As businesses brace for ongoing shifts in the shipping industry, recent announcements from FedEx and UPS regarding upcoming surcharges for deliveries in specific ZIP codes have sparked concerns and raised questions about navigating these changes effectively. Let’s delve into the details of these surcharge updates and their implications for your business.
Key Takeaways:
FedEx and UPS will add surcharges for deliveries in 82 ZIP codes this month, many of which cover parts of major urban areas, according to updates from both companies.
These newly announced changes to Delivery Area Surcharges are in addition to additions/ changes made with carrier General Rate Increases at the beginning of this year.
The delivery area surcharge, or DAS, for the new ZIP codes will take effect on April 8 for UPS and April 15 for FedEx. The additions will impact areas in Boston, Chicago, New York, Los Angeles, and San Francisco.
The DAS ranges between $3.95 and $5.85 for FedEx and UPS, but that can climb higher in areas with ZIP codes categorized as “extended” or “remote.” The surcharge amount is influenced by the package being shipped via ground or air transportation and if it’s a commercial or residential delivery.
UPS also announced that “Effective June 17, 2024, the applicable zone will change for certain origin/destination ZIP code pairs.”
What Are Delivery Area Surcharges?
Delivery area surcharges (DAS) are additional fees imposed by shipping carriers like FedEx and UPS for delivering packages to specific geographic areas. These surcharges are applied when a package is being delivered to locations that are deemed more remote or difficult to access, such as certain ZIP codes or rural areas. The rationale behind DAS is to offset the higher costs associated with delivering to these locations, which may require additional time, resources, and logistics planning.
DAS amounts can vary based on several factors, including:
Geographic Location: Certain ZIP codes or regions may be categorized as “extended” or “remote,” leading to higher surcharge amounts.
Delivery Type: Whether the package is being delivered to a commercial or residential address can influence the surcharge rate.
Transportation Mode: Whether the package is shipped via ground or air transportation can also affect the surcharge amount.
It’s important for businesses and consumers to be aware of DAS as it can impact shipping costs and delivery timelines, especially for shipments to areas subject to these surcharges. Understanding carrier policies regarding surcharges helps in accurately estimating shipping expenses and planning logistics accordingly.
Navigating the Logistics Maze: Understanding FedEx & UPS Audits
In the world of logistics and supply chain, efficiency is the key to successful operations. Businesses rely on FedEx and UPS to deliver their products swiftly and safely to customers around the globe. However, with the complexity of shipping contracts, service agreements, and surcharges, it’s easy for errors to occur, leading to overcharges and unnecessary expenses. That’s where FedEx and UPS audits become a company’s secret weapon to cost savings and optimization.
Understanding the Basics
A FedEx & UPS audit is essentially a thorough review of shipping invoices to identify billing errors, overcharges, and discrepancies. These audits are typically conducted by third-party companies, specializing in parcel auditing services. The goal is to ensure that businesses are paying the correct amount for their shipping services and to recover any refunds owed due to billing errors or service failures. Finding the right company to perform the audit is essential. Look for a company with experience and a proven track record of success in uncovering invalid charges and billing inaccuracies.
How It All Works
The audit process involves several steps:
Data Collection
The auditing company collects electronic shipping data from the business, including tracking numbers, and complete shipment details. This information provides a comprehensive overview of the company’s shipping history and expenses.
Analysis
Experienced auditors, using sophisticated analytical software, analyze the shipping data to identify potential billing errors and overcharges. This includes examining factors such as incorrect weights or package dimensions, improper service charges, late deliveries, and all billing discrepancies.
Claim Submission
Once errors are identified, the auditing company submits claims to FedEx and UPS on behalf of the business. These claims outline the specific errors found and request refunds or credits for the overcharged amounts.
Refunds and Credits
FedEx and UPS typically have refund policies in place for billing errors and service failures, but they must be claimed in a timely basis in order to obtain refunds, so timing is of the essence. Once the claims are processed and verified, the carriers issue refunds or provide credits to the business’s shipping account.
