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Braced for Peak Season, Industry Can’t Help But Eye 2022

The industry is ready for peak season, but everyone is waiting for what comes after – waiting to see how the industry and carriers change.

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  • 🚨 Oct 13, 2021: The White House announced plans to expedite traffic in U.S. ports and increase capacity for carriers and retailers alike. A key component is the intention of FedEx, UPS, and Walmart to move to 24/7 operations. Learn more about the plan: https://n.pr/3vawXOj
  • 🚨 Recently announced: Lasership will acquire OnTrac for $1.3B, combining the two shipping networks for coast-to-coast support across the U.S – with the intention to seriously compete against FedEx, UPS, and USPS. Links: https://bit.ly/3DFvhj8 and https://bit.ly/3p1SEPD

PARCEL CARRIER NEWS

FedEx
  • 🚨 The following peak season surcharges go into effect beginning 10/4/21: Additional Handling, Oversize & Ground Unauthorized Package
  • 🎄 Peak surcharges for Ground Economy and Residential Shipments begin 11/1/21. The existing $0.60 Residential surcharge will resume 1/17/22.
  • The carrier released its Q1 2022 Earnings report on Tuesday, September 21. Here are the highlights:
    • Revenue $22B,  + 13.9%
    • Net Income $1.1B, -10.7%
    • Net Profit Margin 5.05%, -21.58%
    • Total US domestic package volumes increased YOY by 1.5%
      • Express: +7% YOY
      • Ground: Flat
    • Residential volume mix 57% vs. 62% in Q1 2021
    • 🚛 Labor drove $450M in increased expense last quarter ($200M in wages & purchased transportation rates, $250M in network inefficiencies)
      • Ground package handler hourly rate up 16% YOY
      • Express sorting hourly rate up 25% YOY
      • Inefficiencies with staffing across the network are re-routing an estimated 600K packages/day
    • 🎄 On Peak Season, carrier referenced intention to use pricing as a tool to manage capacity and a focus on protecting high-yield commercial segments.
    • 📈 Carrier expects 12% US Parcel market growth (up to 101M packages/day). Expected growth by segment: 1) Commercial, 2) Home Delivery, and 3) Economy.
    • Carrier also announced plan to make a $500M voluntary contribution to pension plan.
  • Find more information about FedEx surcharges, including peak season surcharges.
UPS
  • 🚨 Sep 10, 2021: UPS announced entering agreement to acquire Roadie, a crowdsourcing Same-Day delivery company with prominent clients like The Home Depot.
    • Roadie was founded in 2014 by CEO Marc Gorlin (👋 hey, Marc). The company will exist as a wholly-owned subsidiary of UPS.
    • Roadie often provides service for shipments not compatible with UPS’s network due to their size and perishable nature, typically moved and delivered in shopping bags.
    • The carrier noted that Roadie’s technology platform will provide opportunities to improve existing (and potentially add additional) small package capabilities.
    • 🛒 This acquisition puts UPS in the Same-Day delivery market with competitors like DoorDash and Instacart.
    • Neither company has disclosed financial terms of the acquisition. The transaction is expected to officially close “in the fourth quarter of 2021”, though perhaps it’s already closed.

