Small parcel costs to surge in peak season
With the holiday season approaching, businesses must keep demand surcharges in mind to mitigate an expensive quarter. With peak season results calculated weekly, companies can expect demand surcharges that, based on our client analysis, will increase their Q4 spending by 5-15%.
FedEx and UPS show an increase of minimum of $1 in demand surcharges
As Q-4 begins, residential and air shipments from UPS and FedEx will increase starting October 27th and peak the day before Thanksgiving. Residential packages will increase by roughly $1 before Thanksgiving and $2 until the first week in January and will increase further by service level and additional handling. Demand surcharges apply to all ground residential and air shipments.
On August 15th, FedEx and UPS announced their use of demand surcharges. Supply and demand are evaluated on “calculation week,” which analyzes the customer’s shipping volume to decide the appropriate cost. Size and weight surcharges are also set to increase, peaking in December. In addition to an overall demand surcharge increase and size and weight surcharges, companies with increased shipping volume will also experience inflation. Any shipment changes from 2023 to 2024 will result in a percentage increase based on the difference between years.
Mitigating demand surcharges
To mitigate demand surcharges in business, owners, and CEOs should evaluate shipping schedules from past years. Analyzing data allows C-level executives to budget appropriately for quarters three and four. Organizations must also consider 2024’s previous quarters regarding the business’s expansion or contraction. Preparing your company for a busy season is critical, and strategies like buying material in bulk as well as looking for additional revenue are a few ways companies can navigate the holiday season while providing considerable value to their customers.
ERA helps decrease small-package spending despite rising costs
Even with rising end-of-the-year prices, there are still ways to reduce costs. Unlike other companies, ERA Group focuses on more than negotiating better discounts; we add operational enhancement to negotiations to yield more significant savings.
Our approach to assessing clients’ operational needs and analyzing pricing options that meet those specific needs allows organizations to re-invest in their company with the resources found. Additionally, implementing informed operational adjustments further reduces accessorial and transportation charges. By combining these changes with expert rate renegotiations, ERA has helped clients achieve more than an 18% reduction in express and parcel costs.
About the Author
Dileep Kulkarni is a Senior Consulting Partner with ERA Group. Based in Portland, Dileep focuses on unique freight solutions that deliver savings while improving quality and service. ERA Group is a global expense management consultancy that leverages specialized experts, industry benchmarks, and practical supplier industry knowledge to identify and deliver cost savings to clients.