Redwood Parcel Extinguishes Parcel Cost Inflation

Parcel carriers are raising rates higher than the already-high U.S. inflation rate, while package volumes are falling. It’s a rough recipe for parcel shippers in the second half of 2022, but mediation and mitigation options are available.

Let’s start with a closer look at what the major parcel carriers are up to. 

2022 Parcel Rates Up But Volumes Down

Once again, UPS has reported record-setting quarterly revenue and earnings – all while package volumes drop. UPS’ latest quarterly earnings  were released on July 26. For domestic packages revenue grew 7.3%, driven by an 11.9% increase in revenue per package. 

UPS raised their revenue per package (11.9%) by more than the US inflation rate over the same period of 9.1%.

Meanwhile, UPS CEO Carol Tome’s “better not bigger” strategic framework has placed mid-size shippers (shippers that ship between $1 million and $20 million in parcel annually) as their prized customer.

If you are a mid-size shipper, Redwood Parcel can help you take advantage of the “better not bigger” strategy. The market is ever-changing and now is the time to review your parcel contract.

Peak Parcel Surcharges Reach New Peaks

UPS isn’t alone. FedEx announced 2022 Peak surcharges on Aug. 5. Unsurprisingly, FedEx increased both the amount and duration of their peak season surcharges.

The earliest surcharges start Sept. 5 for Peak-Additional Handling and Peak-Oversize Charges with a higher surcharge rate coming into effect on Oct. 3. At first glance, it appears that surcharges increased by about 10%, but when you consider the duration of the peak surcharges, you see a different story.

FedEx has added a full month to the surcharge period, expanding the peak period from 3.5 months to 4.5 months. Over a third of the year is now considered peak!

Additional complexity was added to the Peak-Residential Delivery Surcharge. This surcharge will vary from $1.25 to $7.00 per package depending on service and volume over 20,000 packages per week the two weeks prior to shipping. Sound confusing? It is!

Below is a table comparing 2021 and 2022 Peak surcharges:

Time to Review Your Peak Parcel Surcharges and Parcel Contract?

Ultimately, whether it’s adjusting to UPS’ mid-size focus or making sense of FedEx’s peak surcharges, Redwood can help you estimate your 2022 peak surcharges and organize your parcel shipping contract. Contact Redwood Parcel today.