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USPS 2019 Price Increase & Impact on Shippers – Part 1

By | Contract Negotiation, Invoice Auditing, News | No Comments

The USPS just proposed a major multi-dimensional price and structure change with a planned January 27, 2019 implementation.  There are a lot of moving parts, including a 10% increase to mail a 1 oz letter with a 29% reduction on the 2ndoz.  Business mailers will see a nice increase in the discount to use a Postage Meter with savings per letter increasing from 3 to 5 cents.

The focus of this article is understanding the proposed changes that will impact shippers.  Part 2 will go into more depth and include some actual case studies to see how the USPS will fare in 2019 with their continuing goal of earning more business from UPS and FedEx shippers.

Shipper focused highlights of the proposed 2019 USPS Shipping rate changes:

  • Priority Mail (PM) “Commercial Plus” (CPP) Pricing will be the same as “Commercial Base” (CBP).
  • Reported 5.9% increase for PM is understated, with CPP users taking a bigger hit.
  • First Class Package Services (FCPS) switching to zone-based pricing and a reported 11.9% increase.
  • Dimensional Divisor for Priority Mail (PM) is being reduced to 166 from 194 and will now include ALL zones. These Dim Policies will also apply to Priority Mail Express (PME) and Parcel Select (PS)
  • “Balloon” pricing is removed in all categories that include the new Dimensional rating rules.

First Class Package Services (FCPS) – Commercial

  • Eliminated “no zone” pricing making YoY comparisons more difficult. See Chart 1
  • Commercial + 11.9% (Note: Retail + 13.3%)
  • Inner zone (Zones L-4 = less than 600 miles) +6.7%.
  • Outer Zones 5-8 up a whopping +15%.
  • Shippers with high zone 8 profile, very common with only a single Distribution Center (DC) on one of the coasts, will see a 21% increase. This will entice those to consider opening a second DC or use 3rdparty fulfilment options.  For example, Amazon should see an increase in their FBA programs.
  • Over a Lb. To give you a better perspective on how massive this increase is, using Zone 5 rates as the median and comparing a cumulative 5 yr. comparison, this year’s increase raises the 5-yr. average to 31% from 19% (2014-2018). See Chart 2

Chart 1:

Chart 2:

Priority Mail (PM)

  • Priority Mail (PM) “Commercial Plus” (CPP) Pricing will be the same as “Commercial Base” (CBP).
    • Most low volume shippers today are getting CPP via one of the Reseller Programs.
    • The USPS provided guidance prior to the 2016 rate change that CPP pricing would go away in 2017. This never happened.
    • In 2018, the USPS indicated their intention to make CBP pricing relevant again.
    • The USPS will reap a quick 3% revenue jump by eliminating the current delta between the rate tables.
  • Reported 5.9% increase for PM is understated, with CPP users taking a bigger hit.
    • For example, let’s compare average increases in the highly used lanes (≤ 2 Lbs, zones L-8).
      • CBP +4.6% (Chart 3)
      • CPP +8.2% (Chart 4)
    • Dim Divisor for affected pkgs will be reduced from 194 to 166 and will now apply to all zones, balloon pricing for zones L-4 is eliminated.
      • Negotiated Service Agreements (NSA) to allow for custom dimensional weight divisor, dimensional threshold, non-rectangular dimensional adjustment factor, or limit the applicable weights and zones.
      • 1728 cubic threshold is maintained. (no Dim policy in effect for packages under 1 cubic foot)
    • Flat Rate Products
      • Flat Rate Envelopes and Sm Pkgs.
        • CBP + 6% (Chart 5)
        • CPP +9% (Chart 6)
      • Flat Rate Med & Lg Pkg
        • CBP – Minor price decrease. (Chart 5)
        • CPP +3% (Chart 6)
      • Regional Flat Rate +4%.
      • Cubic pricing +6.6%. (Chart 7)

Chart 3:

Chart 4:

Chart 5:

Chart 6:

Chart 7:

Parcel Select (PS)

With the huge growth of e-Commerce “free” shipping, e-tailors favor economy shipping options.  A majority of these are inducted via Parcel Select, although many will not recognize the name.  They are better known by their popular brand names like UPS SurePost, UPS Mail Innovations, FedEx SmartPost, Pitney Bowes Newgistics, OSM Worldwide and DHL SmartMail. Collectively known as “Consolidators”, these companies perform and enjoy “workshare Incentives” from the Postal Service for: collection, sortation, transportation and deep induction within the USPS network for final mile delivery.

  • Important to realize that Consolidators use these programs differently, with some offering as many as 3 service levels. It is possible to get 2-3-day transit times and compete with FCPS and PM.
  • New (PM) Dimensional rating policies will apply (see PM Dim policy above).
  • PS Destination Entry (DDU) +9.9% and PS Sectional Center Facility (SCF) +9.6%.
    • 5 Yr. cumulative average increase down slightly to 30% from 31% (2014-2018). (Chart 8)
  • Parcel Select Lightweight (PSL)
    • Ounce-based – no zones, based upon induction point.
    • + 11.5% for DDU induction, and +10.8% for SCF. (Chart 9)
    • New Dim policies do not apply to PSL
  • Parcel Select Ground
    • Single Piece, 1-70 Lbs., Zone based.
    • Often used for OMRD – Haz Mat to avoid Air transport.
    • Was closely aligned with PM Base, now is about $.20 less on average per lane.

Chart 8:

Chart 9:

International

  • Retail – no changes to outbound pricing.
    • Flats limited to 15.999 ounces from previous 64 ounce limit. Earlier removed ability to ship products in this category.
  • Commercial (note: Base and CPP are the same).
    • Expedited Global Express Guaranteed (GXG) +4.9%
    • Priority Mail Express International (PMEI) +3.9%
    • Priority Mail International (PMI) +3.9%
    • International Priority Airmail (IPA), International Surface Airlift (ISAL) including associated M-Bags +19.9%
    • Airmail M-Bags +5.0%
    • First Class Package International Service (FCPIS) +3.9%

This is a major increase, no way to sugarcoat it. Shippers will be well advised to analyze their shipping distribution profile to gauge how these changes will impact your costs.  It will be a good time to look for savings by examining routing logic, review carrier contracts and network with industry peers.

Part 2 of this article will include in-depth studies to estimate how USPS will compare to discounted FedEx and UPS rates that larger shippers command in the marketplace.  I believe the USPS has done their homework and have carefully raised rates where they continue to dominate with little competition.  For those who control pricing in their own business, you know how challenging it can be to raise pricing.  This is not lost on the USPS, they know there is a much stronger elasticity in the “Competitive” (Shipping) arena than in the Market Dominant (Mailing) side, which means that there is a known significant drop % in volume for every % increase in price.

In the meantime, feel free to reach out to me with questions or to ask for help.  Wishing you great shipping success.

 

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 32 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-879-2020 Ext 108 or gordon@shipware.com.

FedEx Announces Significant Rate Increases

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On Monday, FedEx modified its Express and Ground fuel surcharge rates, and created new indexes for International Export and Imports. These changes mean significant rate increases for nearly all FedEx shippers.

Shippers shouldn’t confuse this rate change with the weekly, normal fluctuation in fuel surcharge percentages based on market prices (as published by the Department of Energy), described as follows: “The fuel surcharge percentage for FedEx Express services is subject to weekly adjustment based on the weekly published U.S. Gulf Coast (USGC) spot price for a gallon of kerosene-type jet fuel. The fuel surcharge percentage for FedEx Ground services is subject to weekly adjustment based on the weekly published national U.S. on-highway average price for a gallon of diesel fuel.”

What’s different about the Sept. 10 rate change is the fact that FedEx added .75 percent to previous Express fuel surcharge tables, and a full 1 percent to Ground fuel surcharge tables.

Moreover, for the first time ever, FedEx created separate, higher fuel surcharges for international products.

Measuring the impact from the previous week, FedEx shippers just took a 16 percent to as much as a 69 percent rate increase!

How do the new FedEx fuel surcharges compare to its rival UPS?

Well, since November 2012, FedEx customers have enjoyed lower fuel surcharges than UPS. Not anymore (see chart below).

Shipware is here to help you understand the financial implications to your business and, more importantly, give you tools to push back on these austere rate hikes. If you would like to investigate options with our expert team, please contact us at 858-879-2020 ext 111.

smartpost-vs.-surepost

SurePost vs. SmartPost: What’s the Difference?

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Selecting the best shipping option is not an easy task for retailers already facing intense pressure to ship faster, cheaper, and more efficiently. Yet retailers know that striking the right balance between speed and cost is key to meeting customer expectations and driving down shipping costs.

FedEx and UPS have created solutions, including SmartPost and SurePost, respectively, to address this challenge. The shipping options work similarly, which leave many shippers asking, “What is the difference between the two?” Most of the differences are minor – yet understanding them can assist with selecting the right option and have a serious impact on your bottom line. But how do the services work, and what are the differences to consider when selecting the right one for your business?

SurePost and SmartPost: Understanding the Basics

Cost is a major consideration when sending packages. FedEx and UPS created SmartPost and SurePost to focus on the most expensive part of the journey: the last mile. The last mile isn’t literally the last mile of a journey but can encompass several city blocks or hundreds of rural miles. Either way, it’s the most expensive leg of shipping. A driver might not have many packages going to a specific area, and if so, this drives up the overall cost of shipping.

SurePost and SmartPost were designed to make this last leg of shipping more cost-effective by joining forces with a major competitor. A package is dropped with the regular carrier, such as FedEx or UPS, but once that package gets to that last mile, it’s passed off to the United States Postal Service.

The United States Postal Service visits every address on a daily basis, which provides an opportunity to streamline last mile logistics. As a result, SmartPost and SurePost partner with the USPS to complete the final mile of delivery for the majority of deliveries.

