Changes are afoot once again with the FedEx and UPS fuel surcharges. On March 7th, the FedEx fuel surcharge for Air and International will be 0% (yes, you read that right!) and Ground will decrease from 3.75% to 3.25%. On that same day, the UPS fuel surcharge for Air and International will go from 3.0% to 2.25% and Ground will go from 5.0% to 4.5%. Why the big disparity between the carrier’s fuel surcharges?
Well, let’s not forget that last year we saw both carriers change their fuel surcharge indices twice—in February and then again in November. UPS has benefited from higher fuel surcharges for quite some time now and it’s doubtful that will change anytime soon, if ever.
When questioned about the adjustments to their fuel surcharge indices, FedEx CFO Alan B. Graf Jr. commented that, “FedEx labors under a six to eight week lag between its fuel payments and the surcharges imposed to recoup those costs. The adjustments allow FedEx to alleviate some of those cash flow issues.” FedEx has also noted that adjustments to the fuel indices was due to the “increase in delivery stops because of the rise of e-commerce”.
Now, based on some of the shenanigans these behemoths played last year to prevent the fuel surcharges from dropping to 0%, I’m willing to bet that FedEx will once again adjust their fuel surcharge indices so as not to lose that sweet source of revenue. Of course, with that move, I’m also willing to bet that UPS will follow suit not too shortly thereafter. The only question is when? FedEx reports quarterly earnings on March 16th and normally these types of changes are announced during those calls.
What can you do? For starters, ensure you stay on top of the changes to your carrier’s fuel surcharges. Additionally, take a look at the last time you re-negotiated your carrier agreement. If it’s been over a year…you might want to tackle it posthaste. Bear in mind that thorough research along with a sound strategy and game plan are crucial to success. Carrier negotiations can be tough. If you need help navigating the process, we’re here to help you sort through all the chaos.
Author
Bryan Van Suchtelen
Bryan Van Suchtelen
Corporate Director of Parcel Rate Services
Prior to joining Lojistic in 2015, Bryan enjoyed a 26-year career with UPS where his roles included Pricing, Field Sales and Director-level Sales Management of some of UPS’s largest customers.
At Lojistic, Bryan leverages his wealth of experience/expertise to identify and execute supply chain cost management solutions for parcel shippers of all sizes. Bryan has helped his customers reduce their shipping spend by tens of millions of dollars.