Analysis of Fedex General Rate Increase

As expected, FedEx announced on August 29 its annual general rate increase (GRI) of 5.9%. This rate increase will be followed up by a similar increase from UPS.  Last year, it took UPS nearly a month to release its GRI. The GRI will go into effect January 1, 2024.   

Our experts observe this early move by FedEx to be a strategic advantage for the carrier against its longtime rival UPS.  FedEx announced a lower rate, effectively forcing UPS to match.  By moving ahead of schedule, FedEx has placed pressure on a UPS organization already faced with rising costs.   

Following recent Teamsters negotiations last month, UPS is now confronted with an anticipated annual rise of $30 million in operating costs. Industry experts anticipated UPS would announce first this year in an effort to offset the substantial increases from the new Teamsters contract. The increase in 2022 was 6.9%, and consensus among most experts was that a comparable rate, if not higher, would be anticipated for 2023. At Redwood, we have been preparing for these increases by analyzing shipper spend and providing no-cost peace of mind and direction. Redwood Parcel experts traditionally have been able to identify 15% of savings, which we can help you achieve through our white glove mediation model. 

The 5.9% rate increase is an average and does not include surcharge increase which will be announced September 7 by FedEx.  How much of an increase will you actually see in your 2024 shipping costs? 

Redwood’s Parcel Mediation and Contract Audit group can help guide you through how the answers to these questions will affect your business. By taking a white-glove approach to all our clients’ networks, and utilizing market-leading software to identify larger areas of risk in your parcel contracts, we thoughtfully build a plan based specifically on your network analysis results. 

In addition to their surprising early GRI announcement, FedEx also strategically adjusted other elements that could influence UPS's plan to close the gap. Shippers likely noticed that peak surcharges in late 2022 didn’t stop after peak season in January as they traditionally do. In fact, shippers are still seeing peak surcharges assessed on invoices today! FedEx rebranded their version of this surcharge to “Demand Surcharge” and it will go into effect on October 2nd. You can find the surcharge breakdown by service type and the effective dates on the FedEx website. However, unlike last year, these charges have a specific end date, the latest on January 14th. If UPS aimed to leverage peak surcharges with no specified end date, they may have to reevaluate their approach.  

This announcement from FedEx is an initial ray of hope for FedEx shippers. Not only is the increase lower than last year, but it also has specified end dates for demand surcharges. Will shippers be able to hold FedEx accountable? Will these dates stand, or will they adjust to “until further notice”? 

Let’s re-visit last year’s GRI. Was the increase truly 6.9%? No. In fact, these announced GRI percentages only reflect the increases to base transportation charges. Industry experts calculated increases to the rest of the surcharges and accessorials which showed customers came closer to a 12% increase. If shippers have learned anything from the past few years, it’s that they need to budget for more than the stated rate increase, and focus on making adjustments to other areas of their carrier agreements.  

Redwood Logistics is currently averaging savings of 15-20% for their small package shipping customers. Additionally, the Redwood Parcel team takes a high-touch approach when providing guidance and collaborating with a diverse range of companies, a departure from the prevailing industry norms. Many parcel firms have transitioned to self-service models, which force customers to navigate the complexity of carrier management with limited support and resources.  

Don’t navigate this challenging market on your own. Let the Redwood Parcel team customize a plan tailored just for you.