All posts by : enVista Marketing

The 2019 rate increases announced earlier this week by shipping and logistics giant FedEx Corp. (NYSE:FDX) contains a stark message for shippers: Easily conveyed packages will see relatively modest increases. Heavier, outsized and less conveyor-friendly shipments, by contrast, will not.

The headline numbers show a 4.9 percent increase for shipments moving via FedEx Express and FedEx Ground, and a 5.9 percent increase for less-than-truckload shipments tendered to FedEx Freight. But long-time FedEx shippers, as well as regular customers of rival UPS Inc.(NYSE:UPS) know all too well there is scant correlation between the announced rate hikes and what their actual increases will be.

Next year will be no different, at least at FedEx. (UPS has yet to disclose its 2019 rates). Rates will rise 5 to 5.4 percent for one to 50-pound shipments moving via the two next-day delivery products: Priority Overnight and Standard Overnight. That is slightly higher than its published rate increases.

The pain comes when shipments enter the 50 to 100-pound range. There, the rates for the same products jumps by 9 to 10 percent, according to an analysis from enVista, a consultancy.

The pattern holds true for 2 to 3-day delivery services. For shipments less than 50 pounds, the increase will be between 5 and 6 percent. For the heavier weight breaks, the increases are in the 9 to 10 percent range, enVista says.

FedEx’s rates for 1-pound shipments moving less than 150 miles from the origin point which is considered the benchmark for the carrier’s minimum charges, will rise between 3.6 percent for ground and home delivery services to 5.4 percent for its priority overnight letter product, according to data from Shipware, LLC, another consultancy. Rates for FedEx “Smartpost,” a product it offers in conjunction with the last-mile delivery capabilities of the U.S. Postal Service will rise 4.3 percent for shipments in the 1-9 pound weight range, SmartPost’s bread-and-butter.

The skewing towards the heavier shipments are “part of the war on large packages” that are occupying more capacity in the two carriers’ networks, according to Joe Wilkinson, a senior director at enVista. Larger packages are harder to handle and not easily conveyable. Satish Jindel, head of SJ Consulting, a consultancy, notes that bigger shipments occupy a disproportionate amount of precious space in the carriers’ physical networks that are already near maxing out.

As a result, carriers impose significant rate increases in an effort to reduce their volume. Stiff accessorial charges on those shipments have become commonplace, as has “dimensional pricing” as many large shipments qualify for it. Dimensional pricing, which calculates rates based on a shipment’s dimensions rather than actual weight, is typically more costly for shippers.