These services are fairly similar in their cost-saving model, which involves partnering with the USPS to maximize efficiency and minimize cost. There are some differences, and we’ll highlight those shortly. But first, it’s helpful to understand the general benefits of these services, which include:

  • Cost Reduction: One of the most appealing benefits of SurePost and SmartPost is that using these services lowers shipping costs. Targeting the most expensive part of the shipping journey allows retailers to drive down the total cost of shipping.
  • Saturday Delivery: Since SurePost and SmartPost both use the USPS for the last leg of delivery, customers benefit from Saturday delivery.
  • No Residential Surcharge: UPS and FedEx charge a residential surcharge for regular delivery services; however, this surcharge is waived for SurePost and SmartPost deliveries. Since large UPS or FedEx trucks aren’t used to complete the final mile of shipping, there is no need to assess this fee.
  • Delivery to P.O. Boxes: FedEx and UPS do not typically deliver to P.O. boxes, but when partnering with the USPS, retailers can deliver to these addresses. Some recipients prefer to receive shipments at P.O. boxes, and partnering with the USPS provides additional flexibility for customers.
  • Drop-off is Easy: No special drop-off is required when using SurePost or SmartPost. Instead, retailers can simply mix these packages in with their normal shipments without the need for a special trip to the post office.
  • Tracking is Still Available: Having the ability to track packages is key to the customer experience. Most recipients want to know where their package is in the shipping process at all times. SurePost and SmartPost allow tracking throughout the entire delivery process. However, some users note that with UPS, there is a brief period of time when the package is marked as “delivered” during the transfer from UPS to USPS. The status is updated once the package is in the system, and the shipping process continues.

The largest drawback to using SurePost and SmartPost is slower delivery times. A slow delivery time, however, may be acceptable if customers expect it upfront. This is especially true in cases of free shipping. When considering these services, it’s also important to consider the differences.

Drop Locations Vary From SurePost to SmartPost

Retailers have a large opportunity to save by using SurePost and SmartPost and targeting that last mile of delivery. In fact, the last leg of delivery accounts for up to 28 percent of a shipment’s total cost, so allowing USPS to handle it offers decent savings. UPS and FedEx, however, handle the handoff from carrier to USPS slightly differently.

UPS SurePost packages are dropped at the USPS location closest to the package’s final destination. In most cases, this is the recipient’s local post office. As a result, the package is fairly close to its final destination, which may save time in the shipping process.

In contrast, FedEx SmartPost delivers the package to the nearest USPS regional hub, which is not the local post office. For example, the regional hub might be in a major city and the recipient’s address might be in a suburb 30 miles away. The reason why FedEx uses this strategy is that it creates efficiencies for package processing, yet some speculate that it may impact delivery times. Delivery times will be discussed in more detail shortly, but this is one key difference to note.

Determining the Last Mile of Delivery

UPS and FedEx use a similar strategy to drive down costs by targeting the last mile of delivery, but with UPS, the carrier does not always use USPS for that final leg of delivery. Why?

UPS workers are in the Teamsters union, so concerns were present that “outsourcing” a portion of the delivery process may jeopardize job security. As a result, UPS handles the handoff slightly differently by using sophisticated software. This software determines whether it’s truly more efficient for UPS or USPS to complete the final leg of delivery for each individual package and schedules it accordingly. And in some cases, it’s more efficient for UPS to handle the last mile of delivery.

For example, a UPS driver might already be visiting the delivery area and have multiple packages to deliver. If so, package delivery by UPS is still efficient. In contrast, FedEx uses a more general approach for that last leg of delivery. As a result, up to 60 percent of UPS SurePost deliveries are still delivered by UPS – not USPS.

Using UPS might be more likely to keep the package with the carrier and less likely it will arrive at the destination via USPS. Whether this affects delivery speed is speculative, but it’s one key difference to consider when evaluating options. But what about delivery times? How long does a package spend in transit with each of these services? Here is a quick comparison of SurePost and SmartPost.

  • FedEx SmartPost. According to FedEx, delivery time is typically two to seven business days based on the distance to the destination. There is a longer transit time outside the contiguous 48 states. Service days are Monday through Saturday, and the delivery area includes 100 percent U.S. coverage, including service to Alaska and Hawaii; Puerto Rico; Guam; U.S. Virgin Islands; all U.S. territories; P.O. boxes; and military APO, FPO and DPO destinations.
  • UPS SurePost: Delivery time isn’t published on the company’s website, but users report it’s typically around one day slower than using UPS ground. This is because on the day UPS typically would drop the package at the customer’s door, it’s dropping it off at the nearest USPS location instead.

Shipping Fees – How They Are Charged

It’s estimated that the savings using SurePost and SmartPost are significant – as much as 20 percent when compared to using standard FedEx or UPS. And while savings are significant with each, let’s take a look at some of the potential savings and fees for each service.

  • SurePost and SmartPost do not charge a residential surcharge: When shipping packages to a residential address, there is typically a surcharge for delivery, which increases the total cost to ship a package. Neither company charges this fee for these services.
  • UPS charges about 3 percent more: UPS charges about 3 percent more for SurePost compared to standard UPS; however, still no residential surcharge is charged. When looking at the potential for slightly faster speed, this additional cost might not be a serious consideration, especially since the overall cost of shipping is lower than UPS’ standard services.

When evaluating these services, it’s also helpful to consider the exact details of what you’re shipping, such as weight and dimensions. Understanding the rules and requirements for SurePost and SmartPost is a good starting point for figuring out which one is best for a specific package.

Dimension Differences and Considerations

SurePost and SmartPost have rules about package dimensions that may influence your ability to use these services. How much does your package weigh? Are the dimensions too large? Here is a quick comparison to consider for each carrier.

FedEx SmartPost:

This service can accept a package weight of up to 70 pounds and a size of 130 inches in length plus girth. In addition, it’s important to note a few FedEx special features that are not available, including:

  • Collect on delivery
  • Money-back guarantee
  • Declared value
  • Signature proof of delivery
  • Evening or by-appointment delivery
  • Hazardous materials service

In addition, FedEx SmartPost won’t pick up packages that originate outside the contiguous United States.

UPS SurePost:

A few different UPS SurePost services are available, including:

  • SurePost Less than 1 pound, with a maximum weight of 450.76 grams
  • SurePost 1 pound or more, with a maximum weight of 70 pounds
  • SurePost Bound printed matter, with a maximum weight of 15 pounds
  • SurePost Media, with a maximum weight of 70 pounds

The total dimensions of the package cannot exceed 130 inches and must be less than 1 pound if you select SurePost; it can be 1 pound or heavier and up to 108 inches in size if you select SurePost Bound Printed Matter or SurePost Media in the UPS service box.

Moving Forward to Maximize Cost Savings and Efficiency

Selecting the right shipping option isn’t always an easy choice, especially when attempting to balance cost with speed. SurePost and SmartPost provide good alternatives to help retailers operate with greater efficiency. Package delivery may be slower when compared to traditional options, but if you communicate that clearly to customers, it might not be an issue.

Striking the right balance between efficiency, cost savings, and customer needs and expectations is the key to minimizing costs and maximizing savings. As a result, a unique synergy is achieved – one that has the potential to impact your bottom line and contribute to the future success of your company.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

How Does FedEx SmartPost Work?

By | News

Retailers face fierce competition in today’s digitally fueled environment. People on the receiving end of shipments don’t just want their items fast, but also with no shipping costs. And since customer expectations have evolved to a point where “free shipping” is the norm, retailers must figure out how to absorb those costs. In most cases, this means developing a shipping process that is more efficient and less expensive but still maintains the reliability that customers have come to expect.

Popular carriers such as FedEx are paying attention to the feedback received from retailers about shipping costs. They realized that they needed to figure out an efficient way to drive down costs without taking a hit on margins. One area of great opportunity is that of the “last mile delivery.”

The last mile of delivery isn’t literally the “last mile”, but ranges from several blocks up to 100 miles or more. And because of all the variables that go into that last mile, it’s expensive. For example, if the last mile involves traveling to a rural location with few deliveries, the cost is much higher. FedEx created SmartPost to drive down costs for that last mile and, in turn, help retailers manage their shipping costs. But how does FedEx SmartPost work?

FedEx SmartPost: Understanding the Basics

Take a look into any retailer’s business and it’s easy to see the role that shipping plays in getting a product from production into the hands of the customer. And free shipping is a perk that customers expect. In fact, free shipping is said to be the most effective promotion a retailer can offer.

Twenty-eight percent of shoppers abandon their shopping cart if presented with unexpected shipping costs, and nine out of 10 consumers say free shipping is the No. 1 incentive to shop online. So it’s not surprising that offering free shipping is a priority for retailers. But somebody has to pay for it. And since it’s the retailers in most cases, they must figure out how to manage those costs.

As touched on previously, that last mile of delivery is a huge strategic opportunity to slash shipping costs. Yet how much is that last mile actually costing? Estimates show that the final leg of delivery can comprise up to 28 percent of a product’s total transportation costs. It’s not always efficient chugging that large, fully staffed FedEx truck to locations with low delivery volume or other factors that drive up costs, especially when there is already an organization that visits nearly every single address in the United States.  

FedEx SmartPost is similar to UPS SurePost in that it targets the last mile and uses the same partner to drive down those costs. This hybrid model utilizes the United States Postal Service. FedEx takes the package for the majority of its journey, but that last leg of the trip, which is the most expensive – is handled by USPS.

In most cases, two separate carriers, both FedEx and USPS, handle the package. The US Postal Service visits most addresses on a daily basis; FedEx does not. By offloading this last mile to USPS, maximum efficiency is achieved.

But what are the potential savings, and how could it impact your bottom line? Many retailers are surprised to find that the savings can be significant when this last-mile cost is decreased.

