After announcing the disappointing fiscal year 2023 Q1 results for the period ending Aug 30, FedEx announced cost-cutting measures, including an average 6.9% general rate increase (GRI) for FedEx Express, FedEx Ground, and FedEx Home Delivery, effective Jan 2, 2023.
"We just announced a 6.9% general rate increase this January in response to inflationary pressures on our costs. We also announced our new remote area surcharge and peak residential pricing in the United States," FedEx Chief Customer Officer Brie Carere, told analysts on Sept 22.
Indeed, a new remote area surcharge takes effect on Jan 30, 2023, further extending FedEx's delivery area surcharges. Delivery area surcharges (DAS) are based on zip code and are typically implemented on packages destined to non-city and/or certain metropolitan area locations. The further away the destination is, the price per package will likely increase, and the extended or remote delivery area surcharge may apply. Impacted areas are often costlier locations for FedEx to deliver due to the lower density of packages.
How one determines the difference between extended and remote delivery area surcharge is unknown, but if you notice, FedEx shifted many zip codes from extended to remote delivery area surcharge - ten pages of zip codes to go with the additional 38 zip codes defined as remote.
These remote delivery surcharges will cost $13.20 per package for U.S. Express Package Services and U.S. Ground Services (Commercial and Residential). The remote delivery area surcharge for Express Package and FedEx Ground Multiweight Pricing will be $66.25 per package (Commercial and Residential).
Going back to DAS, FedEx Ground and Home Delivery Residential DAS will increase 10.4% year-over-year from $4.80 per package in 2022 to $5.30 per package in 2023. DAS Extended Residential will increase 10.0% year-over-year from $6.50 per package in 2022 to $7.15 per package in 2023.
FedEx Ground Commercial DAS will increase 8.8% year-over-year from $3.40 per package in 2022 to $3.70 per package in 2023, while FedEx Ground Commercial Extended DAS will increase almost 10.0% year-over-year from $4.10 per package to $4.50 per package in 2023.
FedEx is focusing more on density and, importantly for them, profitability, with these DAS surcharges.
Several other surcharges are increasing, including Additional Handling increasing from 15.4% year-over-year to 17.5% year-over-year depending on zone and dimensions and 13.5% year-over-year to 14.8% year-over-year depending on zone and weight.
Depending on the zone, the Oversize surcharge will range from 17.2% to 22.7% year-over-year increase for Ground delivery, while for Home Delivery, it will range from 17.2% to 18.7% year-over-year.
For big and bulky deliveries, do your research, or better yet, with Intelligent Audit's proprietary freight audit and business intelligence technology offerings, we can give you the data you need to make the best decisions for your shipments. Sometimes, it's less expensive (and perhaps better customer experience) to use less-than-truckload carriers for these types of deliveries.
Residential Delivery surcharges will increase 5.8% year-over-year for Ground and 8.4% year-over-year for Home Delivery to $5.50 and $5.15 per package, respectively.
In addition, FedEx Home Delivery Convenient Delivery Options surcharges will also rise. Depending on the option, year-over-year increases will range from a 6.9% increase to $9.25 per shipment for evening delivery to a 7.7% increase to $21.00 per shipment for appointments and a 7.9% increase to $4.10 per shipment for a date certain delivery.
While most, if not all, surcharges often result in an eyebrow raise, some surcharges simply no longer make sense, such as address correction. This surcharge is increasing from $19.50 per correction in 2022 to $21.00 per correction in 2023. Do yourself a favor and take advantage of technology tools that can be implemented into your shipping systems to keep from having to pay this antiquated surcharge, such as our freight audit and machine learning anomaly detection technology that catches any errant invoices and spikes in spend that derives from any type of anomaly, such as various surcharges unknown or undiscoverable, easily, at mass scale, across millions of shipments. Intelligent Audit's ability to holistically ingest your data, cleanse, normalize and then provide the analysis you need as you enter new pricing contracts with carriers, like FedEx, so you can have a data-driven approach to negotiating new pricing.
Lastly, the rates themselves are going up for all weights and zones. The rate increase for 1-pound packages is among the highest, averaging 7.7% year-over-year across all zones. The highest increase is 7.9% to $10.10 for zone 2.
In addition, FedEx will increase the late payment fee from 6% to 8% for U.S. FedEx Express, and FedEx Ground invoices not paid according to approved payment terms.
Carriers use your shipping profile data to drive decisions directly impacting your bottom line. It's essential also to use your data to look critically at transportation spend for opportunities to save on costs. This point is critical for shippers to remember when budgeting for shipping rate fluctuations and new general rate increases, like the FedEX GRI announcement for 2023. Contact Intelligent Audit today to learn more about monitoring and planning for GRIs with smart freight management and logistics.
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