Resource Center/Article08/25/2022

New Carrier Surcharges Take Effect with Peak Season Around the Corner

Peak season is just around the corner, carriers focus on productivity gains and announcing new accessorial/surcharges.

Parcel Carrier News

FedEx
  • In the pursuit of its ambitious commitment to be carbon-neutral by 2040, FedEx has begun piloting 10 Ford E-Transit electric delivery vans for FedEx SameDay® City service. The pilot program will help the carrier determine how quickly it can swap its entire delivery fleet with electric vehicles and zero emissions. During the pilot, the Ford E-Transit will be put to the test coast-to-coast, with the carrier monitoring overall charging availability, road performance, and weather durability.
  • FedEx Ground suspends Sunday delivery for rural and less populated areas starting this month. It’s been nearly three years since FedEx Ground first began supporting a 7-Day delivery model nationwide in January 2020. The suspension is an attempt to ease economic concerns (like inflation and slow inventory) for contractors that help make the 7-Day delivery service possible. It’s estimated 80% of the U.S. will still have access to Sunday deliveries.
  • 8/5 – FedEx announced its 2022 peak season surcharges and fees for U.S. Express and Ground services. The “peaking factor” introduced by FedEx during the pandemic returns once again, and this year’s FedEx peak season surcharges are broken up across 11 weeks, each with their own calculation and application periods. Shippers with high residential and/or bulky oversized items will be impacted the most.
Surcharge nameApplicable servicesSurcharge amountEffective date
Peak — Additional Handling SurchargeU.S. Express Package Services, U.S. Ground Services, International Ground Service$3.45 per package $6.55 per packageSept. 5, 2022–Oct. 2, 2022 Oct. 3, 2022–Jan. 15, 2023
Peak — Oversize ChargeU.S. Express Package Services, U.S. Ground Services, International Ground Service$39.50 per package $68.75 per packageSept. 5, 2022–Oct. 2, 2022 Oct. 3, 2022–Jan. 15, 2023
Peak — Ground Unauthorized Package ChargeU.S. Ground Services, International Ground Service$385.00 per packageOct. 3, 2022–Jan. 15, 2023
Peak SurchargeFedEx Ground® Economy Package Services2$1.50 per package $2.50 per package $1.50 per packageOct. 31, 2022–Nov. 27, 2022 Nov. 28, 2022–Dec 11. 2022 Dec. 12, 2022–Jan. 15, 2023
Peak — Residential Delivery ChargeFedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate® packages).See Peaking Factor Chart belowOct. 31, 2022–Jan. 15, 2023
Peak — Residential Delivery Charge per Package by Peaking Factor
 >105%–125%>125%–150%>150%–200%>200%–300%>300%–400%>400%
 FedEx Ground®$1.25$1.75$2.00$2.50$4.25$6.00
 FedEx Express®$2.25$2.75$3.00$3.50$5.25$7.00
Peaking PeriodCalculation WeekApplication Week
1October 10, 2022October 16, 2022October 31, 2022November 6, 2022
2October 17, 2022October 23, 2022November 7, 2022November 13, 2022
3October 24, 2022October 30, 2022November 14, 2022November 20, 2022
4October 31, 2022November 6, 2022November 21, 2022November 27, 2022
5November 7, 2022November 13, 2022November 28, 2022December 4, 2022
6November 14, 2022November 20, 2022December 5, 2022December 11, 2022
7November 21, 2022November 27, 2022December 12, 2022December 18, 2022
8November 28, 2022December 4, 2022December 19, 2022December 25, 2022
9December 5, 2022December 11, 2022December 26, 2022January 1, 2023
10December 12, 2022December 18, 2022January 2, 2023January 8, 2023
11December 19, 2022December 25, 2022January 9, 2023January 15, 2023
UPS
  • UPS celebrated another positive earnings report with the release of their 2Q2022 earnings. Notable highlights include:
    • Quote from leadership: “I want to thank UPSers around the world for delivering outstanding service to our customers,” said Carol Tomé, UPS chief executive officer. “While the external environment is ever changing, our better not bigger strategic framework has fundamentally improved nearly every aspect of our business, enabling greater agility and strong financial performance.”
    • Revenue: ⬆︎5.7% or $1.3B YOY
      • U.S. Domestic Revenue: ⬆︎5.3% or $0.2B YOY, driven by a 14.8% increase in revenue per piece
    • Operating Profit: ⬆︎8.5% or $0.3B YOY
      Operating Margin: 14.3% ⬆︎ 30bps YOY
    • Net Income: $2.8B ⬆︎ $0.2B or 6.5% YOY
    • Diluted EPS: $3.25 ⬆︎ 6.6% or $0.20 YOY from $3.05
  • The carrier has also announced a variety of productivity initiatives while continuing to pursue “better, not bigger”.
    • Seeking to reduce human error by removing time-consuming and expensive manual package scanning, UPS is piloting a program that would ultimately lead to the placement of RFID tags on every daily shipment. Once placed, the RFID tag continuously (and accurately) reports on a shipment’s location.
    • Another effort seeks to consolidate packages by holding a shipment for a short period of time waiting to see if another shipment to the same address is scheduled. If two or more packages are matched to the same address, UPS will attempt to deliver each package at the same time. The holding period won’t extend beyond the time commitment made in the UPS Service-Level Agreement (SLA).
    • Why is UPS so focused on productivity? CEO Carol Tomé explains that “a 10-minute improvement in delivery times and schedules translates into $257 million in cost savings.” Ideally, these initiatives will also lower the overall cost per package and result in savings for the customer, too.
  • For the eight consecutive year, Brand Finance has named UPS the “World’s Most Valuable Logistics Brand,” with a value of $38.5B (⬆︎28% YOY). Brand Finance credited the valuation to the carrier’s commitment to raising demand for and awareness about its products/services, all part of the “better, not bigger” mantra. FedEx ranked second with a valuation of $26.6B, and UBER interestingly ranked third with a valuation of $22.8B.

