The holiday season is quickly approaching, which means that UPS, FedEx, and, in a historic move, USPS, have announced this year’s peak season surcharges. This year’s surcharges continue to follow some common themes, mainly regarding size-based accessorials (handling, large package, and oversize charges), but they also include some new, high-impact charges, such as Residential Delivery and SmartPost (FedEx only). These surcharge additions are intended to help the carriers make up for the significant capacity constraints they typically experience during peak season, that are compounded by the fact capacity is already stretched thin due to increased volume related to COVID-19. Many shippers are estimating peak season spend to increase by between $100k and $8M, with spend varying based on the shipper’s profile.

In order to maximize efficiency and cost optimization, shippers should implement the following seven best practices for mitigating the impact of this year’s peak surcharges:

1. Consolidate Packages: Shippers, if able, can consolidate multi-package orders into a single larger carton to reduce multiple per package charges. With this strategy, shippers must be mindful of remaining underneath the criteria for large package and additional handling thresholds, as well as be considerate of the dimensional weight of the new consolidated box. 

2. If You Have a Multi-Carrier Network, Shift Volume to Stay Under Thresholds: If a shipper has a “split-carrier” network (i.e. contracts with both UPS & FedEx) or supplemental carriers such as DHL or USPS, there is opportunity to shift volume accordingly to remain under UPS- and FedEx-established residential delivery thresholds. 

3. Enable BOPIS (Buy Online, Pick Up in Store): Shippers can avoid the peak season residential surcharges entirely by implementing a BOPIS program. While this is a drastic change to a shipper’s network, it may be worthwhile for those projecting high impact from peak season surcharges. For non-retail customers, this can still be an option when utilizing UPS access points and FedEx delivery options, such as delivery to Walgreens stores.

4. Negotiate Discounts on Peak Season Surcharges: Historically, shippers have had success in working with their carrier representative to negotiate down the impact of peak season surcharges. It remains to be seen how willing UPS or FedEx will be this season, but this is one of the most worthwhile exercises a shipper can attempt to realize peak season cost avoidance. One important note when negotiating down peak season surcharges is to make sure to receive a commitment from the carrier that these negotiations will not result in new or more severe volume caps. 

5. Identify Highly Impacted Service Levels and Adjust Volume: If there is a specific service level driving a shipper’s peak season charges, volume could be migrated away from that service level to mitigate impact. For example, if a UPS shipper with a high SurePost volume wanted to lower the threshold they are projected to fall within, they could migrate some of that volume to ground, lower their cost per package related to the surcharges and see improved transit times. 

6. Accept the Charges but Remove Volume Caps: While this strategy does not assist with the problem of peak season surcharges, it does help solve another problem many shippers are facing: volume caps. A shipper could accept all peak season surcharges without protest but ask/or require the carrier to remove any current volume caps. 

7. Pass Along Surcharge to Customer: Since this charge will significantly impact some shippers, an option to mitigate some of its effect is to pass along the increased shipping cost to the customer. This can be especially important for shippers who expedite a higher percentage of shipments around the holidays. As the peak factor is based on February averages, shipping a higher than normal percentage of expedited shipments during peak can lead to dramatic spikes in peak season residential charges.

Peak season surcharges, if managed correctly, do not have to break the bank for shippers. Follow the above seven best practices for mitigating the effects of peak season surcharges to see the best results this holiday season.