In a move designed to capture network costs associated with retailers who fail to meet peak volume commitments, UPS is looking to charge them for shortfalls this year, CEO David Abney told the Wall Street Journal.
The charges would cover costs such as extra workers hired by UPS and surplus space on trucks or in distribution hubs based on retailers’ projections and volume commitments.
“If there are variations to the plan, let’s see what we can do, but we should be compensated accordingly,” UPS CEO David Abney told the WSJ. He added the charge is just one element in ongoing negotiations with large retail customers related to peak season agreements, not meant to punish them for shortfalls.
Abney also said the new pricing will be handled “on a customer-by-customer basis,” taking into consideration its costs associated with any shortfalls.
UPS spokesman Matthew O’Connor said the company is in close communication with major retail customers throughout the year about anticipated needs during the peak holiday season between Black Friday and Christmas.
“What we’re really trying to do is match supply and demand,” O’Connor said. “It’s import to protect the integrity of the UPS network for all our customers, in order to sustain level of service they’re accustomed to. We can’t incur costs of anticipated supply and disregard it when forecasts don’t match the plan.”
In 2015 UPS added surcharges on residential deliveries during peak season to recoup $500 million in network investments it made after the massive delivery issues the previous December. That year an estimated 1 million packages – many from Amazon – failed to reach their destination by Christmas day.