GRI and Surcharges

  • Canada Post
    • Canada Post has announced a price increase that is effective September 12, 2022. Domestic Canada parcel service for commercial customers will increase 4.0%. USA/International parcel service for commercial customers will increase 1.4%. Surcharges are increasing as well. Read the announcement.
  • FedEx
    • FedEx has announced its peak season surcharges for U.S. Express and Ground services and Ground International service. Peak Additional Handling is effective September 5, 2022 ($3.45), with an increase in the charge amount on October 3, 2022 ($6.55). Peak Oversize is also effective September 5, 2022 ($39.50), with an increase in the charge amount on October 3, 2022 ($68.75). Peak Ground Unauthorized Package Charge is effective October 3, 2022 ($385.00). The Peak Surcharge for FedEx Ground Economy Service begins October 31, 2022 ($1.50), with an increase in price on November 28, 2022 ($2.50) and a decrease in price on December 12, 2022 ($1.50). Peak Residential Delivery Charge begins on October 31, 2022, with the price adjusting dynamically each week based on a weekly peaking factor calculation. The Peak Surcharges conclude on January 15, 2023. See all FedEx peak surcharges and fees.
  • Purolator
    • Purolator’s annual GRI is effective September 1, 2022. New rate and zone guides will be available on that day. Read the announcement.
  • USPS
    • The U.S. Postal Service announced proposed temporary rate adjustments for the 2022 Peak Holiday Season.  The planned peak-season pricing, which was approved by the Governors of the Postal Service on Aug. 9, will affect prices on the following commercial and retail domestic competitive parcels: Priority Mail Express (PME), Priority Mail (PM), First-Class Package Service (FCPS), Parcel Select and USPS Retail Ground.  International products will be unaffected.  Pending favorable review by the PRC, the temporary rates will go into effect at 12 a.m. Central on Oct. 2, and remain in place until 12 a.m. Central Jan. 22, 2023. Read the announcement.

LTL Carrier News

  • XPO Logistics has announced a new piece-level tracking (PLT) tool that promises to bring more granular, real-time visibility to each LTL shipment piece. The tool is designed to help LTL shippers have confidence in the tracking of their shipments, but ideally will also help with the early identification of shipment problems and optimization opportunities.
    • Leadership quote: “Piece-level tracking allows XPO to provide greater visibility across individual components within LTL shipments,” said Jay Silberkleit, senior vice president of technology at XPO Logistics. “An LTL shipment is made up of multiple pieces, and they don’t all move at the same time. With PLT, we give a unique identifier to each of those pieces.”
  • Old Dominion Freight Line recently reported on a 69.5% operating ratio (30.5% operating margin) during its Q2 2022 earnings call. The operating ratio is a record for the LTL industry overall, which has seen pricing favor swing in the favor of LTL carriers throughout the pandemic due to increased demand. Like the parcel industry, some of that demand has begun to slow down. While pricing dynamics are expected to stay in the carriers favor, Gregg Gantt, President and CEO at Old Dominion Freight Line, referenced a slow down in hiring as a response to “softening LTL volumes.”
  • The July 2022 Freight Index from AFS Logistics and Cowen Research reports “growth trajectories across modes are flattening, as seasonal factors and continued high fuel costs work against the downward pricing pressure of softening demand… While taking advantage of spot rates can provide immediate savings in the short term, shippers should consider how fulfilling their contractual obligations with carriers can help secure capacity when the market tightens over the long term.” The index goes on to report on LTL shipment cost drivers, such as fuel and fuel surcharges that account for 20.7% of the total cost-per-pound and rising accessorial fees.
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