By Jim Haller | Senior Manager, Transportation | Chainalytics
To prepare for holiday rate hikes on parcel shipments, organizations should have already started analyzing potential budget adjustments and profitability impacts they will likely face towards the end of 2017. With ecommerce and omnichannel shopping continuing to establish itself as a preferred buying method amongst consumers, no organization is exempt from the transformation occurring across the parcel industry.
With UPS’ June announcement detailing their Peak Season Surcharge rates on all residential package delivery this holiday season, many analysts predicted FedEx would follow up soon after with a similar rate hike. However, in a surprising countermove, FedEx announced early August that they will forgo any rate hikes on standard small-parcel business during peak season but instead will apply significantly increased surcharges only to special packages requiring extra handling ($3), oversized packages ($25), and unauthorized shipments ($300). These increases apply from November 20 to December 24, 2017, adding an additional two weeks in December UPS elected to exempt.
It’s still too early to determine if the move will serve as a competitive advantage for FedEx, but at the very least, shippers have to appreciate one area less affected by surcharges come November and December. However, depending on how your shipments and customer profiles look, companies will see cost increases if they fall in “special packages” category currently assessed around 15% of peak season shipments..
While some questions concerning shipping costs this holiday season have been answered, shippers still need to consider additional methods to mitigate costs that will surely arise at the end of the year. Although surprising, FedEx’s lack of a true peak season surcharge this year may not be a permanent fixture in the years to follow, so optimizing your parcel spend now will help you prepare for policy changes down the road.
November may seem off in distance, but it’s just around the corner, so waiting to explore your spend options is no longer a luxury. Be proactive and take the necessary steps to ensure your organization’s profits aren’t negatively impacted this holiday season.
Chainalytics Senior Manager Jim Haller leads the firm’s Parcel Spend Optimization offering, which enables multi-level organizations to reduce costs, improve service levels, negotiate better pricing agreements and generate cost savings of 8-15 percent on their parcel spend.