In a holiday season blow to parcel shippers and merchants, UPS has recently revealed broad changes to its delivery area surcharges. With relatively little in the way of an announcement, UPS has adjusted which zip codes are eligible for a delivery area surcharge, or DAS. The changes, which will take effect on Jan. 1, 2024, will result in as many as 3 million Americans facing additional surcharges on their parcel deliveries. In this article, we’re diving into the thinking behind UPS’ changes to its delivery area surcharges, the consequences for shippers, and how smart shippers can leverage innovative solutions to ensure maximum cost-effectiveness in the face of rising surcharges.
While adjustments to delivery area surcharges are an annual occurrence for most carriers, UPS’ changes to its 2024 delivery area surcharges will impact an outsized number of shippers. While UPS maintains that its surcharges are in line with “appropriate compensation” for services rendered, some experts have pointed out that UPS’ surcharges will result in significant contributions to the carrier’s bottom line.
For eligible air deliveries, shippers will have to pay an additional $5.85 for parcel transportation, while ground residential deliveries will incur a surcharge of $5.70. For packages covered under an extended delivery area surcharge, shippers will need to pay $7.70, with plans on the part of UPS to increase the surcharge by as much as $2.50 in 2024, depending on the mode of transportation.
UPS’ 2024 DAS adjustments will see a significant amount of new zip codes become eligible for surcharges, with many of these zip codes in high-congestion areas where the carrier bears little to no extra cost to provide delivery services. In these high-volume areas, the costs of delivery area surcharges will likely contribute directly to the carrier’s bottom line. In times of overcapacity, surcharges, such as those being implemented by UPS, serve to bolster revenues from multi-year contracts that may otherwise be unprofitable for carriers.
Ultimately, shippers have few options when facing rising surcharges. While shippers can attempt to negotiate with carriers based on volumes, these efforts are likely to result only in lower surcharges, rather than the elimination of the surcharge altogether. Experts point to 25%-50% surcharge reductions as a reasonable goal for negotiations.
With little respite in sight for shippers, many in the parcel transportation industry are turning to technology as a means of navigating rising surcharges. By leveraging innovative solutions, shippers can ensure that their parcel supply chains are running as efficiently as possible.
With surcharges on the rise, shippers are left with few options but to grin and bear it. However, smart shippers are increasingly turning to technology as a means of improving cost-effectiveness throughout parcel operations. Let’s look at three strategies that smart shippers are using to increase efficiency and lower transportation spend.
As surcharges increase, it can be difficult for shippers to make sense of complex invoices. Outdated, paper-based invoicing strategies leave shippers uncertain of invoice accuracy, and unable to quickly spot and resolve invoice discrepancies. While shippers may do their best to ensure accurate invoices, it’s inevitable that, as a business grows, some issues slip through the cracks.
By leveraging a cloud-based carrier payment platform, shippers can ensure that each invoice is treated as top priority. With integrated anomaly detection, cloud-based invoicing platforms ensure that each invoice is anomaly-free. As inevitable anomalies occur, automated invoicing systems quickly identify exceptions and alert shippers. Once a shipper is alerted, they can collaborate directly with carriers through the platform, ensuring streamlined resolution without messy paper trails, voicemails, or email chains.
As businesses grow, transportation is often left as an afterthought to an expanding organizational purview. This, however, can come with significant consequences for shippers. Over-reliance on individual carriers can have significant drawbacks, such as, in the case of UPS, vulnerability to unexpected surcharge increases. As a result of these vulnerabilities, shippers are increasingly looking to diversify their carrier base. This, however, is much easier said than done. With a large number of carriers to choose from, shippers are often left with little to guide them in their quest for a diversified carrier network.
By leveraging advanced historical datasets, logistics network optimization software allows shippers to run real-world simulations, providing actualized insights into potential mode shifts, hub injections, and multimodal opportunities. Through logistics network optimization software, shippers can use peerless, fully standardized data to develop an objective view of existing carrier relationships. Armed with an objective understanding of the unique demands of their transportation network, clients who use logistics network optimization software see reductions in transportation expenditure of 12%-18% on average.
Complex operational data can leave shippers uncertain of how, exactly, to structure operations to build resilience in the face of the fast-moving parcel transportation landscape. Without objective data, shippers are left in the dark, uncertain of where to make operational changes. While almost all shippers understand the importance of operational data, the workload, poor integration, and difficulty of collection often prove to be unscalable barriers to entry.
Cloud-based business intelligence tools stand as an instant solution to persistent data problems. With tools like data visualization, customizable dashboards, and automated reports, shippers can gain objective insight into their existing operations. Using this data, shippers can build effective KPIs, or key performance indicators, that provide an objective operational benchmark. Once shippers understand how effectively a specific facet of their transportation network is performing, they can then make the strategic decisions needed to keep pace with a fast-changing parcel landscape.
As surcharges rise, the need for efficiency in parcel transportation has never been greater. With Intelligent Audit, shippers can leverage innovative solutions against the pains of today’s high-stakes inflationary parcel transportation environment. With over 25 years of experience at the cutting edge of the transportation industry, Intelligent Audit offers shippers an invaluable source of resources to ensure that they make the most of their transportation spend.
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UPS saw a fall of more than 3% YoY in its parcel volume as commercial delivery growth was not enough to make up for the drop in residential parcel orders.
Shippers can save money and find opportunities to ship smarter through freight audit services. A provider can take over the freight auditing process.