On September 29th FedEx made their annual rate increase announcement for the Express and Freight divisions. The news release covered three key points.

First, "FedEx Corp. will increase shipping rates for FedEx Express by a net average of 3.9% for U.S. domestic and U.S. export services effective January 3, 2011. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points."

For comparison, the 2011 net increase of 3.9% matches the 2010 announced net average and is one point lower then the 2009 and 2008 4.9% net average announcements. As in year's past, announced net averages differ from the actual increase by specific service level, zone, and weight. The "Initial Analysis of 2011 FedEx Express Standard List Rate Increase" spreadsheet corresponding to this article shows increases as low as 1.0% in the First Overnight service and as high as 11.0% in the Express Saver service category. The real impact of next year's increase may vary considerably based on your specific shipping patterns.

Second, "FedEx Express and FedEx Ground will implement a change to the dimensional weight volumetric divisor from 194 to 166 for U.S. domestic services. Details of dimensional weight charges and additional changes that will be made to other FedEx Express surcharges can be found at www.fedex.com/us/2011rates."

In addition, FedEx will change the international express dim factor from 166 to 139 and also change the dim factor for Ground. The impact of these changes may catch shippers by surprise come January if they don't study the ramifications it has on their particular shipment characteristics this fall.

FedEx provides this definition on Express Dimensional Weight on page 94 of their Service Guide:

Dimensional weight is calculated by multiplying the length by width by height of each package in inches and dividing the total by 194 (for shipments within the U.S. and shipments between the U.S. and Puerto Rico) or 166 (for international shipments). If the dimensional weight exceeds the actual weight, charges may be assessed based on the dimensional weight. Dimensions of one-half inch or greater are rounded up to the next whole number; dimensions less than one-half inch are rounded down. The final calculation is rounded up to the next whole pound. Dimensional weight applies on a per-package or per-shipment basis to all FedEx Expressâ® U.S. shipments in customer packaging, and on a per-shipment basis to all international shipments and U.S.-to-Puerto Rico shipments in customer packaging. Shipments in FedExâ® packaging may be subject to dimensional-weight pricing.

Here is an illustration of this change. I recently received a package measuring 18" x 12" x 12", via second-day air, zone 6 weighing only 6 pounds so it was rated at dimensionalize weight. Using this year's base rate and dim factor it rated at 14 pounds which has a corresponding published rate of $55.90. Applying the new 2011 dim factor and preview rates this same package would now be rated at 16 pounds and have a corresponding published rate of $65.40. That's an increase of almost 17%. The impact of this change will vary on a shipper-by-shipper basis depending on the provisions of your agreement as well as the characteristics of your shipments.

Third, "FedEx Freight and FedEx National LTL also will implement 6.9% general rate increases (GRI) effective Nov. 1, 2010. These rate increases apply to interstate and intrastate less-than-truckload (LTL) shipments, as well as shipments between the U.S. and Canada covered by the FXF 1000 and FXNL 501 Base Rates. FedEx Freight's and FedEx National's fuel surcharge will remain unchanged and one of the lowest in the LTL industry. On average, the FedEx LTL companies' fuel surcharge is 4.5 to 6.5 percentage points below the next five largest LTL carriers. The new base rates, rules tariff and fuel surcharge information for the LTL companies will be available at fedex.com/us/freight/main [2] on Nov. 1, 2010."

Keep in mind the recent announcement of the combination of operations between the Freight and National LTL groups. While the rate increase is scheduled to go into effect on November 1st, the integration is not scheduled to take effect until January 30, 2011.

In addition, as in year's past, this initial small package rate increase announcement focused on the Express division. FedEx Ground and SmartPost pricing changes will be announced later this year as will those from UPS, USPS, DHL and others. We will keep an eye out for all of the upcoming announcements and keep you informed as they occur.

Doug Kahl is the Principal of Integrity Logistics Consulting Group and Executive Consultant on parcel to TranzAct Technologies.
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View 2011 FedEx Rate Preview.pdf