In the last week, two additional major carriers – FedEx and USPS – announced increased peak season surcharges. This continues to the trend we have seen throughout the COVID-19 crises, but also indicates that we aren’t going to be seeing a return to any sort of normalcy in the near future.
These announcements follow a similar one made by UPS earlier this month in which the company introduced unprecedented changes that directly impacted the largest shippers.
The UPS announcement caused a significant stir due to the fact that it applied additional charges on top of existing surcharges based on the percentage increase over average volume a shipper exceeded. For larger shippers, the overall costs of this pricing scheme could be unbearable.
| Service Level | 110%-200% of Feb Volume | >200%-300% | >300% |
|---|---|---|---|
| SurePost | $1.00 per package | $2.00 per package | $3.00 per package |
| Ground Residential | $1.00 per package | $2.00 per package | $3.00 per package |
| Next Day Air Residential | $2.00 per package | $3.00 per package | $4.00 per package |
| All Other Air Residential | $2.00 per package | $3.00 per package | $4.00 per package |
In this new slew of announcements, FedEx seems to have taken a similar approach, while USPS has applied increased costs that will impact shippers across the board.
FedEx
On August 18th, FedEx announced a new set of surcharges – the most consequential of which were the “Residential Delivery Charge per Package by Peaking Factor.”
| Peak — Residential Delivery Charge per Package by Peaking Factor | ||||
|---|---|---|---|---|
| Peaking Factor | >110%–200% | >200%–350% | >350%–500% | >500% |
| Charge per U.S. Domestic FedEx Ground® Residential Shipment | $1.00 | $2.00 | $3.00 | $4.00 |
| Charge per U.S. Domestic FedEx Express® Residential Shipment | $2.00 | $3.00 | $4.00 | $5.00 |
Like UPS’s new charges, these fees will be levied as a function of when a shipper exceeded a certain level of volume. As the volume increases over that level, the charges will go up with a fee charged per package.
While a slightly more complicated formulation than UPS, this fee is explained a follows:
Customers at the enterprise level who meet a certain volume threshold (as indicated below) will be charged a Peak — Residential Delivery Charge for packages shipped during Nov. 2, 2020–Jan.17, 2021. The scope of a customer’s volume shall be determined by FedEx in its sole discretion. The Peak — Residential Delivery Charge will be assessed in addition to the customer’s Residential Delivery Charge. Any contracted discount the customer may have on the Residential Delivery Charge will not apply to the Peak — Residential Delivery Charge. For invoicing purposes, this charge will be combined with the customer’s Residential Delivery Charge.
In terms of the thresholds mentioned above:
More than 35,000 Shipments per Week – Oct. 5, 2020–Oct. 18, 2020
The Peak Residential Delivery Charge in the chart above will be applied from Nov. 2, 2020 – Dec. 13, 2020.
“Peaking Factor”: =
Average Weekly Packages Shipped (10/5/2020 – 10/18/2020) /
Average Weekly Packages Shippers (2/3/2020 – 3/1/2020)
X 100.
More than 35,000 Shipments per Week – Nov. 16, 2020–Nov. 29, 2020
The Peak Residential Delivery Charge in the chart above will be applied from Dec. 14, 2020 – Jan. 17, 2021.
“Peaking Factor” =
Average Weekly Packages Shipped (11/16/2020 – 11/29/2020) /
Average Weekly Packages Shippers (2/3/2020 – 3/1/2020)
X 100.
USPS Peak Surcharges
On August 14th, The United States Postal Service announced increased surcharges across commercial domestic channels that will be in place from October 18th through December 27th.
These peak holiday season surcharges will mainly impact shippers who significant volume under commercial contracts with USPS.
USPS states that these changes are directly related to increasing costs being incurred as a result of the COVID-19 crises:
…price adjustments are in response to increased expenses and heightened demand for online shopping package volume due to the coronavirus pandemic and expected holiday eCommerce.
According to estimates, these surcharges would mean a 6% to 8% increase for USPS’ largest customers.
Whereas UPS had announced its charges as a function of percentage volume over the average of Feb 2020, USPS is applying these charges across the board.
| Product | Current | Planned Increase |
|---|---|---|
| Parcel Select Destination Delivery Unit (DDU) |
Starts at $3.19 | 24 cents |
| Parcel Return Service | Starts at $3.05 | 24 cents |
| Parcel Select Lightweight | Starts at $1.81 | 24 cents |
| FCPS Commercial | Starts at $2.74 | 25 cents |
| Priority Mail Commercial | Starts at $7.02 | 40 cents |
| Parcel Select Ground | Starts at $6.92 | 40 cents |
| Parcel Select DSCF | Starts at $4.37 | 40 cents |
| Parcel Select DNDC | Starts at $5.98 | 40 cents |
| Priority Mail Express Commercial | Starts at $22.75 | $1.50 |
These increases are the first for new Post Master General, Louis DeJoy, whose short tenure has already stirred much controversy. USPS has been under fire for quite a while now, but with the upcoming election and controversies surrounding vote-by-mail, they are under even more scrutiny.
These changes will not only impact USPS shipments. Many of the other carriers rely on USPS for their last-mile service, through services like SurePost. As USPS increases their charges, it’s like that these other carriers will pass those charges along to their customers as well.
It’s entirely possible that we will see another surcharge increase from the likes of UPS after USPS’s recent announcement.
How to Mitigate
Dealing with the burdensome additional costs being levied on shippers by national carriers has been an ongoing issue during the COVID-19 crises. Unfortunately, there doesn’t seem to be any end in sight.
Intelligent Audit recently released an eBook that is meant to help shippers overcome these challenges.
eBook: Shedding Light on Transportation Data in the Time of COVID
The world of shipping has been inexorably changed in light of the COVID-19 pandemic. Changes that have been slowly building for over a decade are now being infinitely compounded as more consumers have shifted to eCommerce versus the standard brick and mortar shopping experience. This eBook explores how shippers can gain network efficiencies, enabling shippers to deliver shipments faster to their consumers, at a lower cost with fewer exceptions.
In this eBook, you’ll learn about:
- Powerful Analytics Tools & Algorithms
- Achieving Full Supply Chain Visibility
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- The Intelligent Audit Solution
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