GRI & SURCHARGES

  • 🎄 DHL eCommerce
    • DHL Express announced a 5.9% average shipment price increase for U.S. account holders that will take effect on January 1, 2022. Some optional services and surcharges will increase as well. The 2022 rates have not been published yet.
    • ⚠️ Note that the true impact of a carrier’s general rate increase varies by shipper and is largely dependent upon the shipper’s unique package characteristics and unique carrier agreement.
    • Read the announcement for more details.
  • 🎄 FedEx
    • FedEx announced a general rate increase of 5.9% for U.S., U.S. Export, and U.S. Import Express package and freight services that will take effect on January 3, 2022. FedEx Ground will also take a general rate increase of 5.9%. Note that the true impact of a carrier’s general rate increase varies by shipper and is largely dependent upon the shipper’s unique package characteristics and unique carrier agreement. FedEx Ground Economy rates and FedEx Freight rates will also increase. Some brand new surcharges will debut, including a Delivery and Returns Surcharge on FedEx Ground Economy and a No Shipment Tendered surcharge with FedEx Freight. Beginning January 24, 2022, the cost of Additional Handling and Oversize for U.S. Express and Ground services will be based on the shipment’s zone.
    • FedEx is increasing their fuel surcharge indices effective November 1, 2021, for Express (+ 1.75%), Express Freight (+ $0.028), Ground (+ 1.75%) and FedEx Freight.
    • The Peak Surcharge amount for some FedEx Express parcel and freight shipments increased on October 4, 2021. Specifically, the lanes affected include parcel shipments from Taiwan, China to the U.S., Canada, Mexico, Puerto Rico, and Guam, freight shipments from Europe to the U.S. and Canada, parcel and freight shipments from India destined to the U.S., Canada, and LAC, and parcel and freight shipments originating in MEISA (excluding India) destined to the U.S. and Canada.
    • See all FedEx rate changes for more details.
  • 🎄 FedEx Canada
    • FedEx Canada is increasing its Peak Oversize Charge, Peak Additional Handling Surcharge, Peak Unauthorized Package Fee and Peak Residential Delivery Charge for domestic Express and Ground shipments. Most increases took effect on October 4, 2021, while the Peak Residential Delivery Charge will take effect on November 1, 2021.
    • On October 4, 2021, the surcharge amount for FedEx Canada Express international package and freight services increased in some lanes. The increases affected Package and Freight imports from Asia (Zone K) to Canada, Freight imports from Europe (Zones F & G) to Canada, and Package and Freight imports from Middle East, Indian Subcontinent and Africa (Zones Q & R) to Canada.
    • See all FedEx Canada rate changes for more details.
  • UPS Canada
    • UPS Canada announced a general rate increase of 2.8% that takes effect on December 26, 2021. The 2.8% net increase is said to be inclusive of a reduction in certain peak surcharges. Rates are not available at this time. Note that the true impact of a carrier’s general rate increase varies by shipper and is largely dependent upon the shipper’s unique package characteristics and unique carrier agreement. Read the announcement for more details.
  • USPS
    • The USPS released this statement regarding Market Dominant products: “To help customers better prepare for a new Market Dominant price adjustment schedule, the Postal Service will not raise prices on Market Dominant products, including Forever stamps, in January 2022. Instead, the next Market Dominant price adjustment is scheduled to happen in July 2022.”
    • The statement went on to say that “beginning January 2023, Market Dominant price adjustments will occur twice a year, (e.g. January 2023, July 2023, January 2024, July 2024, etc.). Market Dominant products include First-Class Mail (FCM), USPS Marketing Mail, Periodicals, Package Services, and Special Services. Package Services include Media Mail, Library Mail, and Bound Printed Matter.”
    • Read the announcement for more details.

SHIPPING INDUSTRY NEWS

  • 🦃 Amazon rolls out ‘Black Friday-worthy deals’ earlier than ever, kicking off holiday shopping. “Customers can confidently shop early knowing they are receiving incredible deals starting today, letting them get a head start on their holiday to-do lists so they can truly enjoy the holiday season,” said Dave Clark, CEO of Worldwide Consumer at Amazon. Link: https://bit.ly/3lCrxZm
  • Industry analyst, Ian Putzger, predicts Amazon will soon offer “logistics as a service”.
    • Here’s why:
      • ✈️ Amazon’s “freighter fleet… has grown by 24 planes to 73 units”, and now “runs 163.5 flights a day” on average.
      • 🧀 The retail giant opened its own Amazon Air hub in Cincinnati this year, with an estimated $1.5B cost.
      • Amazon Air now flies to 42 airports that are within 100 miles of 70% of the US population.
      • On the ground, Amazon is already moving shipments for third parties.
      • 🗓 When will Amazon offer logistics as a service? Predictions say within 18 months or sooner.
  • On a related note, Amazon surpassed FedEx in domestic parcel volume for the first time ever says Pitney Bowes.
    • While reviewing domestic parcel volume in 2020, Pitney Bowes determined the top four carriers were:
      • USPS (7.6B shipments)
      • UPS (4.92B shipments)
      • Amazon (4.2B shipments)
      • FedEx (3.25B shipments)
    • “While there is tremendous concentration in the industry, the byproduct of historical trends, disruption is creating interesting spaces for new entrants or existing ones to rapidly change their profile and share to change hands,” said Pitney Bowes EVP Jason Dies, “But it’s going to take a while for those volumes to aggregate and be meaningful.”


 Written by Cam Elliott


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