This week in parcel, FedEx breaks down the “FedEx Effect,” ground rates ease, and trucking capacity continues to decline.
What is the “FedEx Effect”?
A recent FedEx report revealed the company contributed more than $80 billion to the global economy in 2023. The carrier has over 500,000 employees across 5,000 facilities globally and ships roughly 14.5 million packages daily across 220 countries and territories.
This report examines the “FedEx Effect,” which is the impact the carrier has had on individuals and communities around the world.
In the United States, FedEx can deliver to every ZIP code using roughly 4,800 facilities and 7,000 independent service providers.
The company’s report highlights its contributions to the economy, the supply chain, small businesses, sustainability, and more. It notes the carrier’s partnerships with suppliers that supported over one million jobs. Ninety percent of the suppliers were small businesses.
Our take: The level of service FedEx (and UPS) provide is exceptional when considered objectively. However, shippers should remain diligent by auditing their invoices and ensuring market-appropriate rates. The service carriers provide is not worth overpaying for.
Read more on FedEx’s report here.
Ground rates are easing
For the first time in four years, Ground parcel rates saw a year-over-year decline in the third quarter. With the volume of shipments falling, Ground delivery costs are as well.
FedEx and UPS are offering competitive discounts to win volume. On average, the discounts are one percentage point higher than in the previous quarter, which is the largest increase this year. UPS is attempting to win back the volume lost during its union negotiations as well.
Pricing during the fourth quarter is expected to decline compared to 2022 Q4, and experts predict a “more muted peak season” this year compared to recent years.
Our take: This is further evidence of a buyer’s market in the parcel industry. Now is the time to take steps to lower costs with FedEx and UPS ahead of their GRI increases. If you don’t know where to start, schedule a call with one of our parcel experts today.
Read more on the declining parcel rates here.
The freight market is still weak
The freight market has been declining since early 2022, and a comeback isn’t imminent. One expert believes that there are more bankruptcies to come within the industry. Larger carriers are parking trucks due to the low demand.
Truckers will likely offer aggressive discounts to win business from the competition during bid season, lowering overall contract rates. However, there will likely be another 20% reduction in truckload capacity, according to one expert.
Many brokers who hedged debt financing are going out of business as interest rates increase and business slows.
Our take: This is an excellent opportunity for shippers because rates remain low, but such low rates can be too good to be true. Ensure you are properly vetting all your carriers because, as with most things in life, you get what you pay for.
Read more here.