Understanding the Potential Savings of FedEx SmartPost

Costs for FedEx SmartPost vary based on what you’re shipping, where it’s going, and other key factors, but in most cases, it’s cheaper than traditional FedEx ground service. But how much cheaper?

Estimates suggest that it can be 20 percent less expensive than FedEx’s Home Delivery Service. For large retailers, this number is significant when multiplied across shipping costs as a whole. One place that this savings comes from is by having “no residential surcharge,” which makes residential delivery cheaper. While this item doesn’t make up the entire 20 percent savings, it’s one area where you aren’t charged, because USPS is completing the last leg of the delivery.

For example, if a retailer spends $2,000 on shipping each month, saving 20 percent could add up to $400 a month, or $4,800 a year. A shipper that spends twice that on monthly shipping could save nearly $10,000 a year. For retailers shipping large volumes of packages, the savings of using a service that reduces last-mile delivery costs can have widespread impacts and free up money to allocate to other parts of the business.

The key to successfully using this service is understanding the benefits and the trade-offs. The savings can be significant, but what are the pros and potential cons? In many cases, the benefits outweigh the drawbacks, but it depends on your situation and customer expectations.

A Quick Look Into Service Details

How long will a package take to arrive with this service? When does the service operate? And what are the package size and weight limitations? These questions are bound to come up when considering whether FedEx SmartPost is right for you. SmartPost provides efficient residential shipping for customers with low-weight packages. The service provides 100 percent U.S. coverage and can deliver to destinations beyond the contiguous U.S., such as Alaska and Hawaii. Here is a look at the major service details.

  • Delivery time: Delivery typically takes two to seven business days, depending on the distance to the destination. Longer transit time is reported for deliveries outside the 48 states.
  • Service days: Service days are Monday through Saturday.
  • Delivery exceptions: This service will not pick up packages that originate outside the contiguous United States.
  • Package size and weight: Maximum is 70 pounds and 130 inches in length plus girth. Typical SmartPost packages weigh less than 10 pounds and are going to residential addresses

These details are a good place to start when learning more about this service, but there are a few more important details to consider, including several advantages and disadvantages of using this shipping option.

FedEx SmartPost: Understanding the Advantages

Reliability is one key factor that is important when using SmartPost. Most users have an experience where they achieved the reliability that you would expect from FedEx. But since the last leg of the journey is covered by USPS, there are a few more advantages in addition to cost savings and reliability to consider, including the following:

  • The ability to deliver to all USPS addresses: FedEx has limitations on delivering packages, and one of those limitations is not delivering to post office boxes. Yet many recipients may use P.O. boxes for their mail, which makes it inconvenient to have packages delivered to a physical address that is not typically used. SmartPost allows more flexibility in the delivery process, since USPS allows packages to be delivered to physical address or P.O. boxes. SmartPost can also ship to Alaska and Hawaii, although these options might not provide the price savings of other shipment options.
  • No residential surcharge: A residential surcharge is common for delivering typical packages. SmartPost gets rid of this charge, which provides additional savings.
  • Normal delivery pickup: Busy retailers need a pickup process that is easy and efficient. FedEx SmartPost packages can take advantage of the same regular shipments. For example, if you have large pickups scheduled through FedEx, you don’t need to change anything if you use SmartPost. The only things that change are that last mile of delivery and your shipping costs.
  • Tracking abilities are unchanged: When using SmartPost, you don’t lose the ability to track packages. FedEx still provides a single tracking number, and you can use that number to monitor the package’s progress throughout its journey.

For many retailers, the advantages outweigh the disadvantages, but having a clear picture of the drawbacks makes for a more accurate decision.

What are the major disadvantages?

Retailers have many questions about using SmartPost for the first time, including questions about transit times, reliability, and tracking. Cost savings are significant, but there are some trade-offs.

  • Slower transit times: Delivery times will be slower. Plan for an additional two to five days compared to ground and home delivery. Slower transit times can be worth the trade-off when packages aren’t time-sensitive and expectations are set with customers ahead of time.
  • Shipping fees outside the lower 48 states are high: SmartPost can be used to ship to destinations such as Alaska or Hawaii. However, fees may be much higher – making the use of this service not cost-effective for these locations. In these cases, it might be best to ship directly through FedEx or a similar carrier. As a result, it’s critical to consider shipping location when figuring out whether this option is the best selection for you.
  • Unified tracking is reliable but may confuse customers: A benefit of using SmartPost is that recipients can track the package even when it’s on the USPS leg of the journey. Shippers report that once FedEx hands off the package to USPS, it will indicate briefly that the package has been delivered. USPS is then responsible for the final delivery, and within 24 hours, the package tracking will show “out for delivery.” However, this process can create some confusion during that short 24-hour period.

In addition, it’s important to understand that a few of the traditional FedEx services are not available with the SmartPost option, including:

  • Collect on delivery
  • Money-back guarantee
  • Declared value
  • Signature proof of delivery
  • Evening or by-appointment delivery
  • Hazardous materials service

With SmartPost, USPS typically provides the last leg of delivery, but in some cases, FedEx does not transfer the package for the last mile. For example, if FedEx is already in the package area and it’s efficient for the carrier to complete the last mile, then USPS is not used. However, for the majority of packages, USPS is used with this service.

Weighing the advantages and disadvantages comes down to answering one question: What are the customer’s expectations, and are those expectations flexible? If the answer is “yes”, then using FedEx SmartPost might be a good option, especially if you communicate expectations clearly to the recipient ahead of time.

Moving Forward With Greater Savings

FedEx SmartPost is not for every customer. If a customer needs fast shipping, this is not the service to use. The speed, however, is reasonable for most customers who do not need expedited shipping. Additionally, if a delivery is going to Alaska or Hawaii, it’s wise to compare costs. These destinations are within the footprint of service but may not be the most cost-effective, so it’s good to check.

Overall, in most situations, SmartPost can be a cost-saving solution for retailers shipping a large volume of items to customers that need options for savings. FedEx achieves reliability with tracking and additional perks, such as Saturday delivery. And for companies struggling to make free shipping work with their bottom line, services such as SmartPost could be the solution.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

What Is Last Mile Logistics?

By | News

When analyzing shipping invoices, you might suspect the cost is high. But without the right information, it’s difficult to truly understand where that cost is inflated. Packages might have a long journey, but what part of that journey is driving up your costs? Without the right tools, it’s hard to know. One area that is getting a lot of attention is last mile logistics.

On the surface, that last mile of delivery doesn’t look all that difficult. Transport the goods from a regional distribution center to its destination. Mission accomplished. Take a closer look, however, and there are large costs associated with that “last mile.” What’s more, you can influence many of these factors and drive down costs. And this is critical, because there are more shipments than ever circling the globe. In fact, e-commerce is expected to reach $2.4 trillion worldwide by 2018, which is a 26 percent jump from 2016.

Yet what is “last mile logistics,” and how can you influence and ultimately decrease that cost? Let’s take a closer look.

Understanding Last Mile Logistics

The transportation of goods from one community to another isn’t anything new, but the methods by which goods are transported are evolving. A large volume of goods might be going from point A to point B, but when there are fewer goods moving in that direction, the cost can be higher. What’s involved in that last leg of the journey is what we call “last mile logistics”.

The details of last mile logistics might appear straightforward at first glance, but upon a closer look, many are surprised by how much of the total shipping cost resides in this single category. But, again, what is last mile logistics, and how does it work?

Last mile delivery is the movement of goods from the transportation hub to its destination. In other words, it’s the last leg of a shipment’s trip before it arrives at its final destination. Even though the name implies the final mile of the delivery trip is in play, the actual distance traveled is variable. For example, the last mile might be a few blocks or it might be present at the end of 100 miles or more. The reason why this last mile concept is so complicated and costly is that not all last miles are created equal. Sometimes the journey is simple, such as traveling on highways and major roads with a large number of shipments. But other times, it’s more complicated, such as navigating a crowded and bustling city or reaching the depths of an isolated and rural area.

Understanding the last mile of delivery doesn’t only lead to cost savings — it may also provide a competitive advantage. The cost of getting products to their final location factors into the pricing of products and, ultimately, profit. When you drive this cost down, you gain flexibility due to reduced costs. As a result, you achieve a competitive advantage and you can stay a step ahead of the competition.

The first step to successfully tackling these costs is understanding the cost of that last mile of delivery and, equally important, what you can to do to lower it. Let’s take a look.

Understanding the Costs of Last Mile Delivery

The last mile of delivery might appear simple, but in many cases it’s expensive and complex. This can be the most difficult part of a shipment’s journey. Last mile shipping can make up 28 percent of a shipment’s total costs. For example, if your shipping costs are $1,000, about $280 (nearly a third) of the cost would be dedicated to that last mile. What would happen if you could slash that cost to 20 percent? The savings could be significant.

For example, if you send an average of 10 large shipments per month with a shipping cost of $1,000 each and reduce last mile costs by a mere 8 percent, the savings on these shipments alone would be $800. But what would happen if you decrease the last mile costs to 14 percent instead of 28 percent of the total cost of shipping? Costs would drop by $140 per shipment, which would be a $16,800 annual savings. As you can see, savings on last mile shipping can quickly multiply and create large long-term gains.

What’s more, last mile delivery will become increasingly important as growth in the number of shipments around the globe continues to rise. In fact, e-commerce sales are expected to reach $1.35 billion by this year, an increase of 28.8 percent from 2013. Increases are expected to span a variety of industries and products, impacting everything from electronics to technology to beauty. As a result, retailers must get prepared to handle ongoing and steady increases in sales.

Achieving maximum last mile savings requires a close understanding of all the factors that influence shipping as a whole and then understanding how those last mile costs fit. Costs can fit into several basic categories, including the following.

