I’m Jay Kent, managing director of SLB Performance, a consulting firm that helps companies reduce supply chain costs, implement BI tools, and improve in-stocks and customer service. After 25 years of leading some of the most complex supply chains in the industry, I began advising companies in multiple industries and verticals. To mitigate costs and improve efficiencies, it’s important to understand the market. So twice a month, I’ll share parcel news and thoughts. Be sure to hit the subscribe button to receive the latest newsletter in your LinkedIn notifications.
Are you attending the Parcel Forum next week? if so, let’s connect. I’ll be moderating the session – Optimizing Supply Chains in a Post-Pandemic World – on Wednesday at 9:00 a.m. Central Time.
FedEx is getting a head start in announcing upcoming rate and surcharge increases as perhaps a way to keep hold of parcel volumes it gained from UPS during that company’s negotiations with the Teamsters. FedEx announced a 5.9% general rate increase (GRI) for 2024. It’s the earliest such an announcement has been made in recent memory and lower than this year’s GRI of 6.9%. Typically, additional rate details are provided with such an announcement, but not this time. According to FedEx’s website, “Detailed rates and surcharges will be available on fedex.com on Sept. 7.”
FedEx also announced its demand surcharges for the peak season, which will be in effect from Oct. 2 through Jan. 14. FedEx will again use its dynamic pricing model for its residential delivery surcharge. The tool automatically adjusts the surcharge if a shipper surpasses a volume threshold. Last year, FedEx earned $150 million from its dynamic pricing model.
“In the coming fiscal year, our predictive anomaly detection will improve revenue quality. We have already built infrastructure that helps us identify instances when we have overbilled our customers. Now, we will use those same capabilities to better manage customer performance and contract compliance,” FedEx EVP and Chief Customer Officer Brie Carere told analysts in March.
Typically, FedEx and UPS announce similar rates and surcharge increases. But with $30 billion in new costs hanging over UPS, will UPS be able to afford to match FedEx? Stay tuned.
UPS has yet to announce its 2024 GRI and peak season demand surcharges. But, Carol Tome did provide an outlook for the holiday season – “Peak will be 21 days this year, the same as last year,” Tome told analysts in August. “We expect [volume] to surge in the 60% area this year. So, it’s still going to pick up. It’s just from a different volume level.”
UPS offering early retirement to pilots
The soft air cargo market is resulting in UPS offering early retirement to some pilots. According to Reuters, UPS hopes 167 pilots will accept its voluntary separation offer.
Total air average daily volume was down 16.5% year over year during the company’s second quarter. On the export side, average daily volume declined 4.5% on a year-over-year basis. UPS reduced flights resulting in international block hours down 9.4% compared to last year.
Couriers & Messengers August employment declines
Couriers and messengers employment continued its decline in August, down 0.9% from July. Year-to-date, employment is down 23.7% from the same period last year. Employment seems to be following package volumes which have been normalizing since pandemic highs.
That’s it for now. Comments are always welcome. Let me know what I missed. Stay tuned for the next newsletter on Sept 20, and don’t forget to hit the subscribe button to ensure you receive it in your LinkedIn notices.
-Jay