The Impact of UPS and FedEx Fuel Surcharge Hikes on Delivery Prices
In recent developments, both UPS and FedEx have announced increases in their fuel surcharge calculations for deliveries. These adjustments, scheduled to take effect imminently, are poised to place additional pressure on shippers as the carriers aim to bolster their per-package revenues. Let's delve into the implications of these price hikes and explore how they might impact the logistics landscape.
UPS and FedEx Fuel Surcharge Increases
UPS initiated the move by raising the percentage markup for its domestic Ground, Air, and SurePost fuel surcharge tables by 50 basis points. FedEx is following suit with its own increase of 100 basis points for its U.S. ground and Express fuel surcharge tables, slated to come into effect soon.
Impact on Shippers and Consumers
These surcharge hikes come on top of previous increases implemented by both delivery giants in December. As a result, shippers are now facing heightened delivery expenses, which could ultimately trickle down to consumers in the form of higher prices for goods and services.
Index-Based Fuel Surcharge Adjustments
The fuel surcharges imposed by FedEx and UPS are index-based and are adjusted weekly based on fuel prices reported by the U.S. Energy Information Administration. For instance, the surcharge for air shipments is tied to the U.S. Gulf Coast price for kerosene-type jet fuel, while ground parcel shipments' surcharge is linked to the national average on-highway diesel fuel price.
Fuel Price Changes and Revenue Impact
A period of lower fuel prices had previously led to decreased fuel surcharges for both carriers, impacting their revenue per package. However, with fuel prices on the rise, UPS and FedEx are adjusting their surcharges accordingly to mitigate the impact on their bottom lines.
Strategic Considerations for Shippers
As the surcharges increase, shippers need to reassess their logistics strategies and budgeting to accommodate higher delivery costs. Some customers may be exempt from these surcharge changes, but others will need to brace themselves for the anticipated spike in expenses.
The fuel surcharge hikes imposed by UPS and FedEx underscore the dynamic nature of the logistics industry, where external factors such as fuel prices can significantly influence operations and pricing strategies. Shippers must remain vigilant and adaptable in navigating these fluctuations to ensure the continued efficiency and profitability of their supply chains.
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