Wednesday, April 5, 2017

Their Separate Ways:

FedEx and UPS’s diverging pricing models offer new challenges to shippers.

FedEx and UPS, the two giants who dominate the parcel delivery business in this country, have long moved in lockstep on how they price their services. Recently the “duopoly” have instituted vastly different pricing models in areas such as fuel surcharges and list rates, resulting in more challenging price comparisons between the two companies. 

For the first time in a long time the two carriers are operating under very distinct pricing models that no longer match, including accessorial charges like fuel surcharges and list rates, which now makes it much more difficult for shippers to meaningfully compare prices between the two. The diverging rate structures stem from their respective rate announcements for 2017.

Not only do the carriers’ published rates not match up, accessorials, dimensional or DIM rates, and the methodology for calculating fuel surcharges have gone their separate ways. FedEx Express and FedEx Ground fuel surcharges are now adjusted on a weekly basis instead of the previous system, in which adjustments came on a monthly basis with a two-month lag between government-published fuel indexes and the surcharge being calculated. 

Each carrier has detailed information on the shipments for their own customers, putting them in the driver’s seat when it comes to negotiating individual rates. And the new standards mean no two shipments are necessarily affected to the same degree.

To maintain some leverage with the carriers, it becomes increasingly important for shippers to have access to information on their options. A TMS (transportation management system) with dynamic pricing capabilities, that allows shippers to do least cost routing between the two parcel giants, and also with LTL carriers, can markedly help a shipper’s ability to best allocate their logistics dollars.

In one respect, though, the FedEx and UPS pricing announcements remained in tandem, and true to form; each carrier took a healthy general price increase as a starting point.

Kirk Shearer

800-989-0054 x103

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