Blog / The Money Still
2 minutes read

The Money Still

Without fail, UPS and FedEx raise their rates at least once each year and have done so for decades. They are in business to make a profit, and their costs increase over time as do the rest of ours. One might take exception with the blanket 5% increase taken despite inflation running at less than half that amount, but upgrading and expanding their vast delivery networks is expensive.

Fair enough

What is often overlooked is that the announced rate increases represent the increase in the transportation ( non-surcharge) rates only. Surcharges are not factored into the average increase calculation. Some fees increase by slightly less than the stated 5%. Some increase by slightly more; some increase a LOT more. For example – the 2019 Residential Extended Delivery Area Surcharge for ground was $4.85 and $4.65 for UPS and FedEx respectively. This charge increased to $5.40 for both carriers representing an 11.3% and 18.3% increase. Another example is Additional Handling – Weight. Both carriers increased their fee to $24.00. UPS’ was a modest 4.3% increase, but the FedEx increase was 20.0%. As if that wasn’t painful enough, the number of packages subjected to this fee increased logarithmically as both carriers reduced the weight threshold at which the surcharge applies from 70 lbs. to a mere 50 lbs. This is significant. The percentage of packages over 70 lbs. is fairly small. The percentage of parcels between 51 -70 lbs. is much more substantial.

Changing the definition of a surcharge so that it applies to more packages is effectively distilling money out of thin air. For some packages, the additional handling change doubled the shipping costs, if not more. Another example of The Money Still is dimensional weight. Once upon a time it didn’t exist. Once implemented it was only applicable to packages over a specified threshold. Later the threshold was removed increasing the number of packages to which it was applicable. Over the course of a handful of rate increases, the divisor was reduced from 194 to 139.

Same package – higher billed weight – higher cost

Unfortunately, shippers don’t have a lot of options for shipments in this weight range as they are well below the point where LTL makes sense. The USPS, last-mile delivery carriers, and regional carriers have taken a fair share of the lighter weight deliveries, but the relatively heavier packages have been left mostly for UPS and FedEx. This likely explains why they are able to make this change in lock-step mostly unchallenged.

Simply put – less competition for these packages

Additionally, there’s no guarantee that the 50 lbs. threshold will continue. Like the dim divisor, this could be lowered to 40 lbs. or 30 even.

The final insult? In January FedEx added additional handling charges to the list of fees subject to the fuel surcharge. In case you were curious, this added another $1.50+ to each package weighing over 50 lbs.

That’s some serious moonshine.

To learn more how to identify the impact of these rate changes or for information regarding ShipRx’s parcel audit or negotiation services, visit our contact page.

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