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How to Control Parcel Shipping Costs Despite Carrier Surcharges

The COVID-19 outbreak has impacted millions of people worldwide. With all but essential stores closed, e-commerce sales have increased, particularly for items people can use in their homes, such as toys and games, sports and fitness equipment, and cooking and gardening tools.

While carriers are providing an essential service keeping supply chains moving and ensuring these products make it to their final destinations, social distancing guidelines can make processing orders–and delivering them–more difficult.  For example, a large percentage of commercial passenger flights are grounded, which means carriers no longer have air transport as a ready means of distribution. (Under normal circumstances, approximately half of all air cargo is carried in the holds of passenger planes.) While a number of airlines are piling cargo into the passenger seats of their planes, the capacity is nowhere near normal levels. And in order to manage this high demand and limited capacity, many carriers have added surcharges to their services.

Carrier Surcharge Updates

DHL

Beginning April 1, DHL Express added a temporary Emergency Situation Surcharge to all Time Definite International (TDI) shipments, though the surcharge does not apply to Day Definite International (DDI–road) or Time Definite Domestic (TDD) shipments. Of note: DHL Express is not adding this emergency surcharge to life science and healthcare customers or to any company using DHL Medical Express (WMX).

DHL Express noted these charges reflect the sharp decline in available commercial air cargo capacity and the significant reduction in the number of destinations. As a result, the carrier has had to fly via indirect routes and purchase extra cargo aircraft lift, which, the company states, has increased costs to “unsustainable levels.”

FedEx

FedEx has also added Covid-19 surcharges and echoed DHL Express, citing limited air cargo capacity. Beginning April 6, FedEx added a temporary surcharge on all FedEx Express and TNT international parcel and freight shipments.

UPS

Similarly, UPS also announced temporary surcharges. Beginning April 5, UPS introduced a surcharge on UPS Worldwide Express, UPS Worldwide Express Freight, and UPS Expedited shipments originating in China, including Hong Kong, and destined for both North America as well as a number of European countries.

In addition, on April 12, the carrier increased the peak surcharge, which applies to more ship-from and ship-to origins and destinations for international shipments.

Carriers Fighting Covid-19 Globally

Although the surcharges highlighted above are unwelcome, it’s notable carriers have also been making their networks available to help governments globally respond to the Covid-19 outbreak.  Examples include:

Controlling Parcel Shipping Costs in the Wake of Carrier Surcharges

ebook logistyx quadrant Choosing a TMS for Parcel ShippingControlling transportation costs is important at any time, but at a time when capacity is tight and surcharges apply, it’s even more critical. While most large enterprises understand the importance of tracking and auditing freight costs, a number of organizations don’t apply the same level of scrutiny to their parcel shipping costs.  In our experience, this is usually because parcel shipments comprise a small percentage of overall distribution operations.  However, this is no longer the case.  In fact, for many shippers and logistics service providers, parcel shipments are now an integral part of their transportation mix.

A couple of examples where shippers and logistics service providers can achieve savings in parcel shipping during the pandemic:

Parcel Consolidation

While it’s unlikely shippers and logistics service providers shipping internationally can avoid surcharges altogether, a cloud multi-carrier shipping system will enable “zone skipping” and consolidate parcels, using one carrier to move a consolidated shipment cross-border, and a local carrier for the last mile delivery–reducing total shipping spend.  Added benefit: by using zone skipping, parcels no longer have to travel to multiple sorting facilities to reach their final destination. Instead, shipments to local carriers are faster, which in turn creates quicker deliveries for customers.

Carrier Invoice Auditing and Business Intelligence

For shippers and logistics service providers shipping large parcel volumes, auditing carrier invoices is crucial. Mistakes can, and do, happen. For example, a carrier may bill for a service level promised, but not received, or a carrier may add an unexpected accessorial. These errors can add up quickly and can have a surprising impact on the bottom line.

By leveraging cloud multi-carrier shipping software, shippers and logistics service providers can automate carrier invoice auditing.  All transportation data, from carrier contracts… to delivery events… to carrier invoices, is captured and normalized in the multi-carrier shipping system, which then flags any discrepancies between expected costs and carrier invoices–giving shippers and logistics service providers greater control over their transportation spend.

And the savings don’t stop there.  In addition to the direct cost savings carrier invoice auditing achieves, shippers and logistics service providers also benefit from “soft cost” savings, such as the elimination of time-consuming tasks that include receiving and opening mail, sorting invoices, looking up rates, auditing and approving invoices, paying carriers, and even assigning a general ledger code.  By removing these soft costs, accounting teams can redirect their resources to more critical initiatives.

Furthermore, carrier invoice auditing provides shippers and logistics service providers with an overview of invoiced carrier costs versus carrier agreements, enabling them to ensure their carrier procurement is aligned with strategy and verifying they’re receiving the delivery outcomes for which they’ve paid.  Sophisticated multi-carrier shipping software will also include Business Intelligence to model and compare selected carrier services against actual carrier performance to find routing alternatives with lower cost implications and/or faster delivery times. Business Intelligence can also reveal even more advanced optimization strategies, such as effective ways to position facilities and inventory around the globe.

Respond Now to Carrier Surcharges

If your current shipping capabilities don’t provide opportunities to optimize parcel shipping such as parcel consolidation and carrier invoice auditing, you’re likely missing potential savings and impeding your business’s ability to quickly react to carrier surcharges. To learn more about the latest parcel shipping tools and technology, contact us today.