  • Warehousing: This includes things such as the space used, storage facility, geographic location, and total number of locations in play.
  • Fulfillment: Fulfillment includes packing needs, fulfillment time, and the number of orders.
  • Delivery: This includes the time frame, size of the order, scope of the delivery and mileage.
  • Technology: This includes the technology that you’re using for supply chain visibility. When you have transparency so you can truly understand all the true costs of shipping, including that last mile, then it can positively influence your costs.

In addition to the above factors, there are hidden costs that are important to uncover, depending on your shipping needs. For example, an article appearing on Supply Chain Dive showed one example of hidden costs in the last mile.

“Research shows that out-of-route miles account for 3% to 10% of a driver’s total mileage at $1 an hour. Every mile-per-hour increase above 55 mph reduces fuel mileage by .1 miles per gallon. Vehicles that average 7 mpg at 55 mph will average less than 5 mpg at 75 mph. And most class 8 tractors will consume 1.25 gallons per hour when idling.”

In this example, out-of-route miles are a huge cost, considering the number of miles a driver logs daily, and these out-of-route stops can use up to 10 percent of his or her daily mileage. Other factors can include heavy traffic and routes that lack maximum efficiency. But these aren’t the only factors influencing the last mile and driving up costs. Let’s take a look at a few more.

Factors That Affect the Last Mile

There are many challenges that create high shipping costs, and when trying to minimize those costs, it helps to understand the entire picture. A few factors that affect last mile logistics were highlighted previously, but there are a few more to consider.

Quicker fulfillment times are becoming the norm

Retail has picked up its pace in recent years. On the consumer side of the equation, customers can get their products the same day in some scenarios. And while freight shipping is a different situation, the trend of “getting things fast” is unchanged. For example, let’s say that you’re shipping a large number of items to a physical retailer that is out of stock on a popular item. Customers expect retail items to be in stock now, or else they’ll find the item on the shelf of a competitor. As a result, shippers must move more product at a faster pace.

New technology is disrupting last mile logistics

Innovative solutions are changing the shipping landscape, but not all of these innovations have staying power. More players will enter the market to solve the last mile challenge, but selecting an established partner, one that has a history of reliability, is key to successfully managing these costs.

Analytics are driving last mile logistics costs down

Understanding shipping analytics can give shippers greater visibility into the exact location of costs. Through shipping analytics tools, they can pinpoint where the highest costs reside and create plans to tackle and reduce these costs.

Autonomous vehicles, robotic delivery and drones are entering the market

The future of delivery may look much different from today’s picture. That future may include drones and robots that drive down last mile costs even further. On the horizon may also be self-driving vehicles, which could further affect shipping and delivery costs.

Understanding last mile delivery is the first step to influencing these costs, but once you have the knowledge, what comes next? The key is to figure out which solutions will provide the greatest efficiency while keeping the customer satisfied.

Finding Solutions That Drive Down Costs

A famous adage says “You can’t manage what you can’t measure,” and this is true for decreasing the cost of the last mile. You must get greater visibility into those costs and what is making them so high. Another key is to get closer. Leverage facility space and the capability of trucks, and look for creative methods for getting closer to the final destination to drive those costs down.

For example, perhaps you’re using FedEx, UPS, or a less-than-truckload carrier. If so, the chances are high that you’re overspending on shipping. With the right partner, you can get to the bottom of where you’re overspending. Submit shipping invoices, uncover where you’re overspending, and realize the benefits of savings. For example, Shipware has negotiated thousands of FedEx, UPS, and LTL contracts, saving clients an average of 19 percent. Sometimes these high costs are at the last mile, and effectively identifying and managing these areas can make a big impact on the bottom line.

In addition, you can use already established services such as FedEx SmartPost or UPS SurePost that focus on reducing these last mile costs. These services use the U.S. Postal Service, which already visits most addresses daily, to drive down last mile costs and optimize logistics.

The Future of Last Mile Logistics

Disruption leverages technology to not only change how things are done but also accomplish those tasks with greater efficiency. And in the future, disruption has the power to affect that last mile of shipping. For example, Uber was a major disruptor in the transportation industry. It discovered the back seat of many cars was empty and that people wanted more options for getting to their destinations. Technology was the disruptor that opened the doors to additional options.

This example isn’t all that different from last mile shipping. For example, FedEx and UPS found that USPS already visited many addresses daily, so why not piggyback on those routes, decrease costs, and pass those savings on to customers?

The key is linking strategic thinking with technology to make those last steps more efficient and cost-effective. For example, a one- or two-delivery drop-off can be more expensive than a delivery that has five to ten stops that are logically planned. So how can we become more efficient? Technology has the power to disrupt the status quo and create maximum efficiencies for last mile logistics. The key is to identify those solutions and find the right ways for your business to maximize efficiency and create additional savings.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

How Does UPS SurePost Work?

By | News

Shipping is an important piece of the puzzle for most companies. But it’s not just about shipping quickly enough to make customers happy or shipping efficiently enough to realize productivity gains — it’s also about achieving lower costs without compromising the outcome.

Saving 10 percent on shipping costs might not seem like a large gain, but when you apply this to a company with high costs, the bottom line can see significant improvements. When this number is raised even higher to 20 percent, those gains quickly multiply.

When breaking down shipping, the final leg, known as the “last mile” regardless of actual distance, is where costs accumulate. That last mile might be a few blocks or 100 miles, but regardless, it’s where a large portion of your shipping dollars are going. As a result, reducing shipping bills and realizing sustainable cost savings start with this single factor.  

A key strategy for driving down costs is using a well-known shipping service that is already achieving success but has created a method specifically for targeting these last mile delivery costs. Driving that big, heavy UPS truck to your shipping destination is expensive. This is especially true when dealing with rural deliveries. As a result, UPS found a way to make that final leg of delivery less expensive, passing those savings along.

That service is called UPS SurePost (similar to FedEx SmartPost), and it’s a good solution for many businesses looking to reduce shipping costs and preserve the quality of delivery. But what exactly is UPS SurePost and how does it work?

What is UPS SurePost?

Before services like UPS SurePost, shippers were at a loss for what to do when faced with expensive last mile delivery costs coupled with negative feedback from customers about the high cost of shipping.  One of the drivers behind these complaints was the high cost associated with an increasingly popular free-shipping option. In fact, nine in 10 consumers say free shipping is the No. 1 incentive when making a purchase, according to Marketing Land.

As a result, UPS created an option that would focus on driving down the costs of the last mile so it could pass that savings along to customers. The existing model included using its own resources — big trucks, fully staffed shifts, and running many deliveries a day, sometimes to rural and expensive delivery areas. In contrast, the last mile needed to be more efficient, so the company had to think differently and utilize resources that were already in place.

The United States Postal Service has a long history of delivering packages in the United States, and what’s more, it delivers to most addresses in the United States on a daily basis. Since the USPS is visiting everywhere daily, what would happen if UPS teamed up with the postal service for the last mile of delivery, saving its trucks from duplicating delivery efforts? This is the basic strategy behind UPS SurePost, and it’s how it saves shippers money.

However, there are some differences between the traditional service and that of UPS SurePost. For example, with traditional UPS service, a package may require a signature. In this case, the UPS driver cannot leave the package and must instead revisit the address until a signature is obtained. With SurePost, this option is not available, and packages are delivered to the address on the first attempt, which is outlined in the terms and conditions.

When considering this option, you might also wonder about limitations and how large packages can be to achieve these savings. The options for delivery are outlined here, but a quick summary includes the following.

  • SurePost less than 1 lb: 1 ounce – 15.9 ounces. Package dimensions cannot exceed 130″ (length × twice width × twice height).
  • SurePost 1 lb. or greater: 1 lb. – 70 lbs. Package dimensions cannot exceed 130″.
  • SurePost Bound Printed Matter: 0.05 kg – 15 lbs. Restricted to books and printed material. Requires a SurePost Bound Printed Matter contract in addition to a SurePost contract.
  • SurePost Media: 0.45 kg – 70 lbs. Restricted to specific items such as binders, films and medical binders. Requires a SurePost Media contract in addition to a SurePost contract.

Once you decide that using SurePost is a good fit, you might have other questions, including some about the potential savings. Exactly how much can you save? Let’s take a closer look into the costs of SurePost to understand the potential savings and whether it’s right for your situation.

How much does SurePost save?

Shipping is a major expense for businesses, and SurePost promises to save you money. Every little bit helps when trimming costs, but is SurePost worth making a switch? It’s estimated that the savings from using UPS SurePost can be as high as 20 percent when compared with UPS’ own residential ground service. And if you’re using a more expensive option than UPS, these savings might be even higher.

In addition, you get further benefits, which we’ll highlight shortly. For example, since the postal service already operates on Saturdays, goods can be delivered on the weekend. Shipping packages to P.O. boxes and military addresses is also possible, a flexibility many other shippers, including traditional UPS service, don’t allow for. These benefits, in combination with cost savings, make SurePost a viable option for those looking to reduce cost and increase flexibility. But there are also drawbacks, and we’ll also cover those shortly.

