An Overview of 2024 FedEx and UPS Rate Increases
FedEx and UPS have announced their 2024 rate surcharges, and those hoping for a reprieve are sure to be disappointed.
Surging labor costs continue to impact ground, air, and international shipments for FedEx and UPS customers, and rate increases will begin in a few short weeks. Starting December 26, 2023(UPS) and January 1, 2024(FedEx), both delivery giants will increase rates by 5.9%.
The two behemoths at the top of the parcel delivery service industry have virtually mirrored their service rates, something that transportation spend experts have come to expect from the rival companies despite the freight market swinging in shippers' favor.
On the surface, the 5.9% bump is down from last year’s General Rate Increase(GRI) of 6.9%. The reality is that shippers, especially those with high volumes, will likely see rates exceed this year’s mark due to shifts in strategy for both companies as a response to increased market pressure and rising labor costs.
Earlier this summer, UPS was embroiled in highly publicized contract negotiations with Teamsters and lost some business to competitors. While a driver strike was eventually averted, when the dust settled, the increased labor rate associated with the new 5-year contract had many expecting that a significant rate increase would be on the horizon.
Unlike previous years, and potentially to put pressure on UPS in response to the Teamster negotiations, FedEx announced their rate increases much earlier than expected. Rather than lose additional business, UPS matched GRIs in an announcement at the beginning of Q4.
So what does this mean for shippers?
The impact of GRIs can vary from one organization to another. While GRIs can help shippers get a big picture of expected freight costs based on year-over-year volumes, they are, at best, a baseline. This is because they only apply to a fraction of the parcel industry and are noncontractual. For most, GRIs simply serve as a starting point for more detailed negotiations and rate contracts.
This isn’t to say that the impact of GRIs won’t be felt. Rates will vary based on a number of factors, including the following:
- Shipment weight
- Shipment dimensions
- Distance traveled
- Services used
- Handling required
- Delivery zone
Short-haul shipments will be the least impacted and will likely hover around the 5.9% mark, before any potential discounts. Go-to-market rates for shipments under 600 miles will be based on seven delivery zones. This is in contrast to long-haul shipments, expedited, and air freight which may see rates as high as 8% depending on the factors described above.
Experts caution only looking at GRI when budgeting for transportation spend, as it only tells part of the story. Larger shipments, or those that require excessive handling before they reach the final destination, are expected to incur rates ranging from 18-21%.
Because of these additional costs, overall averages are still likely to be in the double digits for most shippers unless they can successfully negotiate rates down. Even then, rates will still likely remain above the 5.9% GRI being advertised.
Managing Transportation Spend In 2024
When it comes to transportation management spend, you can only control what you can control. Rates and contracts constantly change, making it difficult to create a comprehensive budget that won’t leave you in the red next December. Having the tools to help you manage costs, contracts, and more is essential to operating within the global supply chain.
At Trax, we are committed to helping global organizations streamline their operations and more effectively manage transportation costs through the use of artificial intelligence and freight audit and payment tools. Regardless of how 2023 ends, start 2024 off on the right foot with tools in place to help improve visibility and data reliability.
Connect with our team for more information.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.