FedEx has been in the news lately. On their most recent call with the financial analysts, they indicated that they are being impacted by the slowdown in the economy and raised the possibility that we may be seeing a global recession on the horizon.
After the dust settled down from that call, FedEx announced a general rate increase of 6.9%. This is the largest increase in their history. They also announced there would be significant - as in double digit - increases in several different accessorial charges. Add it all up and it is likely that it will, pending your negotiations, be more costly to use FedEx in 2023.
After we reviewed these increases, we interviewed our friend and parcel expert Jerry Hempstead to learn more about what's driving these increases, what it means for shippers and what we can expect from UPS after their call with the financial analysts on October 25.
Jerry highlighted the fact that a portion of these increases are attributable to inflationary conditions. But he also noted that terminating their agreement with Amazon, and a drop in demand for volumes resulting from a drop in e-commerce has affected FedEx's volumes. So another major factor driving these increases has been the fact that FedEx's volumes are not where they were projected to be, so they are being more aggressive on the increase front to protect their financial results.
Although this increase is for non-contract shipments, it will influence the contract rate trajectory. And depending on the language in your contracts with FedEx, the charges for accessorial fees are based on the fees in effect at the time of the shipment - not based on what the rates are at the time of the contract.
It is likely that UPS will have comparable increases when they announce their pricing for 2023. Keep in mind that both FedEx and UPS have let it be known that there should be more than enough capacity in 2022 to handle the surge in shipments during "peak season".
We encourage you to watch our interview with Jerry. If you’re wondering how these changes could impact your budget in 2023, we have a great tool for you! We encourage you to take advantage of our parcel toolbox to see how the proposed price increases from both UPS and FedEx could impact your parcel spend in 2023. Get in touch to learn more, or schedule a demo.
One other news item that caught our attention recently is a new development in the negotiations at the West Coast ports. There have been accusations of a work slowdown at the ports of Seattle and Oakland, along with accusations of an improperly awarded contract. Now that the contract has been expired for over three months, we’ll be watching any signs of deterioration closely and keep you posted.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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