What to expect when you’re expecting a package: a guide to 2018 shipping surcharges

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As peak season nears, EnVista’s Senior Project Manager Mark Taylor gave FUEL 2018 attendees his best tips to navigate the sea of surcharges that lies ahead.

As FreightWaves reported in September, the parcel market has largely been focused on commercial shipments between businesses. However, the last 15 years has seen a dramatic shift in the industry, as the emergence of e-commerce within retail has forced parcel delivery companies like UPS (NYSE: UPS) and FedEx (NYSE: FDX) to rethink their delivery network. The majority of the growth in the parcel industry is now being driven by rising demand for e-commerce, bringing along with it added demand for last-mile residential deliveries.

Retail and e-commerce activity peaks during the holiday months of November and December, and has posed challenges to parcel carriers as they attempt to make tight delivery deadlines during this time period. Last year, UPS alone delivered roughly 700 million packages during peak season, so it’s safe to say that surcharges can add up quickly.

“Even if you’ve negotiated your residential or handling surcharges, that’s invalid during peak season,” Taylor warned. “Surcharges are additive to regular surcharges of the same name. For example, there is both an additional handling surcharge and a peak additional handling surcharge,” he noted.

Incentives on non-peak surcharges also do not carry over to their corresponding peak charges, i.e. a 30% incentive on additional handling does not mean 30% on peak additional handling, Taylor explained.

Additionally, Taylor noted that, for a second year in a row, FedEx will not apply peak season surcharges for residential shipments. The company’s executive vice president and chief marketing and communications officer, Raj Subramaniam stated that “FedEx is demonstrating support for these loyal customers during this critical time frame by not adding additional residential peak surcharges, except for situations where the shipments are oversized, unauthorized or necessitate additional handling.”

Just last month, UPS announced that it expects to hire about 100,000 seasonal employees to support the anticipated surge in package volume that will begin in November and continue through January 2019. E-commerce is projected to continue its strong growth during the holiday season, and the company regularly ramps up hiring to accommodate the peak months.

To facilitate this, UPS brings on additional workers during the peak season to help with sorting and delivering packages.

“Every year, we deliver the holidays for millions of customers,” said Jim Barber, chief operating officer. “In order to make that happen, we also deliver thousands of great seasonal jobs at our facilities across the country.”

Taylor advised audience members to offer a special discount on e-commerce for shipping prior to peak or to hold a Cyber Monday event in order to shift demand outside of peak shipping windows. In negotiating prices, Taylor suggested evaluating by analyzing the costs of your program by service level and surcharges, sorting by the highest costs in your program, and ultimately trying to determine your specific impact for peak surcharges ahead of the holiday season.