Disruption has become the name of the game in today’s world of shipping management. Since Q1 2020, the effects of disruption have precipitated multiple changes to standard rates and surcharges by the major parcel carriers. And now, FedEx has taken the initiative once again by updating and increasing several key surcharges in response to the continued demands of e-commerce and omnichannel supply chains. Shippers need to understand what these surcharges mean, how they’ll impact total transportation spend, and why they underscore the need for a technology provider that can track the data and cost throughout the full shipment lifecycle.
FedEx Increases Surcharges Due to the Pandemic
FedEx surcharges have been in a state of flux since March 2020. On January 15, 2021, FedEx announced an additional Peak Oversize Charge, Peak Additional Handling Surcharge, Peak Surcharge and Peak Residential Delivery Charge. These charges impact multiple services as follows:
- Peak Oversize Charge – A $30 per package charge across US Express Package Services, US Ground Services, and International Ground Service.
- Peak Additional Handling Surcharge – A $3.00 per package charge across US Express Package Services, US Ground Services, and International Ground Service.
- Peak Surcharge – A $0.75 per package surcharge for FedEx Ground® Economy Package Services
- Peak Residential Surcharge – A $0.30 per package surcharge for FedEx Express and FedEx Ground US domestic residential packages.
These surcharges are designed to account for the increased demand on parcels created by the pandemic through e-commerce growth. Due to the continued stress and tight capacity, FedEx has implemented these changes.
- Peak Additional Handling Surcharge – A $3.50 per package charge across US Express Package Services, US Ground Services, and International Ground Service.
- Peak Surcharge – A $1.00 per package surcharge for FedEx Ground® Economy Package Services.
- Peak Residential Surcharge – For customers who ship more than 30,000 weekly average packages (total for FedEx Express* and FedEx Ground U.S. domestic residential packages and FedEx Ground® Economy packages) from Jan. 4, 2021–Jan. 31, 2021 (the “Shipping History Period”), a $0.60 per package surcharge for FedEx Express and FedEx Ground US domestic residential packages.
With that in mind, it can be difficult to isolate how they’ll impact freight spend. But let’s take a closer look.
Drilling Into the Surcharge Increase Impact on Total Shipping Costs
The added costs might not seem like much. Over time these costs will stack up and rapidly increase, especially for Peak Residential Delivery the Peak Residential Delivery Charge doubled. That means that every package marked for residential delivery, excluding FedEx Ground Economy and FedEx One Rate® packages, will see their costs tick upward. As such, surcharges for shippers that move a high volume of parcels to residential delivery will see total surcharge costs double. And like all charges, that amounts to lower profitability and increased business risk.
What Can Shippers Do About the Surcharges
The simple reality is that FedEx did not set an expiry date for the charges. If history is any indicator of change, UPS and USPS are likely to follow suit with changes to their surcharges soon. Now, UPS did increase surcharges to international shipments originating from Asia in mid-May 2021 as well. However, UPS did not implement additional surcharges to any other shipments.
Regardless, both carriers’ actions signal an increased strain on resources and a clear tightening of capacity. Meanwhile, both only described the surcharges as applicable “until further notice.” That indicates FedEx expects the surcharges to carry through the fall and perhaps into 2022. Therefore, it is in the best interest of shippers to take action to protect their costs and hold carriers accountable. While the surcharges add to expenses, FedEx further had reinstated its money-back guarantee earlier this spring for Priority services as well. That’s where the opportunity to recapture costs lies. At the same time, it’s best to follow a few best practices to let data and technology keep costs in check. These include:
- Centralizing data tracking and monitoring efforts within a single analytics platform.
- Using automation to comb through the data to find service failures and bring them to your attention.
- Proactively plan by tracking and estimating the total shipping spend by carrier and service level, to see the true impact surcharges have on profitability.
- Integrating the data from carrier networks to your IT provider systems, to know when to adjust product cost to avoid passing surcharges along to consumers.
- Working with an expert to understand and apply shipping analytics data throughout your organization.
Increase Your Level of Accountability and Scrutiny as Surcharges Continue by Choosing the Right Shipping Analytics Software
Despite the continued efforts of the Covid vaccine rollout and a general sense that normalcy is on the horizon, shippers need to stay vigilant with regard to their costs. That includes knowing what surcharges are implemented, when and why. In addition, retail shippers need a real advantage, a way to see the costs applied over the span of their full transportation networks. Intelligent Audit can provide that capability. Connect with Intelligent Audit to get started today.