Understanding the Pros & Cons of SurePost

How would saving 20 percent on shipping costs affect your bottom line? The answer is likely positively. But cost savings aren’t the only benefit of using this option. There are several more potential benefits to consider, including the following:

  • Normal pickup options are available: Using SurePost does not require special treatment for drop-off or pickup. Trips to the post office are not required, and shipments can even be mixed with your typical UPS pickup.
  • Packages are still trackable, even during the last mile: One key feature of UPS is the ability to track packages. You don’t lose this ability when using SurePost. That last leg of delivery with USPS is still trackable with the same tracking number you received when initiating shipping.
  • Integration with shipping software is possible: Software is key when managing large numbers of shipments, and integration is important. SurePost integrates with most software, which is critical if you already have a software program in use.
  • The most expensive part of shipping is managed: As highlighted above, the last mile of shipping is the most expensive piece of the cost. This single factor makes up 28 percent of a shipment’s total costs — nearly a third. SurePost directly tackles this high cost and creates a more cost-efficient option for those who ship large volumes of packages.
  • Access to Saturday delivery is available: The SurePost model dictates that most packages are passed on to USPS for the final leg of delivery. No extra charge is assessed for delivering packages on the weekend — it’s included in the service. This is an important factor because one drawback to SurePost is that it’s slower than traditional UPS service (more on this in a minute). Weekend delivery helps offset this drawback.
  • The ability to ship to more addresses is possible: UPS normally will not deliver to P.O. boxes. Depending on your business, this may or may not be a sticking point. But it’s important to note that since USPS delivers to all addresses, through this hybrid UPS and USPS model, you have the flexibility to reach many places geographically that UPS would not normally go.
  • Packages are primarily lightweight (less than 10lbs) and being delivered to residential addresses.

Members can also use “UPS My Choice” membership, which allows them to use features to reschedule or redirect delivery to an alternative address or The UPS Store. Additionally, upgraded packages may arrive one day earlier.

With all the benefits of SurePost, it’s also important to note there are a few drawbacks. As mentioned previously, SurePost might take a little longer. Making the last mile more efficient does slow down the delivery process slightly. UPS drivers must pass the packages off to USPS, which then must sort them and ensure they get to the correct addresses. Is it cost effective? Yes. But is it slower? Absolutely. But how much slower?

UPS states that packages mailed via SurePost may take anywhere from two to seven days until arrival. Some users report an average delay of about three days when compared with using UPS’ typical service.

The major source of the delay is the transfer of packages from one carrier to the other, but this is also the source of savings. Before using SurePost, it’s important to consider the benefits and the drawbacks to determine what is right for your business. In some cases, when shippers are under intense pressure to offer free shipping, it’s worth the delay as long as customers have clear expectations about shipping times upfront.

Who Should Use SurePost?

SurePost is not right for every shipping situation, but when it’s a good fit, the result of using it can be significant. For example, if you’re worried about rising shipping costs and want to get those costs down and your profits up, this might be a good option. When making the decision about whether this service is right for you, it helps to understand who might benefit most.

  • A large number of packages are shipped weekly: SurePost might not be right for those who ship occasionally, but if you ship a large quantity of packages frequently, it may be a good fit.
  • The last-mile delivery costs are high: Since last-mile delivery makes up so much of the shipping cost, SurePost may be a good option to decrease these costs.
  • Expedited delivery is not required: SurePost is not the right option if you need something to arrive at a destination fast. SurePost does have the added benefit of Saturday delivery, but if recipients expect fast shipping, this is not the right option.
  • Weekly spend with UPS is required to drive down costs: UPS determines negotiated rates based on average weekly spend. Increasing your spending and consolidating shipping from other carriers to SurePost can boost that weekly spend. As a result, you may benefit from lower fees based on increasing this spend.

The best approach is to look at your current shipping costs. Ask this question: Do these shipments need to arrive quickly? If the answer is no, then you may benefit from another option, and in the case of reducing last-mile costs, SurePost is a viable solution.

Moving Into the Future With Greater Efficiency

UPS SurePost offers a good balance of a low price and a reasonable delivery speed. It also offers significant savings over typical ground shipping options by offloading shipping to a large delivery area to USPS, which is already visiting many of the locations and can handle Saturday delivery.

When looking at the market, there is no shortage of shipping options. But the key is to find a match between the customer’s expectations and the most cost-effective method for delivery. Once you find this match and utilize creative options to slash that last-mile cost, you can create maximum efficiencies within your business.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract audit and negotiation services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts and saved our clients an average of 19 percent.

2018 FedEx & UPS Peak Season Surcharges

By | Conferences, Contract Negotiation, Invoice Auditing, News

The FedEx/UPS near-duopoly has allowed the two large carriers to control marketplace pricing for years, echoing each other’s rate hikes to the detriment of parcel shippers, small and large. It’s no surprise then, on the heels of UPS’ latest intra-year pricing changes, that FedEx has recently announced its own set of rate increases, effective September 3rd.

The Additional Handling surcharge, for packages weighing greater than 70lbs, will increase from $12 to $20 for domestic express, international express, and domestic and international ground. Similarly, July 8thsaw UPS raise its Additional Handling surcharge on packages weighing more than 70lbs from $12 to $19 and increased its Large Package Surcharge from $80 to $90.

FedEx’s Unauthorized Package Charge will increase 125%, from $300 to $675, keeping them in line with UPS’ increased Over Maximum Limits charge which jumped from $500 to $650 on June 4th.

In addition, shippers will also see incremental, “peak” seasonal increases by FedEx to some of these surcharges to domestic express and domestic and international ground shipments between November 19thand December 24th. Compare these to the peak increases that UPS will institute between November 18thand December 22ndto all service levels and all domestic destinations.

  • FedEx Additional Handling:  $3.20 / UPS Additional Handling: $3.15
  • FedEx Ground Unauthorized Package Surcharge:  $150 per package / UPS Over Maximum Limits: $165 per package
  • FedEx Oversize Charge:  $27.50 / UPS Large Package: $26.20

Shippers saw changes to these same charges earlier this year, in terms of the surcharge amount as well as to how they’re calculated.

These rate increase announcements signal the continuation of a trend that began last year. The carriers don’t want these packages in their parcel network, but in their freight/LTL network. If shippers don’t adjust accordingly, they will find themselves paying a premium.  Expect this trend to continue.

The one area FedEx and UPS differ, in terms of these latest rate increases, is the Peak Residential Surcharge. Surprising many, FedEx will not implement this surcharge for the second straight year, while UPS will not only apply the Peak Residential Surcharge once again, but will raise the rates established last year.

ups and fedex peak season pricing

This could give FedEx a competitive advantage with shippers looking to shift some volume prior to peak.

LTL Fuel Surcharges: A Helpful Guide

By | Contract Negotiation, Invoice Auditing, News

Millions of businesses around the world rely on less-than-truckload (LTL) shipping for their logistical needs. LTL shipping offers freight service at low costs, making it a great choice for shippers looking to move bulk products at attractive rates. However, like other shipping options, LTL shipments can incur a number of additional surcharges.

These accessorial charges can quickly add up on LTL shipments, yet it’s not always clear what surcharges are being applied to your shipments and when they are being applied. Many shippers simply don’t pay close enough attention to their shipping invoices to see the significant impact that accessorial charges have on their overall shipping costs.

In order to shed some light on this topic, we’ll share some details about important surcharges that can be applied to your LTL shipments. We’ll break down what these charges are, when they are applied to your shipments, and provide some helpful insight into ways to reduce or eliminate surcharges altogether.

What are Shipping Surcharges?

Shipping surcharges are fees that are added to a shipment by carriers as a means of offsetting costs or charging for an extra service. Shipping surcharges can be applied for a wide array of services and extra handling costs. Nearly all special delivery requirements, including Saturday delivery and even residential delivery incur a shipping surcharge. Different types of shipping surcharges are often added to the same shipment, leading to a substantial increase in the cost of the shipment.

Despite the impact on the cost of shipping that surcharges can have, many merchants and businesses fail to accurately assess how shipping surcharges are affecting their shipping costs. A contributing factor to this is the vague way that surcharges are invoiced, making it difficult for shippers to discern what specific surcharges have been applied and what the rate for the surcharge is.

Surcharges often appear on an invoice as a service or handling fee. Identifying what you are paying in surcharges is made even more difficult by the fact that surcharge pricing and naming varies among carriers, and carriers often apply surcharges to a shipment after it has been accepted. This highlights one of the primary challenges shippers face in quantifying and understanding the role that surcharges play in their shipping costs.

What is a Fuel Surcharge?

Fuel surcharges are fees that are widely applied by carriers to shipments within their network. Simply put, fuel surcharges are used to offset the cost of fuel. This charge is in the form of a percentage that is then applied to the base shipping rate. Each carrier determines the fuel surcharge in their own way, so fuel charges vary between carriers. Carriers also reserve the right to change the fuel surcharge at any time, including how it is calculated.

Carriers use fuel surcharges to maintain profit margins if fuel costs rise. This makes sense, given that fuel represents the second largest expense for carriers. Because most shippers are in a long-term contract with carriers, the carriers must be able to account for rising costs of fuel over the course of that contract in order to maintain a profit. Major carriers typically update their fuel surcharges weekly, and calculate fuel surcharges based on the U.S. On-Highway national average for a gallon of fuel, which is provided by the U.S. Energy Information Administration.

LTL Fuel Surcharge

If you are shipping through an LTL carrier, it is almost certain that you are being charged fuel surcharges. LTL carriers apply fuel surcharges to almost every shipment, and they base their fuel surcharges off of the on-highway average cost for a gallon of diesel fuel, the same way they calculate it for other shipment types.

LTL shipments tend to have a much higher fuel surcharge applied to them. LTL fuel surcharge costs vary between carriers, as each carrier calculates theirs differently. For example, FedEx LTL fuel surcharge information can be found here, while the current UPS LTL fuel surcharge percentage can be found here. Although they are based on the same fuel data provided by the government, they may be different due to unique calculation methods that each carrier uses.

For shippers that utilize LTL networks, fuel surcharges represent a substantial portion of their total shipping costs. As such, it is important to explore avenues to reduce these fees. In order to do this, the most important tool that a shipper can have is a means of collecting comprehensive data on all of their shipments.

By doing so, they can quantify exactly how much they are paying in fuel surcharges per package. Once they have this information, a shipper can leverage that data to negotiate a more favorable pricing contract with their carrier. For example, a carrier may reduce fuel surcharge pricing on LTL shipping for a business in exchange for a higher base contract cost. If you know how much you are paying in fuel surcharges, then you can accurately determine if this would drive down your total shipping costs.

