The continued state of disruption and heightened demands due to e-commerce have once again pushed the fringe capabilities of carriers. Starting on June 21, 2021, FedEx has instituted an increase in its ground fuel surcharges. And while UPS surcharges are currently on track to stay the same for UPS, this latest move hints at a possible future of higher accessorials going into summer. Remember that just over one week ago, UPS peak surcharges were increased too. And shippers need to know what services are affected and how they further reiterate the need for strategic decision making and analytic insights into their networks.
What’s Happening With the FedEx Ground Fuel Surcharges
Considering the one-week lag between the weekly fuel reporting by the Energy Information Agency and FedEx fuel rate changes, the current schedule is moving upward. On June 21, 2021, FedEx will increase the ground fuel surcharge rates based on the data reported for fuel prices on June 11, 2021. That surcharge breaks down as follows:
- Fuel surcharges across FedEx Express will increase between 1% and 1.25%.
- Domestic and US-to-Puerto Rico package services under FedEx Express will see a 1% increase, up from 7.5% the week prior, while Freight Services will see a $0.016 per pound, or $0.332 total per pound following increase.
- Exports under the FedEx Express umbrella will incur a 1.75% increase, hitting 9.75% compared to 8.5% the week prior, and imports will incur a 1.25% increase compared to 11.25% the week prior.
- The FedEx Ground Surcharge will increase from 8% to 9.25%.
But fuel costs appear to be stabilizing for now, notes the EIA, which slowed a negligible change between June 14, 2021 and June 21, 2021. And while there is hope on the horizon, capacity issues may continue to worsen.
Why Are the Increases Necessary
Increased fuel surcharges assessed by carriers is a reflection of the market costs for diesel. Both UPS and FedEx leverage the weekly National U.S. Average On-Highway Diesel Fuel Price to determine their current rates. Even more so, the fuel surcharges are subject to change without prior notice, meaning shippers must always be mindful of their possible fluctuations on a day-to-day basis. And it’s necessary to increase fuel surcharges as networks grow strained and as diesel costs tick upward throughout the summer.
Fuel surcharges are also not limited to ground transport either.
For example, UPS uses the U.S. Gulf Coast (USGC) price for kerosene-type jet fuel on a biweekly basis to determine its air fuel surcharges. And as fuel costs across the board increase, it wouldn’t be surprising to see carriers beyond FedEx implement higher fuel surcharges throughout the coming months, especially as the economy recovers and more people resume flying.
What Can Shippers Do About the Increases in Fuel Surcharges Across All Modes
The simple reality is that shippers are currently locked in a cycle. The worsening of the current capacity crunch and a limited pool of carriers will inevitably mean shippers must pay whatever carriers charge. However, blindly paying costs is not a strategic way to keep transportation spend under control. There may be opportunities to rein in costs that have gone unnoticed, or there may be other opportunities to expand carrier contracts. For example, take the following considerations:
- Using hub injection to reduce unnecessary transportation.
- Leveraging zone skipping to effectively reap the rewards of more stable, less expensive transportation costs as a whole.
- Applying data to understand all transportation costs and know when it makes sense to consider diversifying your carrier base.
- Tracking invoicing of surcharges and how they affect total costs to know when to increase point-of-sale costs or even consider passing along some transportation costs to customers.
Increase Accountability in Your Network With the Right Data Analytics Solution
While the state of transportation continues to change as the country reopens, now is the time for shippers to become more strategic. There is uncertainty in the market in all verticals, ranging from pharma shipping to e-commerce purchases, but for now, everything looks to be on an upward trend. And shippers need to ensure their survival by staying vigilant of changes to all transportation costs, including ground fuel surcharges. That all begins with using a single source of truth for understanding your logistics data. Connect with Intelligent Audit to get started today.