It’s been a challenging couple of years for businesses around the globe. Companies are looking to reduce costs, but that seems like a difficult task with the continued rise of shipping fees. However, businesses can monitor spending and remain competitive, we’ll find out how later on. For now let’s take a look at the role of the general rate increase and fuel surcharges in driving costs up.
General Rate Increase and Fuel Price Hike
From 2014 to 2021 FedEx and UPS have put forth the same general rate increase of 4.9%, but this year there’s been a noticeable change, with the rate increasing to 5.9%. On top of this, businesses must deal with yet another on-cost, in the form of fuel surcharges.
Freight companies are facing numerous challenges, with the rising cost of diesel fuel adding to their woes. The U.S. Energy Information Agency indicates that the cost of diesel has risen by $1.143 since 2021 and demand continues to rise. Increased fuel costs result in one thing, a hike in supply chain costs.
The Arrival of New UPS Surcharges
On 21st February 2022 UPS announced that their customers would be facing surcharges, including ground UPS fuel surcharge of 12.50%, domestic air UPS fuel surcharge of 14.75%, international air export UPS fuel surcharge of 16.25% and international air import UPS fuel surcharge of 20%.
Existing customers would see the new charges on their next statement and ad hoc customers would also pay more, with the price hike outlined in the shipping and supply chain costs.
The increase in costs seems small, e.g., the ground UPS fuel surcharge has risen by 1.5%. But over a prolonged period, the new fees will have a noticeable impact on freight expenditure. To put this into context, a business normally spending around $2 million annually on freight, would be faced with an additional spend of $30,000 in light of the latest surcharges.
How Will Businesses Cope with the Surcharges?
Businesses may not be able to do anything to stop the fuel surcharges, but they can prepare themselves. By monitoring freight expenditure and keeping abreast of surcharge fees, companies can plan ahead. This ensures there are no nasty surprises when the next bill arrives!
To balance the books, businesses may have to increases their own prices too – passing on all, or some, of the additional costs to their own customers. In a competitive market this can be challenging as consumers don’t take kindly to rising prices.
In order to remain competitive, businesses need to keep costs low. One way to do this would be to shine a light on freight costs and the way in which goods are transported. Surcharges vary depending on the freight method. Domestic air transportation incurs a higher fuel surcharge than ground transportation, so if it’s possible and time allows, ground freight would be a more affordable option.
Aside from reducing costs via considering transportation methods, businesses can also claw back money by tracking the accuracy of their shipping provider. That’s where freight audit services come in.
How Can a Freight Audit Service Help Me?
Companies can engage the services of a renowned audit company, such as Betachon, to carry out a DHL, UPS and FedEx audits on their behalf. This provides the perfect opportunity to reduce small parcel costs, secure refunds and get a better handle on delivery fees.
In a competitive and challenging market-place businesses need to stay on top of costs to retain customers and maximize profits. Fuel surcharges are just one of the many costs’ firms have to face, so it’s more important than ever to get expert help in reducing shipping spend.