In a recent customer update, mega-carrier UPS set off into the new year on what some customers might consider the wrong foot. Rather than removing peak season surcharges following the holidays, UPS has announced that demand surcharges will remain in the foreseeable future. The new UPS surcharges, which come at a lower cost than those instituted before peak season on Oct. 30, took effect on Jan. 15 and will remain indefinitely.
While UPS blames the surcharges on an unpredictable economy, critics weary of rate increases accuse the company of taking advantage of customers with few alternatives for parcel shipping.
Regardless of what shippers think of UPS’ new post-peak surcharges, it’s clear that they’re here to stay.
For customers utilizing UPS’ Air Residential, Ground Residential, and SurePost economy service, demand surcharges will apply to packages that exceed 105% of baseline volume. For the new surcharges, UPS establishes baseline volume as a shipper's weekly volume for June 2022 (June 5 to July 2). For all shipments exceeding this baseline, shippers will be charged the highest possible surcharge. However, these surcharges will only be applicable to shippers billed for more than 20,000 packages in any week since October, 2021.
Beyond surcharges targeting key services, the new UPS surcharges are focused on high-labor shipments, such as those requiring additional handling or those designated as ‘large packages’ under UPS specifications.
For shippers, the price associated with the new UPS surcharges depends upon the type of shipment, the shipment size, and whether the shipment requires additional labor on the part of delivery professionals.
UPS SurePost and Ground Residential will see surcharges of $0.40 for shippers with 105% to 125% of baseline volume, $0.50 for shippers with 125% to 150% of baseline volume, and $0.60 for shippers seeing 150% of baseline volume.
For shipments deemed to require additional handling, UPS will include a surcharge of $3.50. For shipments that meet or exceed UPS’ large package definition of a combined length and girth of 130 inches or more, or a length of 96 inches, UPS will include a surcharge of $40.00 per package.
UPS’ decision to leave surcharges, albeit lower surcharges, in place following peak season comes on the heels of a year of rate increases from major carriers. In September 2022, UPS’ largest competitor, FedEx, announced a general rate increase of 6.9%. Shortly after, UPS announced its own rate increase of 6.9%, leaving shippers stuck in the middle of a fight between two multibillion-dollar carriers.
“Our surcharges help protect our network and ensure UPS receives appropriate compensation for additional costs to maintain our high-quality service against the backdrop of dynamic market conditions,” UPS said in a statement emailed to Supply Chain Dive.
However, industry experts rebuke these claims, citing plummeting volumes and fuel prices as evidence that UPS is simply looking to bolster its revenue in the new year.
“With actual demand down year-over-year and diesel costs predicted to drop, the post-peak residential ‘demand surcharge’ is UPS finding an additional way to drive profits without delivering more value,” Josh Taylor, Senior Director of Professional Sales at parcel software provider Shipware, told Supply Chain Dive.
If previous rate hikes and surcharges are indications, shippers should expect surcharges or rate increases from FedEx soon. While both companies blame surcharges and rate increases on challenging inflationary landscapes, frustrated shippers with operations dependent on parcel shipping services from mega-carriers are left with few options but to accept the surcharges as they are.
That said, shippers can employ a few cost-saving strategies to compensate for higher costs from mega-carriers:
Although shippers might feel helpless in the face of the new UPS surcharges, turning toward innovative, cloud-based logistics software solutions can provide previously unnoticed opportunities to improve supply chain efficiency and bolster the bottom line.
As emboldened carriers continue to raise prices on inflation-weary shippers, it’s more important than ever for shippers to develop an accurate understanding of how to use their transportation budget. With a suite of innovative finance and accounting tools, Intelligent Audit enables shippers to optimize accounting practices.
Start a conversation with Intelligent Audit today, and learn how to regain control over your transportation spend.
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Both FedEx and UPS 2021 GRIs are still subject to change and reflect another significant jump in pricing for shippers. Learn more today.