How to Prepare For FedEx & UPS 2023 General Rate Increase
Demand for package deliveries may be falling, but parcel carriers keep raising prices.
While we expect yearly rate increases from FedEx and UPS, the 2023 hikes are (once again) the highest ever announced. Base rates will increase by 6.9% for both carriers going into the new year.
Executives for both companies have blamed inflation as the catalyst for the most significant increase yet. However, as Parcel Magazine notes, declining shipment volumes have also given both carriers a rare opportunity to minimize rate increases to stimulate demand.
Instead, FedEx and UPS are choosing to offset volume declines with steeper rate increases – so shippers lose and carriers win.
That 6.9% rate increase can be deceiving. Your rates will likely increase by much more. In typical carrier fashion, price increases for most common surcharges are greater than 6.9% – with some accessorial fees rising by double digits. Following trends of recent years, two categories of parcels will be hit the hardest:
Heavy, bulky, and/or oversized packages
Packages sent to residential and remote areas
Whether you use FedEx, UPS, or both for your shipping, here’s what you need to know to prepare for the 2023 general rate increases.
FedEx 2023 General Rate Increase
FedEx was the first carrier to announce their 2023 general rate increase – a 6.9% price hike taking effect on January 2, 2023.
It’s worth noting that these increases come as the Memphis-based carrier announced that declining shipment volumes and rising operating costs from inflation impacted FedEx revenues more than the company expected. As a result, the carrier has announced it will be undertaking an “aggressive cost-reduction plan” for the next fiscal year – at the same time, it is dramatically increasing the rates you pay for shipments.
Here are a few key things to know from this year’s rate increase:
FedEx is adding a new $13.25 per-package surcharge for shipments going to specific, rural ZIP codes – which cover more than 3 million people in the US. This new charge follows a similar surcharge introduced by UPS last year.
Ground minimum charges – the absolute lowest rate charged to shippers regardless of negotiated discounts – are rising above $10 for the first time. The new cost of $10.10 marks a 7.9% increase from the 2022 rate.
Rates are increasing for more distant zones at a higher rate than closer zones. Last year, rate increases were similar across all zones.
Rate increases across weight categories are consistent this year. Last year, lighter packages increased much more than heavier packages.
Parcels subject to additional handling or oversize surcharges will be particularly hard-hit next year. Accessorial fees applied to heavy, bulky, or oversized shipments are increasing by double digits and, in some cases, more than 20%.
Packages shipped to residential, rural, and remote destinations are also getting hit with hefty surcharges for 2023:
Other common surcharges and their increases:
UPS 2023 General Rate Increase
UPS followed its rival to announce a 6.9% general rate increase, which takes effect on December 27, 2022. This rate increase is also the highest on record for the Atlanta-based carrier.
Both carriers typically move in sync with each other when it comes to the general rate increase. For nearly a decade, rate increases have hovered between 3.9% and 4.9%. Last year’s increase disrupted that pattern with a then-record 5.9% increase, which was broken again for 2023.
In addition to the rate increase announcement, UPS implied peak surcharges are also here to stay. First introduced to cover additional costs during the holiday season, peak season surcharges were called just that.
Last year, UPS began calling the charges “peak/demand” surcharges, perhaps to account for the increased demand for home shipments that followed COVID. Now, for 2023, the carrier has started calling them “demand surcharges,” an example of a temporary surcharge made permanent.
Other highlights from this year’s rate increase:
Individual ZIP codes assigned to each zone will change, which may affect your shipping rates.
Like FedEx, the ground minimum charges – the absolute lowest rate charged to shippers regardless of negotiated discounts – are rising above $10 for the first time ever. The increase to $10.10 also marks a 7.9% increase from the 2022 rate.
Shippers who use 3-Day Select services will see the most significant across-the-board rate hikes.
UPS shippers who ship bulky, heavy, or oversized parcels will see incredibly steep price hikes for 2023. Like the FedEx rates, shipments subject to these charges will increase by double digits and, in some cases, more than 20%.
Parcels destined for rural and residential ZIP codes will also see increases more considerable than the base 6.9%, in many cases, with the full extent determined by service level.
Other common surcharges and their price increases:
How Can You Cope With General Rate Increases?
Whether you ship with FedEx, UPS, or both, you can do a few things to mitigate the impact of the price hikes.
Understand Your Shipping Profile
With surcharges increasing faster than the published 6.9% increase, most shippers will see their bills increase by a much larger margin. Knowledge is power to understand the full effect on your bottom line.
That’s why it’s essential to understand your data and shipping profile. Consider the following:
Which zones do you ship to the most?
What are the weights and measurements of your shipments?
Which services do you use the most?
Once you understand the areas impacting your shipping spend the most, you can look for opportunities to save.
Audit Your Invoices
Carriers make mistakes with shipments all the time. With so many rates and surcharges, the carriers will inevitably slip up somewhere with billing errors and incorrect pricing. Late shipments are also subject to refunds – with one temporary exception.
FedEx is implementing a temporary suspension for U.S. Domestic and U.S. Export shipments at several service levels. The suspension is in place from Dec. 13, 2022 - Jan. 2, 2023. One-day shipments and international export shipments remain eligible for the money-back guarantee.
No suspensions are in place for the UPS service guarantee.
Keeping a close eye on your invoices, or taking advantage of invoice auditing services, can help you spot these errors – and recover an average of 2-6% of your shipping spend.
Find a Trusted Partner
Despite how intimidating this year’s general rate increases may seem, a trusted partner can help you understand your shipping profile, audit your increases, and negotiate savings with the carriers.
We founded AUSPI GROUP on the importance of partnership and the desire to empower businesses like yours with market insights and industry knowledge to lower shipping costs.
A trusted partner, like AUSPI GROUP, can audit your invoices to find opportunities for savings. Your trusted partner will also analyze your shipping data and benchmark your carrier pricing, so you can understand how your rate compares to others and get detailed visibility into possible discounted rates – which may be up to 30% of your total spend.
If you’re interested in gaining greater control of your parcel spend, let’s talk.
Our zero-risk, success-based services will give you the analytics and reporting to successfully manage your spend, gain insights, identify trends, identify efficiencies and detect ways to save.