The FedEx and UPS 2021 General Rate Increases are officially here, and as many have noted – including the Big 2 – the average carrier cost increase is 4.9%. But, as always, the true price increase will vary by shipper, largely depending on your individual shipper profile. In addition to this year’s rate increases, both FedEx and UPS have reintroduced pandemic driven surcharges, also impacting your overall shipping costs. To help navigate this changing landscape, we’re highlighting three key takeaways from the 2021 General Rate Increases. Let’s dig in!
1. Optimize your carriers (and their shipping services) for the best price depending on weight and zone. This year, we see both FedEx and UPS raise costs for shipping lightweight packages (between 1-10 pounds), with average increases generally above 4.9%.
Keep in mind that higher zones tended to see the greatest average cost increases.
These cost increases mean that each carrier is attempting to improve their margin profit on lightweight parcels. Shippers looking to mitigate such expenses would do well to consider which carrier (FedEx or UPS) is most cost effective when shipping certain weights or shipping to certain zones.
2. Start (or continue) to optimize your carton utilization. As the cost per parcel increases, so does the need to ensure you’re only paying the minimum shipping expense possible per parcel. If your parcel’s dimensional weight is unnecessarily larger than its actual weight, the carrier will base its fee on that larger number, and you’re unnecessarily inviting additional shipping costs. Make a direct impact on your shipping costs by not just optimizing the number of boxes per shipment, but also the size and space utilization of those boxes as well.
Reduce the possibility of increasing (and costly) carrier accessorial and surcharge fees wherever possible, and appropriately plan for those you can’t eliminate. For some of the most common surcharges (see charts below), we see an average 7.24% and 7.65% increase for FedEx and UPS respectively.
It’s important to also keep in mind that both carriers have added additional zip codes to their Delivery Area Surcharge (and Delivery Area Surcharge Extended), casting a wider net for the zip codes where these fees apply. Some common surcharges, such as Address Corrections can be easily avoided; however, others like the Additional Handling surcharges may require some creative effort during contract negotiation to change the rate or conditions. For surcharges that cannot be avoided or negotiated, it’s never been more important to analyze your network and understand the fees that impact your business the most. These expenses are not going away or being reduced anytime soon, so make sure they’re reflected in your 2021 and 2022 budgets.
Navigating the 2021 General Rate Increases (and updated assessorial and surcharge fees) is no easy feat; however, understanding your shipping profile and the needs/expenses of your unique network are critical to optimizing your shipping expenses and savings. Consider partnering with Green Mountain Technology to guide you along the way – we’ve partnered with some of the world’s largest shippers (and most complex networks) for the past 20 years, helping them navigate not just these same challenges, but also implement highly complex network optimization strategies that turn expenses into savings every day. Learn more about our solutions, and don’t forget check out our 2021 Guide to COVID-19 Surcharges and Rate Changes.
Subscribe to GMT's newsletter to get the latest updates
Get the latest updates 📪
Subscribe to our monthly newsletter to stay in the know of Parcel industry and GMT updates.