Reporting
Throughout the audit process, the auditing company provides detailed reports to the business, outlining the findings, refunds obtained, but more importantly, potential cost-saving opportunities for future shipments which can be significant.
One of the primary benefits of conducting FedEx and UPS audits is cost savings. By identifying and rectifying billing errors and overcharges, businesses can reduce their shipping expenses and improve their bottom line.
Improved Accuracy
Audits help businesses ensure the accuracy of their shipping invoices, eliminating discrepancies and billing errors that can arise from complex rate structures and surcharges.
Time Savings
Outsourcing the audit process to third-party companies saves businesses valuable time and resources. Instead of manually reviewing invoices and tracking down errors, they can focus on core operations while experts handle the audit process on their behalf. It also gives businesses the opportunity to leverage years of experience and expertise that audit companies have in-house, for their own benefit, without the expense of hiring.
Performance Monitoring
Audits also provide valuable insights into carrier performance, including on-time delivery rates, service failures, and areas for improvement. This information enables businesses to make informed decisions about their shipping strategies and carrier partnerships– as well as creating data for additional optimization through parcel carrier negotiations.
The video below gives a fast and easy explanation on how audits work and why they can be so valuable to a business. Take a look!
Conclusion
In today’s competitive business landscape, every penny counts. FedEx and UPS audits offer a proactive approach to managing shipping expenses, ensuring that businesses only pay for the services they receive. By partnering with experienced auditing companies, businesses can streamline their shipping operations, reduce costs, and enhance overall efficiency. In the complex world of logistics, audits provide a valuable tool for navigating the maze of shipping contracts and tariffs, ultimately leading to cost savings and improved profitability. Ready to get started and see immediate value? Reach out to our parcel carrier experts and get started.
I recently got fired up when I read a post from a Transportation Professional on LinkedIn that detailed how he felt that it was not a great idea for a company to engage with a Parcel/Freight consulting company for assistance with carrier contract negotiation. The message the post attempted to deliver was that it’s not worth bringing in outside experts, due to the fact that the costs associated with doing so will erode a lot of the overall savings potential.
I really saw a lot of issues with the message that the author of the post was trying to portray, along with opinions expressed by others in the comments. This left me thinking that there really are a lot of misunderstandings and misconceptions in the Logistics community regarding the value that a Parcel/ Freight consultant can provide. I would expect that this negative sentiment is driven by bad experiences, and bad actors in the Logistics consulting world.
So, I thought it would be beneficial to put together an article that explains how all Logistics consultants are not created equal. I will also address the reality that the costs associated with engaging Parcel/ Freight consultants may appear at first glance to be high. However, the value that a solid provider delivers should always outweigh the cost multi-fold. If you engage with the right Parcel/ Freight consultant- the ROI should be staggering!
There were several recurring themes in the original post and comments that attempted to downplay the value of Parcel/Freight consultants.
The Gain Share pricing model that is often used in the Parcel/Freight Consulting world is too costly and should be avoided, or minimized.
Companies should hire in house Transportation experts instead of using consultants or outsourcing
Parcel/Freight Consultants do not have access to, and cannot provide meaningful Market Intelligence. They only use marketing and scare tactics that suggest that carriers are overcharging shippers.
As someone that has been on both sides of the negotiating table, I feel that I am well positioned to address each of these scenarios.
No Pain, No Gain
We have been hearing more and more about companies being concerned with the Gain Share model, due to the costs that can be associated with this. There are often concerns about the percentages being charged, along with the Gain Share term (length of time that is charged).
The good news for shippers is that the Gain Share amounts that consultants had charged in the past (as much as 50%), have come down. This is somewhat due to increased competition in the consulting world. But, is also tied to improvements in technology.
The analysis associated with Contract Optimization/Analysis that was done in the past was a bit more manual. Carrier data has gotten better, and consultants have been able to build programs that take away some of the manual work that was required in the past. This has helped to drive down some of the costs incurred by consultants, which is now being passed onto their shipper clients.
