Each year the General Rate Increases (GRI) issued by FedEx and UPS shake up the small parcel shipping marketplace — despite everyone knowing they’re coming. The announcements leave most shippers feeling uncertain about the impact on their costs and powerless to do much about it. What most don’t recognize in the chaos of the moment is that GRIs provide a great opportunity for small parcel shippers to reevaluate their transportation costs and carrier options on a strategic level. To do this right, however, takes deep analysis and an understanding of your own shipping characteristics. As we’ve written about many times, the stated average of 4.9% (or whatever percentage increase the carriers announce) is nowhere near the actual increase most shippers face. It’s almost always more, because the actual impact of GRIs is dependent on companies’ own shipping characteristics — not an average stated in a press release.

Headlines aside, here are the key points shippers should take note of when comparing the GRI announcements. We’ll explore each in detail throughout this report. 

FedEx domestic shippers will realize a similarly small rate advantage in 2019 compared to 2018 for most services. The most glaring exception being postal-hybrid services where UPS SurePost will now cost an average of 5.4% more overall compared to just a 1.5% disadvantage in 2018. SmartPost will undoubtedly be the cheaper option in 2019, especially at low weights. Details on these rates changes are explained in illustrations 1 and 2 below. The target here is obviously ecommerce/B2C shippers, but even companies not using a postal-hybrid service should pay attention, because many of the Accessorial surcharges (detailed in illustrations 8 through 10) will disproportionately impact them as well.  

There is no simple guideline for how international shippers should react to the impact of the GRI. Our advice is to look at the lane-by-lane increase very closely based on your own business’s shipping.

The Accessorial surcharge increases may be the most noteworthy part of this year’s announcements. Illustration 8 details the advantage FedEx has over UPS in many prominent fees and surcharges, in particular those affecting residential shippers and shippers with unconventional or heavy package characteristics.  

A final area shippers need to consider when comparing FedEx and UPS is Fuel Surcharges. Hopefully, you already know that changes in carriers’ fuel surcharge tables require year-round attention and not just when the GRIs are announced. That said, analyzing a recent four-week period, and despite a general market decrease in the price of fuel, we have two observations worth noting. First is that FedEx has a lower domestic Fuel Surcharge than UPS for both domestic Ground and domestic Air/Express. Second, Exports and Imports are more of a mixed bag, with UPS demonstrating a price advantage with Exports, and the carriers being almost at parity with Imports. See Illustration 9 for more details.

All things considered, it would be inaccurate to say that FedEx is the best choice across the board for all shippers. But, any company with a large amount of residential volume and that has historically incurred a lot of additional Accessorials needs to take a very close look at how the GRIs will impact costs in 2019.  

And remember . . . 2018 saw many mid-year rate increase announcements from both carriers. Gaps and advantages in rates opened and closed several times. This shows that nothing is set in stone, and all shippers need to remain vigilant in watching what the carriers are doing and understanding how each announcement will impact their costs.

GRIs are a reminder that the carriers have a lot of control over shippers — but it doesn’t have to be this way. GRIs represent the perfect opportunity to take a fresh look at your carrier agreements. Every shipper should use this annual rate revision to think about which carriers you use on a daily basis: in which lanes, for which modes, and for which parts of your business. In most cases, smart shippers can find pockets of price discrepancy between the carriers which they can leverage into opportunity. 

Companies’ small parcel rates have significantly changed for 2019, and it’s every shipper’s responsibility to understand how they’ve changed, as well as how to react to those changes. It’s not a time to be passive and accept what the carriers are doing as an unavoidable cost of doing business. 

At the same time, it is not only about costs going up. There are always plenty of opportunities to mitigate costs by changing how you ship. GRIs can be negotiated in your agreement too, by the way. And, no matter how new your carrier agreement may be, if there’s no early termination clause, it can likely be renegotiated at any time. 

