Even companies that have carefully negotiated and budgeted parcel shipping costs can feel they’ve overpaid by 40% or more once the invoices show up. And even after double-checking all the base rates they’ve been quoted, they still may not see what went wrong.
So what happened?
Many shippers aren’t aware of the hidden fees, surcharges, and accessorials that are buried — deliberately? — in all parcel agreements. Agreements that are so complex you may not be able to understand what is included without an expert to interpret them. It’s no wonder then that shippers are shocked when they get invoices significantly higher than they expected.
Accessorials and Fees on Invoices Are No Accident
These surcharges and fees are standard parts of service-level agreements for both FedEx® and UPS®. They’re an excellent way for carriers to drive up their own margins, since shippers are more likely to notice things like the well-publicized annual GRIs. Add to that, the majority of shippers don’t have an agreement in place to cap or prevent some or most of these charges.
When you line this practice up with an explosion of B2C deliveries, thanks to the rise in ecommerce, it’s not hard to understand why carriers maintain this approach of generating incremental — and lucrative — revenue streams. This is especially true when you consider how unprepared carriers were for this sort of growth from the perspective of both pricing and operations (FedEx and UPS have historically been focused on B2B.)
Unfortunately, it’s the customer that pays. Always. Their shipping expenses end up being higher than they’ve budgeted for because of an opaque process.
Avoiding These Unnecessary Small Parcel Charges
What’s important to know is that, in many cases, you’re paying for something avoidable. A few examples of avoidable extras are fees for address corrections or missing or invalid account numbers. The extra moment it will take you to double-check these will cost you much less than the surcharge. If you’re habitually making these mistakes, those charges will add up quickly. And in many cases, the surcharge is even more than the average cost of your shipments.
Another common surcharge is for fuel, and it’s added to all shipments. UPS “kindly” provides current and historical fuel surcharge information on its website. This fee can change weekly and is at historical highs, so it’s important to keep watch of.
Commonly Occurring Surcharges
Here are other key areas to watch when it comes to avoidable fees and surcharges that are costing companies money.
- Mistakes with destination zip codes
- Incorrectly manifested shipments
- Mislabeled or miscalculated package contents, shipment value, and delivery requirements
- Inaccurate package dimensions and weight
- Incorrectly assigned residential vs. commercial deliveries
Start by paying attention to these common mistakes and you take a big step toward minimizing unnecessary accessorials and surcharges.
More You Can Do
It also helps to talk with your carrier. The more they know about your business and shipping needs, the better position you’re in to negotiate favorable costs and fees. Otherwise, you’re just paying blanket charges. And don’t wait until your current agreement expires. Do it now.
Look at where your distribution centers are located. If any of them are in a DAS zip code, you’re also paying DAS surcharges on all inbound packages. However, depending on the frequency of inbound shipments, you should be able to negotiate this.
Finally, an examination of your shipping history should show where you’re incurring most of the extra charges. With that information, you can do some reconfiguring to tighten up your processes and lower your costs. If you discover inaccurate addresses or missing account numbers are common culprits, those are both easy fixes.
Leveraging a Parcel Business Intelligence (BI) tool is a simple and fast way to identify these types of savings opportunities.
Avoid Surcharges Where You Can
You’re probably never going to escape all surcharges, but there’s no reason to pay the ones that are avoidable. Part of that comes from educating yourself and understanding why surcharges happen. Start tracking your costs to identify and cut the wastage.
Accessorials are not simply a cost of doing business. They’re often a tactic carriers use to increase their margins at your expense. It might be your own carelessness that’s costing you — so don’t let it.