Additional LTL Shipping Surcharges

Although fuel surcharges are the most common accessorial fee applied to LTL shipments, there are a number of other fees that can be added to your shipping costs as well. Because these surcharges are often added onto your invoice after the shipment has been made, they can be difficult to anticipate or monitor. It is important to remember that, like fuel surcharges, many other accessorial fees can be negotiated down with your carrier. This can represent substantial cost savings for shippers that incur these fees frequently.

Lift Gate Surcharge

A lift gate surcharge is applied by LTL carriers for shipments that require the use of a lift gate. When calculating your base rate for LTL shipments, carriers assume that the destination address has a loading dock that your shipment can be unloaded on. Addresses that don’t have a loading dock require the driver to use a lift gate to lift or lower packages for delivery.

The lift gate surcharge is a means of offsetting the cost for both the lift gate and time it takes for the special handling of the package. Lift gate fees vary between carriers. If you find that you are frequently being charged a lift gate surcharge, you may consider negotiating a more favorable rate with your carrier of choice to reduce these fees.

Oversize or Extreme Length Freight Surcharge

A handling surcharge is applied to shipments that contain very large packages. Typically, shippers will encounter these fees if the packages they are shipping are 12’ in length or greater. (Note: some carriers are starting this charge at 9’ now.) This fee is called different things by different carriers, including an oversize item surcharge or extreme length freight surcharge. The cost of this surcharge also varies between carriers. In order to accurately track when you are being charged these, you may consider relying on a third-party logistics provider that can provide detailed analysis on your invoices.

Residential Surcharges

As the benchmark report demonstrated, residential surcharges are very common. Residential surcharges are applied by LTL carriers on shipments that are delivered to a residential address. Deliveries to homes are considered residential deliveries by carriers. This is true regardless of whether a business operates out of the same structure.

UPS considers a residential address a house that doesn’t have a publicly accessible address. Because residential delivery fees can be substantial, shippers that use LTL carriers may consider transferring the package to another carrier or delivery network before final delivery to a residential address.

Limited Access Charges

LTL carriers can apply a surcharge for any shipment being delivered to an area that is deemed to have limited access. This can often be difficult for shippers to know prior to shipment. This fee can apply to a wide range of delivery areas, from construction sites to military bases, airports, or piers.

If you are frequently incurring a limited access charge, you should consider negotiating a reduction in these fees with your carrier. For example, if a high proportion of your shipments go to an area with limited access, like a military base, your carrier will probably work with you to reduce or eliminate the charge.

Additional Services

There are a large number of additional services that can incur surcharges on LTL shipments. Carriers typically apply a surcharge to any shipment that requires additional handling or services, so the range of surcharges that can be applied to packages is necessarily large.

Services that often incur a charge are scheduled pickup services, signature requirements, deliveries into a building, or deliveries that require the driver to take a payment (Cash on Delivery). Each carrier will either publish their complete list of accessorial fees on their website or provide them to shippers upon request.

Other Factors That Affect LTL Shipping Rates & May Cause Increases

There are other factors that can contribute to shipping rate increases that aren’t considered surcharges. Although these are not surcharges, shippers should still be mindful of these factors when determining overall shipping costs.

These factors include shipping mode, freight type, and freight class. Shipping mode can have a substantial impact on LTL costs. Many carriers offer one, two, or even several tiers of expedited shipping. Each of these tiers has a cost increase associated with it, resulting in a much higher base shipping price.

Freight type can have an impact on your base shipping costs as well. Freight that is hazardous or fragile, for example, will have higher shipping rates because they must be handled differently. Alongside freight type, freight class is worth paying attention to for shippers. A shipment’s freight class is primary based on the freight density of the shipment. Shipments that have less density, or pounds per cubic feet, are considered a higher freight class and charged at a higher rate.

Shippers can often negotiate more beneficial freight class ratings with their carrier. This is referred to as Freight All Kinds (FAK) and allows shipments to be rated at a class that is lower than the actual class.

Summary

For businesses that rely heavily on LTL shipping, being aware of what surcharges you are incurring on your shipments is crucial to understanding your total shipping costs. This is because shipping surcharges are frequently added onto a shipment after it has been released to a carrier, making surcharges difficult to track and quantify for shippers.

The good news is that the amount you are paying in surcharges can probably be reduced by negotiating with your carrier. Many shippers aren’t aware that carriers are willing to negotiate reductions for surcharges. Central to any negotiation strategy with a carrier is to first know exactly how much you are paying for surcharges, what those surcharges are, and when they are being applied.

Shippers may consider outsourcing this to a third-party logistics provider that can track each shipment, including its dimensions, real weight, billable weight, and any surcharges that were applied to the shipment. This information can then be leveraged to pursue cost reductions in the surcharges that have the greatest impact on your total shipping costs.

fedex-fuel-surcharges

FedEx Fuel Surcharges: What to Know

By | Contract Negotiation, Invoice Auditing

Based out of Memphis, Tennessee, FedEx is one of the most recognized and relied on  package carriers in the world. Processing over 14 million shipments per day, FedEx represents a key logistical resource for millions of merchants, shippers, and consumers in over 220 countries.

Clients find that working with FedEx as their third-party logistics resource can be both beneficial and challenging at times. FedEx provides access to a shipping network that is efficient, reliable, and massive in scale. Yet because of this scale, FedEx often has few competitors, presenting a challenge for businesses interested in alternative shipping options.

One of the primary reasons shippers explore different shipping options is to reduce or eliminate shipping surcharges. Like all other major carriers, FedEx applies shipping surcharges (in addition to transportation charges) to shipments that meet certain qualifications. These surcharges can quickly add up – leading to hefty increases to the total cost of a shipment.

One of the most common surcharges that FedEx applies to shipments is the fuel surcharge. This article will provide more information about what the FedEx fuel surcharge is and explore some avenues you can take to lessen it. We’ll also discuss some other common FedEx surcharges and their cost. This article will provide shippers with a greater understanding of their shipping costs and begin to explore avenues for possible reductions.

What are Shipping Surcharges?

A shipping surcharge is any fee applied to packages on top of the carrier’s base transportation rates. Fees are applied for fuel, residential deliveries, packages requiring signatures, etc. Shipments that have multiple special requirements that fall outside of the bounds of a standard shipment will incur multiple shipping surcharges.

Many shippers won’t know that they have incurred an additional charge on a shipment until they review their invoices. The charges appear on an invoice as a service charge or handling fee in addition to the transportation charges. This can lead to difficulty in keeping track of what exactly you are paying for when you are shipping an item.

Because there are so many different types of shipping surcharges, costs tend to add up quickly for shippers. This, along with the vague way that shipping surcharges are often invoiced, leaves many shippers unaware of how much they are paying in shipping surcharges.

Furthermore, many merchants and businesses don’t realize that there are proven strategies and tools that can help reduce or eliminate the amount they pay in shipping surcharges. The first step in reducing the amount you are paying in surcharges is to understand exactly what shipping surcharges are, when they are applied to your shipments, and what alternative shipping options exist.

Benchmark Report of Surcharges

To highlight the necessity of understanding exactly what shipping surcharges are and why you need to monitor them, we conducted a comprehensive benchmark report at Multi-Channel Merchant. The benchmark report yielded some results that may surprise most merchants.

First, it demonstrated the impact of surcharges on the total cost of shipments. Across a sample size of over 4.6 million shipments, accessorial surcharges accounted for 28% of total shipping charges. Put another way, surcharges can total nearly one-third of all shipping costs. The report also shows the frustration that many shippers feel towards surcharges, with 69% of respondents saying that if they could change their pricing agreement it would be to have fewer surcharges.

In addition to demonstrating the impact of shipping surcharge costs, the report also sheds light on the difficulty many shippers face in pricing agreement negotiations with carriers. 41% of respondents said that they felt that negotiating agreements with carriers was harder. This was primarily viewed as due to a lack of competition between carriers.

However, an important point to highlight here is that pricing agreement negotiation is possible, and data can help. The majority of respondents said that they relied on reporting and benchmark data to drive their negotiation. For shippers looking to save money on surcharges through more favorable pricing agreements, comprehensive shipping data for their operations is essential.

FedEx Fuel Surcharge

One of the more controversial surcharges that FedEx and other private carriers apply to shipments is the fuel surcharge. Fuel charges are applied to shipments to help carriers offset the rising costs of fuel and are calculated as a percentage the package cost. Because fuel surcharges are so common, and because they are calculated differently than other surcharges, they are worth spending some time to understand.

One of the major differences between fuel and other surcharges is that fuel surcharges are updated on a weekly basis. FedEx Ground shipping is subject to weekly rate updates, while FedEx Freight is updated and effective every Monday. This means that shippers must stay abreast of how fuel surcharges are affecting them on an ongoing basis. The current FedEx fuel surcharge can be found here.

As one would expect, FedEx calculates their fuel surcharge based on the cost of fuel. Specifically, FedEx uses the U.S. on-highway average price for a gallon of Diesel Fuel for Ground shipments and the U.S. Gulf Coast (USGC) spot price for a gallon of kerosene-type jet fuel for Express. Both are updated on a weekly basis by the U.S. Energy Information Administration and can be found here (gasoline/diesel) and here (jet fuel).

The FedEx fuel surcharge is a percentage that is applied to the transportation charge, meaning heavier packages and those moving longer distances will have a much higher fuel surcharge. The FedEx fuel surcharge is applied to a variety of shipping methods, including FedEx Ground, Express, and Freight. The fuel surcharge is applied on the net package rate and in addition to other transportation-related surcharges, such as residential delivery, on-call pickup, and oversize packages.

