Most shippers expect an annual general rate increase from the major parcel carriers. Monitoring these pricing fluctuations can mean the difference between operating profitably and losing money on every e-commerce order.
Shippers often don’t expect accessorial changes and peak season surcharges that carriers introduce at different times throughout the year. In most cases, seasonal demand swings and business peaks drive these cost changes.
This year a global pandemic prompted peak season surcharges. Because these new costs coincided with skyrocketing demand for online shopping, many shippers lacked the visibility required to protect e-commerce profit on every shipment.
An Aug. 7 communication from UPS confirmed that more peak surcharges are coming for the holiday season.
Here are three ways to keep these surcharges from killing your company’s profitability. They’ll become increasingly important as peak season surcharges could become a new year-round norm.
- Carefully Audit Every Carrier Invoice
Go beyond examining the invoice number and dollar amount. Taking the position, “Okay, last week I shipped $75,000 worth of merchandise. That sounds about right,” isn’t a deep enough dive into your parcel invoices.
This high-level analysis doesn’t give you the insights you need to pivot effectively when surcharges are imposed. Get down to the actual package and charge level. This is one of the most important practices in managing peak season surcharges and protecting e-commerce profit.
- Share the Cost – Pass It or Promote It
Don’t assume that these surcharges have to get tacked onto your “costs of doing business.”
As long as it doesn’t affect your competitive position, pass the surcharge costs along to your customers. By strategically aligning products with marketing promotions, you can also increase order value, optimize shipment density and, ultimately, mitigate bottom-line impact of peak-season costs.
If you do have to absorb the additional cost, be sure to factor that into the sale, versus waiting for your parcel carrier’s invoice to arrive and taking it right out of your profit for a specific order.
- Team-up with E-Commerce Partners
Burdened by carrier surcharges and operating in a challenging business environment, shippers may be tempted to only deal with carriers when they have a gripe, a fee that needs to be refunded, or a surcharge that doesn’t apply (but was charged anyway).
These situations generally reach a positive resolution when shippers have win-win relationships with their carriers. This has been a practice for years in the truckload/less-than-truckload sector, where being a “shipper of choice” has become a popular stance for companies that are assessing their total costs of transportation.
The same applies in the parcel space, where we rely on accurate, up-to-date, supporting data when working with carriers on behalf of our customers (versus just managing issues in a one-off manner).
By serving as a link between shippers and carriers (who would otherwise be forced to work with thousands of different customers on an individual level), we are an extension of your parcel team.
Master Your Parcel Program
To help you control costs in an ongoing peak season surcharge environment, we created "Manage the Surge: Avoid Surcharge Shocks, Power Performance." It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your e-commerce profit. And, don't forget to register for our parcel roundtable digital event for more expert insight.