UPS and FedEx Extend Demand Surcharges Despite Lower Year-Over-Year Volumes
UPS and FedEx have decided to extend their demand surcharges for additional handling and large packages, despite lower year-over-year volumes. UPS reported a 12.8% decrease in consolidated revenues in the third quarter of 2023 compared to 2022. The surcharges have been rebranded from "peak" to "demand," and they are a way for carriers to maintain high revenue streams. Analysts suggest that carriers, including UPS and FedEx, are unlikely to rescind these surcharges, as they have trained shippers to accept them. For small- to mid-sized shippers, carrier pricing, with its constant changes and surcharges, can be challenging to navigate. However, experts advise shippers not to passively accept price increases but instead negotiate their agreements and find ways to avoid surcharges by adjusting packaging and weight.
WHY IS THIS IMPORTANT FOR MY INDUSTRY?
Keeping those surcharges alive means more money flying out the door for companies that use UPS and FedEx’s services. These charges used to be just seasonal "peak" fees, but now they're an all-year "demand" charge, sticking around like an unwanted guest.
Knowing what's up with these surcharges is a must. It's how we keep our budgets in check, stay in the green, and make smart moves when it comes to shipping.
🔥 OUR HOT TAKE?
The charges might feel like a headache for businesses, but in the wild world of logistics, they're kind of necessary. These charges help carriers keep up with all the twists and turns in the industry. They're not just random fees; they cover the real costs carriers face.
Plus, here's the silver lining: these charges can push companies to get smart about how they pack and ship. When we see those extra costs, it's a nudge to make our packages smaller and lighter. That's considered a win for more efficient shipping and sustainability efforts - being pushed from all sides.
Sure, nobody's thrilled about paying more… but remember, carriers are in tough competition. They need to keep their game strong to give us good service.
United Parcel Service (UPS) reported a disappointing start to the year with first-quarter earnings revealing a 5.3% drop in revenue and a 31.5% plunge in operating profit compared to last year.