How to Manage UPS and FedEx Rate Increases

Man delivery fragile boxes
June 21st, 2021 SHIPPING & LOGISTICS

The pandemic is winding down—at least in the United States—but not parcel carrier shipping rates.

Both UPS and FedEx have increased the volume of lighter-weight and deferred-service level packages flowing through their systems in response to surging pandemic business-to-consumer (B2C) demand. Even regional parcel carriers like LSO, Lasership, and OnTrac, and the U.S. Postal Service (USPS) introduced package surcharges in 2020.

Larger ecommerce shippers have historically used their volumes to leverage significant discounts. But that's not the case for small-to-midsize shippers. They have less pricing latitude and will face carrier resistance in negotiating down base rate or surcharge increases.

But all ecommerce shippers are impacted by the rates UPS, and FedEx instituted in early 2021.

So if you're an ecommerce shipper, how do you handle all these changing charges as we head deeper into 2021?

The bad, ugly, and less-ugly of FedEx and UPS 2021 charges

So far in 2021, FedEx and UPS have loaded on price increases, peak surcharges, and upcharges that significantly impact ecommerce shippers:

  • Both mega-carriers have increased rates for almost all services and package types. This move is something ecommerce shippers need to pay attention to since a few new dimensional surcharges can significantly impact shipping costs for mid-sized and large packages. Like UPS, FedEx's based additional handling surcharges (AHS) on dimensions, weight, and packaging. FedEx charges apply to Express and Ground packages measuring >48 inches on the longest side and >30 inches on the second-longest side. Further, packages >105 inches in length and girth will be subject to an extra charge.

  • Ecommerce shippers will likely bear the brunt of UPS Inc.'s 2021 rate increases. So far in 2021, UPS rate increases have been tilted toward the slower, less-pricey "deferred" services that ecommerce customers generally favor vs. urgent, time-definite, or day-definite services like UPS' core ground delivery service and SurePost.

  • UPS's Ground residential surcharges have increased by 8.54%. Meanwhile, deferred express services rose about 6% above the 4.9% 2021 general rate increase (GRI), which is mainly irrelevant to the actual shipping costs of regular UPS customers. Lightweight parcels are the only area where the 2021 deferred express increase is higher than the 2020 increase.

  • UPS has tacked 20 "accessorial" fees and levies onto their base rate. This move reflects the company's costs of providing additional services beyond pickup and delivery. And so far this year, UPS has also already introduced a $2.99 per-package levy on parcels shipped to more than 9,000 of UPS' "Access Point" locations operated by partners like CVS.

In addition, both UPS and FedEx rates now vary based on the shipping zone. So depending on a package's destination zone, each ecommerce company may experience different shipping cost increases.

Real-life ways to get around FedEx's June 2021 upcharges and fees

If your head is spinning, imagine how your shipping and fulfillment folks are doing. Packers don't have the time to evaluate and optimize packaging choices manually for every shipment. Shippers who invest in a smart cartonization approach will gain a marked advantage as competitors try to weather higher shipping costs.

Want to start solving problems and optimizing your costs?

Here are a few examples of how you can work around the upcoming June 21, 2021, FedEx increases (yes, there are yet more 2021 FedEx rate increases in store):

  • A Peak Additional Handling Surcharge for U.S. Express Package Services, U.S. Ground Services, and International Ground Service. Effective June 21, 2021, until further notice, this surcharge will increase from $3.00 per package to $3.50 per package. For better shipping cost management, you may want to consider tactical packing directives like consolidating a shipment into one box that was previously cost-efficient to ship in two or investigating which types of shipments are cheaper in a polybag instead of a box.

  • A Peak Surcharge for FedEx Ground Economy Package Services. The peak surcharge will increase from $0.75 per package to $1.00 per package and will also take effect on June 21, 2021, until further notice. This increase will be especially onerous for multi-item shipments that won't all fit in the same box. You would think just putting everything in the same large box would suffice, but remember, you risk oversize and dimensional weight fees with this strategy.

  • A Peak Residential Delivery Charge for FedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate packages). This charge will increase from $0.30 per package to $0.60 per package and go into effect on June 21 until further notice. Here's an instance where, for example, if you're a B2C retailer, you'd be wise to offer USPS shipping or package locker pickup options.

Because FedEx and UPS often march more or less in lockstep, additional UPS fees are likely not far behind FedEx's upcoming June 2021 increase. Stay tuned.

Want to give your shipping department a break, stay ahead of new fees and ensure your packaging and box configurations aren't triggering unnecessary expenses? Learn how easily Paccurate lets you automatically factor surcharges and fees into your shipping calculations whenever FedEx and UPS make changes by visiting us at paccurate.io. Or take a look at our 10-minute read, easy-scan, Cost-Optimal Parcel Packing White Paper to explore how Paccurate's smart cartonization helps you navigate fees and other rate incentives in real time.

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