Brace yourselves
Is there anything more daunting in the Operations and Supply Chain community than the relentless warehouse traffic of the holiday season? Yes, indeed: the holiday surcharges from FedEx and UPS! đ±
These higher charges have historically been a key revenue driver for the carrier giants during the costly operating period. They allow them to hire seasonal workers and manage a surge in volume.
We can expect the 2024 holiday season to be no different. In short, they’re going up, they’re going to last longer, and they’re going to affect nearly every shipper.
UPS Surcharges Hit First
UPS announced the surcharges for the 2024 peak season earlier than ever, and as hinted in their latest earnings call, the charges are aggressive.
Fee hikes will begin on September 29 for bulky and hard-to-handle packages and on October 27 for UPS Ground Residential, Air, and SurePost packages. The surcharge amounts vary by date, peaking between November 24 and December 28, and ending on January 18, 2025.
- The Demand Surcharge is back, revived from 2021, and applies to all SurePost, Ground Residential, and Air packages, no exceptions.
Other surcharges will be similar to last year, although with rate increases:
- Additional Handling, Large, and Over Max Surcharges start in September, peak between Thanksgiving and New Year, and taper off afterward. Over Max surcharges peak at $495âavoid exceeding these limits!
- Peaking Factor:This surcharge will follow last yearâs structure with six tiers based on average weekly volume in June. Expect higher surcharges this year, ranging from $1.50 to $7.05.
Keep in mind: All UPS shippers are subject to these charges. The combination of the peaking factor surcharge and the base all-packages surcharge will drive up costs significantly if not managed carefully. If your discounts remain unchanged, expect to pay 20-50% more in surcharges than last year.
FedEx Surcharges Are Second to None
Similarly, FedExâs 2024 peak season surcharges are on par with those of UPS, differing only slightly in application dates and pricing variations.
Surcharges begin on September 30 for oversized, unauthorized, or packages requiring additional handling and on October 28 for regular shipments across various FedEx delivery services. Prices will peak between November 25 and December 29, with season fees ending on January 19, 2025.
- FedEx has also introduced a per-package peak surcharge starting on October 28 for regular shipments across various services, with no qualifying volume criteria.
- On top of this, youâll need to account for additional volume-based surcharges calculated on the percentage of excess over your baseline.
What can you do to mitigate these costs?
SMBs have a range of strategies at their disposal to manage these expenses, though some require more time and resources than others.
- For example, you could incentivize consumers to shop early, avoiding the highest surcharge periods. This may work with loyal customers or through pre-Halloween promotions, but letâs be honestâthe bulk of orders will likely come with Black Friday deals.
- Many shippers are diversifying their carrier mix this year to reduce transportation costs. Consider regional fulfillment options to cut down on shipping distances and fees, or explore ship-to-store or local pickup options. However, carrier switching during peak season is a bold move and should be weighed carefully against your teamâs capacity.
- Some say UPS announced its surcharges early this year to give clients and reps time to negotiate special discounts on peak surcharges. Carriers may be willing to negotiate, especially with those who are proactive and pay close attention to rate changes. If you have any leverage with your carriers, now is the time to use it. And if you need assistance, weâre here to help.
In Conclusion: Know Your Shipper Profile
At the end of the day, success in this peak season comes down to knowing your shipper profile. If you have desirable characteristics, leverage them at the negotiation table. Unfortunately for many SMBs, the carriers often know your profile better than you do. Parcel data is frequently underutilized, with many shippers failing to regularly download or manage their carrier data. And given tight margins, it is often not feasible to hire an analyst to handle this.
At Betachon, we have the tools, the people, and the experience to help you navigate peak seasonâand all year round. Stop viewing logistics as a necessary burden and start using them as a competitive advantage. Contact us today for a free, no-strings-attached analysis of your shipper profile.