While individual parcel shipping surcharges may seem small, they can easily add up and have a large impact on your bottom line.
More goes into the number on your shipping invoice than just the cost of freight, handling, and gas. Often, there’s an extra fee added to the shipment cost, known as a surcharge. These surcharges account for a wide array of shipment services and scenarios, such as shipping during peak season, shipping above volume thresholds, rush shipping, an immediate shipment pickup, or shipping an oversized package. These surcharges change every year, and sometimes even multiple times per year, depending on peak season.
While individual surcharges may seem small, they can easily add up and have a large impact on your bottom line. And due to the fluctuating nature of the carrier market, it can be difficult to appropriately budget for these surcharges.
The Parcel Shipping Market is Volatile
In November of 2021, we saw a hike in surcharges from major carriers. For example, UPS raised its fuel surcharge by 1% on all U.S. air and ground services.
While this sounds like a simple update, there was also a general rate increase of 5.9% in 2022 for any UPS and/or FedEx shipment, a reaction to the impact of peak season, during which the COVID-19 pandemic triggered a large wave of e-commerce purchases amidst unprecedented supply chain disruptions. Sure, these rate hikes are implemented to help carriers protect their bottom lines by managing capacity and keeping deliveries on time in a period of growing demand, but they also put a strain on your budget, especially when occurring in tandem with surcharges.
Typical surcharges fall into categories such as:
- Transportation – Because of rising fuel costs and the surge of e-commerce orders, surcharges may apply to certain ground deliveries.
- Global shipping – Delays due to COVID-19 impacted many global carriers, making high-turnaround deliveries more expensive.
- Bulky, odd-sized items – Additional handling costs for oversized or bulky packages can incur a surcharge.
- Peak season – Carriers usually announce new peak season surcharges to ensure they have enough capacity to deliver their orders.
Staying up to date with surcharge announcements and communicating with your carriers is the best way to monitor any changes that may affect your shipping operations.
Manage your Parcel Shipping Costs
While carrier surcharges are often a cost of doing business, you’re not entirely at the mercy of the market. There are steps you can take to fortify your bottom line against any rate changes and/or surcharges that may occur.
- Consolidate your parcels – Often, the same customer/recipient places multiple orders in your order management system within minutes of each other. Without adequate planning to take advantage of packing those orders into one container, you’re paying for multiple, individual parcel movements when perhaps you could pay for one LTL movement. Using a cloud multi-carrier shipping solution to automatically consolidate parcel shipments can help you save, especially on international shipping costs. A parcel shipping solution can perform these consolidations either at the time of order or at the end of the day to reduce your transportation costs.
- Establish an invoice audit process – Auditing your carrier invoices is crucial to ensure the service levels for which you’re paying are being delivered. Invoice errors can add up quickly and have a major impact on your bottom line. Multi-carrier shipping software can automate these audits, flagging discrepancies between expected costs and carrier invoices to give you greater control over your transportation spend.
- Invest in Business Intelligence – The right multi-carrier shipping software will include Business Intelligence (BI) to help you extrapolate the impact of various transportation scenarios across significant data sets. These analyses will enable your carrier negotiations and transportation budgets to take shape, empowering you to make cost-savvy supply chain decisions that align with your business strategy.
- Plan now – Waiting to adjust your shipping operations after a surcharge is announced will only hurt your organization. Make sure you’re partnering with a parcel shipping system provider that has an expansive library of carrier integrations. This will automatically enable you to deploy a multi-carrier shipping strategy and offset surcharges. Furthermore, it will help you manage your contracted capacity so that you don’t exceed your volume thresholds and incur unwanted surcharges. For example, good warehouse management software, integrated with multi-carrier parcel shipping software, will measure shipment volumes against carrier capacity thresholds automatically to help you optimize your shipping strategies – essentially maximizing capacity utilization to minimize transportation spend. And by understanding how much product can ship with each contracted carrier at one time, you can also communicate accurate lead times and manage shipping expectations with your customers.
Find your Remedy to Parcel Shipping Surcharges with Logistyx
Logistyx’s expert parcel shipping solutions can help your organization manage any surcharge fluctuations and audit your carrier invoices to keep overhead costs low. Reach out to us today to learn more about our latest parcel shipping tools and technology.