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As UPS struggles to improve revenue in a volume-starved parcel environment, the carrier is implementing steep surcharges in ZIP codes previously spared the added expense of delivery area surcharges (DAS). For one shipper, new surcharges in three key NYC ZIP codes could add more than $125,996 to transportation costs in 2024. Across the carrier’s operational base, UPS is being forced to make difficult decisions. Between layoffs and the ongoing split with e-commerce giant Amazon, 2024 is proving to be a difficult year for the nation’s second-largest parcel carrier.
In this week’s newsletter, we’re looking at UPS’s tough year, new executive orders from the Biden Administration, and a troubling report from the USPS. In an always-moving industry, here’s what you need to know.
As UPS introduces new delivery area surcharges (DAS) in several Manhattan ZIP codes to navigate a low-volume parcel environment, shippers are seeing the impact on their bottom line. Traditionally applied to rural or remote areas to offset delivery challenges, the expansion of DAS to urban areas like Manhattan has sparked criticism. Shippers argue this strategy is more about boosting carrier revenue than covering logistical costs.
An educational publisher experienced notable increases in shipping costs in key Manhattan ZIP codes due to these surcharges, with a nationwide anticipated rise in transportation spend of $125,996 based on 2023 volumes.
FedEx is warning shippers that new regulations from Washington and California could significantly impact their costs. If the Biden Administration approves the measures, which allow for longer rest and meal times for truck drivers, FedEx predicts a deleterious impact on both productivity and safety.
“State rules on meal periods and rest breaks require FedEx and other transportation companies to revise routes, as well as compensation plans and policies, at a great operational cost,” FedEx Corporate Vice President Clement Klank wrote in a comment filed with the FMCSA. “The addition of this break time, some of which is paid time, increases labor costs to the tune of multiple millions of dollars each year.”
In addition to previously announced layoffs and shift cuts at sortation centers nationwide, UPS has announced plans to lay off workers at key facilities in California, Ohio, and Pennsylvania. The locations that will see layoffs include a regional air hub in Ontario, California, a sortation facility in Stanton, Pennsylvania, and a trailer shop in Perrysburg, Ohio.
“This action is expected to be permanent due to the lack of available work at this location moving forward,” UPS spokesperson Jim Mayer wrote in a letter obtained by FreightWaves. The layoffs come as UPS continues to recalibrate its workforce to a stubbornly low-volume parcel environment.
At the inaugural meeting of the White House Council on Supply Chain Resilience, President Biden unveiled a series of actions to bolster supply chain resilience. Among them will be steps toward a collaborative data-sharing network for the U.S. transportation industry, significant investments in supply chain infrastructure revitalization, and improved supply chain connections to global allies.
“These actions will help Americans get the products they need when they need them, enable reliable deliveries for businesses, strengthen our agriculture and food systems, and support good-paying, union jobs here at home,” the White House wrote in a fact sheet.
UPS revenue derived from Amazon shipments fell by more than 5% in 2023. The drop, which saw UPS revenue derived from Amazon fall by $10.7B, comes as the carrier attempts to part ways with Amazon, which has long been UPS’s top customer. Under an agreement between the two companies, Amazon will attempt to further bolster its internal delivery operations.
“We doubled the size of our fulfillment center network in 18 months and built out a last mile transportation network the size of UPS in 18 months,” Amazon President and CEO Andy Jassy said during a Feb. 1 earnings call. “It was disruptive to get that optimized. But one of the things that was very useful was, it really caused us to relook at everything we were doing with the fulfillment network.”
FedEx has opened a new office in Singapore to bolster efficiency in operations in the Asia-Pacific, Middle East, and Africa (AMEA) regions. The new office adds to the carrier’s already robust presence in Singapore, where it has sortation facilities, data-analytics hubs, and security centers. Currently, FedEx employs roughly 35,000 workers throughout the AMEA region.
“Singapore’s geographic advantages make it a natural gateway, which allows us to tap the immense opportunities presented by the fast-moving markets of the region, especially in Southeast Asia,” said FedEx AMEA President Kawal Preet, in a quote obtained by The Straits Times.
A recent audit released by the USPS Office of Inspector General (OIG) points to failures in the Postal Service’s oversight of its extensive network of contracted brokers, drivers, and trucking companies. The report, released on March 1, found 373 accidents resulting in 89 fatalities related to 43 on-duty contractors for the Postal Service.
“These 43 contractors were associated with Postal Service contracts totaling about $1.34 billion between October 2018 and December 2022,” wrote the Office of the Inspector General. “We determined that the Postal Service had not terminated any contracts with trucking companies involved in accidents or fatalities prior to March 2023.”
As struggling carriers implement additional surcharges, it’s more vital than ever to maintain control over volatile shipping costs. With over 25 years of experience at the forefront of supply chain innovation, Intelligent Audit provides shippers with an invaluable suite of resources to gain unparalleled insight into transportation spend:
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