When looking at the fuel surcharge rate percentage you may notice that it differs from other carriers that you use. This is because each carrier calculates fuel surcharges differently. This is one controversial aspect of fuel surcharges. Because there is no law requiring carriers to calculate fuel surcharges the same way, and because fuel surcharges are a way to maintain profitability even when fuel costs rise, fuel surcharges can seem more tied to profit margins than to the actual cost of transporting goods.

Additionally, carriers aren’t actually required to pass on the money they accrue from fuel surcharges to the freight carrier or transporter who actually purchased the fuel. All of these factors can lead to frustration on the part of shippers.

There are a number of different strategies that shippers use to reduce the amount they pay in fuel surcharges. One of the most effective is data-driven. If shippers utilize a software platform that can track and analyze their comprehensive shipment data, they can then leverage that data in negotiations with carriers. Shipping carriers are often open to negotiating reductions in their fuel surcharge rate. For example, a shipping carrier may substantially reduce your fuel surcharge rate in exchange for a higher base shipping price.

For many merchants, this would result in significant net savings. In addition, shippers can use their data to show lower fuel surcharges with a competitor which may push the carrier to reduce their surcharge to match the competition. Lastly, while private carriers apply fuel surcharges to a variety of shipments, the U.S. Postal Service does not. Therefore, shippers may consider utilizing USPS Priority or Express shipping in order to avoid shipping surcharges.

Additional FedEx Shipping Surcharges

In addition to fuel, FedEx applies a variety of other surcharges. They can add up quickly, leading to substantial cost increases per shipment for many merchants. We’ll go over some of the more common FedEx surcharges in this section and break down what they are and how much they will cost you. This list will focus on only some of the most common surcharges, but you can access a full list of surcharges and how much they cost here.

Additional Handling Fee

The additional handling fee was introduced by FedEx in June of 2016 with UPS  introducing a similar fee shortly thereafter. The thresholds for the fee were updated in January 2018. Essentially, the additional handling fee is a fee applied to items whose dimensions, weight, or packaging exceed the thresholds set by FedEx.

A package may not exceed 48 inches on its longest side, 30 inches on its second-to-longest side, or 70 lbs. There are also a variety of restrictions on packaging type. The additional handling fee applies to domestic and international Express, Freight, and Ground shipments. For domestic and international ground and express shipments, a fee of $12.00 is applied to each package. For domestic freight shipments, a fee of $140.00 is applied to each freight handling unit.

The introduction of additional handling fees hit certain shippers much harder than others. Specifically, merchants who regularly shipped items that exceeded the size thresholds set by FedEx saw a substantial increase in their shipping costs almost overnight. While many shippers who are most affected by additional handling fees are already highly aware of them because of this, they may not know that there are a couple of different ways to go about reducing these fees.

First, it isn’t always easy to know exactly when you are being assessed an additional handling fee. Discerning this requires the use of a robust analytics platform that can analyze each shipment and the associated fees. Merchants that are incurring a high number of these fees are encouraged to perform a line-by-line audit of their invoices to pinpoint exactly how often they are being charged for them.

Many shippers are being assessed additional handling fees on otherwise lightweight packages, when they could simply use a smaller shipping container. As a final option, shippers can seek to negotiate more favorable pricing contracts that reduce or eliminate additional handling fees for their packages.

Delivery Area & Extended Area Surcharges

Delivery area and extended area surcharges are applied to shipments that fall outside of normal shipping locations. The addresses or destinations that fall into these categories are determined by the carrier. These may appear on your invoice as a delivery area surcharge (DAS), or extended delivery area surcharge (EDAS). These surcharges were put in place to offset the costs of deliveries to out-of-the-way or rural areas.

For FedEx, these charges are assessed based on the ZIP code where the package is being delivered. The use of ZIP codes to determine when to apply the surcharge is problematic for a number of reasons. First, ZIP codes are inexact and may be shared across a wide range of locations.

For example, a business based in an urban area may share a zip code with a rural area and may be charged for a delivery area surcharge on every shipment. The complete list of U.S. ZIP codes that are included in this fee can be found here.

An important caveat to keep in mind is that FedEx operates multiple independent delivery networks for Express, Commercial Ground, and Residential Ground delivery, and the delivery area surcharges differ for FedEx Ground Commercial with Residential Delivery and FedEx Home Delivery.

Because of this, shippers must ensure that they are shipping within the network that will reduce the surcharges that they are paying. One of the best ways to reduce costs associated with delivery area surcharges and extended area surcharges is to carefully select the appropriate delivery network.

For example, if a delivery to a residential address falls into a ZIP code that incurs a delivery area surcharge, the shipper would save $1.10 per shipment by shipping the package through FedEx Home Delivery rather than through FedEx Ground since both the residential and delivery area surcharges are lower for residential packages moving through the Home Delivery network.

Oversize Charge

FedEx will apply a substantial fee of $80.00 per oversize package. If your package exceeds the thresholds set forth by FedEx, then an oversize charge will apply. Packages that exceed 96 inches in length or 130 inches in length and girth are considered an oversized package.

For shippers that frequently ship oversize packages, the best course of action to reduce the amount of money they are spending on surcharges is to negotiate more favorable pricing in their contract. In order to do this, shippers will need comprehensive shipping data from past shipments that have incurred this charge. Often, carriers will reduce the oversize package surcharge in exchange for a higher base shipping rate which can result in substantial cost savings over time.

Residential Delivery and Pickup Charges

FedEx will also apply a fee for deliveries to residential addresses. In addition, FedEx charges a wide variety of fees for shipment pickup. Pickup fees are assessed on a weekly basis, and depend on whether the pickup location is residential, same-day, or in an extended delivery area. Residential delivery fees are based on the destination address, regardless of if a business is operated out of the same address. This leads to frustration and confusion, particularly for small businesses that operate out of a residence, or where businesses operate out of a building that has been rezoned from commercial to residential.

The most effective way around residential delivery surcharges is simply knowing what your options are. FedEx operates multiple independent shipping networks that can perform residential deliveries, but using the right one will result in the lowest package charge.

Additionally, shippers can consider shipping through USPS, which doesn’t charge a residential delivery fee. Alternatively, shippers can ship via FedEx SmartPost, which utilizes USPS for the final leg of the shipment and eliminates residential delivery fees.

Summary

FedEx shipping surcharges can quickly add up for shippers that aren’t paying close attention to their shipping costs. As we have seen, these surcharges are applied to shipments for a number of different reasons and range from fees associated with fuel to residential deliveries. The most important step a shipper can take towards reducing the amount they are spending in surcharges is to collect comprehensive data on their current shipping.

This can be difficult due to the obscure way that shipping surcharges are invoiced. Outsourcing this to a third-party logistics provider like Shipware can be a cost effective means of accessing detailed shipping information across all of your shipping channels. This data will potentially highlight areas where you are overpaying for shipping surcharges and can be leveraged to negotiate more favorable pricing on surcharges. Remember, surcharges account for up to one-third of all shipping costs, making this a top area for cost reductions.

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Types of Shipping Surcharges: A Guide

By | Contract Negotiation, Invoice Auditing, News

The cost of shipping continues to rise – making it very challenging for merchants to maintain profit margins in today’s competitive markets. One of the major sources for the rise in shipping costs is the abundance of shipping surcharges imposed by carriers. Shipping surcharges are tacked onto shipments for a variety of reasons and can add significantly to the cost of shipping goods both domestically and internationally.

The challenges facing merchants are twofold. Shipping surcharges tend to add up quickly yet remain obscure and difficult to discern for merchants that don’t pay particularly close attention to their weekly invoices. Maintaining ongoing oversight over shipping surcharges requires time and extensive knowledge of the shipping industry. Additionally, the way that each carrier applies surcharges varies – which only adds to the amount of information logistics managers need to keep top-of-mind when they are reviewing their invoices.

These factors make being aware of shipping surcharges and keeping track of them over the long-term difficult and time-consuming. In order to shed light on the impact of shipping surcharges, this article will explore what a shipping surcharge is, what different types of surcharges exist, and how they vary by carrier.

We’ll also provide some insight into how merchants can save money on shipping surcharges or even avoid them altogether. This information will prove beneficial for merchants looking to reduce their bottom-line, expand their profit margin, and eliminate paying for needless shipping surcharges.

What Are Shipping Surcharges?

Many merchants may be vaguely aware of what a shipping surcharge is, but may not realize that there are a variety of different surcharges they can be hit with. Gaining a greater understanding of what exactly a shipping surcharge is, and what specific types of shipping surcharges exist on the market can illuminate the extent to which shipping surcharges impact their shipping costs.

Shipping surcharges can appear on invoices as a number of different things, but most often are categorized as a “service fee” or “handling charge”. Regardless of how they are labeled, these fees tacked onto a shipping invoice all represent a shipping surcharge.

At the most basic level, a shipping surcharge is a fee that is added to the base cost of transporting goods. Thus, service fees and handling charges are a vague way of referring to a shipping surcharge.

The wide range of shipping surcharges further lend to confusion for merchants and make it more difficult to assess what their base transportation costs are. Private carriers like FedEx and UPS apply a number of different surcharges to shipments in order to offset transportation costs or additional handling associated with a package. These shipping surcharges can include things like residential delivery fees, signature fees, fees for deliveries outside of normal service areas, and fees for Saturday or weekend delivery.

Typically, private carriers adjust their shipping surcharge rates an annual or biannual  basis, while things like fuel surcharges tend to be updated on a weekly basis. This can lead to unexpected jumps in shipping prices for merchants on a weekly or semi-annual basis. For example, rising oil prices one week will almost certainly lead to an increase in fuel surcharges in the following weeks.

