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!
Please reach 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!
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