Following YRC, ABF and Vitran, FedEx has announced rate increases across the board.  While FedEx Express and FedEx Ground announced increases to be effective January 3, 2010, FedEx LTL will increase their rates an average 6.9% ,FedEx announcement exceeding the 5.9% increased announced by the other LTL carriers.  As I have pointed out before, these general rate increases are not across-the-board increases.  Rather, they will increase certain lanes, commodity classifications and weight breaks differently and state the average impact.  For each shipper, the impact can be smaller or higher.

FedEx Express increased their threshold for adding their fuel surcharge thus arguing the net effect is an average increase of 3.9%.  Interestingly, FedEx Ground announced a change in their dim factor from 194 to 166.  This is a hidden increase for less dense shipment of 16.9%.  In the past FedEx Ground would charge you as if your package weighed 8.9 pounds per cubic foot.  Now, the minimum density will be 10.4 pounds per cubic foot.  If you are shipping nuts and bolts there won’t be an impact.  If you are shipping light bulbs your costs went up a minimum of 16.9%.

What’s interesting is that FedEx proudly boasts that their fuel surcharge is 4.5% to 6.5% lower than other in the industry.  That is a true statement.  What they fail to mention is that their base rates are near the very top of all LTL carriers.  The reason they don’t mention that is because it is very difficult for the average shipper to figure that out.  They can afford to charge a lower fuel surcharge because they make it up in the base rate.  We don’t know how much of the increase is embedded in their rules tariff and accessorial charges.  Those won’t be available until the day the increase takes affect, November 1, 2010.

It’s going to be interesting to see how the other LTL carriers react. Con-way has already stated that they aren’t going to issue a mid-term increase.  However, I am certain they will have an increase with everyone else around the first of the year.  There are ways to minimize the impact of carrier increases.  One is to contract with carriers and not refer to their base and rules tariff.  Another is to have a software where  you can quickly and easily compare multiple carrier rates and make routing decisions based on total net costs.  We tell our clients to exercise both of these tactics.