Building most businesses today includes creating a shipping plan. Whether a business focuses on an online presence or is mostly a brick-and-mortar store, shipping products can be a challenge.
All major shipping carriers, including UPS, USPS, DHL, and FedEx, include surcharges in their pricing scheme. These charges, unfortunately, can be unexpected, and how they are applied to shipments may be unpredictable, especially if a shipper is unfamiliar with the surcharges or not paying close attention to their invoices.
Being educated about these surcharges and how they affect a business's bottom line is paramount. In this article, we’re talking all things surcharges: What they are, the most common types of surcharges, and how to cope with them.
What are shipping surcharges?
Shipping surcharges are fees or extra charges added to a shipment. They’re added to cover additional costs of shipping a particular item, the added cost of shipping a longer distance or are applied during a specific time of year. They will often appear on invoices under the rate charge and may appear as a “handling fee” or as “service charges”.
What are the most common types of surcharges?
Surcharges include any additional fee added on top of the base rate of a shipment. They vary broadly between carrier, season, and type of shipment. Below we’ll breakdown the most common types of surcharges, but keep in mind that there are too many to discuss in this article.
Fuel charges are the most common type of surcharge. They are fees added to shipments based on the market value of fuel. This type of charge is calculated on an ongoing basis and rises in instances where the price of fuel goes up.
Keeping an eye on the price of fuel and paying attention to market predictions for fuel costs can allow businesses to project what their fuel surcharges may be. Keeping track of your past carrier invoices so you can use historical data to better predict future costs is a great idea, too.
Peak Season Surcharges
Historically, peak season surcharges were fees added to packages sent during the winter holiday shopping season. Several carriers have expanded the dates they consider as the winter peak season and some have added summer peak seasons as well.
The reason that these surcharges were originally created was due to increased capacity constraints during times when more volume is being shipped nationally. Recent trends in carrier capacity have made this reasoning slightly more complex, so it’s good to keep an eye out for data about carrier capacity and performance.
Residential Delivery Surcharge
Residential delivery surcharges are fees added to shipments delivered to home addresses. This type of fee is especially prevalent for DTC and eCommerce retailers and became a much larger topic during COVID, as more US consumers turned to shopping online. The tricky piece to this surcharge is that the differentiation between a commercial address and a residential address is made by the carriers themselves and varies from carrier to carrier.
Oversize Package Surcharge
Oversized package surcharges are exactly what they sound like: When a parcel exceeds a certain size or weight an extra fee is added. This fee is often decided based on the parcel’s volumetric weight. This means the weight is considered in proportion to the dimensions of the package.
Additional fees can be added for freight shipments and the oversized fees can be highest for shipments that exceed carrier-set weight and size thresholds.
The carriers aren’t too creative with their naming scheme for surcharges. Just as it sounds, Saturday surcharges are added to shipments delivered outside of the normal Monday through Friday workweek. Different service levels often include parcels being delivered on specific days, so it is important to consider what carrier offerings you are utilizing to avoid unnecessary costs.
How to avoid or lessen shipping surcharges?
At the top of most shippers' minds is how to lessen the impact of surcharges or avoid them altogether. In this section, we’ll discuss some of the most common strategies.
First, research, research, research. It’s not the sleekest recommendation but a deep understanding of the different shipping options across the major carriers will help make the decision as to which networks benefit your business. Careful analysis of a business's carrier invoices and understanding of carrier-specific surcharges allows for the most informed decision (note that there are many more surcharges than the few we discussed in this article).
Aside from research, another way to avoid and lessen the impact of surcharges is to give your customers the power to give an outline of their preferences. Either conducting market surveys or giving shipping options at checkout allows businesses to meet the specific shipping expectations of your specific customers.
There are many surcharges outside of the ones discussed in this article and the waters are murky by design. If your business is struggling with shipping surcharges or you’re interested in learning more about how to reduce their impact, contact our team of experienced logistics advisors today!