The 2021 peak season is shaping up to break records. USPS is getting in on the mix of higher peak costs as Business Insider reports, “On everything from the base level flat rate boxes and envelopes to much larger items, USPS is increasing costs between October 3 and December 26.” In a blog last week, we discussed how UPS announced new fuel surcharge increases. Now it comes as no surprise that FedEx is following suit and has announced peak season surcharge increases as well. Shippers need to know these new FedEx peak season surcharge increases, how they’ll impact total shipping spend, and how data can help mitigate them.
New Peak Season Surcharge Increases Go Into Effect October 4, 2021
The new peak season surcharges are an attempt by FedEx to ensure capacity and account for increased operating costs across the network through peak season. Surcharges range from an additional $0.60 for the residential delivery charge through a 108.33% increase in peak oversize charges. Here is the full breakdown of the increases:
|Surcharge||Services Impacted||Amount||Effective Dates|
|Peak Additional Handling Surcharge||U.S. Express Package Services, U.S. Ground Services, International Ground Service||$5.95 per package||Oct. 4, 2021–Jan. 16, 2022|
|Peak Oversize Charge||U.S. Express Package Services, U.S. Ground Services, International Ground Service||$62.50 per package||Oct. 4, 2021–Jan. 16, 2022|
|Peak Ground Unauthorized Package Charge||U.S. Ground Services, International Ground Service||$350.00 per package
||Oct. 4, 2021–Jan. 16, 2022|
|Peak Surcharge||FedEx Ground® Economy Package Services2||$1.50 per package
$3.00 per package
$1.50 per package
|Nov. 1, 2021–Nov. 28, 2021
Nov. 29, 2021–Dec 12. 2021
Dec. 13, 2021–Jan. 16, 2022
|Peak Residential Delivery Charge||FedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate packages).||Additional $0.60 per package||Beginning Jan. 17, 2022|
These surcharges are based on the continued demands within the FedEx network. The updated charges also are evidence to support a busier-than-expected peak season. Remember that FedEx implemented the last round of peak surcharge plans on May 21, 2021. As these latest surcharge changes have occurred nearly 90 days later, they could be a harbinger of peak season surcharge increases before the holiday shopping season officially begins.
How New Peak Season Surcharges Might Impact Shipping Spend
Now, the peak season surcharge increases might not seem like a major hurdle for shippers. After all, surcharges increase every year. However, the increases in FedEx’s network are unlike those of UPS. These FedEx surcharges can dramatically drive the cost of shipping upward beyond what a fuel surcharge might cause. For companies sending multiple shipments that fall just slightly beyond the maximum limits, runaway spend might occur due to the $350 per shipment unauthorized package charge.
For example, assume a company makes a mistake and sends 100 packages through FedEx at the wrong service level. Unauthorized package charges might apply, resulting in a $35,000 increase in shipping spend.
As another example, the increase in the Peak Additional Handling Surcharge, $2.95 more than the May 21, 2021, surcharge value of $3.00 per package, will have the net effect of increasing total handling costs for FedEx shipments by 98.33%. If a shipper sends 1,000 packages that fall into the oversize category, that will result in $32,500 in extra spend.
Taking these three costs together across 1,000 shipments that result in oversize charges and 1,000 that lead to unauthorized charges, it amounts to an added $67,500+ (expected number of peak packages multiplied by $5.95). If we were to isolate these 2,000 shipments, we arrive at an increased cost of $73,450, and that doesn’t consider enterprise shippers that go beyond the thresholds for the peaking factors from early 2020.
What You Need to Do Next
Finding ways to lower shipping spend is more critical than ever. The complexity of the peak season surcharge increases among all carriers will only increase. That’s why it’s crucial for shippers to start tracking their total costs and breakdowns across all peak season surcharges, carriers, and other granularities. That is the only way to truly know when it may be worth shipping more packages via FedEx, UPS, USPS, or another carrier. Moreso, these surcharges can have a disparate effect, depending on how much more e-commerce demand swells between now and the holidays. Regardless, the key to success rests in actionable insights based on aggregated, cleansed, normalized, and accurate (anomaly-free) data. Connect with Intelligent Audit to learn more about how to leverage data to stay atop surcharges today.