By james art This audio is automatically generated. Please let us know if you have any feedback.
Brief description of the dive:
- Shipping discounts by UPS and FedEx in the third quarter led to unexpectedly low ground shipping rates, according to the TD Cowen/AFS Freight Index released Oct. 15.
- The third-quarter ground parcel price for a package was 20.3% above the index’s January 2018 baseline, the lowest since 2021, as aggressive carrier discounting activity over the past year continued.
- AFS Logistics principal analyst Mingshu Bates told Supply Chain Dive that the price per package was expected to drop in the third quarter, but not to the extent that it did. Discount growth for large customers in the quarter was more pronounced than for smaller businesses, she added.
Discounts reduce the cost of ground delivery of shipments
TD Cowen/AFS Ground Parcel Freight Index vs. January 2018 baseline
Dive Insight:
Although FedEx and UPS have expanded their range of surcharges this year, that hasn’t slowed the discount as carriers compete for volume in a soft market.
The average discount for land plots increased by 2.4% from Q2 to Q3 according to AFS performance of the index. These price reductions don’t just apply to base freight rates — carriers are also offering better terms on fuel surcharges for various shippers. The index reported a 6.8% decrease in the net fuel charge for the ground package.
“Today, even small customers can get some level of discount for additional fuel,” Bates said. “Of course, it won’t be as big as the big companies get, but still just getting a fuel surcharge discount was difficult a few years ago.”
The index forecasts a rising pace from Q3 to Q4 as peak season surcharges take hold, but conditions are expected to remain more favorable for shippers than last year.
“Competitive pricing pressures will continue to dominate the holiday shipping season, with a noticeable trend toward increased discounts for large customers,” the presentation said.
The higher discounts also extended to express shipments. The price of express parcels per package fell from 4.5% in Q2 to 1.6% in Q3, according to the index. The rate is expected to decline further to 1.4% in the fourth quarter as carriers struggle to increase expedited delivery volumes in a cost-conscious environment.