When Halloween goods start to materialize,
You know peak season’s drawing near, it’s no surprise.
Peak season is rapidly approaching, making shippers and consumers brace for heightened peak season surcharges. Announced in July, this year's fees have raised some eyebrows across the industry, with even some analysts expressing surprise at the fee's magnitude. Here's what you need to know about the UPS peak season surcharges.
The compressed 2024 holiday shipping season
A key factor driving UPS' decision to implement steeper surcharges is the compressed timeline of the 2024 holiday shipping season. With Thanksgiving falling on November 28th this year, the window between Black Friday and Christmas will be significantly shorter than in previous years. UPS CEO Carol Tome emphasized that this condensed period will result in "the highest volume ever in our network" on December 18th, arguing that UPS needs to adequately prepare and price its service accordingly.
Anticipating record-breaking holiday volumes
UPS forecasts that it will handle the "highest volume ever" during the 2024 peak season, reflecting the continued growth of e-commerce and the brand's expanding customer base. This surge in parcel volume is partly driven by the emergence of UPS' new contract with the U.S. Postal Service, which sees the carrier onboarded as a major air cargo customer before the holidays. As Tome explains, "When you have that kind of volume flowing to your network, you actually have to charge to service them well, because you have to hire people and lease aircraft and delivery vehicles, so on and so forth."
Implementing tiered surcharge structures
To manage the anticipated influx of holiday shipments, UPS has unveiled a comprehensive suite of peak season surcharges that will take effect from September 29th, 2024, through January 18th, 2025. These fees vary in magnitude depending on the service and timing, with the highest charges being applied during the busiest period between November 24th and December 28th.
Additional handling surcharge
For U.S. domestic, import, and export shipments, UPS will impose an Additional Handling Surcharge ranging from $7.75 to $9.95 per package.
Large package surcharge
Packages that exceed UPS' size limits will incur a Large Package Surcharge of $84.75 to $99 per shipment.
Over maximum limits surcharge
Shipments that exceed UPS' maximum weight and size restrictions will be subject to a surcharge of $445 to $495 per package.
Demand surcharges
UPS will also implement Demand Surcharges on its Ground Residential, Air, and SurePost services, with fees ranging from $0.25 to $2 per package. For customers who exceed a weekly volume threshold of 20,000 packages, a tiered Demand Surcharge of $1.50 to $8.25 will apply.
Justifying the pricing strategy
In response to analyst skepticism regarding the magnitude of these surcharges, Tome remains firm in her defense of these pricing decisions. She argues that the carrier's strategy aligns with the anticipated demand and operational challenges it will face during the 2024 peak season: UPS must charge accordingly to ensure it can adequately staff, expand its fleet, and deliver an "amazing peak" customer experience.
Preparing for heightened competition
While UPS is the first to unveil its 2024 peak season surcharges, the company is aware that there are other shipping carriers out there. Therefore, as shippers seek out lower-cost delivery options, UPS' heightened fees may prompt some to explore alternative carriers. However, Tome remains confident in UPS' ability to stay above the competition, noting that "there's still time to try to onboard alternatives or negotiate discounts on the peak surcharges."
Empowering shippers to mitigate surcharge impacts
UPS announced the fee changes earlier than usual in July. Therefore, shippers now have more notice about the upcoming surcharges, which gives them more time to prepare and explore other shipping options. Businesses can better manage the impact of UPS' heightened fees by taking proactive measures like onboarding alternative carriers or negotiating discounts on the peak surcharges to offset the anticipated cost increases.
Adapting to evolving market dynamics
As e-commerce continues to drive unprecedented parcel volume growth and the holiday shipping window becomes increasingly compressed, carriers must adapt their pricing and operational strategies to meet customer demands. While the increase in UPS' fees might have caught some analysts off guard, the carrier's rationale – rooted in anticipated volume, operational challenges, and the need to maintain service quality – underscores the industry's complex realities. As shippers navigate this evolving landscape, staying agile, exploring alternative solutions, and negotiating favorable terms will be crucial in mitigating the impact of these heightened peak season charges.
Final thoughts
As shippers prepare for the holiday rush, the ability to adapt, explore alternative solutions, and negotiate favorable terms will be essential in managing the impact of these heightened fees. Ultimately, the 2024 peak season surcharges underscore the evolving dynamics of the logistics industry and the need for all stakeholders to remain agile and responsive in the face of changing market conditions.
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