Another year of record-breaking carrier increases.
FedEx just released a 6.9% 2023 General Rate Increase (GRI). But the actual impact shippers will see next year is closer to double-digits. 6.9% is just an overall average.
Things are getting more than real. They’re getting serious.
Before you apply a 6.9% increase across the board. Take a look at these spikes
- AHS (Additional Handling Surcharge) up 16.5%
- Oversize up 18% for Ground & 19.6% for Express
- Address Corrections up 7.7%
- Delivery Area Surcharge up 8.5%
- Residential Delivery up 9.4% for Express & 7.4% for Ground
Here’s a breakdown of those heavy hitters.
(FedEx) Zone-Based Additional Handling & Oversize Surcharges
If you ship heavy packages, weight and dimensions-based fees are up 17%.
Zone-based charges to calculate additional handling and oversize fees are here to stay. And anything being shipped to zone 7+ or higher will get tacked with charges that pack an extra punch. Zones 7+ will see average price increases from 18% to 21.6%.
Carriers are making moves to avoid “ugly freight,” and shippers with heavy packages need to be aware of these specific increases. Anything with a high weight (additional handling, oversize) has a higher rate increase than any other fee. On average, the Additional Handling Surcharge is going up 16.5% + Oversize fees are up 18% for Ground and 19.6% for Express.
|Surcharge Name||2022 Rate||2023 Rate||Increase|
|Additional Handling (Weight)|
|Additional Handling (Length & Width)|
|Additional Handling (Packaging)|
|Oversize (Home Delivery)|
What you can do about it
- Consider regional carriers or LTL for larger items. If it’s not small and lightweight, carriers don’t want it.
- Prioritize origin optimization. Assess where you can open a new Distribution Center closer to your customers.
- Evaluate where you can utilize zone-skipping to consolidate shipments and ship across multiple regions. Especially if you’re going to further zones.
- Utilize optimal boxes. It might even make sense to split your shipment into two to avoid extra fees.
FedEx Ground Economy Delivery Area Surcharges Will Hit Hard
Ground is up at least 7.04% up to 9.83%. And Express is increasing by 7.33%. Why? Because FedEx is trying to avoid shipments that aren’t efficient for them to deliver. In addition to higher prices, they’ve also spread the net for Delivery Area Surcharges to include more zip codes, affecting more shippers with a new ‘remote’ charge.
The 2023 Delivery Area Surcharge Remote Fee has a massive $13.25 price tag.
FedEx is showing that a “bigger is better” business model isn’t their goal. They want to focus on shipments they’re good at, not heavy, long-distance packages. And if that’s what your freight looks like, you’re about to get hit the hardest.
What you can do about it
Ensure you’re using service types the way they are intended. It might make sense to switch services, especially for bulkier items. Or look into a regional carrier that may not even have delivery area surcharges. Another option is to make shoppers aware of alternative options like lockers and access points offered by carriers to avoid.
New FedEx Fuel Index Tables Could Cost Shippers 1/4 of Their Parcel Spend
Expect fuel increases for these FedEx service types: Express, Ground, and Freight.
Let’s take a look at the biggest increases coming to shippers throughout the year. If the average cost of diesel is $2.51 but less than $2.56, you’ll incur a 15.50% increase on the total cost of the package. On the higher end, if the average fuel cost is between $3.91 to $3.96, you’ll pay a 22.50% fuel surcharge.
What you can do about it
Every percent that you save on your package equates to what you’ll save on fuel.
Managing this increase comes down to managing the total cost of your package. If you’ve already negotiated a fuel surcharge discount, then look at other operational savings. Package optimization like weight, dimensions, and proximity to your customer base all play a role. The shorter distance your package travels, the less fuel and the less total cost you’ll pay.
Carriers are turning up the heat. This is your wake-up call to understand down to the penny what your shipping looks like to make relevant changes for profitability.
Now that we’ve broken down the heavy hitters, here’s how you know which ones are pertinent to you.
Step #1 Get an Accurate Picture of What the GRI Means for You
The 6.9% average increase is just that. An average of all the rates across the board. So if you’re taking 6.9% and running with it for operational budgeting, you’ll be scraping your bottom line soon. Your actual impact is likely much higher. You need to analyze your network and how the individual rate hikes will attack your specific shipping profile.
