As we continue to see online shopping fiercely grow beyond any expectations, “fast and free” has been the rule. But how can shippers continue to offer their customers what they have come to expect? This is especially difficult when they are forced to rely on the Carriers who, for all intents and purposes, determine just how big a dent shipping expenses will put in their clients’ budgets. Unless a package requires no special attention, is the ‘right’ size, and is delivered to a convenient location, Carriers have the upper hand on imposing surcharges, and lately, even choosing to deliver your packages at all. Remember, their best interests come before yours.
Surcharges, also known as “service or handling fees” or “accessorial fees”, are additional expenses applied to standard fees. Varying from temporary surcharges – such as holiday surcharges applied during peak shipping periods – to permanent fees that range from fuel surcharges to oversize package surcharges, there is a wide range of additional expenses that shippers need to know about.
Incorporated into contracts, other non-fuel accessorial fees (and there are over 50 unique ones) can be complex to identify and often overlooked. Ultimately, they are likely responsible for a larger percentage of your total Carrier costs than you may have thought. Depending upon your shipping profile and the service levels you are contracted for, these fees can, on average, range anywhere from 10% up to 40% of total shipping costs, and they may be sneaking right past you. The examples below show the variance of overall percentages that can occur for accessorial charges.
All accessorial fees are not finalized and identified until after delivery. Therefore, simply by that nature, they are not visible until after they are charged to you. This pattern offers insight a little late in the game. With our TruCost reporting capabilities, these charges are easily called out in precise detail, allowing you to view the specifics of each on a per-package level. It is only then, upon further review, that you may be able to eliminate some of them. After all, you can’t fix what you can’t see.
Every Carrier has its own model of surcharges. For example, size and weight both typically influence cost, but there is a lot of variation. Shipping a large, but lightweight package does not guarantee that the package won’t be classified with ‘additional fees’. There’s no uniform definition of an oversized package, and there is no standard for surcharges. The Carriers only have to be competitive with each other, not luring to the customer. To become a more educated customer of the Carriers, shippers should start by understanding the many types of surcharges.
- Residential: Applied to deliveries made to home addresses and include businesses that operate out of a home.
- Delivery Area: Applied to addresses that are deemed as rural or outside of a specific range from a Carrier’s hub.
- Additional Handling: A flat-rate fee applied to packages over certain size limits. This can vary based on the Carrier’s specific guidelines.
- Declared Value: Applied to packages with a declared value of more than $100.
- Direct Signature: Applied for the necessary task of obtaining a signature of the person to whom the package is being sent to upon delivery.
- In-direct Signature: Applied for obtaining any signature upon delivery.
- Adult Signature: Applied for obtaining a signature from an adult 21 years of age or older, upon delivery.
- Weekly Service: Vary every two weeks based on the fluctuation of fuel charges and adjust according to the fuel rates of each two weeks prior.
- Print Return Label: Applied only if shippers used a return label provided to them.
- Other Shipping (OS) Extra: Varies widely from freight fees to international fees and more. The best way to monitor potential OS surcharges is to have an auditing system in place that alerts you to any fees inaccurately charged to an account.
Online retailers encounter many challenges in their efforts to cost-effectively deliver packages to their customers. Understanding all potential shipping charges and accessorial fees can help you reduce your shipping spend and improve your customer service. By leveraging LJM Group’s intelligence, including Contract Analysis & Rate Negotiating, Logistics Advisory Services, Auditing Services, and TruCost™ Reporting, there’s no reason for your organization to let shipping costs consistently eat away at your profits.