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2022: Supply Chain Issues May Ease but Parcel & LTL Costs Set to Rise

This year’s Parcel and LTL marketplaces welcome rising costs to not just meet demand but lead the future markets.

two parcel boxes stacked

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GMT’s Shipped Monthly unboxes the latest Parcel and LTL industry news each month! Don't forget to subscribe to our newsletter to get the latest updates right from your Inbox.

PARCEL CARRIER NEWS

FedEx
  • 🏡 The carrier’s Residential Delivery Surcharge sees a per-package increase this month. Beginning January 17, 2022, the Residential Delivery Surcharge will increase by $0.60 per package for FedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate packages).
  • In its Q2 Earnings call, carrier reports higher operating income. Notable takeaways include:
    • Revenue $23.5B, + 14%
    • Net Income $1.3B, 0%
    • Operating Margin 7.1%, -0.3%
    • Salaries & Employee benefits $8.1B, + 9%
    • Total Avg. Daily volume -3.4%
    • Total US Avg. Daily volume +2.9%
    • Total US domestic package revenue increased year-over-year by 10%
    • Other notable highlights:
      • 🚚 During the call, the carrier acknowledged labor costs and network bottlenecks accumulated $470M in additional YOY expenses. “$230 million was incurred in higher wage and purchase transportation rates… network inefficiencies increased costs by approximately $240 million,” said Mike Lenz, Executive VP and CFO of FedEX Corporation. Lenz continued to say that these issues would persist throughout Q3, despite anticipated labor headwinds.
      • 🛍 Brie Carere, Executive VP and Chief Marketing and Communication Officer for FedEx Corporation, noted “the US domestic parcel market will reach 134 million pieces a day by calendar year 2026, a remarkable 70% growth from 2020. E-commerce is expected to drive 90% of the parcel market growth.”
      • While speaking on the carrier’s “favorable pricing environment”, Carere said the carrier anticipates “a higher than normal capture of our general rate increase,” as FedEx plans to make “structural changes in all of our contracts as we move forward.”
  • The carrier’s Additional Handling and Oversize surcharges see changes this month. Starting January 24, 2022:
    • Additional Handling Surcharge rates for U.S. Express Package Services and U.S. Ground Services will be determined based on the shipment’s zone.
    • Oversize Surcharge rates for U.S. Express Package Services and U.S. Ground Services will be determined based on the shipment’s zone.
    • See all FedEx Express and FedEx Ground surcharges and fees.
UPS
  • 👀 The carrier announced plans to increase shipment visibility, codenamed Project Evolve. Few specifics were shared by UPS CEO, Carol Tomé; however, the carrier did say to expect a product that “will provide a digital dashboard to capture every move along the package supply chain.” The carrier has not charged a specific timeline or current progress.
  • ✈️ The carrier has also announced plans to purchase 19 Boeing 767 Freighters as it works to meet expanding e-commerce demand. The move would allow UPS to “meet near-term and long-term cargo demand”.
  • In December, the carrier celebrated over one billion COVID-19 vaccines “delivered with near-perfect on-time delivery.” UPS noted that the “milestone was made possible through UPS’s innovative approaches, one-of-a-kind UPS® Premier tracking technologies, industry-leading cold chain solutions, and an expansive, sophisticated, global network providing UPS Healthcare™ services to customers and communities around the world.”
  • Upcoming events:
    • Q4 2021 Earnings Conference Call – February 1, 2022
    • Q1 2022 Earnings Conference Call – April 26, 2022

GRI & SURCHARGES

LTL Carrier NEWS

  • After 96 years of operation, Central Freight Lines closes its doors. “The company explored all available options to keep operations going. However, operating losses sapped all remaining sources of liquidity, and the company’s liabilities far exceed its assets, all of which are subject to liens in favor of multiple creditors,” said the carrier’s president, Bruce Kalem, “The company concluded that the best alternative was a safe and orderly wind-down.” The carrier’s prior freight will likely be divided across a variety of LTL carriers; however, the company stands as a cautionary tale for other industry leaders about being omni-strategic regarding financial commitments incurred.
  • 💰 Similarly, Logistics Management reports LTL carriers anticipate continued rising costs for shippers as carriers focus on improving their networks and adding capacity. But LTL carriers aren’t simply seeking just any improvements – they are seeking “what best fits into our business model[s]”.
  • 📊 The Journal of Commerce (JOC) has also reported anticipation of rising LTL shipping rates in 2022, pointing to LTL carriers like Old Dominion Freight Line (which recently announced a 4.9% GRI increase), Yellow, XPO Logistics, Force Freight, and Estes Express Lines as examples of what to expect this year. It’s estimated that LTL carriers will increase their overall revenue by nearly 12% this year, not including the estimated almost 27% revenue increases in 2021.


 Written by Cam Elliott


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