Start with comparing your current landed cost against your landed cost after the 2023 rate increases.
This is the total amount it costs to create a product, transport it, and have the customer receive it.
A few essential metrics you need:
- Average zone
- Average price/pack
- Total accessorial charges
- Shipping charges by service type
- Spend trends
- Carrier agreement terms and discounts
These costs add up quickly. Especially when it comes to accessorial charges. For example, even to ship a one-pound package, you could incur base transportation costs, plus:
- A residential surcharge (up to 18% higher in 2023)
- A dimensional weight charge (higher than your actual weight charge would be)
- A delivery area surcharge (8.5% higher in 2023)
- A fuel surcharge (15.50% to 22.50% higher in 2023)
**If you ship to a customer’s home, you could pay a 16.85% higher surcharge than you did in 2021.**
|FedEx Service Level||2022||2023||Increase|
|Residential Surcharges (FedEx Ground)||$5.20||$5.50||7.4%|
|Residential Surcharges (FedEx Express)||$5.30||$5.80||9.4%|
|Residential Surcharges (FedEx Home Delivery)||$4.75||$5.15||18.7%|
Spoiler alert. Your carriers are tracking these metrics and using them to their advantage. They know your profile well and have their own profits in mind.
If you want to ease the blow of these increases, you need to think as the carrier thinks and ship like they want you to ship.
Since this data can be siloed in multiple systems, plan how you will capture and take action on these vital metrics. If you’re feeling overwhelmed or crunched for time, you’re not in this alone. Software like Sifted Logistics Intelligence can model these changes for you.
Step #2 Build a Plan to Minimize Impact
Don’t give carriers the upper hand. While you can’t hide your shipping profile from them, you can use your data to identify inefficiencies and make changes.
View your carrier as an ally during negotiations & smartly position yourself
You can work together with your carrier representative to find how you can help them be more efficient so they can help your efficiency in return. The more attractive you can make your freight to carriers to become their ideal client, the harder they’ll work to meet your (and your customer’s) expectations. Use step #1 to run the numbers and find where the GRI will hit you the hardest. Then identify areas of leverage and negotiate based on your shipping profile.
Analyze your carrier agreement for hidden fees and surcharges. (Read the fine print!)
Sift through your agreement to find any minimum spending clauses. You may have negotiated a discount that decreases your shipping costs, but does it offset the deal if there’s a shipping minimum?
For example, if a parcel costs $15 to ship, but your 50% discount leads you to believe it’s only going to cost $7.50, you’ll be shocked when you find out you have a spending minimum of $10. Be thorough in your examination and signing of these agreements.
Start shipping smarter
Shipping costs will only continue to increase. We expect an even higher average for 2024. You have to start looking at how you ship now and how your carriers want you to be shipping. If not, it will cost you. They don’t want ugly freight.
With these challenges still on the rise, consider:
- Passing additional shipping costs onto your customers
- Downgrading to cheaper shipping with longer transit times
- Working with regional carriers and expanding your carrier mix
- Exploring other ways to offset surcharges like box optimization or zone skipping
- Finding any possible way to maximize in-region fulfillment
Get Ahead of the GRI Before It Gets Ahead of You
These are historic rate hikes, it’s true. We know you’re feeling the pressure in this chaotic environment. But there’s more than hope; there’s a solution.
With Sifted Logistics Intelligence, you can analyze exactly how the GRI increases will affect you–down to the penny.
To take it a step further, use Sifted decision support tools to run advanced modeling scenarios. It will help you recognize when to:
- Open a new Distribution Center
- Your origin optimization has to be a top priority with additional handling and oversize surcharges going zone-based
- Add regional or LTL carriers to your mix
- You shouldn’t rely solely on UPS and FedEx
- Re-evaluate appropriate packaging
- Are you getting hit hard with accessorials? Looking at you large packages.
- And so much more
Don’t let the GRI slow you down – or catapult you deep into the red. Sifted has the insights you need to stay ahead of the carriers and your competition.