FedEx and UPS Add Surcharges to 82 High-Density ZIP Codes

While the stubbornly low parcel volumes plaguing the transportation industry are nothing new, major carriers are ramping up their efforts to mitigate the fallout from meager volumes. FedEx and UPS are implementing significant surcharges in high-density ZIP codes. FedEx Express is further cutting back on capacity as the carrier shifts focus to more affordable overland transportation options. UPS is continuing its push for efficiency and plans to close 200 sortation centers by 2028. In the parcel sector, carriers are reprioritizing the importance of efficiency, revenue-bolstering, and cost-effectiveness. In the industry that’s always moving, here are the headlines you need to know.

Carriers Add Delivery Surcharges in Major Urban Centers

FedEx and UPS, the two largest parcel carriers in the United States, will add delivery surcharges to 82 ZIP codes in April. The surcharges are largely centered on major urban areas such as Boston, Chicago, New York, Los Angeles, and San Francisco. The new delivery area surcharges, or DAS, range between $3.95 and $5.95, and the price is determined by package size and delivery method.

The new surcharges come as carriers struggle to navigate a low-volume parcel environment and search for opportunities to maximize revenues from parcel transportation. “These surcharges are huge profit centers for carriers,” an industry expert told Supply Chain Dive. “It’s not surprising that when volume is down, they’re trying to find new opportunities to increase profits and margins.”

As Capacity Glut Persists, UPS Implements Ambitious Consolidation Plan

Amid aggressive network consolidation efforts, UPS has announced plans to close up to 200 sortation centers over the next five years. By reducing excess capacity and labor costs, UPS hopes to save upward of $3B annually by 2028, as laid out in the carrier's “Network of the Future” plan.

The ambitious consolidation plan comes amidst an industry-wide capacity surplus, as reported by FreightWaves: “Also acting as a potential revenue drag is a capacity surplus equivalent to the average daily volume of 12 million packages across the industry after e-commerce and delivery companies ramped up infrastructure to meet shelter-at-home demand during the pandemic. The company is doing its part to bring supply into equilibrium by closing 70 conventional sorting facilities in 2023 and 2024 and flowing more volume into automated facilities, said Nando Cesarone, president of U.S. operations. By 2028, UPS will close 200 facilities and consolidate operations in high-capacity spaces.”

FedEx Express Continues Capacity Reduction Push

As FedEx Express struggles against a stubbornly low volume parcel environment, the carrier has announced the decommissioning of 17 freighter aircraft currently serving in their parcel fleet. Additionally, the carrier has relinquished options to purchase seven Boeing-767 cargo jets.

These efforts toward capacity reduction come as the carrier works to meet the new realities of a post-pandemic parcel environment. They have already delivered positive results for shareholders: despite lower revenues, the carrier saw better-than-expected profit margins in Q3 2023, according to reporting from FreightWaves.

ALPA Elects Third Chairman In 8 Months, Underscoring Internal Divisions

The Airline Pilots Association, the union representing some 5,800 pilots serving FedEx Express, has elected Capt. Jose Nieves as the new chairman of the union’s executive council. Capt. Nieves is the third individual elected to the position within the last eight months, reflecting the ongoing internal divisions that have plagued the union as it works to establish a new contract with FedEx.

“FedEx pilots are facing challenges unlike any in recent years, and I believe this is a critical time in our union’s history,” Capt. Nieves said in a March 26 press release. “At the top of that list of challenges is standing up to a Company that has explicitly demonstrated a failure to value its pilots and employees. Just last week, during the third-quarter earnings announcement, FedEx executives expressed confidence in the direction the airline is headed, while simultaneously confirming an unspecified number of layoffs impacting many of our fellow employees and ignoring the impasse of bargaining with its pilots.

Bridge Collapse Leaves Policymakers and Supply Chain Leaders Searching for Solutions

In the wake of the tragic collapse of the Francis Scott Key Bridge in Baltimore, Maryland, supply chain professionals are scrambling to find solutions. Many have diverted volumes to other East Coast ports, with the Port of New York taking on the majority of the redirected volumes. The closure of the Port of Baltimore, the largest roll-on, roll-off automotive transportation hub in the nation, will have an outsized impact on the automotive sector. As the herculean task of removing the downed bridge begins, policymakers and supply chain leaders alike are working to find solutions.

“Clearing debris from the channel ASAP is vital for reopening the port and protecting jobs and livelihoods in Baltimore & MD,” Sen. Chris Van Hollen, D-MD, wrote on the social media platform X. “I'm thankful [President Biden] immediately instructed the U.S. Army Corps of Engineers to lead this effort, which is underway and to fully cover the significant cost."

Following Bridge Collapse, FMC Prepares for Spike in Container Fee Disputes

The Federal Maritime Commission (FMC), is predicting a precipitous rise in container fee disputes arising from port congestion stemming from redirected volumes at the Port of Baltimore. While new rules surrounding demurrage and detention, set to go into effect in late May, will have some alleviating effect upon disputes, the Commission is nonetheless preparing for a glut of disputes from shippers.

“Carriers may deviate to another port where there aren’t as many chassis available, as was the case in Baltimore, so you could have issues on pickup and return of empty containers,” Carl Bentzel, a member of the FMC, told FreightWaves. “These dislocations could result in problems with detention and demurrage. There will be lots of work for the FMC, unfortunately.”

Judge Dismisses Yellow’s $137M Lawsuit Against Teamsters

Yellow Corp., the now defunct LTL carrier, has recently had its lawsuit against the Teamsters dismissed by a U.S. District Court Judge. The lawsuit, in which Yellow was seeking $137M from the Teamsters, alleges that the Teamsters stood in the way of Yellow’s efforts toward the modernization of its network.

“After years of corporate mismanagement, Yellow still never misses an opportunity to embarrass itself or bring further shame to what used to be one of America’s strongest freight carriers. As the Teamsters expected, the court saw right through Yellow’s PR stunt of a lawsuit,” Teamsters General President Sean M. O’Brien said in a March 26 press release. “Yellow’s greedy executives drove this company into the ground despite enormous, selfless sacrifice from its workforce for decades. This lawsuit represented management’s desperate, last-ditch attempt to save face — and they failed yet again.”

As Carriers Take Drastic Steps Toward Efficiency, Shippers Work to Build Resilience

As carriers restructure operations, shippers are searching for strategies to bolster resilience in a dynamic parcel environment. With over 25 years of experience in supply chain innovation, Intelligent Audit offers shippers access to an invaluable suite of supply chain innovation software assets:

Get started with Intelligent Audit, and see how 25 years of supply chain innovation can build resilience in your operations today.

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