The holiday season is just around the corner, and if you plan to ship any packages, watch out, it will cost you. FedEx, UPS, USPS, and many other last-mile carriers and providers have announced heftier holiday peak season surcharges than higher rates and other surcharges.
Most carriers and providers are implementing holiday peak season surcharges beginning in October and running through mid-January. However, FedEx announced early peak surcharges for Additional Handling, $3.45 per package, and Oversize, $39.50 per package, beginning Sept 5 and then increasing both once more beginning Oct 3 to $6.55 per package for Additional Handling and $68.75 per package for Oversize packages.
FedEx's October increase coincides with UPS' implementation of peak season surcharges. UPS' Additional Handling peak surcharge will be $6.50 per package, Large Package peak surcharge of $70.00 per package, and $400.00 per package for Over Maximum effective Oct 2.
Regional parcel last-mile carrier, OnTrac/Lasership, is also implementing Additional Handling and Large Package peak season surcharges beginning on Oct 2. Both fees are similar to what FedEx and UPS are charging - $6.50 per package for additional handling and $70.00 per package for large packages.
The common theme across the announcements continues to be higher peak season surcharges on services that require extra handling and slows down delivery times.
Small parcel carriers' facilities are not typically set up to handle large packages. Plus, larger and bulkier packages take up more space in delivery vehicles, thus, resulting in less-than-optimized delivery routes. Sometimes, however, depending on the size of the large/bulky item, larger vehicles may be required for the last-mile delivery, which will likely mean higher costs that are ultimately passed on to the shipper in the form of both surcharges and higher rates.
Residential deliveries are more time-consuming and less profitable for carriers and providers than business-to-business (B2B) deliveries.
The rise of e-commerce and the COVID pandemic has caused a dramatic shift in residential deliveries for carriers and providers.
Residential surcharges have increased several times to compensate for the shift, including the holiday peak season.
For the 2022 holiday season, as in recent years, holiday peak residential surcharges are based on shippers' volumes.
For example, OnTrac/Lasership noted that it will apply a peak season surcharge beginning Oct 30 on all residential packages shipped during any weekly invoice period, which exceeds 105% of the shipper's weekly average minimum package volume in June 2022. Depending on volumes, the surcharge will range from $1.25 to $6.00 per package and stay in effect until Jan 14, 2023.
Meanwhile, UPS will apply a peak surcharge to UPS Air Residential, UPS Ground Residential, and UPS SurePost packages beginning Oct 30 for shippers billed for more than 20,000 packages during any week following October 2021. The surcharge will apply every week to each package over 105% of the baseline weekly average volume for each service level. Depending on volumes, the surcharge will range from $1.25 to $7.00 per package and stay in effect until Jan 14, 2023.
FedEx's peak holiday residential surcharge is similar to UPS' peak holiday residential surcharge. Still, it will be adjusted dynamically, which means FedEx will adjust the surcharge in real-time utilizing artificial intelligence and other technologies. However, according to FedEx's peak season surcharge announcement, "a two-week lag will apply between the shipping activity calculation and the surcharge application." This will be the first holiday season that FedEx will apply dynamic adjustments, so pay extra attention to your invoices to ensure accuracy.
The USPS is also implementing holiday peak surcharges for the third year in a row. Priority Mail Express (PME), Priority Mail (PM), First-Class Package Service (FCPS), Parcel Select, and USPS Retail Ground will be impacted from Oct 2 until Jan 22, 2023. Rates will vary based on zone and service and will run from a low of $0.25 per package to as high as $5.85 per package.
In addition, there will be surcharges on Parcel Select Destination Delivery Unit (DDU), Parcel Select DSCF, and Parcel Select DNDC, increasing by $0.25, $0.75, and $0.75, respectively. These surcharges are based on where a shipper, provider, or carrier injects Parcel Select packages into the USPS network. The USPS defines Parcel Select as a "ground delivery service for packages entered in bulk, including those entered at destination facilities. It is designed for and generally used by large- and medium-sized parcel shippers".
Among the providers that primarily use USPS as a last-mile delivery carrier are Pitney Bowes and DHL e-Commerce. While Pitney Bowes has yet to announce holiday peak surcharges for this year, DHL e-Commerce plans to pass on USPS peak holiday surcharges to its customers. In addition, it will charge a peak holiday surcharge for its SmartMail domestic products, international services, and returns services.
A return to 'normalcy' is expected this holiday season as more consumers return to stores. However, inflation will likely remain high through the end of the year. How much more shopping consumers will do will be a big question.
For retailers, concerns about higher inventory levels will result in more promotions to unload inventories and thus, reducing retailers' anticipated profits…if consumers spend.
The consulting firm KPMG estimates holiday retail growth of 4.2%, down from a 14.1% increase in 2021 reported by the National Retail Federation, while Bain forecasts 7.5% nominal growth in US holiday retail sales.
Meanwhile, Deloitte forecasts that holiday retail sales will likely increase between 4% and 6% compared to 15.1% in 2021. "The lower projected growth for the 2022 holiday season reflects the slowdown in the economy this year. Retail sales are likely to be further affected by declining demand for durable consumer goods, which had been the centerpiece of pandemic spending. However, we anticipate more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane," said Daniel Bachman, Deloitte's U.S. economic forecaster. He added, "inflation will also help to raise dollar sales, although retailers will see less growth in sales volume."
Stay on top of all the latest surcharges and general rate increases to make the best shipping decisions that help with transportation spend management by partnering with Intelligent Audit. By leveraging freight audit reports from the same data pool, departments with different priorities can begin to speak the same language, improving communication throughout the organization and aligning each department with the same strategic goals this holiday season. Contact Intelligent Audit to learn how we get shippers the best data to make the smartest shipping decisions.
Set up a call with one of our experts to discuss how Intelligent Audit can help your business uncover opportunities for cost reduction and supply chain improvements through automated freight audit and recovery, business intelligence and analytics, contract optimization, and more.
%%excerpt%%We recently posted about the on-going (and at times contentious) negotiations that were taking place between the Teamsters Union and UPS.