The logistics industry quivers in anticipation of the most prominent peak season in history. All signs point to unprecedented demand. And as reported by Mark Solomon of FreightWaves, demand will surge up to 50% than the 2019 holiday shopping season. However, both FedEx and UPS are still subject to the rising demands of e-commerce. And that is going to have a profound effect on supply chain finance and accounting practices. With such uncertainty in the market, companies need to know what’s happening and what to expect from the peak season surcharge standards for FedEx and UPS.
FedEx and UPS Are Focused on the Expected Demand
The demands of the upcoming peak season surcharge breakdown reveal companies have continued to push their luck. This fall, both FedEx and UPS announced peak season surcharges ranging from 200 to 400% higher than those assessed during peak season 2019. Unfortunately, many companies, i.e., shippers and brokers, are rapidly running out of time to protect against these surcharges. As further explained by Solomon:
“FedEx and UPS continue to be responsive to pricing requests from smaller shippers, customers coveted by both carriers because they are stickier than big shippers and typically lack the vast volumes to demand deep discounts.
As evidence of mounting negotiating pressure as Atlanta-based UPS gets closer to peak, several contract proposals that have been ‘lingering on the table a little too long’ have since swung from huge savings to considerable increases in just a few short weeks.”
What Will Each Company Assess as a Peak Season Surcharge
That is a loaded question. The exact peak season surcharge depends on the type of freight, date of shipping, and demand, as shown in the below graphic from FedEx:
| Surchage Name | Applicable Services | Surcharge Amount | Effective Date |
|---|---|---|---|
| Peak – Oversize Charge | U.S. Express Package Services, U.S Ground Services, International Ground Services | $52.50/package | Oct 5,2020 – Jan 17, 2021 |
| Peak – Ground Unauthorized Package Charge | U.S. Ground Services, International Ground Service | $350.00/package | Oct 5,2020 – Jan 17, 2021 |
| Peak – Additional Handling Surcharge | U.S. Express Package Services, U.S Ground Services, International Ground Services | $4.90/package | Oct 5,2020 – Jan 17, 2021 |
| Peak Surcharge | FedEx Smart Post® Package Services | $1.00/Package; $2.00/package; $1.00/package |
Nov 2, 2020 – Nov 29. 2020; Nov 30, 2020 – Dec 6, 2020; Dec 7, 2020 – Jan 17, 2021 |
| Peak – Residential Delivery Charge | U.S. Express Package Services, U.S Ground Services | See Peaking Factor Chart Below | Nov 2, 2020 – Jan 17, 2021 |
It’s also worth noting that the residential delivery charge through peak season is based on the February 2020 shipping volume in what’s known as a Peaking Factor Chart. That is to account for the increased demand for logistics during the pandemic. The breakdown for that chart is as follows:
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 Package | $1.00 | $2.00 | $3.00 | $4.00 |
| Charge Per U.S. Domestic FedEx Express® Residential Package | $2.00 | $3.00 | $4.00 | $5.00 |
The UPS peak season surcharge breaks down similarly. For instance, UPS already implemented the following peak surcharges based on COVID-19:
Peak Period (Inclusive of starting and ending dates) and Applicable Peak Surcharge ($/Package)
| Service Levels | May 31, 2020 – November 14, 2020 |
|---|---|
| UPS® Ground Residential | $.30/package |
| UPS® SurePost | $.30/package |
Like FedEx, the UPS peak season surcharge breakdown is based on the pre-COVID volume in February 2020:
Peak Period (Inclusive of starting and ending dates) and Applicable Peak Surcharge ($/Package)
| Service Levels | May 31, 2020 – November 14, 2020 | ||
|---|---|---|---|
| 110% to 200% of February Volume | >200% to 300% of February Volume | >300% of February Volume | |
| UPS® SurePost | $1/package | $2/package | $3/package |
| UPS® Ground Residential | $1/package | $2/package | $3/package |
| UPS Next Day Air® Residential | $2/package | $3/package | $4/package |
| All Other UPS® Air Residential | $2/package | $3/package | $4/package |
Additionally, UPS has implemented other peak season charges too:
| Other Charges | Peak Period: October 4, 2020 to January 16, 2021 |
|---|---|
| Additional Handling | $5/Package |
| Large Package | $50/Package |
| Over Maximum Limits | $250/Package |
What Do Supply Chain & Freight Analytics Have to Do With 2020 Peak Season Surcharges
As the world moves forward into peak season, the industry is already swaying due to the demands of COVID. And most notably, FedEx and UPS are expected to launch added GRIs that will continue the stark increases after peak season ends. The mix of rates and added charges can push total freight spend significantly higher—undercutting the industry. Furthermore, the flurry of activity—pardon the pun—will make tracking freight spend more cumbersome. And using analytics that applies advanced algorithms in business intelligence and analytics for logistics, artificial intelligence, and machine learning will be crucial to identifying errors and avoiding overpayment.
Know More About Annual and Seasonal Freight Spend With Data-Driven Analytics
The industry is buzzing about the coming peak season surcharge increases. And if demand rises further, these companies will undoubtedly implement additional fees or change the surcharge standards again. Now is the time to make sure your company can control freight spend and get the right service levels. Visit Intelligent Audit online to learn more about how your team can lower costs and identify improvement opportunities.