FedEx Peak Season Surcharges Target Large Shippers’ Volume Surges

FedEx has announced its 2022 peak season surcharges, adding further strain on shippers who have weathered high fuel surcharges and selective carrier capacity this year. Several of the holiday shipping surcharges exceed their prices from last year, including fees for large customers who ship more during peak and bulky or oversized packages. The start date varies by surcharge, but most are active from October through January.

• “As FedEx prepares for high demand during peak holiday season, we are adjusting our networks to best deliver for our customers,” FedEx said in announcing the surcharges on its website. “We again anticipate the surge in residential volume to carry over into the new year.”

Although package volumes have fallen from their 2021 highs, FedEx isn’t easing up on its peak season surcharges.

The parcel carrier, which says the fees are necessary to keep service levels high during its busiest period, took in more than $250 million in peak season surcharge revenue last December. Since then, it has pursued more profitability per shipment under new CEO Raj Subramaniam as demand has waned. A similar strategy is being executed at rival UPS, and both carriers have constrained volume growth that would have led to lower-yielding deliveries.

This approach has led to a pricey 2022 for parcel shippers. The Cowen/AFS Ground Parcel Freight Index, which tracks parcel transportation pricing versus a January 2018 baseline, reached a record high of 27.7% in Q2 as fuel surcharges more than doubled YoY. The index is projected to dip slightly to 25.7% in Q3.

“FedEx and UPS leveraged fuel surcharges as significant profit drivers, adjusting fuel surcharge tables twice since late 2021, with increases that continue to outpace corresponding indices from the U.S. Energy Information Administration on which they are based,” according to a Cowen/AFS news release.

The latter half of the year will be particularly expensive for large FedEx shippers that see volumes jump during the holidays. FedEx’s peak residential delivery charge applies to enterprise customers shipping more than 20,000 residential and FedEx Ground Economy packages weekly starting Oct. 10.

An eligible shipper’s peak residential delivery surcharge per package can range from $1.25 to $6 for FedEx Ground, and $2.25 to $7 for FedEx Express. The exact cost depends on how many more packages they are shipping compared to their weekly average volume for residential and FedEx Ground Economy shipments between June 6 and July 3. FedEx refers to this metric as a shipper’s “peaking factor.”

FedEx will calculate a shipper’s peaking factor each week from Oct. 10-16 to Dec. 19-25. The charge for a week’s peaking factor occurs three weeks later.

A shipper who ships 60% more the week of Oct. 24-30 than they did from June 6-July 3, for example, will see an additional $2 charge per FedEx Ground package they ship from Nov. 14-20.

By: Max Garland / SupplyChain Dive