By Jeff Berman / www.logisticsmgmt.com / May 9th, 2016
When it comes to pricing changes, transportation and logistics bellwethers are usually on the same page. And that was again made clear with changes each company made for additional handling charges on ground packages.
Last Monday, May 2, FedEx issued an announcement saying the following:
“Effective June 1, 2016. Additional Handling Surcharge. A surcharge applies to any FedEx Ground package that measures greater than 48 inches but equal to or less than 108 inches along its longest side. Prior to June 1, 2016, a surcharge applies to any FedEx Ground package that measures greater than 60 inches but equal to or less than 108 inches along its longest side. All other Additional Handling Surcharge size, weight and packaging parameters remain unchanged. The surcharge remains at $10.50 per package. This change applies to shipments within the U.S. and from the U.S. to Canada. See the Jan. 4, 2016, FedEx Service Guide for details.”
And UPS followed serve last Friday, May 6, with this statement:
“Effective June 6, 2016, UPS is changing the measurement that determines whether the UPS Additional Handling charge will be applied to UPS Ground services packages in the U.S. The updated 2016 UPS Rate and Service Guide will be available to download on June 6, 2016. Any package with the longest side exceeding 48 inches, instead of 60 inches, will be assessed the fee. The Additional Handling fee of $10.50 remains the same. The change does not impact UPS Air or International shipments.
This change is being implemented due to the additional handling required for these types of packages in the UPS network.”
An industry stakeholder was blunt in explaining these pricing hikes, simply saying “they do it because they can.”
Given the ongoing strides e-commerce is making in terms of boosting ground delivery volumes, coupled with the vast UPS-FedEx duopoly continuing to dominate the domestic ground package market, it wouldn’t make sense for them not to raise rates, it seems.
With the duopoly as strong and dominant as it has ever seemingly been, thanks in no small part to e-commerce gains, along with consumers and shippers like becoming more comfortable with ordering things online, something which has led to them ordering larger items that these price changes adhere to, compared to the “old days,” which saw more orders for smaller items like books and other things of similar size as well.
What’s more, in some cases, the writing has been on the wall for FedEx and UPS to make these changes.
FedEx signaled that intention last September, when it first announced its 2016 rate increases, and said it would be updating certain fuel surcharge tables at FedEx Express and FedEx Ground, effective November 2. These changes were made due to what FedEx described as changing industry dynamics, including, increases in average package size and weight, and increased residential deliveries.
The company also noted that it planned to up surcharges for shipments that exceed published maximum dimensions, or unauthorized packages, in its FedEx Ground network. It explained that unauthorized packages that exceed length or weight limitations of FedEx Ground “are handled at the option of FedEx Ground.
“If you would look at one of these packages, you would more likely to expect it to travel in an LTL network,” said T. Mike Glenn, FedEx executive Vice President, Market Development and Corporate Communications, on the company’s fiscal first quarter earnings call last September. “It is up to FedEx Ground as to whether we accept these packages but we felt the change was needed in the price or the surcharge if we elected to do so.”
As for oversized packages, Glenn said these are packages that have specifications that are within FedEx’ current service guide features or service, but have to be longer or heavier than a typical package, adding that they carry a separate surcharge with the dramatic shift in e-commerce, where more and more e-commerce companies are electing to ship those packages through networks like the FedEx network rather than handle them in the store.
“We’ve seen an increase in those types of packages,” said Glenn. “We are working with those individual customers that are driving that change, at least the ones that are having the biggest impact and obviously, we always look at pricing opportunities to mitigate that where needed. So overall, we do an excellent job of handling those packages in our network but it’s obviously something we will continue to monitor.”
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