Shippers using FedEx and UPS next year may be in for a shock when they see the real cost of the services.
Analytics firm Reveel analyzed the 5.9 percent increase in 2022 shipping rates unveiled by FedEx and United Parcel Service (UPS) to determine the real impact of the rate card increases, as well as surcharges and other fees introduced by both companies in 2021.
Reveel found that while UPS increased its rate by an average of 5.9 percent on its rate card, the actual impact of its 2022 rates, surcharges, fees and new terms will be a 10.25 percent increase for most companies.
Some organizations will also be hard hit because of the kinds of parcels they ship, the zones they do business in and other factors. The impact will be particularly acute for customers in several industries, including the auto parts, furniture and home goods, and sporting goods sectors.
Reveel also found that FedEx’s 5.9 percent rate increase actually represents a 12.86 percent increase for most customers when its new surcharges, fees and terms are added. The same group of industries will feel the increase the most.
However, organizations that used FedEx’s Ground Economy, formerly SmartPost – a shipping option aimed at small and medium-sized businesses – will see an average increase of 26 percent next year.
“Carriers’ rate cards provide a limited view into the real costs shippers face in any given year, and that’s never been more true than it is today,” said Josh Dunham, co-founder and CEO of Reveel.
“Rate card increases don’t convey the impact of surcharges, new fees associated with zones and parcel dimensions, and the myriad details hidden in the fine print of any shipping contract, from any carrier. Our goal with this analysis is to enable shippers to know how much FedEx and UPS’s 2022 rates and terms will actually cost their businesses next year so that they can begin to plan ahead.”
Rate card vs. reality
Annual rate card increases do not illustrate the surcharges, zone-specific rules and other fees that can dramatically impact what it actually costs to ship a parcel. To provide a direct comparison, Reveel took real shipping orders its customers made in 2021 and ran a model that applied both carriers’ new 2022 rates and terms to them.
The company’s data scientists used artificial intelligence to parse millions of lines of shipping data to run the model and compare the rates in effect in 2021 to those that will be in place next year.
The analysis also found that less than three percent of the shippers included in Reveel’s analysis would sustain an increase at or below the 5.9 percent general rate increases announced by FedEx and UPS for 2022 if they did nothing to proactively address them.
In addition to the auto parts, furniture and home goods, and sporting goods sectors that will be particularly hard-hit, the increases will also greatly impact organizations that ship parcels directly to consumers – a reality that could impact e-commerce retailers that are not key, national accounts for either FedEx or UPS.
“UPS made more money in the first nine months of 2021 than in any year in the company’s history and FedEx capped off a record-breaking Q4 this summer,” Dunham said.
“Granted, carriers face labour shortages and other challenges their customers face as well, and either carrier can walk away from business when their networks are pushed beyond capacity. Even so, they are negotiating and it’s crucial that shipping professionals be knowledgeable not only of their own shipping profile, but also their carrier’s goals when they meet with their sales rep to negotiate for 2022.
Shippers should also be prepared to switch carriers. It’s never been more advantageous to be carrier agnostic.”