Increased Shipping Surcharges Across the Board Will Have Retailers Scrambling

August 25, 2020


FedEx, UPS and, for the first time, the United States Postal Service (USPS), have reported peak holiday surcharges. FedEx and UPS surcharges will begin earlier and last longer, through mid-January, while the USPS surcharges will be in effect from October 18 until December 27, 2020.

 “Many retailers are already fighting for survival,” John Haber, CEO of Spend Management Experts told the Atlanta Journal-Constitution. “Some of these costs are going to have to be passed down.”

Overall, FedEx and UPS surcharges are fairly similar. FedEx surcharge on Additional Handling, Oversize Package, and Unauthorized Package will be $4.90 per package, $52.50 per package, and $350 per package respectively from October 5 through January 17.  The UPS surcharge on Additional Handling will be $5.00 per package, $50 per package for Large Packages and $250 per package for Over Maximum Limits from October 4 through January 16. These UPS charges will be applied to any customer who ships 1,000 packages, or more than 10 packages in any category, in a week during the peak period; once this threshold is met, the surcharge will apply for the remainder of the peak period regardless of volumes. Still, the biggest changes are in Residential, SmartPost, SurePost and Parcel Select.

Residential Package Deliveries Will Feel the Impact

The majority of volumes have dramatically shifted to Residential this year because of COVID-19 and continue to remain elevated. FedEx and UPS Residential surcharges are based on volumes, however the calculations differ.

From November 15 through January 16, UPS Residential surcharge will range from $1.00 to $4.00 per package and will be based on a percentage of February volume: 110% to 200%, 200% to 300% and greater than 300%. Like the size-based surcharges, these residential surcharges will only apply to UPS customers who ship more than 25,000 packages in a peak period week (combined ground, air, and SurePost volumes), and once the threshold is met the charge will apply for the remainder of the peak period.

The FedEx Residential surcharge will range from $1.00 to $5.00 per package. Based on a two-tiered approach:

  • For customers who ship more than 35,000 weekly average packages (total for FedEx Express and FedEx Ground U.S. domestic residential and commercial combined) from Oct. 5, 2020–Oct. 18, 2020, the Peak Residential Delivery Charge will apply Nov. 2, 2020–Dec. 13, 2020. The amount charged per package will be based on a Peaking Factor, calculated as weekly average packages shipped Oct. 5, 2020–Oct. 18, 2020, divided by weekly average packages shipped Feb. 3, 2020–March 1, 2020, multiplied by 100. Peaking Factor and amount charged are determined separately for FedEx Express and FedEx Ground.
  • For customers who ship more than 35,000 weekly average packages (total for FedEx Express and FedEx Ground U.S. domestic residential and commercial combined) from Nov. 16, 2020–Nov. 29, 2020, the Peak — Residential Delivery Charge will apply Dec. 14, 2020–Jan. 17, 2021. The amount charged per package will be based on a Peaking Factor, calculated as weekly average packages shipped Nov. 16, 2020–Nov. 29, 2020, divided by weekly average packages shipped Feb. 3, 2020–March 1, 2020, multiplied by 100. Peaking Factor and amount charged are determined separately for FedEx Express and FedEx Ground.
FedEx Service Feb Wkly Avg Vol 2 wks Oct Wkly Avg Vol Calculate Peak Factor Peak fee@ 110-200% of Feb Vol*
Ground Residential 27,000 36,000 36K / 27K * 100 = 133 $1.00

* Fee will apply to all Ground Residential packages shipped from Nov 2 through Dec 13, 2020 (New threshold for Dec 14-Jan 17, 2021.

Note: The average weekly volume is over 35,000 pieces the first two weeks of October for total Dom Express & Ground Com & Resid combined

Parcel Select, SmartPost and SurePost Get Surcharges Too

For the first time, USPS has announced proposed surcharges of either 24 or 40 cents per package on all of its Parcel Select products. Depending on the product, the surcharge will be included in existing pricing that starts as low as $1.81 per package up to $6.92 per package. While the proposed increases are pending approval from the Postal Regulatory Commission, it is widely assumed that these surcharges will be applied unchallenged.

Often regarded as the lowest priced service that retailers opt for when providing “free shipping,” the Parcel Select surcharge will impact a number of customers including Amazon, FedEx and UPS.

