Mitigating Hefty New Parcel Shipping Surcharges this Holiday Season

Parcel shipping services will be in high demand for peak holiday season this year as more consumers are shopping online due to the coronavirus pandemic. As a result, the new wave of peak surcharges from major carriers poses a significant burden for retailers and ecommerce companies – and they’ve already hit.

In August, FedEx, UPS and even the U.S. Postal Service unveiled new surcharges that will significantly impact ecommerce shippers anticipating record volume during the holiday season. Fees from FedEx and UPS target high-volume, enterprise shippers, while a first-time peak surcharge from the USPS applies to all commercial shippers. The carriers will also charge additional fees for oversized packages during the holiday season.

4 Tips to Help Mitigate the Impact of Seasonal Surcharges

To accommodate the seasonal surcharges in the short term, you may need to adjust your shipping mode/speed, pass the cost increase along to your customers or find another way to recoup costs, such as increasing the cost of goods.

Exploring your transportation options is a smart first step. While increased fees are probably unavoidable if you rely on major carriers, there are creative ways to help mitigate their potential impact. Here are four tips to help get you started:

Do Your Homework

Take time to study the new peak surcharges and estimate their potential cost impact on your shipping budget. You’ll want to consider the average order profile, shipping patterns and current carrier mix. A parcel analytics tool can help determine where the changes will have the greatest impact on your operations based on these variables. Armed with this information, you’ll be better able to focus your mitigation efforts where the ROI will be greatest.

Look for Opportunities to Downsize

With stiffer surcharges for oversized packages, be sure to consider the dimensional weight (DIM) of your packages if you ship large, lightweight items regularly. Confirm that you are using the smallest possible package size and packing the contents efficiently. There’s still time to make changes to improve packaging density before peak season, so you can avoid unnecessary parcel shipping charges, and plenty of helpful tools available.

Explore Your Options

Look for the lowest-cost option to meet your transit commitment. Rate shopping solutions can help you compare transportation costs for a variety of carriers and service levels. You may be able to reduce costs or – if you are already using the most cost-effective option – reduce days in transit.

Determine Your Strategy

Firm up your parcel shipping strategy for the holiday season as soon as possible to allow time for any necessary adjustments. For example, if free or low-cost shipments are a priority, it may make sense to utilize more cost-effective ground service instead of air. If you plan to guarantee two-day delivery, you may want to consider a higher threshold for free shipping. The goal is to find the right balance between cost and service.

Looking ahead to 2021, there is considerable buzz about the possibility for continued surcharges and rate increases. Keep monitoring the situation with potential increases in mind when budgeting for the new year. It is also a good idea to start thinking about longer-term options such as optimizing your distribution network, fine-tuning carrier management and utilizing zone skipping and postal workshare options.

If parcel shipping is not your area of expertise, a third-party logistics (3PL) provider can help you take a strategic approach to parcel management. With conveniently located distribution facilities, advanced technology, established carrier relationships and economies of scale, many are well-equipped to help you navigate the new parcel landscape.

Jennifer Doles is senior manager, transportation, at Saddle Creek Logistics Services

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