UPS Peak Surcharges Arrives in the Parcel World
*Updated with SurePost Peak Surcharge
After experimenting on several high-volume peak shippers last year, UPS announced on Monday that it is implementing Peak Surcharges on select packages tendered between November 19th and December 23rd of this year for all its shippers. The explanation for these new charges is their need to offset additional costs incurred to “flex its delivery network” when volumes effectively double between Thanksgiving and Christmas. In entertainment (theme parks / pro sports) and airline parlance, it’s referred to as “dynamic pricing”. Ride hailing services refer to it as “surge pricing”. Simply put, when demand is high, consumers will pay a premium.
With Monday’s update to their 2017 Daily Rates, UPS introduced three new surcharges which are in addition to all other applicable charges:
1) Residential Peak Surcharge ($0.27 - $0.97 per package depending upon service level)
2) SurePost Peak Surcharge ($0.36)
3) Large Package Peak Surcharge ($24.00 per package)
4) Over Max Peak Surcharge ($249.00 per package)
The Residential Peak Surcharge will apply to each package addressed or delivered to a home. The cost per residential ground shipment will be $0.27 and will apply between 11/19 and 12/2 (weeks of Black Friday and Cyber Monday) and again between 12/17 and 12/23. A charge of $0.81 and $0.97 will apply to overnight and 2-Day / 3-Day services respectively between 12/17 and 12/23 when the bulk of expedited shipments are tendered. The lack of a charge between 12/3 and 12/16 is presumably to encourage the shift of shipments to those weeks and smooth-out volume spikes.
The Large Package Peak Surcharge will apply to packages with a length plus girth exceeding 130 inches and will be assessed during the entire period between 11/19 and 12/23. This is on top of the $70.00 (non-discounted) charge that already exists. As a point of reference anything larger than a 26 cube box (26 x 26 x 26) is subject to this charge.
The Over Max Peak Surcharge will apply to any packages weighing (scale weight) more than 150 lbs. or exceeding 108 inches in length or 165 inches length plus girth. The $249.00 charge is applicable during the entire peak period and is on top of the $150.00 charge for such parcels ($399.00 total). UPS doesn’t want these packages in its system in the first place; and if it isn’t obvious, it REALLY doesn’t want them during peak.
In addition to the above, UPS intends to announce Peak Surcharges for specified import lanes. These are expected to be announced on or before September 1st and will presumably affect international lanes for which plane capacity is traditionally scarce.
How or if existing discounts for the above will apply to these charges has not been communicated yet. UPS may opt to grandfather existing discounts for their non-peak counterparts towards these, but it’s likely that any incentives will require an amendment to your carrier agreement.
For its part FedEx has not made a decision yet as to follow suit or not. On their earnings conference call Tuesday afternoon they noted UPS’s announcement and commented that they are evaluating their peak season pricing options. Even if they take a pass this year to gauge shipper response, we expect that they will implement something similar for 2018.
As always, Lojistic is here to answer any questions that you may have regarding UPS and FedEx services, rates, or pricing agreements.
The details of UPS’s announcement can be read here.
Planning on attending this year’s Parcel Forum in Nashville? Be sure to attend Lojistic's presentation on the past, present, and future of carrier surcharges. http://parcelforum.com/sessions/106-how-to-predict-analyze-the-impact-of-carrier-accessorial-increases/. We hope to see you there!