FedEx Corp this week announced that their 2022 rates for both Parcel and LTL shipments will be increased at higher levels than they had previously published over the past 8 years. FedEx stated their shipping rates would go up on average 5.9%, meaning some increases will be lower than 5.9% and some will be higher than 5.9% next year across its various service lines. For their part, UPS will be the follower this year as we expect to see their General Rate Increase announcement in the coming weeks. As parcel shippers know, both carriers increase their rates at the beginning of a new calendar year each and every year whether they had a good year financially or a bad year financially. The only difference is, sometimes UPS is the first to announce and sometimes its FedEx taking the lead.
FedEx Announces 2022 Rate Increases
According to FedEx, this year’s increase is a direct result of rising costs associated with a “challenging operating environment”. The increase would also enable FedEx to serve its customers more efficiently through its continued investments in service enhancement, fleet maintenance, technology innovations etc., FedEx said.
The rate increases will become Effective on Jan 3, 2022 for its Express, Ground and FedEx Freight divisions. FedEx Express shipping rates for U.S. domestic, export and import services will rise by 5.9%, on average, and that is always the key. FedEx Ground and Home Delivery shipping rates will also increase by an average of 5.9%. FedEx will also raise its Ground Economy shipping rates.
FedEx Freight, their LTL division, will see increases on average of 5.9% for customers who use FXF PZONE and FXF EZONE, and by 7.9% for those who use FXF 1000 and 501 pricing agreements. This begs the question, do shippers really know which pricing agreements their rates are published in? Do they really know how their rates stack up with each of their freight carrier partners? Do they know how their rates stack up against their competitors? The answer, as we have experienced over the years is…..not really! And, that information is not attainable unless the shipper has a comprehensive Benchmark Analysis of their shipping expenditures performed by an independent third party with access to the various carrier pricing structures.
The FedEx Freight rate increases will be applied to shipments within the United States (including Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands) and between the contiguous United States and Canada. Freight shipping rates will also be increased for shipments within Canada, Mexico, and between the contiguous United States and Mexico.
The increase above prior year averages of 4.9% indicates how the freight carriers currently have the pricing power over their shipper customers. But as every shipper knows, the pendulum swings in both directions. The only remaining question is, when will that swing begin to take place. Shippers are hopeful to see some rate relief in mid-year 2022. When capacity is squeezed, as it has been for the past 18 months or so, carriers are clearly in the driver’s seat, (no pun intended.)
On-line retailers have been feeling the pinch of higher freight costs throughout the Pandemic, with both FedEx and UPS approaching several large shippers with new contracts and pricing agreements that resulted in some cases double-digit cost increases through a combination of higher rates and lower discounts. With capacity continuing to be tight across all carriers, some retailers accepted the “new terms” or attempted to move their business to other competing service providers. FedEx and UPS also compounded the freight cost quagmire by adding a series of surcharges and other fees for items such as Large Package Surcharges throughout the pandemic that have further increased shipping costs.
To help parcel shippers navigate this latest General Rate Increase, ICC Logistics will again make available free of charge, FedEx List Rate Comparison Charts 2022 vs. 2021. To obtain your copy, fill out the following form and add “Rate Comparison Charts” in the message field.
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