In a move that caught many by surprise, FedEx released its 2024 General Rate Increase on August 29, 2023—earlier than the traditional late September timeframe. This early announcement has given businesses an extended period to prepare for the changes that will take effect on January 1, 2024. Here, we delve into the details of the 2024 FedEx GRI, examining its significance, implications, and potential reasons behind the rate adjustments.
The headline news of the 2024 FedEx GRI is the rate increase of 5.9%, which is notably 1% lower than the previous year’s GRI. This departure from the trend of incremental rate hikes raises intriguing questions about the factors driving this decision. One plausible explanation for the milder rate increase is market conditions. A relatively more stable economic environment, coupled with lower inflationary pressures, may have influenced FedEx’s choice to opt for a smaller rate hike. Another conceivable explanation for FedEx’s decision to implement a relatively lower rate increase could be rooted in strategic maneuvering vis-à-vis their main competitor, UPS. Following UPS’s well-publicized labor negotiations and the subsequent increase in operating costs, FedEx may have strategically opted for a milder rate adjustment. This strategic move can be interpreted as a challenge to UPS, presenting them with two contrasting options: either impose a considerably higher rate increase, or keep their rate increase aligned with FedEx’s, which could impact their financial performance. UPS chose the latter option, announcing a GRI match of 5.9% following their recent press release. This development underscores the competitive dynamics at play within the shipping and logistics industry, where major carriers closely monitor each other’s rate decisions and respond strategically to maintain their market positions.
However, it’s essential to note that the 5.9% figure represents an average increase across all services, and the actual impact can vary significantly based on specific shipping profiles.
Ground Services vs. Express Services:
FedEx’s GRI is not a one-size-fits-all increase. When it comes to ground services, there’s an average rate increase of around 6.03%. However, the story is different for express services, where Priority Overnight witnesses a 6.22% increase, and 2nd Day Air faces an even steeper hike, reaching up to 6.48%. This difference means businesses relying heavily on express shipping services may bear a more significant cost burden.
FedEx tailors its rate adjustments according to shipping zones, with typically more substantial rate increases in higher zones. Shippers often lean towards utilizing express services for deliveries to these higher zones, aiming for faster delivery times. Conversely, for lower zones, shippers may opt for a less premium service that can still meet the delivery timeframe. A notable discrepancy emerges in Express Saver shipments, with zones 5-8 experiencing a higher average increase of 7.86%, while shipments to zones 2-4 encounter a relatively lower increase of 4.44%.
Often overlooked is the impact of minimum rate adjustments when dealing with the general rate increase. Take, for example, a priority overnight shipper. Initially, they might anticipate a rate increase of 6.22%. However, this shipper primarily handles low-weight packages that consistently meet the minimum charge. As a result, their rate increase within the same service can surge from 6.22% to as high as 7.88%. This underscores the significance of considering minimum charges when evaluating the true impact of rate adjustments.
Other Transportation-Related Fees:
In the past, FedEx used to calculate the Additional Handling Surcharge and Oversize Charge for international multi-piece shipments based on the entire shipment. In simpler terms, if you had multiple packages bundled together in one shipment, these surcharges were applied just once, regardless of how many individual packages were included. However, there’s a new approach in effect as of January 15, 2024. FedEx has shifted to assessing these surcharges on a per-package basis for international multi-piece shipments. What this means is that for each eligible package within the shipment, FedEx will now calculate and apply the Additional Handling Surcharge and Oversize Charge separately. For shippers who regularly send oversized or bulky items internationally, this change is likely to result in an increase in your overall shipping expenses, as each qualifying package may now incur these charges individually, potentially leading to higher costs for such shipments.
An interesting shift in the FedEx 2024 GRI involves the alignment of residential surcharges. Presently, there exists a disparity where a residential shipment incorrectly categorized as Ground incurs a $5.50 residential surcharge, while Home Delivery shipments are charged $5.15. However, in 2024, both types of shipments will carry an identical $5.55 surcharge. This represents a 7.8% increase for Home Delivery and a 0.9% increase for Ground Residential.
The FedEx 2024 General Rate Increase represents a comprehensive and intricate adjustment that impacts shippers in diverse ways, depending on their unique shipping characteristics and strategies. To adeptly navigate these changes, businesses must gain a clear understanding of how the GRI specifically influences their shipping circumstances.
Conducting a comprehensive analysis of your shipping history and patterns can yield valuable insights into how the GRI will shape your financial outcomes. Additionally, it is crucial to explore cost-saving strategies, negotiate favorable agreements, and contemplate alternative shipping approaches to mitigate the repercussions of this rate increase.
Consider leveraging the expertise of LJM Group, equipped with a team of experienced professionals, to identify and minimize the impact of this year’s rate adjustments on your shipping profile.
Residential surcharges for Home Delivery and Ground are now the same charge amount. Currently, a residential shipment incorrectly manifested Ground is getting a $5.50 residential surcharge as opposed to the $5.15 incurred for Home Delivery shipments. This is an extra $.35 prior to any lost discounts for these charges. In 2024, both of those charges will carry the same $5.55 charge.
Additional handling and oversize package charges continue to increase at levels inconsistent with other accessorials. This is a trend we saw entering 2023 which FedEx is continuing. Domestic additional handling/oversize will be increasing about 20% overall, while international changes see significantly smaller increases at only 2-3%.
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