How many of you just read that title and thought, “What do you mean ‘versus’? The fee isn’t the same?” Not only is it not the same, but also the Ground Residential fee carries a substantially higher cost differential over its Home Delivery counterpart and possible flat rate options. As shippers, we may see our Ground Commercial rates as lower than Home Delivery’s and choose to put everything in the Ground Commercial network, allowing FedEx to then determine Commercial versus Residential charges. Or we may be accustomed to UPS and one Residential Fee for Ground, not realizing with two separate networks at FedEx comes two separate Residential fees. The Ground Residential fee at FedEx is not a hidden cost, but it can easily be a costly oversight during negotiation.

For 2014, the listed Home Delivery Residential Fee is $2.90, and Ground Residential is $3.35. In 2013 the former was $2.80 (a 3.6% increase YOY), the latter $3.20 (a 4.7% increase YOY). The more eye opening number is the difference in cost between the Home Delivery fee and Ground Residential charge. At list rate for 2014, a shipper will pay over 15% more when charged the Ground Residential fee versus the Home Delivery Residential fee. 
 
We should ask two questions. First, what defines a Ground Residential package and second, is this fee negotiable? FedEx Home Delivery will only accept packages at 70lbs or less. Anything over 70lbs must move in the Ground Commercial network but is still considered a Residential package and subject to all Ground Residential fees — including Delivery Area Surcharge. The 2014 fee for Ground Residential DAS is 64% higher than Ground Commercial ($3.40 and $2.07 respectively) and 19% higher than the Home Delivery cost of $2.85.

Residential versus Commercial Delivery locations play a role in the fee designation. FedEx offers a delivery classification matrix to determine if a delivery is Residential or Commercial. A church is considered a Commercial location and, therefore, assesses Commercial fees. A nursing home is Residential, but any package over the 70lbs limit will now move as a Commercial shipment and assess the higher fees. 
Some classifications come down to business/residence location. A business with a residence at the same location, such as a veterinary office:
1. Will be classified as Commercial if the delivery is to a different building
2. Will be classified as Residential if the delivery is to the same building
Can we negotiate this Ground Residential fee? Yes, we can (assuming we are using the networks correctly). Since the package is now moving in the Commercial network, it will not be delivered free of charge on Saturday, as it would have been with Home Delivery. If the shipment doesn’t arrive on Friday, your consignee will need to wait until Monday for the delivery unless other fee inclusive arrangements are made. 
Can we avoid this Ground Residential fee? If you ship anything Home Delivery over 70lbs, a good rule of thumb is no, you cannot avoid this fee. But you can monitor it. FedEx offers an address validation API called FedEx Address Checker. Part of FedEx Ship Manager, by entering the consignee’s address, city/state, or zip code, Address Checker can:

1. Receive Monthly updates to its address matches
2. Provide Street Level address matches
3. Distinguish between Business and Residential addresses, if an exact match is found
 
Address Checker is a beneficial tool to better see how FedEx is classifying an address as Commercial or Residential and determine any possible billing errors with the classification.
We can also look at Flat Rate shipping. FedEx One Rate offers a competitive rate matrix by Local (Zone 2), Regional (Zones 3-4), and National (5-8/Alaska/Hawaii) Zones. This rate matrix includes applicable Residential, Delivery Area, and Fuel surcharges. One Rate requires use of the FedEx Express packaging—if you use your own packaging you won’t qualify for One Rate. 
If we look to shift from a Ground Residential profile to the 2 Day and/or Express Saver Air mode, with the FedEx box at 50lbs or less, we see the following cost
comparisons:
One Rate rates are effectively your base and net rates (keeping in mind the rates are subject to other charges such as signature fees, insurance, and address corrections). In the above example the two Ground rates are the base service guide rates of $7.30 (5lbs) and $15.55 (50lbs) plus the $3.35 Ground Residential fee. We can see potential savings when considering One Rate over Ground Commercial (the latter undiscounted and not including DAS, fuel, dims, or other charges). Consideration obviously should be given to time in transit versus rates—getting there quicker versus getting there cheaper.

Brittany Beecroft is Director of Parcel Pricing for AFS. In her position, she oversees Parcel Cost Management and RFP processes for the purpose of negotiating and retaining best-in-class client-specific pricing. Brittany also provides training and guidance to sales and the support staff to manage parcel cost reduction and optimization services. Prior to joining AFS, she spent 12 years as a Strategic Pricing Analyst at FedEx. Brittany consults regularly with some of the largest shippers in the world and is a sought-after speaker and consultant. 
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