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Posts Tagged ‘fedex’

FedEx Express to Increase U.S. Prices 5.9%

On September 18th, 2012, FedEx Express announced that they will increase prices for U.S. services by a net average of 3.9%. The full average rate increase will be 5.9%, but this will be partially reduced by a change to the company’s fuel surcharges. Specifically, the threshold at which fuel surcharges begin will be increased, effectively reducing the surcharge by 2 percentage points.

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FedEx Announces 2010 Rates

On September 17th, FedEx announced their rates for the year 2010.

According to their website, “FedEx package and freight rates will increase an average of 5.9% for U.S. and U.S. export services. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharges begin, reducing the fuel surcharge by 2 percentage points.”

For a complete list of FedEx’s new rates click here.

When Ware-Pak studied the rate changes, we noticed that the smallest rate increases seem to be occurring in the Express Saver and First Overnight services. The Express, Standard and 2-Day services appear to have increases greater than the average that was announced.

In addition to the standard rate increases, FedEx is also raising accessorial charges by close to 10%. They are also adding an additional Delivery Area Surcharge to select remote zip codes for residential shipments.

Minimum billable weight will be increased for FedEx Express U.S. and FedEx Express U.S. export services. The minimum billable weight will apply to shipments packaged in FedEx Express boxes and tubes.

For FedEx Express Multiweight® shipments, qualifying shipments weighing 100lbs. or more are rated on both a per-package and total-shipment weight basis, and the lower rate applies. The average minimum package weight will increase from 10lbs. to 15lbs.

FedEx did not announce any ground service increases at the present time. My guess is that when UPS makes their announcement, they will follow suit.

Is Another Postal Increase in Our Future?

In recent years, the United States Postal Service (USPS) has made significant strides with improvements to their service levels and increased profitability, but the economic downturn is not taking its toll. According to Morgan Stanley, USPS is on track to lose between $6 and $10 billion this year.

Under normal conditions, the process for determining the postal rate increase is tied to the Consumer Price Index (CPI). The amount of increase cannot be higher than the CPI by class of mail. The current trend for the CPI is a negative number, which would mean no postal rate increase.

However, the USPS has another means to raise rates in emergency situations, known as exigent pricing. For example, if a natural disaster causes a dramatic increase in cost, they are able to pass that cost increase along to the consumer.

The question is: Does the current economic recession qualify as an emergency situation? Some think it does.

In the past, Postmaster General John Potter, has said that he does not want to increase rates. But given everything that Congress has been spending on, it puts a great deal of pressure on the USPS to perform, at the least, a breakeven status.

The USPS has laid out several initiatives to reduce their losses. These include reducing funding for retirement benefits, closing post offices and eliminating Saturday service in the second quarter of 2010. These changes will also have some effect on other carriers such as UPS and FedEx. As some of you know, UPS and FedEx rely upon the USPS for the final mile delivery for hard to reach or isolated areas. This reduction in service levels would impact their ability to provide timely service to some areas.

The USPS can file an exigency case at any time, meaning the new rates could be implemented before May of 2010, which is when normal increases are implemented. However, if they take this action, the increase will probably not be implemented before the May timeframe.

The Bottom Line
Put some money in the budget for a USPS rate increase. In my opinion, the losses are too great and the medicine to correct the situation is too difficult not to take precautionary measures and be prepared.

Changes from Shipping Companies

The weakening U.S. economy has caused businesses and private consumers to do a little belt tightening in recent months, and many businesses in the service industry, including shipping, are among those feeling the pinch. The economic downturn is proving to be both positive and negative for the shipping industry. They have benefited greatly from reduced fuel costs, but are facing the challenge of reduced demand because consumers are watching their wallets and spending less on shipping.

This has lead many of the shipping industry’s major companies to make some changes. Europe-based DHL has been one of the hardest hit by recent economic events. They have decided to discontinue U.S. domestic-only air and ground services starting in January, 2009, so they can focus on international shipping. This move will save the company an estimated $4 billion in annual operating costs.

Other big names like FedEx and United Parcel Service (UPS) are making some adjustments of their own, though not quite so major. Both companies have decided to raise their rates in 2009 in an effort to make up for the decreased demand. Standard list rates for UPS and FedEx ground and home delivery are expected to increase by about 5.9%. UPS is also going to be increasing their air service rates by about 4.9%.

What does this mean for Ware-Pak clients?
While prices may increase slightly, Ware-Pak customers won’t be affected nearly as much as average shipping customers.

Ware-Pak has a long-standing, quality reputation with many of the top shipping companies. We negotiate with all carriers and freight companies for discounted rates, based upon the aggregate shipping activity of the entire warehouse. Customers receive 100% of these discounts. In addition, Ware-Pak’s central location allows us to ship anywhere in the U.S. at a lower cost than much of the competition.

The Bottom Line
Most of the rate increases are scheduled to begin in January 2009 so make sure you get all of your holiday orders out on time. Orders may cost a little more to ship next year, but hopefully as the economy continues to change so will the state of the shipping industry. It helps that clients can count on Ware-Pak to help hold the line on shipping costs in these challenging times.

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