In contrast to private carriers, the U.S. Postal Service does not apply shipping surcharges for fuel, Saturday deliveries, or residential deliveries. This important difference between carriers can result in substantial savings for merchants who are selective about their shipping carrier. Merchants must recognize the differences between carriers and weigh the costs versus benefits of utilizing a private carrier.

If using a private carrier, merchants must stay informed about changes to shipping surcharges on an ongoing basis and apply that knowledge to each shipment. Merchants must determine the current shipping surcharge rates for private carriers and then account for how those surcharges will impact their shipping costs with an eye towards the weight of their shipment, their delivery area, and any special handling considerations their shipments require. If merchants fail to pay attention to the way shipping surcharges affect their shipments, they may be paying significantly more for their shipments than necessary – even when more cost-effective options exist.

Types of Shipping Surcharges

The broad spectrum of shipping surcharges that can be applied to shipments can have a substantial impact on shipping costs. At the same time, they can lead to confusion for merchants attempting to calculate how much they are paying for shipping surcharges for each shipment.

Understanding the types of shipping surcharges that appear on your invoices can provide insight into where you can save costs while continuing to maintain timely shipping speeds. The following breakdown of the types of shipping surcharges can help merchants make more informed decisions about their shipping needs and avoid any unnecessary shipping costs.

Fuel Surcharges

Fuel surcharges are calculated by private carriers on an ongoing basis and are tied to the market price of fuel. For carriers, fuel surcharges represent an important facet of maintaining ongoing profitability due to long-term contracts with shippers. If rising fuel costs aren’t adequately accounted for, private carriers can lose money on each shipment they deliver.

Tracking changes to fuel charges is important because fuel surcharges can lead to a substantial increase in shipping costs for merchants. We recently conducted a study that determined that fuel surcharges across over 2.5 million shipments resulted in an additional $2.2 million dollar cost for those shipments, or roughly $0.88 more per package.

Fuel surcharges are calculated by each private carrier, which accounts for variation in fuel surcharges between carriers. Gaining a greater understanding of how these surcharges are calculated can illuminate the crucial role that fuel surcharges play in determining ongoing costs.

In order to illustrate this, let’s take a closer look at how two of the major private carriers in the United States calculate their fuel surcharges. Both UPS and FedEx calculate their ground fuel surcharge according to an index reference based on the U.S. Average On-Highway Diesel Fuel Price that can be found here.

UPS fuel surcharges go into effect each Monday, and are calculated from their index reference for fuel charges from the two-weeks prior to the rate change. In contrast, FedEx calculates their ground service fuel surcharges slightly differently by only drawing from the average diesel cost for the previous week. Shippers can find more information about current FedEx fuel surcharges for different services and how they are calculated here, and UPS fuel surcharges here.

Fuel Surcharges: Tips for Shippers

Fuel surcharges can result in substantial changes in shipping costs due to the volatility of the international oil market and the subsequent impact on rising fuel costs. Although both FedEx and UPS calculate their fuel surcharges from the same data source, the period of time they are considering is slightly different, leading to discrepancies in fuel surcharges between the different carriers.

What many shippers don’t know is that fuel surcharges can often be negotiated with carriers to bring down the cost of shipments. As such, shippers can use this information to their advantage by leveraging lower costs with one carrier to gain a more favorable rate with their preferred carrier.

Residential Delivery Surcharge

If you are a shipper that delivers directly to residential destinations, it is important to understand what residential delivery surcharges are and how they are impacting your shipping costs. As the name suggests, residential delivery surcharges are fees that carriers levy for deliveries to residential dwellings.

The confusion surrounding residential delivery surcharges comes into focus when determining exactly what constitutes a residential dwelling. Typically, this charge is based on the delivery address, and whether the address is categorized as a residential or commercial structure is up to the carrier.

There are discrepancies between how private carriers determine this. For example, UPS determines an address is a residence if the delivery is to a house and the house doesn’t have an entrance that is open to the public. Therefore, if a shipper is delivering to a business located in a home, they would have to pay a residential delivery fee.

FedEx calculates residential shipping surcharges similarly to UPS in that deliveries to a home address are considered residential deliveries, regardless of if a business is operating out of that address. The key difference between these two private carriers lies in the availability of different delivery networks.

While UPS has only one ground network that makes both commercial and residential deliveries, , shippers could take advantage of FedEx’s Home Delivery network in order to pay a reduced residential surcharge  relative to what they would have paid had they shipped the package via FedEx Ground.

Residential Surcharges: Tips for Shippers

The best way to reduce residential surcharges is to be mindful of different shipping options and networks that allow you to reduce or even eliminate the surcharge completely. FedEx’s Home Delivery is one such network that charges a reduced surcharge for residential deliveries. Other options include utilizing FedEx Smart Post or UPS SurePost. Both networks handle the package for the majority of transit before handing it off to USPS for final delivery – eliminating the residential delivery charge for shippers.

Intelligently utilizing alternate shipping networks can allow shippers to avoid the hefty delivery fees that are tied to residential deliveries. These fees are continuing to rise, making this an ongoing avenue of cost-savings for shippers that will only continue to become more important over time.

Oversize Package Surcharge

The oversize package surcharge is applied to shipments that exceed the weight or size thresholds of private carriers. Incurring an oversize package surcharge can result in a substantial increase in shipping costs for shippers.

According to our benchmark study, 594 oversize shipping surcharges resulted in an average cost increase of approximately $50.00 per shipment over a period of 12 months. This highlights the need for shippers to be particularly mindful of situations where they might incur an oversize package surcharge and to be aware of alternative shipping options for those packages.

Both UPS and FedEx apply oversize package surcharges when a shipment exceeds either the size or weight thresholds they have set forth. For both private carriers, shipments cannot exceed the dimensional girth of 130 inches.

Weight thresholds depend on the delivery network the shipper chooses to use. If a package has a dimensional girth smaller than 130 inches, but weighs over the threshold set by the carrier, then the package is considered oversized and charged accordingly. If a package is over both the weight and size thresholds, then the carrier may apply multiple surcharges.

Oversize Package Surcharges: Tips for Shippers

The most important tip for shippers is to be very mindful of the rates for oversize packages and the thresholds set by the shippers. These rates change frequently, requiring shippers to stay abreast of any rate changes that may impact them.

If shippers frequently ship oversize or large packages, they may be able to leverage rate changes that have a substantial impact on them. For example, shippers that regularly use FedEx for transporting oversize packages may be able to negotiate their contract to eliminate handling fees on those packages, resulting in substantial cost savings.

Saturday Surcharges

Saturday deliveries can be excessively expensive for shippers. If you look at our study, you’ll see that Saturday deliveries cost shippers an additional $13.49 per package. Not only do deliveries on Saturdays incur an extra charge, but Saturday Pickup services also resulted in an average increase of $14.95 per package. For shippers that frequently utilize Saturday Delivery and Pickup services, these surcharges represent a critical channel for cost increases.

As the name would imply, Saturday surcharges are applied to deliveries that occur outside of the normal operating week of Monday – Friday. Since customers are increasingly expecting deliveries to occur on Saturdays, shippers must explore alternative avenues of delivery. One of the most common ways to avoid Saturday surcharges is to ship packages via USPS Priority Mail. Priority Mail doesn’t apply a surcharge for Saturday deliveries, which is a boon for shippers that have a desire to meet their customer’s expectations for weekend delivery service.

Other Surcharges To Be Aware Of

Although we’ve explored some of the most common surcharges that shippers see, there are a number of other less common surcharges that can also substantially impact shipment costs. These surcharges include:

Signatures (Adult, Direct, Indirect)

This is a surcharge for packages that require a signature upon delivery. Signature surcharge prices vary depending on the service. Adult signature surcharges average $4.15, while direct signature surcharges average $3.12 and indirect signature surcharges average $1.92.

Address Correction

Address correction surcharges are applied when a shipment has an incomplete or incorrect address that the carrier must seek to correct. The average cost of an address correction surcharge on ground deliveries is $10.83.

Delivery Area Surcharge

A delivery area surcharge is applied for shipments whose destination is outside of the standard delivery area for that network. The average costs of a delivery area surcharge is $2.58.

Declared Value Surcharge

A declared value surcharge is applied to packages whose value exceeds the carriers liability limit. Typically this limit is $100.00. The average cost of a declared value surcharge is $10.91.

Weekly Service Charge

The weekly service charge is applied for shippers who have regularly scheduled pickups from a carrier. The average cost of a weekly service charge is $12.65.

How to Avoid or Lessen Shipping Surcharges

There are a couple different avenues through which shippers can reduce the amount they are spending on shipping surcharges. One of the most impactful things that shippers can do is gain a better understanding of how shipping surcharges are impacting their shipping costs, and what alternatives are available that might have reduced or eliminated surcharges.

By understanding the different shipment options available to them, how carriers calculate and apply surcharges, and which networks are ideal for specific packages, shippers can reduce what they pay in shipping surcharges or avoid them entirely. Shippers can also use this knowledge to renegotiate carrier contracts that are more beneficial to them. For example, a shipper that frequently ships oversized packages may be able to leverage differences in rates and thresholds between carriers to reduce or eliminate the surcharges associated with oversize packages.

In order to avoid overpaying for shipping surcharges, shippers need to be aware of what a shipping surcharge is, what the different types of surcharges are, and how they are calculated. With this base of knowledge, shippers can make more intelligent choices about how their packages are shipped.

One of the main challenges that face shippers is keeping track of this information. Shipping surcharge rates change frequently. Fuel surcharges for private carriers change weekly, while other surcharges are typically updated on an annual or bi-annual basis. Utilizing a third-party logistics provider can help businesses itemize their shipments, accounting for each shipping detail and supporting a data-driven approach to their shipping logistics.

By combining detailed shipment analysis with other tactics to reduce shipping surcharges, like renegotiating contracts with carriers, shippers can reduce their shipping expenses and, consequently, their bottom-line.