Fedex Rate Increase 2013 – FedEx Domestic Air

Rate Increase Impact FedEx Domestic Air

The 2013 rate hike season has begun. FedEx surprised the shipping community by announcing their air rate increases on their September 18th investor call, much earlier than in past years. The announced rate increase is 5.9% with a 2% reduction in fuel for a net increase of 3.9% increase. The FedEx rate increases are effective January 6, 2013.

Savvy shippers know the true increase will be much higher than the stated 3.9% but even the largest shippers have a hard time forecasting the true increase in time for 2013 budgets to be in place.

To help shippers better understand the true impact of the 2013 rates BirdDog Solutions is launching a Rate Impact Series. The Rate Impact Series is designed to help industry leading shippers identify hidden costs in the new rates and help determine what it means to you. We kick off the series this week with a review of the FedEx Domestic Air Rate Increase. We hope you enjoy our first installment and welcome your feedback and suggestions.

Impact Overview

Impact Insight: 2DA and Express Saver Shippers Beware

Shippers using FedEx 2 Day Air Service are once again targeted for larger than average increases. This year’s increase of 7.02% in the largest in 4 years and is on top of a 5.02% increase in 2011 and a 6.27% increase in 2012. For this time period, the overall effect is that a $10 package in 2010 will costs$11.94 in 2013 or 19.4% more.

Express Saver service increases 7.74% in 2013 which is in addition to a 7.97% increase in 2011, and a 7.23% increase in 2012. For this time span, the overall effect is that a $10 Express Saver package in 2010 in 2013 will cost $12.48, a significant 24.8% increase.

2DA and Express Saver Shippers Beware[1]

Impact Insight: The Higher the Zone, Higher the Increase for Overnight Shippers

An optimized shipper understands overnight should be used for longer zones since most Zone 2 and Zone 3 shipments can be adequately serviced through use of a Ground Service. For instance, although the ‘Average’ increase for Standard Overnight is 6.55% it’s important to note that all Zones 4-8 are higher than the ‘Average’ increasing between 6.71% and 6.87%. The table below provides a zonal analysis by service.

Higher the Zone, Higher the Increase for Overnight Shippers

Higher the Zone, Higher the Increase for Overnight Shippers [2]

Impact Insight: Minimum Net Charge Targeted Again in 2013

The minimum net charge [3] continues to increase and impacts a high number of packages. The following table provides an overview of the minimum net charge changes for 2013. Depending on the service the % increase ranges from 4.44% up to 7.93%.

The table below shows the impact on a 2nd Day Air shipper with a 50% discount. Forty percent of all weight/zone combinations from 1-20lbs. and Zones 2-8 will be impacted by the minimum net charge, and thus not receive 100% benefit of the 50% negotiated discount.

Minimum Net Charge Increase

Minimum Net Charge Increase

Seeing that 2 Day Air and Express Saver shippers getting hit with a steeper rate increase, and Overnight shippers seeing a higher rate for the higher zones, and finally the ever present Minimum Net Charge having a broad impact across your shipping mix; 2013 is going to be as difficult of a year to understand your actual cost for shipping parcel as ever.

Minimum Net Charge Impact

Despite all the complex factors involved in projecting annual shipping costs, budgeting and planning does not have to be a major burden for shippers. That’s where an objective third-party, such as BirdDog Solutions, comes into play. As the Parcel shipping experts BirdDog has the expertise and technology to accurately analyze your costs and pinpoint your greatest opportunities for savings. We’ll look at your current environment as well as your long-term objectives to come up with the best possible plan. We manage over $3 Billion in shipping expenses and audit over 1 Million packages daily for our clients. Controlling shipping costs is all we do and we’re relentless at it.

As part of our Rate Impact Series, we published an article on the UPS rate increase.

[1] These overall percent increases are calculated by taking the average of a percent increase rate card.  These values include single piece packages (excludes Multiweight) shipped to zones 2-8 only.

[2] These overall percent increases are calculated by taking the average of a percent increase rate card.  These values include single piece packages (excludes Multiweight) shipped to zones 2-8 only.

[3] Minimum Net Charge is for each FedEx Ground and FedEx Home Delivery package,you pay the greater of the net package charge based on Participant’s discounts, if any, for a given service or a minimum net charge equivalent to the Zone 2, 1-lb. rate as per the FedEx Service Guide in effect on the date of shipment.

David Sullivan, Senior Consultant

David Sullivan is a senior consultant specializing in small parcel (UPS®, FedEx®, DHL®, etc.) and LTL carrier contract and pricing agreement negotiation and optimization. Sullivan’s consultative approach has saved his clients millions of dollars in annual distribution costs. He is a graduate of Temple University and holds an MBA from Northeastern University.

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