Each year, parcel shippers get the unique privilege of certainty – certainty that their shipping costs will go up. This expectation is dutifully met by UPS and FedEx each year with General Rate Increases (GRI), across-the-board price hikes designed to increase revenue on every shipment in the network.
Let us compare the increases across services, zones, weight groups, and surcharges.
Announced Average Increases: Matching at 4.9%
Both UPS and FedEx have matched recent years in the overall average increase. Experienced shippers know that the announced average increases and actual increases deviate significantly based on shipping profile. Taking a closer look at where the increases are happening, we see FedEx and UPS were nearly identical in where the highest increases were applied.
Comparison Across Services
The carriers were in lockstep when it came to each service’s increase, with a notable exception on Postal options.
Weight Breakdown
Interestingly, FedEx and UPS Ground rates are a cell-for-cell match for zones 2-8, weights 1-10lbs. Overall, there is very little difference between rate cards.
Minimum Comparison
Shippers with national contracts know how important the zone 2, 1lb package cell is in a rate card. This is what the minimum net charge is based on. No matter how great your contractual discounts may be, the minimum charge determines what your effective discount is, particularly with low-weight, low-zone shipments.
Surcharge Comparison
Like the base rate changes, UPS and FedEx took identical raises across nearly all surcharges:
The only notable difference to be found between the carriers is on residential surcharge. FedEx raised Additional Handling for packaging by more than UPS, but FedEx still sits at $1.25 less per occurrence than UPS.
Both carriers have introduced new ways of applying existing surcharges and entirely new charges.
FedEx New Charges
•Late Payment Fee: 6%
•Additional Handling Dimension Qualification - Measures greater than 105 inches in length + girth
--- Length + (2x Height) + (2x Width)
•DAS Zip Code Changes:
UPS New Charges
•Zone-based pricing for Additional Handling and Oversize surcharges
--details to be announced Apr 2021
•Additional Handling Dimension Qualification - Measures greater than 105 inches in length + girth
--Length + (2x Height) + (2x Width)
•Ship to UPS Access Point Location: $2.99
•DAS Zip Code Changes:
Takeaways
In a margin-focused duopoly, shippers are faced with very similar circumstances whether they ship with FedEx or UPS. Both carriers are specifically targeting low-weight, residential packages for the highest increases.
With the ever-present threat of additional charges arising like FedEx’s indefinite peak surcharges or UPS’s 19 rate updates in 2020 (none of which were reductions), shippers have to be more vigilant than ever. Leaning on the assistance of experts in such a fraught environment of tight capacity can massively influence the degree to which your transportation costs increase.
Matt Weickert is Senior Consultant for Shipware, a shipping consulting firm that specializes in cost reduction and recovery services.Prior to his work at Shipware, Matt advised the world’s largest shippers like Walmart, Office Depot, Costco, and Apple in strategic logistics analyses and contract negotiations. He earned a B.S. in Industrial Engineering from Mississippi State University and used to run a lot. For additional information: UPS vs FedEx 2021 Rate Increases (Video)