USPS Service Weight Cost Peak fee % Increase
Parcel Select Lightweight 3 OZ $1.81 $0.24 13.26%
Parcel Select (DDU) 5 lbs $3.58 $0.24 6.70%

 

The FedEx SmartPost surcharge for the holiday period will steadily increase through the season. Beginning November 2 through November 29, the surcharge will be $1.00 per package. November 30 through December 6, the surcharge increases to $2.00 per package. December 7 through Jan. 17, it will increase once more to $1.00 per package which will mean higher shipping costs for holiday returns as well.

FedEx SmartPost Service Weight Zone Cost Peak fee % Increase
Parcel Select Shipment 1 lb 2 $8.23 $2.00 24.30%

*Note the Peak fee varies based on week incurred. Example provided for weeks Nov 30 through Dec 6 on all SmartPost shipments (No thresholds required)

 

UPS’ SurePost, which is also a hybrid service that utilizes USPS as the last-mile delivery service provider, will follow the same calculation and cost as the Residential surcharge.

UPS Service Feb Wkly Avg Vol Nov 21st Wkly Avg Vol Calculate Peak Factor Peak fee@ 110-200% of Feb Vol*
UPS SurePost 18,000 28,000 28K / 18K = 155% $1.00

* Applies to all SurePost packages shipped  from Nov 15 through Jan 16, 2021.

Note: The average weekly volume is over 25,000 pieces during any peak week for Ground Resid, Air Resid and SurePost combined.

Retailers Will Need to Adapt to Increasing Shipping Costs

2020 has been a most unusual year for shippers of all types. COVID-19 lessons have been plentiful as retailers have been forced to adapt quickly. Those that have not been able to adapt have declared bankruptcy. In fact, 2020 will likely see a record number of bankruptcies as the retail industry continues to adapt to a changed environment that favors e-commerce.

“The companies that are going to be hurt by these surcharges are the companies that can least afford it at this point, and that’s retailers,” said John Haber, chief executive officer of Spend Management Experts in a recent interview with Bloomberg.

Indeed, while retailers adapt, they are faced with higher shipping costs in addition to ongoing last mile delivery delays. FedEx and UPS implemented temporary peak surcharges beginning in March on international express shipments and then on ground deliveries in May and June. The ground surcharges will then increase when the peak holiday surcharges take effect.

For more on each carrier’s surcharge announcement:

FedEx

UPS

USPS

Instead of trying to figure it all out yourself, we can help. Contact us today for more information.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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Increased Shipping Surcharges Across the Board Will Have Retailers Scrambling

August 25, 2020


FedEx, UPS and, for the first time, the United States Postal Service (USPS), have reported peak holiday surcharges. FedEx and UPS surcharges will begin earlier and last longer, through mid-January, while the USPS surcharges will be in effect from October 18 until December 27, 2020.  “Many retailers are already fighting for survival,” John Haber, CEO of Spend Management Experts told the Atlanta Journal-Constitution. “Some of these costs are going to have to be passed down.” Overall, FedEx and UPS surcharges are fairly similar. FedEx surcharge on Additional Handling, Oversize Package, and Unauthorized Package will be $4.90 per package, $52.50 per package, and $350 per package respectively from October 5 through January 17.  The UPS surcharge on Additional Handling will be $5.00 per package, $50 per package for Large Packages and $250 per package for Over Maximum Limits from October 4 through January 16. These UPS charges will be applied to any customer who ships 1,000 packages, or more than 10 packages in any category, in a week during the peak period; once this threshold is met, the surcharge will apply for the remainder of the peak period regardless of volumes. Still, the biggest changes are in Residential, SmartPost, SurePost and Parcel Select.

