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Tag Archive for: FedEx fuel surcharges

CNN money

Why You’re Still Paying A Fuel Surcharge At FedEx And UPS

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The recent article published by CNN entitled “Why you’re still paying a fuel surcharge at FedEx and UPS” created quite a frenzy on Social Media including comments like “increased business means using more fuel, what next, a surcharge to pay for all the extra people they have to hire to count their profits” or, “companies that impose fuel surcharges right now are nothing more than thieves, pure and simple”.

Those are pretty harsh criticisms of two of the world’s largest package delivery companies, which combined represent over $100 Billion in annual revenues.  What the article did not state was that every transportation company that we know of has been charging “extra” for fuel surcharges since around 1999 when they first appeared as “temporary” fuel surcharges due to significant spikes in fuel costs at that time.

Well the term “temporary” has now morphed into the term “permanent” and all shippers and consumers need to understand these additional fees are not going away any time soon.  Facts also show that the various accessorial fees that both UPS and FedEx charge can amount to 30% of the total revenue the carriers charge for their various services.

Two additional points we would like to make.  1, when these carriers determine their base rates for delivery, don’t they include considerations for the fuel it takes to make those deliveries?  And 2, doesn’t the additional Residential Delivery Surcharge these carriers assess include the additional cost of delivery, including the fuel costs?  Just some food for thought.

For more information please see: http://money.cnn.com/2015/11/23/news/companies/fedex-ups-fuel-surcharge/

 

 

fuel surcharge

Watch Out For New Fuel Surcharges from FedEx and UPS This Holiday Season: ‘Jolting’ News

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E-Commerce companies, retailers and other businesses that need to ship packages this Holiday season beware! According to a recent article by Laura Stevens of the Wall Street Journal, a fuel-surcharge increase is taking effect this November 2, 2015, and it could have serious consequences for shippers and their customers.

Earlier this year in February, FedEx previously increased its fuel surcharges, following UPS’ lead. The companies claim that the driving force behind the surcharge increase is the higher expense associated with delivering heavier packages and the ever increasing number of residential deliveries, according to the article.

Interestingly, some business owners have not yet noticed that the fuel surcharges, which were once included in base rates, are now a separate charge. This means that just negotiating reduced base rates will not help mitigate these increases.

Complicating the matter is that diesel fuel costs have decreased substantially (35% down from last year), so why are market prices essentially going up? One might ask UPS and FedEx, ‘why are savings not being passed onto their customers?’ The article does make clear that carriers have been faced with the challenge of finding new ways to improve margins—perhaps this is their solution, at least in the short run.

In addition to the net impact on shippers, who depend on volume sales during the Holiday, Stevens writes that the increase could ‘jolt’ customers. With new surcharges, what will happen when fuel prices themselves go up again? That could be “double trouble.” With many companies building the expected costs of fuel/shipping into their process, they may need to increase costs or take a hit on margins.

Asurchargenother interesting point brought up in the article is that both UPS and FedEx buy their fuel close to their actual need. Were they both more intent on buying spot futures, could they potentially find a way to further decrease fuel costs and pass savings to consumers?

We are left with many questions, one of which is “What’s next?”(quote from Brian Litchfield).

What fall out if any could UPS and FedEx experience downstream as they make these margin-making moves? How will business owners adapt to these surcharges? How will this impact how carrier rates are negotiated? How will business owners build this ‘volatility’ into their pricing to customers?

One thing is for sure: navigating through annual price increases and new and ever-increasing carrier surcharges has never been more important. The work of transportation and logistics consultants is vital to maintaining profitability for businesses and locking in the best possible shipping rates.

Original article:
http://www.wsj.com/articles/fuel-prices-fall-but-fedex-and-ups-boost-surcharges-1444088938

 

Original article:
http://www.wsj.com/articles/fuel-prices-fall-but-fedex-and-ups-boost-surcharges-1444088938