Latest Surcharges Add to Businesses’ Increasing Costs but for How Long?

June 11, 2020


New Surcharges from UPS and FedEx

As businesses shut down and consumers stay home due to COVID-19, last mile delivery providers have experienced unplanned volumes that have flooded networks and resulted in delays to many consumers. Amazon, FedEx, UPS, USPS and food delivery services all have been overwhelmed and have stepped up efforts to hire extra help and reconfigure networks to ensure deliveries were made.

As we watched this scenario unfold, we waited for the inevitable surcharges to be announced. UPS and FedEx did not disappoint. On May 26, UPS announced their temporary surcharges effective May 31. FedEx also announced their surcharges just days before going into effect on June 8.

 

FedEx

FedEx is an essential business keeping commerce moving and delivering critical shipments to homes during the COVID-19 crisis.

As the impact of the virus continues to generate a surge in residential deliveries and has also generated a surge in oversize, hard-to-handle packages, we have experienced increased operating costs across our network.

To continue providing our customers with strong levels of service during this time, we are implementing three temporary peak surcharges beginning June 8, 2020.

- FedEx

UPS

Indeed, while UPS did not give a reason, one can suspect if they read FedEx’s response above. They would probably say ‘ditto’.

During UPS’ first quarter earnings call, the company noted that 70% of its volume was B2C in March. This was trending the same for April. B2C deliveries are expensive for last mile delivery providers. Therefore a reason why UPS and FedEx have touted alternative delivery options and partnerships.

The new surcharges mainly target large shippers through volume thresholds that spare most small-to-medium-sized shippers.

 

How Long will these Surcharges Last?

"All of the large e-commerce shippers are going to get hit with this," John Haber, CEO of supply-chain consulting firm Spend Management Experts. "A lot of them will try to negotiate it out, but there hasn't been a lot of flexibility about not paying these peak surcharges."

UPS and FedEx's latest surcharges are described as ‘temporary’. The surcharges follow ‘temporary’ international air surcharges that were enacted earlier and still in effect.

Now, the burden has shifted to businesses who have to not only adjust to changes in demand but also will now struggle to manage these unplanned shipping costs. Even though e-commerce sales are expected to reach record levels this year, total U.S. retail sales, which also includes auto and fuel, is expected to drop 10.5% in 2020.

Many businesses are already on the financial edge as many stores remain closed and/or have had to adapt to social distancing requirements, workers concerned about returning to work and now higher shipping costs. How long is ‘temporary’ and how long can businesses hold out?

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. We use cost modeling technology and market intelligence to help companies with transportation, distribution and fulfillment spend. As a result, 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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Latest Surcharges Add to Businesses’ Increasing Costs but for How Long?

June 11, 2020


New Surcharges from UPS and FedEx

As businesses shut down and consumers stay home due to COVID-19, last mile delivery providers have experienced unplanned volumes that have flooded networks and resulted in delays to many consumers. Amazon, FedEx, UPS, USPS and food delivery services all have been overwhelmed and have stepped up efforts to hire extra help and reconfigure networks to ensure deliveries were made. As we watched this scenario unfold, we waited for the inevitable surcharges to be announced. UPS and FedEx did not disappoint. On May 26, UPS announced their temporary surcharges effective May 31. FedEx also announced their surcharges just days before going into effect on June 8.  

FedEx

FedEx is an essential business keeping commerce moving and delivering critical shipments to homes during the COVID-19 crisis. As the impact of the virus continues to generate a surge in residential deliveries and has also generated a surge in oversize, hard-to-handle packages, we have experienced increased operating costs across our network. To continue providing our customers with strong levels of service during this time, we are implementing three temporary peak surcharges beginning June 8, 2020.

- FedEx

UPS

Indeed, while UPS did not give a reason, one can suspect if they read FedEx’s response above. They would probably say ‘ditto’. During UPS’ first quarter earnings call, the company noted that 70% of its volume was B2C in March. This was trending the same for April. B2C deliveries are expensive for last mile delivery providers. Therefore a reason why UPS and FedEx have touted alternative delivery options and partnerships. The new surcharges mainly target large shippers through volume thresholds that spare most small-to-medium-sized shippers.  

How Long will these Surcharges Last?

"All of the large e-commerce shippers are going to get hit with this," John Haber, CEO of supply-chain consulting firm Spend Management Experts. "A lot of them will try to negotiate it out, but there hasn't been a lot of flexibility about not paying these peak surcharges." UPS and FedEx's latest surcharges are described as ‘temporary’. The surcharges follow ‘temporary’ international air surcharges that were enacted earlier and still in effect. Now, the burden has shifted to businesses who have to not only adjust to changes in demand but also will now struggle to manage these unplanned shipping costs. Even though e-commerce sales are expected to reach record levels this year, total U.S. retail sales, which also includes auto and fuel, is expected to drop 10.5% in 2020. Many businesses are already on the financial edge as many stores remain closed and/or have had to adapt to social distancing requirements, workers concerned about returning to work and now higher shipping costs. How long is ‘temporary’ and how long can businesses hold out?  
ABOUT SPEND MANAGEMENT EXPERTS Spend Management Experts provides strategic guidance to optimize your supply chain. We use cost modeling technology and market intelligence to help companies with transportation, distribution and fulfillment spend. As a result, 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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