As we approach the 2024 peak shipping season, both UPS and FedEx have announced significant changes to their demand surcharges. These changes include increased rates, restructured surcharge models, and extended periods of application, making this peak season potentially more expensive and complex for shippers. Here’s a deep dive into what to expect from each carrier.
UPS’s 2024 Peak Season Surcharge Strategy
UPS surprised many by announcing its peak surcharges as early as July 2024, a departure from its typical September announcement. The early timing could be a strategic move to allow shippers time to negotiate or prepare for the increased costs. The bottom line: the 2024 peak season will be longer and more expensive for shippers.
Key Changes to UPS Demand Surcharges:
1. Introduction of a New Surcharge Model:
UPS restructured its demand surcharges into two categories for 2024:
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- Volume-Based Surcharges: Applicable based on the percentage increase in volume over a June baseline. These have increased by 9-11% year-over-year, depending on the specific week and volume.
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- Flat Demand Surcharge: A new, universally applicable surcharge regardless of volume fluctuations. This change broadens the scope of customers subject to surcharges.
2. Changes to Additional Handling and Oversize Surcharges:
The surcharges for Additional Handling, Large Packages, and Over Maximum Limits shipments have also been revamped.
3. UPS introduced a “peak of peak” period:
This new peak period applies significantly higher rates for these services between November 24th and December 28th. This new peak window could result in unexpected costs for shippers during the busiest part of the season.
4. Extended Surcharge Assessment Period:
UPS has extended the period during which demand surcharges will apply. Previously, these charges tapered off by mid-January; in 2024, they will continue through the third week of January 2025.
Eligibility for UPS Demand Surcharges in 2024:
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- Flat Demand Charges: These will now apply universally to all customers sending residential shipments under the listed services, expanding the number of customers affected.
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- Volume-Based Demand Charges: These apply only to shippers who have sent at least 20,000 residential packages in any week since October 2023.
FedEx’s 2024 Peak Season Surcharge Strategy
Following UPS’s announcement, FedEx released its own peak season surcharge changes in August 2024. While FedEx typically follows UPS in these announcements, the delay this year might reflect surprise or recalibration in response to UPS’s new structure. Nevertheless, FedEx’s demand surcharge changes align closely with UPS, with a few distinct differences.
Key Changes to FedEx Demand Surcharges:
Restructured Surcharge Model:
FedEx introduced a similar two-category surcharge model for 2024:
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- Volume-Based Surcharges: Increased by 7-12% year-over-year, depending on the service area and week. Unlike UPS, FedEx offers broader categories for different service areas, which may benefit some shippers (like those in temperature-sensitive industries) while disadvantaging others (like e-commerce businesses experiencing high volume increases without a change in service level).
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- Flat Demand Surcharge: This new fee is universally applicable regardless of volume, similar to UPS’s flat demand surcharge.
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- Changes to Additional Handling and Oversize Surcharges:
FedEx has also introduced a “peak of peak” period with elevated rates for Additional Handling, Oversize Surcharges, and Unauthorized Package Charge shipments from November 25th to December 29th. These surcharges are in effect for a longer period than in previous years, potentially leading to higher costs during the busiest shipping weeks.
- Changes to Additional Handling and Oversize Surcharges:
2. Extended Surcharge Assessment Period:
Like UPS, FedEx has extended its surcharge period by an additional week. Demand surcharges will now continue through the third week of January 2025, instead of stopping in the second week.
3. Eligibility for FedEx Demand Surcharges in 2024:
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- Flat Demand Charges: These will apply to all customers sending residential shipments under the specified services, expanding the customer base affected by demand charges.
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- Volume-Based Demand Charges: Applicable only to shippers who send at least 20,000 residential packages in any given week during the calculation period.
Preparing for Peak Season: What Shippers Should Do
The restructuring and increase of demand surcharges by both UPS and FedEx make it crucial for shippers to review their shipping strategies and contracts ahead of the peak season. With higher costs, extended surcharge periods, and more complex eligibility criteria, shippers should:
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- Analyze Shipment Volumes: Understand which weeks are likely to incur the highest surcharges and plan shipments strategically to minimize costs.
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- Negotiate with Carriers: With the early announcement of surcharges, there is an opportunity to negotiate terms and potentially reduce fees.
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- Explore Alternative Carriers: Consider using alternative shipping options during periods with the highest surcharges to mitigate expenses.
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- Adjust Service Levels: If possible, adjust service levels or consider consolidating shipments to reduce the impact of volume-based surcharges.
To navigate these complex changes and optimize your shipping strategy for the 2024 peak season, contact the Reveel team for expert support and tune into our upcoming webinar. We can help you analyze your data, work with carriers, and find the most cost-effective solutions to manage peak season surcharges effectively.