However, we must caution you about relying on the use of technology in the Contract Optimization/ Analysis process. Our long term experience tells us that besides having good technology and systems, it is imperative that a consultant also incorporate their knowledge, experience and insight into the process. The bottom line is that good consultants will “put their hands on your data”.
There are consultants out there that will just inject your carrier invoice data into their system and then have it spit out results, which will be fed to you. These types of consultants are also likely to agree to the lowest Gain Share percentages and terms. There is a reason for this, and you will pay for it in the end. Basically, they are not spending the time or using capable human capital to truly dig into your data to provide a comprehensive analysis.
Money that you save from those offering lower Gain Share percentages and terms can be far less than what you can save by partnering with a consultant that really digs into your data, and has the resources and intellectual capital that will lead to the best outcome for your negotiations.
Shippers often push for shorter Gain Share terms to keep their costs down, and maximize their savings in later years of a contract. However, it is important to consider the downside to this. A top notch Parcel/Freight consultant will check carrier rates for accuracy as part of their weekly Gain Share reporting process. So, shippers basically receive a comprehensive free rate audit as part of a Gain Share scenario. So, once the term of the Gain Share agreement is over, so is the auditing process.
We can tell you from firsthand experience that carrier rates need to be checked in every year of an agreement. We have seen customers experience significant overcharges following annual rate changes, since there are a lot of manual processes that carriers use to update shipper’s rates, discounts and incentives. The impact of money lost due to billing errors can easily eclipse charges associated with paying a Gain Share for multiple years.
Right Man (Person), for the Job
There is no debate that a company should try to hire top notch Transportation professionals for their Logistics functions. We can tell you how important this is, because we work with a lot of them!
There is a common misconception in the Logistics world, that a company only needs to use a consultant if the folks that they have on staff are lacking in knowledge or experience. Some Transportation professionals feel threatened by consultants because they are afraid that they might make them look bad! Some Transportation Professionals feel that leadership might question their abilities if they push for a consulting engagement. There is nothing further from the truth than this.
Parcel/Freight consultants provide tremendous value to a company’s Logistics function in a variety of ways. First, good consultants have a much broader view of carrier rates compared to an individual Transportation or Logistics Manager. If a carrier offers a proposal to a Transportation/Logistics Manager, that individual only has the ability to compare the offer to their existing agreement. Maybe there are savings, but how do they know if these are the best rates they can achieve? They have nothing else to compare them to! A good consultant will have the data, experience, and insight that no individual within a company’s logistics operations could possess.
Another way that consultants support top notch Transportation Professionals is by providing a second set of eyes. Anyone in the Parcel/Freight world knows that carrier agreements and proposals are complex. It is very easy to miss a single discount level, minimum, or contract term, that could have major impacts on shipping costs. So, having a good consultant review carrier agreements and proposals is basically a form of insurance against making costly mistakes! Once again, this could pay dividends far beyond the costs associated with engaging with a consultant.
Artificial (Market) Intelligence
Just so you know, we did not use AI to write this article! Also to let you know, our Market Place intelligence is real! If a consultant tells you that you are over paying your carriers before analyzing your data, you better start running. If a consultant is willing to quote you a Gain Share percentage before analyzing your data, forget running, get in your car and get the hell out of there as fast as you can! Both of these are signs that there will be little effort, insight, or resources put into helping you negotiate the best deals.
A good consultant will not use scare tactics or misrepresentations to help increase their business. The better consultant will provide potential customers with a free Comprehensive Logistics Analysis to determine if there are any real savings opportunities. The best consultant will use a free upfront analysis, provide marketplace data they possess, along with their experience and unique insight to help you drive maximum savings. They will utilize a multi-faceted approach (not just Contract Optimization) to help you improve your bottom line.
So, if you would like to explore the benefits of working with a best in class Parcel/Freight consultant give us a call today. We are sure that you will get fired up when you hear some of the creative ways we have helped shippers achieve unbelievable ROI’s through their engagement with us.
