The pandemic-driven e-commerce growth is tapering off, but it’s not contracting. Truck tonnage is on the rise, and shippers are adjusting to the changing behaviors of their customers. FedEx is finding more ways to increase revenue, but it could also be joining its rival, UPS, in dealing with the threat of a strike.
Shippers need to stay diligent about their small parcel shipping operations to contain costs and find new savings.
FedEx Using Dynamic Surcharge Pricing to Increase Revenue During Peak Season
This past peak season, FedEx used its new ability to dynamically adjust surcharges to bring in an additional $150 million in profit on home delivery fees.
A decline in package volume prompted FedEx to extract as much revenue as possible, and the carrier introduced dynamic pricing in August.
Despite the daily average package volume falling 14% with express and 11% for ground, revenue per package increased 11% in both areas.
The carrier expects the gains in revenue to slow in the coming quarters, however.
The carrier has also made several other cost-cutting measures like reducing Sunday Ground deliveries and parking Express planes.
You can learn more here.
Balancing the Demand of E-commerce and Freight
The surge in e-commerce from the pandemic is leveling off, but it’s still growing. In addition to sheer volume, the industry is also starting to evolve what products are being shipped in.
“Box-on-demand” technologies have helped shippers package products with more customization, allowing them to bring down costs as well.
Currently, there are several types of fulfillment models and the biggest question is which model works best. From distribution center to customer and store to customer, to manufacturer to customer.
Behaviors are also changing. Consumers are more likely to return products bought online, meaning shippers need to be prepared to deal with reverse logistics costs.
For a more in-depth look at the balance of demand of e-commerce and freight, you can find more here.
Truck Tonnage on the Rise Compared to 2022
Compared to February 2022, truck tonnage increase 2.3%, according to American Trucking Association’s For-Hire Truck Tonnage Index. Additionally, the growth the last three months is just 0.3% less than the record high last September.
The ATA tonnage index is calculated through surveys from its membership since the 1970s. February’s growth could point to an improved inventory cycle and help with truck freight volumes.
While ATA shows promising growth in the trucking industry, Logistics Managers’ Index isn’t as bullish, as it shows growth as a much slower pace. Last month’s LMI was 54.7. When the LMI is above 50, it shows growth. However, this figure was a drop from January’s 57.6.
To learn more on how truck tonnage in 2023, click here.
FedEx Union Issues?
UPS isn’t the only carrier who faces the threat of a strike. FedEx pilots have started to voice their frustrations with the carrier over its delay in delivering a new contract.
Negotiations began back in March, 2021 and progressed reasonably through this past December, but since then, talks have stalled.
FedEx pilots believe the carrier has failed to provide reasonable compensation and have felt that management has downplayed negotiations to current customers.
The carrier has not faced a strike authorization vote since 1998, but FedEx pilots haven’t ruled it out if talks continue to stall.
You can find the opinions of Chris Norman, chair of the Air Line Pilots Association’s FedEx Group, as well as more information here.
Tips to Keep Parcel Spending in Check
TransImpact’s Vice President of Sales, Jey Yokeley, recently detailed three tips to keep parcel spending in check for PARCEL.
The first is to examine parcel data. Parcel data is everything a shipper needs to reduce costs. The problem is most shippers don’t know how to use the data.
Some might try to parse through their data on their own, but in reality, a parcel BI is a necessity. A parcel BI will identify areas of improvement shippers easily miss. Whether it’s being overcharged on fees or not shipping from an optimal location. These insights will help shippers make quick and decisive actions that keep parcel spending low.
To see the next two tips, click here.