FedEx’s 2018 GRI announcement talks about the increases that will take place January 1; however, there are other substantial changes that will take place on January 22 that will have a major cost impact for many shippers. Following UPS’s lead, FedEx will change the specifications for additional handling and oversize charges. FedEx will also start dimensional weighing SmartPost packages and charge a 2.5% Third-Party Billing Surcharge to shipments billed to a third party.
In 2017, any package with the longest side measuring more than 60 inches incurred an additional handling surcharge. On January 22, that threshold will drop to 48 inches. For the oversize charge, the current criterion is the longest dimension longer than 119 inches or length plus girth more than 165 inches. In 2018, oversize charge will be applied to packages with 96 inches in length or 130 inches in length and girth. More packages will be charged with additional handling and oversize charges. Considering that the oversize charge is going to be $80, shippers of bulky items need to prepare for the 2018 increase.
UPS rolled out third-party billing surcharges in January 2016, and FedEx will follow suit with the same surcharge in January 2018. FedEx, like UPS, will charge 2.5% of the total charges (excluding duties and taxes) for all service levels, which includes Express, Ground, SmartPost, and International. This charge will impact companies using drop-shipping most significantly. However, almost all shippers use a third party to some extent.
Finally, the biggest change is the dimensional weight for SmartPost. On January 22, FedEx will begin to apply dimensional weight to SmartPost packages. The service guide dimensional factor will be 139. Because this is a new term, parcel contracts do not have a negotiated DIM factor for SmartPost yet, and shippers will be using this DIM factor in January. For example, a relatively small box of 10x10x10 will be charged at a minimum of eight pounds after this change takes place.
While these are not part of the GRI announcement for FedEx, they will impact all FedEx shippers, and the cost could be more than the 4.9% transportation rate increase. Unfortunately, shippers have a very short window before they can assess and react to reduce the effect of these upcoming changes.
Sam Simpson is a senior transportation analyst at enVista. Sam’s diverse background includes expertise in negotiation, analytics, contracts, and vendor management. His experience covers parcel, truckload, LTL, and mail. Sam’s focus during his career has been generating savings through detailed analytics and process improvements. His experience as an analyst and negotiator gives him a unique perspective on opportunities to generate savings and improve processes.