UPS & FedEx Profiteering During Crisis
Posted: June 15, 2020 |
It was Winston Churchill that first said: "Never let a good crisis go to waste." The world Crisis post WWII led to the formation of the United Nations as he worked with world leaders offering numerous opportunities in the midst of a crisis. Today, with the COVID-19 crisis impacting business and our everyday lives, companies have stepped up to ease the burden on consumers and companies: free meal deliveries. Deferred payments for 6 months and loan relief guarantees by car companies. However, there are companies that have exploited the crisis to keep shareholders happier and increase profits. We all ask, “Why are they doing this?” The simple answer is they can.
FedEx & UPS roll out COVID-19-based “temporary peak” surcharges
As the world economy reels from the current COVID-19 coronavirus pandemic, industries and consumers are feeling the effects. We are witnessing entire industries; long established companies close permanently or file for bankruptcy. But for others, business is booming more than ever. Global shipping, including UPS and FedEx, have both announced temporary peak surcharges related to the coronavirus to cash-in on the crisis. Once again as they have in past years, are adding unfair costs to the shipper and enhancing company profits. Many businesses are struggling and reinventing their business models to stay afloat. This surcharge, particularly one that targets consumers is excessive and unnecessary during this time. They claim that the surge in Residential deliveries is adding costs. We completely disagree. A big component of shipping costs is the delivery. Pre Covid-19, the number of delivery attempts were much higher as people were not at home; conversely, during Covid-19, more people are at home and reducing the cost of delivery attempts. This is a clear example of profiteering and this is not an isolated act as both FedEx and UPS continue to manipulate rules to increase fees.
The surcharge became effective May 31 until further notice. We can expect similar actions in the future by both carriers which dominate the market as both routinely adjust their commercial terms to reflect changing market conditions. Sample of UPS and FedEx surcharges.
- UPS: A $0.30 peak surcharge now applies to certain UPS Ground Residential and UPS SurePost packages if customer’s (like Amazon, Best Buy and Target) average weekly volume exceeds 25,000 packages.
- UPS is also adding a surcharge of $31.45 for shippers who send more than 500 large packages in a week, defined as having a length by height by width of 130 inches or more.
- FedEx: $0.40 per package surcharge for FedEx SmartPost packages until further notice.
- FedEx: $30 per package surcharge peak oversize charge for U.S. domestic FedEx Express and FedEx Ground packages until further notice [FedEx defines oversize as any package that exceeds 96 inches in length or 130 inches in length and girth].
- FedEx: $0.30 per package peak residential delivery surcharge for U.S. domestic residential FedEx Express and FedEx Ground packages until further notice [this applies to enterprise level customers who within a given week ship 40,000 FedEx Express residential and FedEx Ground residential packages combined, excluding FedEx Smart Post and FedEx OneRate, and whose volume in that same week exceeds 120% of their average weekly volume in February 2020].
CPC Consultants has been tracking the Small Parcel rates since 1998. When UPS and FedEx formed an Oligopoly on Parcel Services in 2011, they have raised their rates over 125%. The increases came in the form of General Rate Increases (90%), and stingier dimensional divisor rules (20%) and extra or increased surcharges, such as required signatures, expanded delivery and residential delivery. We can see below; FedEx has not had much issue maintaining revenue growth thanks to the added charges.
- FedEx revenue for the quarter ending February 29, 2020 was $17.487B, a 2.8% increase year-over-year.
- FedEx revenue for the twelve months ending February 29, 2020 was $69.666B, a 0.67% increase year-over-year.
- FedEx annual revenue for 2019 was $69.693B, a 6.48% increase from 2018.
- FedEx annual revenue for 2018 was $65.45B, an 8.51% increase from 2017.
- FedEx annual revenue for 2017 was $60.319B, a 19.76% increase from 2016.
This “New Normal” for shipping includes the added burden of managing through the disruptions of COVID-19. Now, piling on surcharges and the rate increases, now more than ever shippers need a way to combat the ever-changing rules. It’s imperative that shippers understand the rules and negotiate concessions to mitigate unfair increases. These types of surcharges can be negated or reduced with discounts if you have the right contract in place.
CPC is a solution. Our approach is to surgically apply discounts to the services that the Shipper needs in their program. This is accomplished with a No-Cost assessment where these requirements are identified and then sourced through a structured selection process. CPC can be of assistance of combatting these increases through our proven and guaranteed optimization process which saves Shippers money.
Contact CPC immediately if your company is ready to save. This new rule could wind up costing you tens of thousands of dollars annually.