Exploring the Impact of UPS and FedEx Financial Challenges and Unveiling New Avenues for Shippers
Back in October, we released a blog which described why conditions in the Parcel market made it attractive for shippers to renegotiate their Parcel agreements. At that time, both UPS and FedEx were pushing to increase volumes in their networks in advance of peak season. Based on our long term experience and unique insight, we felt that this battle for packages would drive deeper incentives for shippers, and from what we can tell, it did.
Some shippers have informed us that during the fourth Quarter of 2023, they received offers from the carriers that included discounts and incentives that were significantly higher than offers they had received in the recent past. Some of these offers resulted in shippers moving volume away from their incumbent carrier. So, it did appear that the time was ripe to try to reduce costs.
But in a few short months it appears that things could be changing. Earnings announcements by FedEx and UPS were quite negative, and have led to stock price declines for both. Last month FedEx announced earnings and revenue results that fell short of expectations. Last week, UPS also announced bad results. They outlined plans to reduce 12,000 jobs to help offset their declining revenues.
So what does this mean for the Parcel Industry? Could the window of opportunity to reduce Parcel shipping costs be closing so quickly? What should shippers do to keep the window open? We will answer all of these questions for you today.
Impact of UPS and FedEx Challenges
Our opinion is that the bad financial results reported by the major carriers will result in a pullback in discounting by the major carriers. Prior to peak, the big carriers needed to “buy volume” to help fill their networks. This resulted in more aggressive pricing and discounting. Both carriers were willing to reward shippers for onboarding volume quickly before peak, even offering signing bonuses to some to encourage fast conversion.
For the coming months, we anticipate that there will be a more conservative approach to pricing by the big guys. Both carriers are in cut back modes, so they will be attempting to improve profit margins through cost reduction including the announced layoffs, moth balling planes and other equipment, along with adjustments to operational plans. We feel that this could be coupled with less of an appetite to offer aggressive discounts/ rates along with less flexibility with customer agreements.
What options do shippers have?
In the past, when the big carriers pulled back on discounting, there were not many options for shippers. The ability to reduce costs was often limited. Shippers that attempted to renegotiate their agreements when carriers were in “margin protection” mode, were not likely to experience major pricing improvements. Incumbent carriers might have offered to lock in rates, or extend rate caps for future years. Shippers were sometimes offered increased or new discounts on services/accessorials that they did not use that often.
Well the good news is that there have been major changes in the Parcel market landscape in recent years. We have seen many new players enter the Parcel arena within the last five years. We have seen Regional Carriers expand and merge creating viable competitors for the two Parcel giants.
Many new First Mile, Middle Mile, and Final Mile delivery companies have emerged. Many of these companies have developed solid on-time performance, improved time in transit and continue to expand their serviceable zip codes at a rapid pace. We also feel that strategic mergers in this space could create even more full scale competitors for the big guys.
Next Steps
So, now that you understand the lay of the land as well as potential options, the million-dollar question is what do you do? Here are some of the questions that you might be asking yourself;
Should I attempt to engage with one of the now well established Regionals and or one of the other newer startups in the market?
If yes which ones?
How do I know which start-ups have the best capabilities?
How will I know how to split up my volume between the large integrated carriers, Regionals, and smaller First/ Middle/ Final Mile carriers to drive maximum savings?
What impact will this have on service to my customers?
Will my existing shipping/ label creation processes be able to support these new carriers?
Will I need to continue to use UPS or FedEx for a portion of my volume?
If yes, how much and where?
Do I really need to consider the use of other carriers, or would it be possible to reduce my cost and stay with my incumbent carrier?
For some shippers the challenge and complexity of answering these questions will discourage them from making any changes. Many shippers are faced with the reality that they do not have the time to do the research, or resources to perform the analysis associated with trying to reduce costs, or make carrier changes. Let’s face it making carrier changes can be a risky proposition. Making the wrong decisions could cost a company a lot of money, or cost someone their job!
The unfortunate result of this is that many shippers and individuals will chose to accept the status quo. They may just try to figure out a way to absorb the never ending carrier rate increases. This might involve raising prices of their products, or increasing shipping costs for customers. Some might even choose to take a hit on their profit margins! But do any of these approaches really make sense? All of these could result in lost customers, lost revenues, and even worse… LOST PROFITS!
