Ongoing pressure to increase shipping volume and speed has once again led another major carrier—FedEx—to implement new shipping rate increases for 2022. This is the latest carrier general rate increase (GRI), or rate hike, to affect shippers and will create a ripple effect throughout the industry. As the 2021 peak season approaches, these rate increases are not unexpected. However, the past year has had one rate increase after another, and shippers will soon reach a breaking point. For that reason, it’s important to know what FedEx is doing and how it reiterates the need for a single source of truth in managing shipping data, as well as how to use such data to lower spend and optimize throughput where possible.
What New Shipping Rate Surcharges Will Take Effect?
FedEx Express shipping rates will increase approximately 5.95% on average across U.S. domestic, U.S. export, and U.S. import services. FedEx Ground services are also expected to increase as well. Specifically, rates will increase 5.9% across those using FXF PZONE and FXF EZONE. Those who use FXF 1000 and 501 will see shipping rates increase 7.9%.
There are a few other surcharges set to take effect in the coming months, but FedEx has not yet released their exact amounts. These include the following:
- An increased fuel surcharge on November 1, 2021 on all FedEx Express, FedEx Ground and FedEx Freight shipments.
- A new tendered surcharge for carrier pickup when no shipment was tendered to the carrier, which will take effect on January 17, 2022.
- An international out-of-delivery-area or out-of-pickup-area surcharge for International Express Freight and Parcel services, set to take effect on January 17. 2022 as well.
- More oversized package handling surcharges for U.S. Express Package Services and U.S. Ground Services based on zone, which will take effect on January 24, 2022.
What is the Driving Force of this Highest Shipping Rate Increase?
FedEx’s shipping rate increase announcement comes on the heels of their earnings report which may indicate why this year marks the highest GRI average rate increase since 2013. According to Yahoo! News, “First quarter operating results were negatively affected by an estimated $450 million year over year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses. This was partially offset by higher package and freight yields, increased international export express shipments and a favorable net fuel impact. In addition, while commercial ground and U.S. domestic express package volume increased year over year, continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast.”
As a result, to compensate for lower operating ratios and challenges faced in hiring, FedEx decided to increase shipping costs. Like many goods in stores, the volatile shipping industry, which has seen constraints in all shipping modes, is seeing higher prices across the board. Shippers need to continue to do all they can to squeeze out extra costs, particularly around accessorials and other surcharges, by implementing programs like freight audit and payment that also provide an analytics mechanism to make future decisions that will reduce total shipping costs. However, let’s dig a bit deeper to see what else shippers may do to keep a watchful eye on total transportation spend in the face of ever-increasing shipper costs.
What Do These Surcharges Mean for the Average Shipper?
The added surcharges underscore the importance that shippers have deep knowledge of their actual shipping costs. This is especially true as these shipping rate increases are associated with specific service levels, locations, and shipping zones. Without maintaining visibility into the actual spend for each, it will be impractical for shippers to strategically maintain control overspend. Moreover, the added costs will result in higher overhead that may force some shippers to rethink “free shipping” order minimums and service guarantees.
How Do These Surcharges Further Support the Need for More Actionable Shipping Intelligence?
The ability to track and analyze shipping data as a whole and in granularities adds tremendous value. Such granularities include zone, lane, origin, destination, postal code, carrier, and service level. While these datasets may seem trivial, their value rests with applying that information to make more strategic, informed decisions about when to switch carriers, change service levels, or otherwise implement new charges for their customers.
Of course, that also implies the ability to understand which carriers cost the most versus the least. That’s a distinct advantage in an industry rife with continued shipping rate increases, and with this new move by FedEx, it’s only a matter of time before other carriers announce planned shipping rate increases for 2022 as well.
The goal is to capture the data from within and beyond the four walls of your company, ingest that data into a single source of truth, cleanse and standardize it to compare apples-to-apples, and derive actionable insights that help your company determine the best way forward. Further, the added surcharges also possess the risk of lost costs and missed opportunities by simply not knowing what you’re actually paying for shipping.
After all, carriers generate thousands upon thousands of invoices, and shippers do not have the time to sort and audit those invoices manually. It’s simply impractical. However, this again demonstrates why shippers need an intuitive, automated freight auditing resource that can compare bids against invoices, validate details, and initiate either payment or chargeback processes without human intervention. In turn, shippers realize a more efficient strategy for shipping execution and payment processing.
Avoid Added Costs With Intelligent Audit Capabilities at Your Disposal
There’s a real risk of incurring unchecked shipping costs as carrier rate increases continue. Without the ability to understand your costs across all granularities easily, your rates will lead to runaway transportation spend. However, your team can retake control by putting the power of a single source of truth and the expertise of an outside party like Intelligent Audit to work. Stop worrying about surcharges that are an inevitable part of shipping. Know what’s happening and remember to connect with Intelligent Audit today to keep track of your financial data and discover ways to maintain control over shipping spend despite the rate increases.