In the world of logistics, not only does peak season mean more deliveries, but it also means increased shipping costs. Shipping giant United Parcel Service (UPS) recently made some big announcements about their peak season surcharge.
UPS’ peak surcharges will now be called “demand surcharges.” This news means their surcharges will extend beyond the traditional peak shipping season and routinely apply to packages that require additional handling or are larger in size.
Like their competitor, FedEx, these peak surcharges have increased for 2023. These changes will apply to high-volume shippers who bill more than 20,000 packages a week. Let’s break down the need-to-know details about UPS’ peak season surcharge for 2023.
Key Takeaways:
- UPS peak surcharges are in response to the demand for air cargo capacity and increased service maintenance costs.
- UPS peak season surcharges (now called demand surcharges) will extend beyond the holiday season.
- UPS demand surcharges are subject to change. You should always check with the carrier before tendering your packages.
- Consider partnering with a third-party logistics company to manage and offset the cost of shipping, including peak shipping charges.
An Overview of UPS’ peak shipping surcharges for 2023
UPS peak surcharges are a newer pricing policy established in response to the spike in eCommerce shipments during the COVID-19 pandemic. UPS introduced these surcharges in May 2020 and were implemented as a temporary measure to manage the increased demand for shipping services.
The initial peak surcharges applied to packages shipped via UPS Ground Residential and UPS Air Residential services in the United States. The surcharges are based on factors such as the volume of packages being shipped and the specific dates during the peak holiday season.
Since the initial beginning of peak surcharges, UPS has continued to modify its pricing policies to manage the ongoing surge in eCommerce shipments. The carrier has extended the duration of the peak season and expanded the list of services and destinations subject to demand surcharges.
The history of UPS peak surcharges is related to the broader trends in eCommerce and the changing landscape of the shipping industry. As more consumers turn to online shopping and businesses adapt to meet the demands of the digital marketplace, carriers like UPS have had to develop new pricing strategies to manage the increased volume of shipments and maintain the quality of their services.
Changes to the UPS peak demand surcharges for 2023
UPS releases a General Rate Increase at the start of each year. This year, UPS and FedEx went toe-to-toe with their GRI, raising shipping costs by 6.9%—making it the largest GRI in the United Parcel Services’ history.
Many variables come into play regarding how this GRI and the UPS peak demand surcharges will affect the consumer. These increases depend on package type and weight, shipping duration, shipping speed, and the package’s route.
Peak demand surcharges for 2023 will push the rate increase beyond 6.9% for many UPS customers.
Shipping services affected by the 2023 peak demand surcharge
Ground Residential
UPS Ground Residential shipping may be subject to demand surcharges if there is a significant increase in demand for shipping services due to various factors such as holidays or unexpected events.
These surcharges are fees added to the standard shipping rates to account for the additional costs incurred by the carrier to meet the increased service demand.
The application of demand surcharges to UPS Ground Residential shipping will depend on the specific terms and conditions of the carrier’s pricing policies. The surcharges depend on factors such as the volume of packages being shipped, the weight of the packages, or the destination of the shipments.
It is important to note that demand surcharges can vary over time and may be subject to change based on market conditions and other factors. Customers concerned about the cost of shipping should monitor the carrier’s pricing policies and consider alternative shipping options if necessary.
Air Residential
UPS Air Residential shipping could also face demand surcharges if there is a significant increase in demand for air shipping services due to various factors such as holidays or unexpected events.
Like UPS Ground Residential shipping, demand surcharges for UPS Air Residential shipping are fees added to the standard shipping rates to account for the additional costs incurred by the carrier to meet the increased service demand.
The application of demand surcharges to UPS Air Residential shipping will also depend on the specific terms and conditions of the carrier’s pricing policies. As with UPS Ground Residential, surcharges depend on variables like the number of packages shipping out, package weight, and the package’s final destination.
Just like UPS Ground Residential shipping, it is essential to note that demand surcharges for UPS Air Residential shipping can vary over time and may be subject to change based on market conditions and other factors. It’s important to proactively minimize profit loss whenever possible. Monitor your carrier’s pricing policies, stay abreast of information related to rate increases, and be familiar with other shipping options in case an immediate change is necessary.
Reasons for the peak season increase in 2023
Shipping companies like UPS and FedEx release a rate increase each year. UPS is one of the major players in shipping and logistics, operating in over 200 countries and shipping over 20 million packages daily.
Even though UPS paves the way for package delivery, the organization still experiences challenges during the busy season. The demand surcharge helps UPS maintain quality control during the busiest shipping times. In addition, UPS needs to hire additional staff members and use additional vehicles and fuel, both of which drive up the cost of shipping.
In recent years, eCommerce shopping has increased significantly. As more people shop online and rely on major shipping partners to deliver their purchases, shipping companies like UPS need help to maintain operations and resources. This influx creates additional costs and challenges concerning quality control. The demand surcharge helps cover those expenses.
The impact on eCommerce retailers and their customers
UPS on-demand surcharges for 2023 add a layer of unpredictability to eCommerce retailers. These fluctuations make it difficult to keep transportation costs consistent.
It’s important for eCommerce retailers to audit their expenses regularly; a thorough evaluation will consider billing errors, accessorials, fuel, and duty costs. Make cuts where necessary, adjust to conserve expenses, and recoup any items billed or overcharged in error.
Many eCommerce businesses use a “free shipping” model to attract customers. The variable UPS demand surcharge makes this challenging to anticipate and maintain adequate profit margins. Retailers may need to increase base prices or reduce profit margins to compensate for the demand surcharge.
It’s wise for eCommerce retailers to explore other options for shipping, like partnering with a 3PL, to reduce and control costs.
Leveraging a 3PL provider to offset surcharge costs
Suppose items like peak surcharges, package handling, and shipping, in general, are overwhelming to you. In that case, consider partnering with a third-party logistics company (3PL) for your eCommerce fulfillment solution.
A 3PL can help eCommerce retailers reduce shipping surcharges by providing volume discounts, optimizing shipping strategies, offering alternative shipping options, integrating technology solutions, and providing expertise and support.
By working with a 3PL, eCommerce retailers can reduce costs, improve their day-to-day shipping protocol, and maximize the customer experience.
As you can see, carrier shipping costs are variable and subject to change at any time. As an eCommerce retailer, staying ahead of these changes and understanding how they affect your baseline is essential.
You can stay current on UPS surcharges by visiting UPS’ notification page. Continue to educate yourself and pay attention to your overall cost of doing business so you can manage shipping costs accordingly. We are happy to provide additional information about offsetting shipping costs for your retail business by partnering with a 3PL. Please contact or call Kable Product Services at any time. It’s our pleasure to help.