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Understanding Surcharges: Peaks and Valleys
Shipping Carriers routinely implement seasonal surcharges to offset increased costs associated with peak shipping seasons. These costs can include such variables as increased labor, fuel, and new equipment costs, in addition to maintenance on existing equipment and increased congestion at shipping hubs.
For small businesses, shipping surcharges are often confusing, since different Carriers apply them differently in efforts to manage their specific delivery volume and avoid package congestion. Certain surcharges, however, are common across Carriers, and can be predicted with some level of accuracy, allowing shippers to avoid unnecessary costs.
The most common type of seasonal charge is the “peak seasonal” surcharge, typically applied to all shipments during the holiday season. Others include the “oversize surcharge”, applied to packages that are too large or heavy for standard shipping, and the “hazardous materials” surcharge, applied to packages that contain hazardous materials. For out-of-the-way locations, the “remote area” surcharge is often applied to packages that are shipped to areas away from major routes.
Forecasting and Avoiding
To avoid these peak surcharges, businesses can utilize various forecasting tools and strategies to better manage shipments and optimize logistics, though specific tools and capabilities may vary depending on the individual Carrier or logistics provider.
For example, historical data analysis can be used to identify patterns and trends during peak seasons. Such niche analytics can help to anticipate surges in demand and plan accordingly to avoid peak surcharges. This methodology is often used in conjunction with demand planning software or enterprise resource planning (ERP) systems that offer forecasting modules. Such tools use statistical algorithms and historical data to predict future demand, enabling analysts to make informed decisions about shipping volumes and timing.
As another strategy, collaborative forecast planning can be used to establish closer collaboration with shipping Carriers and logistics providers. By studying demand forecasts and schedules with Carriers, analysts can help allocate sufficient capacity and resources to accommodate specified shipments, and potentially help avoid peak surcharges.
Elsewhere, Transportation Management Systems (TMS) can be used that incorporate forecasting capabilities. TMS software can help optimize transportation routes, consolidate shipments, and facilitate planning, based on historical data and demand forecasts.
To further avoid peak surcharges, consider pairing forecasting with surcharge avoidance strategies. By forecasting shipping needs in advance, customers can proactively avoid the holiday rush and schedule shipments to arrive before or after peak periods. As a complementary strategy, Carrier diversification uses comparative research to analyze those that offer competitive rates and require fewer surcharges during peak seasons. Establishing research and planning relationships over time with multiple Carriers can also provide alternatives when surcharges are high.
Regardless of your shipping volume, remember, any time is the right time to pursue parcel contract negotiations with the Carriers. Your current agreement with them may have been right at the time, but may require adjustments now which you can immediately benefit from.
Optimize Surcharge Management
To optimize surcharge management, consider using a third-party logistics (3PL) provider to help integrate shipping needs, including negotiating rates with Carriers, packaging products, and tracking shipments. 3PL experts can free up time and resources, allowing you to focus on other aspects of your business.
Ultimately, your business is a unique operation, so, it is essential to assess all specific requirements and consult with logistics professionals or service providers to identify the most suitable forecasting tools and strategies you may benefit from for any specific application.
Sources
USPS Delivers, Losing Customers to Shipping Surcharges, uspsdelivers.com. Available at:
https://www.uspsdelivers.com/losing-customers-to-shipping-surcharges/
SelectHub, Supply Chain Management Demand Planning Tools. Available at:
XChange Insights, May 2023, Container Availability Index (CAx). Available at:
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