Demand Surcharge

­Navigating the UPS vs FEDEX Demand Surcharge Landscape: Insights and Strategies for Businesses

by LJM Group

Important Update

Back on December 11, FedEx announced their 2024 Demand Surcharges for Additional Handling & Large Package fees that would go into effect on January 15, 2024, which were actually 42% and 49% respectively LOWER than what they were in 2023. This seemed odd as it was a reduction.

On January 5, 2024, UPS announced their Peak/Demand Additional Handling & Large Package fees to remain the same as they were in 2023. (almost double the amount of FedEx’s announcement)

This past Friday, January 19, 2024, FedEx has subsequently announced a new INCREASE to revert back to the old 2023 fee amounts, which now aligns to slightly less than what UPS is charging. See below timeline for UPS and FedEx Additional Handling and Oversize Peak/Demand Surcharges.

In summary, FedEx announced their Peak Demand Fees prior to UPS to potentially put pressure on UPS to match theirs like they did with the 2024 GRI, but apparently UPS did not conform. Thus FedEx reneged on their fee reductions.



UPS and FEDEX Demand Surcharge

In the ever-evolving landscape of logistics and shipping, the implementation of demand surcharges (DS) by major Carriers like UPS and FedEx has become a pivotal factor for shippers. The years 2023 and 2024 have seen a notable shift in the dynamics of these surcharges, prompting businesses to reassess their shipping strategies. This article aims to provide a comprehensive understanding of the UPS versus FedEx demand surcharge, its implications, and strategic approaches for companies that are looking to thrive in today’s challenging environment.

Understanding Demand Surcharge

Demand surcharge is an additional fee imposed by Carriers during peak demand periods. Historically, Carriers have utilized surcharges to manage the increased costs associated with high-demand seasons, ensuring the sustainability of their operations. In 2023 and 2024, both UPS and FEDEX have implemented surcharges, but the nuances of their models differ significantly.

Factors Influencing Demand Surcharge

Several factors contribute to the determination of demand surcharge rates. Economic conditions, market fluctuations, and Carrier-specific policies play pivotal roles. Additionally, seasonal trends and peak demand periods significantly impact the surcharge landscape. Understanding these influencing factors is crucial for businesses seeking to navigate the complexities of the DS environment.

Comparison of UPS and FedEx Models
Analyzing some of the surcharge differences between the two Carriers allows companies to tailor their shipping strategies based on the Carrier they predominantly engage with.

  • UPS matched their 2023 Additional Handling and Large Package Demand Surcharges for 2024, effective January 14, 2024, until further notice.
  • FedEx decreased their 2024 Additional Handling and Large Package Demand Surcharges, compared to 2023.
  • UPS Additional Handling and Large Package Demand Surcharges are about 50% higher than FedEx in 2024.
  • The UPS Demand Surcharge Applied to UPS® Air Residential, UPS® Ground Residential and UPS SurePost® Packages is no longer in place after January 13, 2024.

Implications for Businesses in 2024

The implications of these surcharges on companies are profound. Firstly, the increased costs associated with demand surcharges directly impact profit margins, challenging the financial viability of shipping-dependent establishments. Businesses today are confronted with the need for real-time adaptability in their logistics strategies. Failure to anticipate and respond promptly to these surcharges changes may result in financial setbacks, operational disruptions, and potential customer dissatisfaction due to delayed deliveries.

To mitigate these implications, businesses must engage in proactive cost analyses, implement flexible shipping strategies, and leverage technology to stay abreast of real-time surcharge adjustments. Strategic negotiation with Carriers and optimization of shipping processes are crucial steps to navigate the intricate landscape of demand surcharges in 2024.

Strategies to Mitigate DS Impact

  1. Optimize Shipping Processes: Streamlining shipping processes can contribute to reduced surcharge impact. Consolidating shipments, optimizing routes, and leveraging Carrier-specific programs can be effective strategies.
  2. Negotiate Contracts: Engage in contract negotiations with Carriers to secure more favorable contract rates and terms. Understanding the Carrier’s surcharge policies and proposing mutually beneficial arrangements can lead to cost savings.
  3. Utilize Technology: Implementing advanced shipping technology and analytics can enhance visibility into shipping patterns. Businesses can leverage this data to make informed decisions and proactively adapt to surcharge changes.

Critical Thinking Questions

  1. Justification for Surcharge:  Do UPS and FedEx justify the implementation of demand surcharges, especially during specific periods?
  2. Long-Term Consequences: What are the potential long-term consequences for businesses that fail to adapt to the demand surcharge changes in 2023 and 2024?
  3. Strategic Optimization: In what ways can companies strategically optimize their shipping processes to minimize the impact of demand surcharges?

Proactive and Informed Approach

UPS and FedEx demand surcharge demands a proactive and informed approach from shippers. By understanding the influencing factors, businesses can not only weather the surcharge storm but also position themselves for sustainable growth in the complex world of shipping.

Sign up for our newsletter to be the first to hear about our live webinars and new ways to reduce shipping expenses, and to keep up with the latest must-know developments in parcel shipping and logistics.
© 2024 LJM Group - Small Parcel, FedEx & UPS Invoice Auditing, Contract Negotiating & Consulting • 312 Conklin Street, Farmingdale, NY 11735