FedEx announced freight increases with a potential major impact on the e-commerce industry.
70% of your total package cost in the e-commerce business is in freight and labor. Any changes in the market involving freight will affect the shipping costs and ultimately your business’ bottom line. Possibly the most impactful change in 2018 is the announcement that FedEx will be adding DIM weight charges on last mile deliveries through SmartPost. This change will increase the shipping costs for every e-commerce business fulfilling local deliveries. Keep reading for specific information about these 2018 changes.
Effective January 2018, FedEx Corp. announced it will increase shipping rates on FedEx Express, FedEx Ground and FedEx Freight by an average of 4.9%. The changes will impact the following:
- Express package and freight standard list rates for U.S., U.S. export, and U.S. import services
- FedEx Ground and Home Delivery standard list rates
- FedEx Freight rates
Furthermore, FexEx announced that it will begin applying a dimensional weight (DIM) factor of 139 (changed from 166) to all SmartPost packages. This is potentially the most impactful change for 2018, especially for e-commerce businesses, aligning SmartPost DIM weight pricing with FedEx Express & FedEx Ground. This change also more closely aligns FedEx SmartPost DIM pricing with that of UPS SurePost, although UPS still has a higher DIM factor for packages measuring less than one cubic foot. As of this writing, UPS has not announced its 2018 rate changes.
Comparing the 2017 non-dimensionalized rate to the new 2018 dimensionalized rates will show the impact of this change. The percentage cost increase is significant and illustrates why the 4.9% announced average should be taken with a grain of salt and why changes to DIM pricing are often more impactful than other changes.
In addition, there will be changes to FedEx surcharges and other fees, also effective in January. Notable among the changes for 2018 include:
- The addition of a Third-Party Billing Surcharge of 2.5% of the total shipment charge for any shipment billed to a third party. The charge will apply to FedEx Express and Ground U.S. and international shipments. This more closely aligns FedEx with UPS.
- The Additional Handling Surcharge for U.S. and international express will now apply to any package that measures greater than 48 inches on its longest side, which is a change from 60 inches in 2017.
- The minimum net charge for a ground package will increase to $7.58 from $7.25.
Changes have also been made to some of the more common surcharges, along with the percentage increase. As in recent years, the largest increases continue to be reserved for those surcharges related to package size and dimensions. As previously stated, it remains to be seen what changes are in store for UPS in 2018.
A thorough audit of your business’ packaging can keep you ahead of the game when it comes to these DIM weight changes and increases in freight charges. Optimizing your packaging using innovative, cost-saving solutions to decrease this potential impact can be found through analyzing your current processes and materials usage. Contact your Piedmont National sales representative today to stay ahead of the curve.