The bottom line is that accepting the status quo should be the last thing that you are doing. There is no need to feel overwhelmed by the challenges associated with assessing your Parcel carrier options. There are companies that have the resources and capabilities that can simplify the process of driving cost control and cost reduction. A lot of the heavy lifting associated with answering the questions above has already been completed.
Ready to seize the opportunities and overcome challenges in the dynamic Parcel Market? Connect with us today to explore tailored strategies for optimizing your shipping costs, navigating carrier options, and ensuring your company emerges as a hero, not just in the face of change, but as a pioneer of increased profits. Let’s embark on this journey together—because the status quo is the last thing your business deserves. Contact us now to revolutionize your Parcel strategy!
Now that Thanksgiving has come and gone, we are into the prime shipping season, or Peak Season as everyone in the shipping world calls it. If you are not sure of that, take a quick look at the rates that you are being charged by your carriers. Even if you are not a large volume shipper, it is very likely that you will see some type of Peak Surcharges on your carrier bills now. Believe it or not, some of these have been in place since last year!
It is important to note that you do not need to be a large volume/ E-Commerce shipper to get hit with these unplanned/ unexpected charges. There are plenty of Peak Surcharges to go around for everybody!
For example, UPS has been charging “Demand Surcharges” on shipments coming to the US from Asia since August of 2022. They have been billing a Demand Surcharge for these shipments, that varies from $.65 to $1.54 per lb., depending on origin and service. There are also Demand Surcharges on other International shipments that have been in place since January of 2022!
FedEx has also had Demand Surcharges in place for International Shipments well in advance of Peak Season. Like UPS, these surcharges vary based on Origin, Destination, and Service. Some of the International Demand Surcharges that FedEx lists are as much as $1.90 per lb.
So, if you are thinking that your safe since you don’t do much International Shipping, think again. There are Peak/ Demand Surcharges that are in place for some accessorials including: Additional Handling, Oversize/ Large Package Surcharges, and Over Limit/ Unauthorized Packages. Shippers should pay very close attention to these package size based charges for a couple of reasons.
First, some of these charges are extreme. For example, the Demand Surcharge for Large Packages will increase the cost of this accessorial charge by over $70 for both carriers (an increase of over 50% in some cases).
Next, Carriers weigh and measure in motions systems are not perfect. We have seen many examples of shippers being charged for Additional Handling, or Large Package surcharges on packages that don’t have the dimensions to qualify for these surcharges. The bottom line is that this is not a fine science. It’s bad enough to be improperly billed for these charges. But, having a Peak Demand Surcharge on top of this is like rubbing salt in the wound!
If you are a larger volume shipper (defined as a shipper that has sent out more than 20K packages in a week), you may have been paying Peak Surcharges on Residential shipments throughout the year. UPS literature indicates that certain larger shippers could be billed $.40 to $.60 more per package throughout the year. With both UPS and FedEx, these charges ramp up as you get into October and November.
At this point, you might be thinking “Why is this all so relevant?”. Well here’s why- Don’t you find it interesting that carriers are still charging Peak/ Demand surcharges when volume has been lower, and there seems to be more capacity in the market place?
We have all heard about the softness in the economy for the past 6 months, and the impact that this has had on Carrier volume. UPS has acknowledged a loss of volume due to their negotiations with the Teamsters during the summer. From what we can tell, Both UPS and FedEx are fighting for volume. So why are they both still charging Peak/ Demand Surcharges? The answer is simple- BECAUSE THEY CAN AND WILL IF YOU LET THEM!
Hopefully by now you are thinking- Well what can I, and should I be doing about this? You might be thinking that you could have some leverage with carriers to try to improve your rates and discounts. You may be right here. You also may be thinking about picking up the phone to call your carrier rep to kick off negotiations or request an improved agreement. But before you do that, you need to think about the complexity and reality of negotiating Small Parcel agreements.