Residential Package Deliveries Will Feel the Impact

The majority of volumes have dramatically shifted to Residential this year because of COVID-19 and continue to remain elevated. FedEx and UPS Residential surcharges are based on volumes, however the calculations differ. From November 15 through January 16, UPS Residential surcharge will range from $1.00 to $4.00 per package and will be based on a percentage of February volume: 110% to 200%, 200% to 300% and greater than 300%. Like the size-based surcharges, these residential surcharges will only apply to UPS customers who ship more than 25,000 packages in a peak period week (combined ground, air, and SurePost volumes), and once the threshold is met the charge will apply for the remainder of the peak period. The FedEx Residential surcharge will range from $1.00 to $5.00 per package. Based on a two-tiered approach:
  • For customers who ship more than 35,000 weekly average packages (total for FedEx Express and FedEx Ground U.S. domestic residential and commercial combined) from Oct. 5, 2020–Oct. 18, 2020, the Peak Residential Delivery Charge will apply Nov. 2, 2020–Dec. 13, 2020. The amount charged per package will be based on a Peaking Factor, calculated as weekly average packages shipped Oct. 5, 2020–Oct. 18, 2020, divided by weekly average packages shipped Feb. 3, 2020–March 1, 2020, multiplied by 100. Peaking Factor and amount charged are determined separately for FedEx Express and FedEx Ground.
  • For customers who ship more than 35,000 weekly average packages (total for FedEx Express and FedEx Ground U.S. domestic residential and commercial combined) from Nov. 16, 2020–Nov. 29, 2020, the Peak — Residential Delivery Charge will apply Dec. 14, 2020–Jan. 17, 2021. The amount charged per package will be based on a Peaking Factor, calculated as weekly average packages shipped Nov. 16, 2020–Nov. 29, 2020, divided by weekly average packages shipped Feb. 3, 2020–March 1, 2020, multiplied by 100. Peaking Factor and amount charged are determined separately for FedEx Express and FedEx Ground.
FedEx Service Feb Wkly Avg Vol 2 wks Oct Wkly Avg Vol Calculate Peak Factor Peak fee@ 110-200% of Feb Vol*
Ground Residential 27,000 36,000 36K / 27K * 100 = 133 $1.00
* Fee will apply to all Ground Residential packages shipped from Nov 2 through Dec 13, 2020 (New threshold for Dec 14-Jan 17, 2021. Note: The average weekly volume is over 35,000 pieces the first two weeks of October for total Dom Express & Ground Com & Resid combined

Parcel Select, SmartPost and SurePost Get Surcharges Too

For the first time, USPS has announced proposed surcharges of either 24 or 40 cents per package on all of its Parcel Select products. Depending on the product, the surcharge will be included in existing pricing that starts as low as $1.81 per package up to $6.92 per package. While the proposed increases are pending approval from the Postal Regulatory Commission, it is widely assumed that these surcharges will be applied unchallenged. Often regarded as the lowest priced service that retailers opt for when providing “free shipping,” the Parcel Select surcharge will impact a number of customers including Amazon, FedEx and UPS.
USPS Service Weight Cost Peak fee % Increase
Parcel Select Lightweight 3 OZ $1.81 $0.24 13.26%
Parcel Select (DDU) 5 lbs $3.58 $0.24 6.70%
  The FedEx SmartPost surcharge for the holiday period will steadily increase through the season. Beginning November 2 through November 29, the surcharge will be $1.00 per package. November 30 through December 6, the surcharge increases to $2.00 per package. December 7 through Jan. 17, it will increase once more to $1.00 per package which will mean higher shipping costs for holiday returns as well.
FedEx SmartPost Service Weight Zone Cost Peak fee % Increase
Parcel Select Shipment 1 lb 2 $8.23 $2.00 24.30%
*Note the Peak fee varies based on week incurred. Example provided for weeks Nov 30 through Dec 6 on all SmartPost shipments (No thresholds required)   UPS’ SurePost, which is also a hybrid service that utilizes USPS as the last-mile delivery service provider, will follow the same calculation and cost as the Residential surcharge.
UPS Service Feb Wkly Avg Vol Nov 21st Wkly Avg Vol Calculate Peak Factor Peak fee@ 110-200% of Feb Vol*
UPS SurePost 18,000 28,000 28K / 18K = 155% $1.00
* Applies to all SurePost packages shipped  from Nov 15 through Jan 16, 2021. Note: The average weekly volume is over 25,000 pieces during any peak week for Ground Resid, Air Resid and SurePost combined.

Retailers Will Need to Adapt to Increasing Shipping Costs

2020 has been a most unusual year for shippers of all types. COVID-19 lessons have been plentiful as retailers have been forced to adapt quickly. Those that have not been able to adapt have declared bankruptcy. In fact, 2020 will likely see a record number of bankruptcies as the retail industry continues to adapt to a changed environment that favors e-commerce. “The companies that are going to be hurt by these surcharges are the companies that can least afford it at this point, and that’s retailers,” said John Haber, chief executive officer of Spend Management Experts in a recent interview with Bloomberg. Indeed, while retailers adapt, they are faced with higher shipping costs in addition to ongoing last mile delivery delays. FedEx and UPS implemented temporary peak surcharges beginning in March on international express shipments and then on ground deliveries in May and June. The ground surcharges will then increase when the peak holiday surcharges take effect.

For more on each carrier’s surcharge announcement:

FedEx

UPS

USPS

Instead of trying to figure it all out yourself, we can help. Contact us today for more information.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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