FedEx Sets New Pickup Charges. Will Your Costs Go Up?

UPS quietly updated its fees on June 2, including new domestic fuel surcharges, delivery area surcharges, and handling charges. They’re only the latest in an ongoing stream of charges from UPS aimed at increasing profit margins.  

But the big news this month comes from FedEx, which is making some wider-reaching changes. 

In the latest news from FedEx, the carrier has also announced new surcharge changes beginning on July 14. But the biggest news? Effective August 18, FedEx is introducing a new pricing and rating structure for parcel pickups. There will be a weekly charge for  Regularly Scheduled (U.S. and Canada) and Automated (U.S. only) pickups, regardless of service type. That means FedEx expedited and standard service customers will be charged the same amount for pickups. In addition, on-call parcel pickups in the U.S. will be charged per stop, not per package. 

The carrier’s most recent move is part of FedEx’s Network 2.0 program, launched three years ago to streamline its package networks and increase collaboration between its Express, Ground and Freight units. FedEx says the new “rationalized rating structure” launching in August will simplify pricing, as well as enable shippers to choose a parcel pickup cadence that best suits their business. “Customers have expressed an overwhelming preference for a single pickup,” says FedEx on its website. 

It's worth noting that the new pickup pricing structure will make FedEx more competitive with UPS, which already offers single pickups for packages with different service demands. As we discussed in an earlier blog post, FedEx’s efforts to optimize its networks are placing it closer to, or ahead of, UPS in efficiency. While UPS reduced its Amazon business by 50% to eliminate low-margin fulfillment center outbound volumes, FedEx confidently picked up Amazon’s large, harder-to-handle shipments to residential customers at the same time. 

Will the New Rate Structure Reduce Your Costs? It Depends 

Usually new pricing schedules mean a win for carriers at the expense of shippers. But in this case, the impact will depend heavily on each company’s patterns and behaviors—and willingness to make adjustments.  

For example, companies who schedule one pickup per day, may pay less when compared to the carrier’s previous per-package charges. And companies who can move their parcels to a single location within the warehousing complex will benefit from lower pickup fees. Just about every customer will benefit from not having to sort and separate packages depending on service type. 

The new FedEx rate schedule will generate rewards for companies who can consolidate shipments and reduce their pickup cadence. But, of course, those cost advantages must be balanced with customer service goals, as well as internal workflows and available resources. 

As Rates Evolve, Turn to Redwood for Guidance 

Both FedEx and UPS continue to make regular changes in their rates and policies as they work to optimize their own operations. Often, the effects of these changes can be complex and tough to analyze. Shippers need to make increasingly nuanced choices to minimize their parcel costs, while still meeting overall market needs, remaining competitive in delivery speed, and satisfying individual customer expectations. 

Fortunately, the parcel experts at Redwood are on top of these changes—and can translate them into smarter practices and new behaviors that optimize all your outcomes. Our Parcel Advisory team includes former employees of FedEx and UPS who understand the “why” behind the new policies—and can reveal the “how” as shippers try to capitalize on them.  

By analyzing customers’ shipping frequencies and patterns, parcel sizes and weights, service mix, carrier mix, and other factors, the Redwood Parcel team typically saves shippers 12% in the first year alone. Contact Redwood—and let’s increase your readiness for the next big carrier announcement.