We often see carrier offers that on the surface, provide the appearance that they will save the shipper money. We have even had carrier reps tell shippers that their new offers will save them X amount of dollars per year. However, when we performed our proprietary analysis, we have seen some interesting results. We have seen many scenarios where there are no savings at all, or even dis-savings! The bottom line is that the carrier pricing folks are experts at the “smoke and mirrors” game.
Even if you do have the ability to analyze a carrier proposal, and were able to confirm savings opportunities, how would you know that this is the best that you could expect from carriers? Do you really want to Bench Mark offers against your own rates? This does not seem to make a lot of sense.
What makes sense is to partner with a company that has had long term experience and success with helping shippers analyze carrier proposals, and that can drive optimum cost savings. After all, the savings that we drive can have a big impact on your profit margins and bottom lines.
Additionally, we do not limit our cost saving initiatives to improved Carrier contracts. Our solutions are often multi-faceted to ensure maximum value for our clients. We always look at the big picture, and seek to provide solutions that create customers for life. How else do you think we have remained in business for close to 50 Years!
Pleasereach out to us today to find out if your company qualifies for our free Comprehensive Logistics Assessment. We are anxious to help you put an end to the perpetual Peak Season that has been going on for the last couple of years!
Cultivating a Value-Centric Parcel Carrier Relationship
Navigating the intricate dance of a shipper/parcel carrier relationship requires more than a keen eye on the bottom line; it demands a shift in dialogue from the immediate allure of price to the enduring promise of value.
This philosophy is not just about deflecting attention but about guiding clients to a vantage point where long-term benefits outshine short-term savings. Its here that the client-focused consultants can truly excel, helping decision-makers to see beyond the price tag and embrace the holistic value of their investments.
Understanding the Price-Value Dichotomy
The fixation on price is a natural inclination for clients seeking to maximize their immediate gains from parcel carriers. However, this narrow focus can eclipse the broader picture of total cost and long-term value. The art of consulting is not just about presenting a product or service; it’s about leading a client through a paradigm shift—from price-conscious to value-aware.
How to Shift from Price-Conscious to Value Aware
1. From Price to Total Cost:
A good logistics consultant helps a client to see beyond the tip of the iceberg. The dialogue should illuminate how your carrier’s offering reduces not just the monetary cost but also the cost of time, potential waste, and inefficiency. By articulating the broader cost implications, a good consultant can reframe the conversation to focus on the comprehensive value your provider’s solution provides.
2. From Savings to Differentiation:
The allure of savings is potent, but it’s the differentiation that sustains a business relationship. When price is the only factor, it’s crucial to help clients pivot the conversation to what sets a carrier’s offering apart. This shift is about showcasing the unique benefits and superior outcomes that justify the price difference. It’s not just about what the service is, but what the service does differently—and better.
3. From Narrow to Broad Needs:
Simplistic needs invite simplistic solutions. By broadening the conversation to encompass the full spectrum of the client’s complex needs, you create more value for your client. A parcel carrier should be a partner, not just a provider.
Empathy as the Gateway to Value
Each conversational shift begins with two powerful words: “I understand.” This empathetic bridge reassures the client that their concerns are heard and validated. A good logistics consultant will work with you to find a parcel carrier that understands this important dynamic. It’s the starting point for a dialogue that transitions from a transactional interaction to a consultative relationship.
The Focal Point
In the end, what remains focal is what becomes important. By maintaining a steadfast focus on value, our clients can elevate the conversation, transcend the commoditization trap, and make better decisions that are not just good for today but great for tomorrow. Learn how ICC Logistics is different by setting up a free consultation today. Let’s help you get the value you deserve out of your parcel carrier relationships.
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I recently got fired up when I read a post from a Transportation Professional on LinkedIn that detailed how he felt that it was not a great idea for a company to engage with a Parcel/Freight consulting company for assistance with carrier contract negotiation. The message the post attempted to deliver was that it’s not worth bringing in outside experts, due to the fact that the costs associated with doing so will erode a lot of the overall savings potential.
