of March 2024, the jet fuel index was up 40% since 2021, but during the same period, the express fuel surcharge was up over 100% for both carriers. Over the same period, the diesel fuel index was up 22%, but the ground fuel surcharge for both carriers was up over 75%. a package and service 2 Conduct audit
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THE 2024 PEAK SEASON IS COMING
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By Micheal McDonagh
he piping hot pandemic-era parcel market has cooled, giving way to softer demand. But while shippers currently navigate calmer seas, peak season looms on the horizon. Forecasts for this year call for a more muted peak, though shippers still face icebergs lurking beneath the surface that can cause carefully planned peak operations to leak cash and sink budgets. Here are five ways to prepare.
1 surcharges
Keep a close eye on carrier
After engaging in significant discounting to compete for falling package volumes last year, UPS and FedEx have more recently deployed accessorial charges as covert tools to increase yields, with changes to fuel, demand, and delivery area surcharges. Carriers typically communicate changes to fuel tables and other accessorial charges as part 26 PARCELindustry.com JULY-AUGUST 2024
of annual general rate increase (GRI) announcements, but in recent months, they have made several out-of-cycle changes to boost revenue. With new rules governing which surcharges apply in what circumstances and major increases applied to others, shippers could face higher costs to move the same parcel mix. For example, UPS and FedEx expanded the delivery area surcharge (DAS) to more ZIP Codes earlier this year, adding 82 ZIP Codes clustered in urban centers that impact a full one percent of the US population. As a result, carriers now consider more than half of all ZIP Codes in the US “difficult or costly to access” and subject to the DAS. Carriers have also raised the fuel surcharge three times since the 2024 GRI announcement, with both ground and express fuel surcharges becoming increasingly divorced from the government indices on which they’re supposed to be based. As
Getting a thorough understanding of their package volume can help shippers navigate the evolving minefield of carrier surcharges. Audits can not only define the potential impact of recent changes but give shippers a view of their most expensive parcels and actions that could be taken to avoid incurring oversize and other major surcharges. For example, to avoid the particularly expensive additional handling surcharge that applies to large, bulky packages, it may be more cost-effective to divide them into two smaller ones that fall below the carriers’ size and weight thresholds for the fee. Audits are also important tools to get ahead of the errors that tend to happen when shippers and carriers alike get busy working through higher volumes. Validating addresses in advance helps shippers avoid correction charges from carriers in case fulfillment operations neglect to check addresses in the rush to get orders out the door. And if carriers erroneously apply surcharges, audits equip shippers to quickly correct them before they snowball. For example, one inappropriately applied residential charge can turn into a recurring problem if a shipper has several customers in the same area. Finally, shippers should take a critical eye to the service levels they use and evaluate whether more expensive express services are really necessary, or if a lower cost option like ground or even SurePost will do the job. For example, shipments within a 600-mile radius of their destination will typically make it there within two days via ground, without the added cost of more expensive express service. promotions earlier to 3 Start smooth out peaks Remember the “peak surcharge” of years past? It now has a different name — demand surcharge — and rather than