We’ve already published two very objective and detailed analyses of the FedEx and UPS GRIs as standalone reports. If you would like a free copy of either (or both), email info@firstflightsolutions.com to request it. 

With this, our latest report, we’ve developed a comparative analysis to help shippers understand the 2019 increases announced by each carrier in relation to each other. You will gain an understanding of where opportunities exist between the carriers that will enable you to make better decisions in 2019.

The following sequence of ten charts presents a broader, high-level analysis first, progressing to an in-depth analysis. 

As an overarching theme, the charts support the general narrative that FedEx will remain or become the cheaper carrier option in many areas. This is particularly consistent across most residential shipments (including postal-hybrid services), as well as packages exposed to dimensional or excessive-weight related Accessorials. Accompanying each chart are comments offering further explanation. Please note that in the Illustrations a negative percentage reflects a UPS advantage and a positive percentage is a FedEx advantage.

Illustration 1 details the overall price advantage of using FedEx vs. UPS for domestic service groupings (1 to 99 lbs.) in 2018 and 2019. Note that in most cases the carriers are in line with each another, except for 3-Day and Postal services. The 3-Day discrepancy is large, but it’s already priced in the market, as it has been this way for years. The price advantage for FedEx in Postal services is new, however, and important to take note of.  

Illustration 2 details the overall price advantage in Postal services, SmartPost (FedEx) vs. SurePost (UPS), in 2018 and 2019. You’ll see that FedEx has at maximum a 2% price advantage over UPS in 2018. The cost advantage jumps to anywhere from 5% to 8% at 1 to 9 lbs. in 2019.  

Illustration 3 details the price advantage of FedEx over UPS for International Export shipping in 2019 by country for 1- to 3-Day guaranteed services. FDX has the overwhelming price advantage for most lanes (although not much in percentage terms, with the maximum being 1.4%).  

Illustration 4 also details the International Export shipping in 2019 price comparison by country, but for 2- to 5-Day guaranteed services. Shippers will have to “mix and match” to find the price advantage, but it appears UPS wins for exports to most Asian countries. 

Illustration 5 details the International Import shipping for 2019 price comparison by country for 1- to 3-Day guaranteed services. Note that UPS has large advantage with imports from Japan and S. Korea, but FedEx has an advantage with Taiwan.

Illustration 6 details the International Import shipping for 2019 price comparison by country for 2- to 5-Day guaranteed services. Similar to Illustration 5, UPS has a large advantage with imports from Japan, S. Korea, and now also Saudi Arabia. FedEx has an advantage with imports from Taiwan.  

Illustration 7 details the overall price advantage for popular Accessorial groupings in 2018 and 2019. UPS had some advantages in 2018 (such as with Oversize / Additional Handling Surcharges), but that changes in 2019, with FedEx becoming the lowest-cost option in most Accessorial groupings.

Illustration 8 below details the overall price advantage for Delivery Area Surcharge accessorials and Accessorials related to dimensions, weights, package type, etc. in 2018 and 2019. You’ll see that in every category FedEx is cheaper. This was also the case last year, but the gap widens even further in 2019 (especially for Delivery Area Surcharges tied to Postal services). Download a complete breakdown here.

Illustration 9 The four illustrations below compare the Fuel Surcharges of UPS and FedEx across several services. 

  Analyzing how the changes impact your specific situation is the first step. Most companies do not have the tools to do this on their own, so find a partner (First Flight Solutions will do it for free) who can calculate precisely what each carrier’s announced GRI will mean to your company.  

And remember, rate caps on the GRI (and other Accessorials) can be negotiated. No company should accept the increases from both carriers as a normal cost of business. It’s time to reevaluate your agreements and look for ways to lower your shipping costs.  

Contact First Flight Solutions for a free, no-obligation analysis of not only what your cost will be as a result of these increases, but also what your potential savings could be with a new carrier rate agreement. Call us at (252) 764-2886 or email us at info@firstflightsolutions.com.

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