11, 2023

Written by: Paul Yaussy

Effective January 1, 2024, FedEx Express package and freight standard list rates for U.S., U.S. export, and U.S. import services, and FedEx Ground standard list rates will increase an averagenformed negotiation with your carrier of 5.9%.  The September 7th General Rate Increase (GRI) release marks the earliest announcement in company history.

While it’s impossible to analyze every 2024 change in pricing, below are some important key takeaways about the FedEx 2024 General Rate Increase for all shippers to note and assess:

#1 Rare decrease in GRI

For the past two plus decades, the annual rate increase generally remained the same, or grew.  Typically, both FedEx and UPS announced the same rate increase each year around the same time.  Prior to Covid-19, both carriers announced modest 3.9% to 4.9% increases.  In 2022, we saw a record breaking 5.9% increase followed in 2023 by yet another record breaking 6.9%.  In 2024, FedEx has announced a rare deceleration of the rate of increase, falling back to 5.9%.

#2 Earliest announcement ever

The FedEx GRI announcement follows a trend where both carriers declare rate increases earlier than the prior year.  This not only allows shippers ample time to create 2024 budgets with knowledge, but also the ability to negotiate those increases down.  

Further, one of the things that makes this year’s announcement unique is that strategically FedEx put pressure on UPS to match as it comes out of a costly negotiation with its labor force.  This shot across the bow seems to have worked as UPS responded with their own 5.9% rate increase a week later.

#3 Rate increases are similar across most weight breaks, but longer zone shippers will see higher increases

As illustrated by the following charts, all services will see rate increases across all weight breaks, and most all above the 5.9% target line.

With the exception of 2Day AM, FedEx raised rates above 5.9% for all shipments to zones 5-8.  Conversely, most services see a smaller increase for zones 2-4.  FedEx may be telegraphing one of two things: 

• Shippers with extended zones will continue to pay more year over year. 
• It may be a direct acknowledgement of more competition from regional carriers for the shorter haul shipments.

The trend continues from previous years where FedEx illustrates a clear preference for packages 10 pounds and under.  Those packages see a smaller rate increase compared to shipments 11 pounds and over.  Is the regional carrier impact at play here again?  Yes, regional carriers tend to compete at the lower weight breaks.

#4 Don’t forget the impact of minimum charge increases

For shippers with existing discounts, the minimum charge, or floor price, operate hand in hand with the rate increase.  The floor price gives additional protection to FedEx from any discounts they have already conceded.  For example, even if you have a 100% discount, you would pay $10.10 for a ground shipment in 2023, or $10.70 in 2024, without negotiating minimum concessions.  Yearly minimum charge increases can have a dramatic impact on your shipping costs.

In Chart Three, you can clearly see FedEx is more aggressive on Priority Overnight and Standard Overnight services, with increases ranging from one to two points higher than the general rate increase.  Because FedEx is one of only two national carriers, these are the services that distinguish them from the competition and have rates that can accelerate at higher clips. Meanwhile, Ground and 2Day services fall in line with the general rate increase.

#5 Surcharges continue to rise higher than the announced general rate increase

Most read the headlines, or the email from their carrier rep, and think all their rates are increasing 5.9%.  If you are not careful, you can blow your parcel budgets with this thinking because the annual GRI announcement does not limit surcharges to the 5.9% rate increase.  Again, this year, most common surcharges will increase significantly more than 5.9% and, depending on your specific profile, may be extremely detrimental to your parcel pricing.  Surcharges make up between 20% and 40% of a parcel shipper’s annual spend.  So, it’s critical you understand the impact of these increases.

Of note, shippers of large packages will once again be severely impacted by the 2024 increase.  Additional Handling surcharges and Oversize surcharges are increasing between 18% and 21%. Table One below does not illustrate all surcharges but does highlight the most commonly charged additional fees.

#6 Peak Surcharges to be called Demand Surcharges and will increase

A year after UPS made the name change, FedEx will now refer to Peak Season Surcharges as Demand Surcharges.  These fees will increase and now can be charged throughout the year.  As noted in the announcement, “We again anticipate the surge in residential volume to carry over into the new year.”  Please refer to FedEx’s website for updates on the changing fees:  https://www.fedex.com/en-us/shipping/rate-changes/demand-surcharges.html

It should be noted that FedEx has not yet announced its GRI for Ground Economy.

What can shippers do?  

• Know your data and your specific shipping profile.  That is the only way to fully analyze how these increases will impact you.  
• Engage multiple carriers. Regional carriers are becoming increasingly viable for almost all shippers and often offer extremely competitive rates. It’s been a year since OnTrac and Lasership merged offering coverage to 80% of the population. GLS, and others, continue their expansion.  Amazon announced earlier this year that Amazon Shipping is now a service provider and has offered services on a case-by-case basis where there is a mutual fit, with plans on continuous expansion in 2024 and beyond.
• Negotiate!  With large increases and introductions of new charges, the carriers are opening the door for you to lobby them for relief.

In summary, while FedEx’s GRI decreased from 6.9% to 5.9% this year, shippers should still anticipate a double-digit price increase after factoring in all surcharge increases.  The slowing of the annual increase can be viewed as a small win for shippers.  However, there is never a wrong time to reach out to your carrier to discuss mitigation tactics. The key is to make sure you have a complete understanding of the impact of annual increases. Whether you have an in-house expert or partner with a consultancy, these increases can’t be ignored. Your budget is at stake, and you owe your organization the chance to have an informed negotiation with your carrier to ensure you have an effective approach to freight cost management.

Paul Yaussy is a Senior Professional Services Consultant for Shipware, where he consults and advises clients on transportation cost-reduction strategies. Paul joined Shipware, a division of SIB, in April 2021 after more than two decades in logistics management roles, most recently at JOANN Stores, where he distinguished himself as a transportation cost-reduction specialist and was responsible for leading the team that routed over $80M in parcel, truckload, intermodal, and LTL freight.

 

This post was developed by SIB’s team of logistics experts from our Shipware division.