LTL/transportation news: FedEx announces rate hikes

LTL rates set to rise 6.9 percent in November

By ·

Soon after less-than-truckload (LTL) transportation service providers YRC Worldwide and ABF Freight System announced matching 5.9 percent general rate increases, FedEx Freight said this week it is upping its GRI a bit higher at 6.9 percent, effective November 1.

FedEx officials said these rate increases for FedEx Freight and FedEx Regional LTL apply to interstate and intrastate LTL shipments and shipments between the U.S. and Canada covered by the FXF 1000 and FXNL 501 Base Rates. They also said that FedEx Freight’s fuel surcharge—at 4.5 to 6.5 percentage points below the next five largest LTL carriers—will not change

Late last month, FedEx said that it plans to combine its FedEx Freight and FedEx National LTL operations, effective January 30, 2011, in an effort to increase efficiencies and reduce operational costs. A major component of the company’s approach to this strategy is centered on fuel management initiatives, more disciplined contract pricing, and reviews of lower-performing accounts that await adjustments, according to FedEx.

Anecdotal evidence suggests that many LTL carriers are seeing rates recover and are turning their attention to rate increases, following a challenging 2009 for the sector in which LTL carriers to a degree were highly focused on driving volume gains with pricing power largely diminished.

What’s more, LTL carriers are also seeing marked improvements in pricing, volume, and weight per shipment in recent months, according to analyst reports.

An LTL executive told LM that there is no question that LTL rates are starting to firm up on the yield side and it has become a focus for carriers—with all having some sort of yield improvement process to raise rates in place.

But a research report from Stephens Inc. noted that there is not always a direct correlation between GRI’s and overall rates.

“Our studies have found that, historically, GRIs have little correlation with rate performance over the following year, as supply/demand dynamics are the true drivers,” according to Stephens. “To be sure, we do see the opportunity for these “out-of-cycle” GRIs to have some positive impact as 1) LTL pricing has been artificially deflated, 2) large players are reducing their network size, and 3) concerns about YRCW’s survival are beginning to weigh on shippers’ minds. However, absent a YRCW failure, we think Street estimates overstate the impact of GRIs and understate the incremental costs coming back on line in FY11.”

Other LTL players such as Con-way Freight, Old Dominion Freight Line and Vitran have yet to announce rate increases.

Other FedEx rates: FedEx also announced FedEx Express shipping rates are set to increase by an average of 3.9 percent for U.S. domestic and U.S. export services effective January 3, 2011.

Company officials said that the full average rate increase of 5.9 percent will be offset by adjusting the fuel price threshold at which the fuel surcharge begins, which reduces the fuel surcharge by two percentage points.

And FedEx and FedEx Ground will implement a change to the dimensional weight volumetric divisor from 194 to 166 for U.S. domestic services.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

FedEx · LTL · All Topics
Latest Whitepaper
SaaS Supply Chain Management Systems
A guide to better understanding the market, the software and the benefits
Download Today!
From the November 2016 Issue
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL) provider that could successfully combine transportation services and technology capabilities under one roof.
Warehouse & DC Operations Survey: Ready to confront complexity
2016 Quest for Quality Awards Dinner
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Digital Evolution: Streamlining Logistics and Supply Chain Operations
In this FREE virtual conference we'll define the challenges facing operations and offer solutions designed to create dynamic, automated networks that offer seamless communication, improved collaborative third-party relationships, and the ability to respond to changes at a moment's notice.
Register Today!
EDITORS' PICKS
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...
Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...

Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...